“Indicative Rulings”: For Settling Disputes During Appeal (Part 1)

Many years ago, when I first heard a bankruptcy attorney refer to an “indicative ruling,” I thought it was a joke. And I say something like: “Ha, ha! There is no such thing.” Then, to my embarrassment, the attorney points to a rule of bankruptcy procedure, a rule of civil procedure, and a rule of appellate procedure that prove me wrong.

“Indicative Rulings” Question

So, here’s an “indicative rulings” question: What should happen when litigating parties settle their dispute that is on appeal from a Bankruptcy Court order? There is a predicament because:

the parties can’t ask the Bankruptcy Court to approve the settlement, because the Bankruptcy Court has no jurisdiction over the appealed dispute; and
when the bankruptcy estate is a settling party, for example, the parties can’t ask the appellate court for approval, because only the Bankruptcy Court has authority to approve or deny a settlement under Fed.R.Bankr.P. 9019.

“Indicative Rulings” Answer

The answer is in three separate federal rules of procedure.

–Bankruptcy Rule 8008

Fed.R.Bankr.P. 8008, titled “Indicative Rulings,” says:

“(a) Motion for Relief Filed When an Appeal Is Pending; Bankruptcy Court’s Options. If a party files a timely motion in the bankruptcy court for relief that the court lacks authority to grant because an appeal has been docketed and is pending, the bankruptcy court may: (1) defer considering the motion; (2) deny the motion; (3) state that it would grant the motion of the court where the appeal is pending remands for that purpose; or (4) state that the motion raises a substantia issue.”

“(b) Notice to the Court Where the Appeal Is Pending. If the bankruptcy court states that it would grant the motion or that the motion raises a substantial issue, the movant must promptly notify the clerk of the court where the appeal is pending.”

“(c) Remand After an Indicative Ruling. If the bankruptcy court states that it would grant the motion or that the motion raises a substantial issue, the district court or BAP may remand for further proceedings but retains jurisdiction unless it expressly dismisses the appeal. If the district court or BAP remands but retains jurisdiction, the parties must promptly notify the clerk of that court when the bankruptcy court has decided the motion on remand.”

–Civil Procedure Rule 62.1

Fed.R.Civ.P. 62.1, titled, “Indicative Ruling on a Motion for Relief That is Barred by a Pending Appeal.” says:

“(a) Relief Pending Appeal. If a timely motion is made for relief that the court lacks authority to grant because of an appeal that has been docketed and is pending, the court may: (1) defer considering the motion; (2) deny the motion; or (3) state either that it would grant the motion if the court of appeals remands for that purpose or that the motion raises a substantial issue.”

“(b) Notice to the Court of Appeals. The movant must promptly notify the circuit clerk Federal Rule of Appellate Procedure 12.1 if the district court states that it would grant the motion or that the motion raises a substantial issue.”

“(c) Remand. The district court may decide the motion if the court of appeals remands for that purpose.”

–Appellate Rule 12.1

Fed.R.App.P. 12.1, titled “Remand After an Indicative Ruling by the District Court on a Motion for Relief That Is Barred by a Pending Appeal,” says:

“(a) Notice to the Court of Appeals. If a timely motion is made in the district court for relief that it lacks authority to grant because of an appeal that has been docketed and is pending, the movant must promptly notify the circuit clerk if the district court states either that it would grant the motion or that the motion raises a substantial issue.”

“(b) Remand After an Indicative Ruling. If the district court states that it would grant the motion or that the motion raises a substantial issue, the court of appeals may remand for further proceedings but retains jurisdiction unless it expressly dismisses the appeal. If the court of appeals remands but retains jurisdiction, the parties must promptly notify the circuit clerk when the district court has decided the motion on remand.”

How Rule 8008 Appears to Work

Settlement of a bankruptcy dispute between the bankruptcy trustee/DIP, while that dispute is on appeal from a bankruptcy court order, is governed by Rule 8008.

Here’s how it appears (based upon the Rule 8008 language quoted above) that the Rule 8008 “indicative rulings” process would work:

the parties start by asking the Bankruptcy Court for an indicative ruling on approving the settlement;
the Bankruptcy Court can then, (i) defer the motion, (2) deny the motion, (3) state that it would grant the motion, if the appellate court were to remand for that purpose, or (4) state that the motion raises a substantial issue;
if and when the Bankruptcy Court states that it would grant the motion to approve the settlement or that the motion raises a substantial issue, the parties must promptly notify the clerk of the appellate court (i.e., the District Court or the BAP);
then the appellate court may remand for further proceedings but retain jurisdiction, unless it expressly dismisses the appeal; and
if the appellate court remands but retains jurisdiction, the parties must promptly notify the clerk of the appellate court once the Bankruptcy Court acts on remand, so that the appellate court can respond.

Series of Articles

This article is the first of a four-part series on how the three federal rules on “indicative rulings” actually work. The articles to follow focus on:

second article — an opinion applying Civil Rule 62.1 outside of bankruptcy;
third article — an opinion applying Bankruptcy Rule 8008; and
fourth article — a bankruptcy appeal before a U.S. Circuit Court of Appeals when settlement occurs.

Conclusion

I’ve found this inquiry into the “indicative rulings” process fascinating. I hope you do too.

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