“Indicative Rulings”: Settling Bankruptcy Disputes While On Appeal — Rule 8008 (In re Millenkamp) (Part 3)

Here is an opinion illustrating how the “indicative rulings” process in Fed.R.Bankr.P. 8008 can work:

Millenkamp Cattle, Inc. v. East Valley Development, LLC (In re Millenkamp Cattle, Inc.), Adv. No. 25-8003, Idaho Bankruptcy Court (decided August 19, 2025).

Facts

Before filing bankruptcy, Debtor enters into two contracts with Defendant for constructing and operating a biogas production facility at Debtor’s dairy.

Each of the two contracts contains a mandatory arbitration provision for resolving disputes.

Arbitration Requests, Denial & Appeal

Numerous disagreements arise, resulting in Debtor’s demand for arbitration against Defendant for breach of the two contracts.

Then, Debtor files bankruptcy, withdraws the arbitration demand, and files this adversary proceeding asserting the same claims. In response, Defendant moves to compel arbitration and seeks relief to assert breach of contract counterclaims against Debtor in the arbitration.

The Bankruptcy Court denies Defendant’s arbitration motion, due to conflicts with underlying purposes of the Bankruptcy Code, including:

overlap between plan confirmation issues (including proposed assumption of the two contracts) and arbitration issues;
potential delay, duplicate proceedings, or collateral estoppel effect; and
the interests of other parties in the bankruptcy, who could not participate in the arbitration.

Defendant asks for leave to appeal to the District Court.

Confirmation of Consensual Plan

Meanwhile, Debtor negotiates a consensual Chapter 11 plan with all stakeholders, including Defendant. Terms include:

instead of paying damages to Defendant from Debtor’s breach of the contracts, Defendant’s damages will be offset against whatever amount Defendant may owe to Debtor.

Given such agreement, the Bankruptcy Court conducts an evidentiary hearing and finds:

Debtor is in default under the two contracts; but
the requirements of § 365(b) are satisfied, permitting Debtor to assume both contracts.

So, the Bankruptcy Court confirms Debtor’s plan and approves assumption of both contracts, subject to the agreement on the treatment of Defendant’s damages–all while Debtor’s motion for leave to appeal is pending.

Motion to Reconsider

Because of plan confirmation, Defendant asks the Bankruptcy Court to:

reconsider and modify its prior order, so that arbitration can proceed;
dismiss Debtors’ adversary complaint with prejudice; and
close the adversary proceeding.

The Bankruptcy Court, in response, applies the “indicative rulings” process described in Fed.R.Bankr.P. 8008 and grant’s Defendant’s request.

Summary of Court’s Analysis

Here is a summary of the Bankruptcy Court’s analysis.

–Jurisdiction: A Predicament and a Rule 8008 Solution

The filing of a notice of appeal confers jurisdiction on the appellate court and divests the trial court of control over those aspects of the case involved in the appeal. Such reality creates a predicament:

absent a stay pending appeal, a bankruptcy court has jurisdiction to proceed on all other matters that it must undertake to implement or enforce the judgment or order—but it may not alter or expand upon the appealed judgment; and
here, granting the motion to reconsider would alter the appealed Order, yet Defendant seeks relief in this Bankruptcy Court rather than moving to dismiss the pending appeal or for other relief in the appellate Court.

Rule 8008 provides a means for addressing the predicament. It says:

“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 if the court where the appeal is pending remands for that purpose; or (4) state that the motion raises a substantial issue.”

So, the Bankruptcy Court declares that, although it “lacks authority to grant the Motion,” it is issuing “this indicative ruling pursuant to Rule 8008(a)” (emphasis is in original).

–Reconsideration of Order

Defendant cites Fed.R.Civ.P. 60(b) (made applicable here by Fed.R.Bankr.P 9024), as grounds for relief, which provides:

“On motion and just terms, the court may relieve a party . . . from a final judgment, order, or proceeding for the following reasons: . . . (5) the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or (6) any other reason that justifies relief.”

Defendant asserts that all issues pertinent to confirmation have been resolved, so the only matters remaining are the non-core, non-bankruptcy issues of (i) Defendant’s counterclaim damages, and (ii) Debtors’ damages (if any) in connection with Debtors’ claims against Defendant. Thus, the impetus for overriding the federal policy in favor of arbitration no longer exists, and reconsideration is warranted.

The Court considers relief under Civil Rule 60(b)(5) and (b)(6) in turn.

–Civil Rule 60(b)(5)

The party seeking reconsideration of an order under Civil Rule 60(b)(5) must demonstrate a significant change in either factual conditions or in law has occurred. Pertinent here, modification is warranted if the change in conditions renders continued enforcement detrimental to the public interest.

Defendant asserts that these changed conditions warrant modification—Debtor’s plan is confirmed, all core bankruptcy issues are resolved, and there is no longer any identifiable conflict with any purpose of the Bankruptcy Code..

Debtor disagrees, arguing that remaining issues are intertwined with a core proceeding—the implementation of Debtors’ confirmed plan—and arbitration would conflict with underlying purposes of the Bankruptcy Code. Debtors:

point to the plan’s provision that the Bankruptcy Court retains jurisdiction to ensure that the plan’s purpose and intent are carried out; and
argue it would be inefficient and wasteful for the parties to resolve the remaining matters through arbitration.

Therefore, according to Debtor, the fundamental circumstances underlying the appealed Order are unchanged.

However, the Bankruptcy Court finds no conflict between permitting the requested arbitration to proceed and any underlying purpose of the Code. That’s because:

the treatment of Defendant’s claim against Debtors, if any, is comprehensively provided for in the confirmed plan and damages are limited to offset; and
so, the remaining issues are incidental to assumption of the two contracts under § 365 and, as such, resolution of those issues does not bear on implementation of the plan or implicate the interests of other parties to the bankruptcy case.

As to the public interest, federal policy favors enforcing valid arbitration agreements.

–Civil Rule 60(b)(6)

The catch-all phrase in Rule 60(b)(6) (“any other reason that justifies relief”) is to be both:

liberally applied to accomplish justice; but
used sparingly as an equitable remedy to prevent manifest injustice in extraordinary circumstances.

Accordingly, a party who moves for relief under Rule 60(b)(6) must demonstrate both injury and circumstances beyond that party’s control, which prevent that party from proceeding with the action in a proper fashion.

Additionally, a Rule 60(b)(6) motion must be based on grounds other than those listed in the preceding clauses.

The changed circumstances in this case, declares the Bankruptcy Court, fall within (b)(5) and, therefore, the Court is not inclined to grant relief under (b)(6).

–Bankruptcy Court’s Indicative Ruling

“For the reasons stated herein, the Court respectfully indicates to the District Court that if it were to remand the case, this Court is inclined to grant the Motion for reconsideration and modify its April 16, 2025, Order.”

“Pursuant to Rule 8008(b),” Defendant “is directed to promptly provide a copy of this Memorandum to the District Court for its consideration and, if it is so inclined, action.”

District Court’s Response

Defendant notifies the District Court of the Bankruptcy Court’s indicative ruling and moves the District Court for this relief:

for a stay of the appeal; and
for a limited remand for the purpose of allowing the Bankruptcy Court to reconsider its Order Denying Arbitration and amend its ruling, in accordance with the Bankruptcy Court’s Indicative Ruling.

In response, the District Court grants Defendant’s motion generally, and specifically (i) grants a limited remand of jurisdiction to the Bankruptcy Court to grant Defendant’s motion for reconsideration and amend its prior Order denying arbitration, and (ii) stays the appeal proceeding until the Bankruptcy Court reconsiders its prior Order.

Back in Bankruptcy Court

After receiving the District Court’s response to its indicative ruling, the Bankruptcy Court enters an order titled, “Order Granting Motion to Reconsider and Amended Order Compelling Arbitration.”

Conclusion

That’s how the “indicative rulings” process in Fed.R.Bankr.P. 8008 can work in the real world.

NOTE: This is the third in a series of four articles on how “indicative rulings” processes work for settlements entered while a ruling is on appeal: under Fed.R.Civ.P. 62.1, Fed.R.Bankr.P. 8008 and Fed.R.App.P. 12.1.

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