Limited Appellate Review Of Bankruptcy Abstention Decisions (Cal-Tex v. LTM): Part 2

This is the second of two articles on abstention in bankruptcy. This article is about appellate review of a decision on bankruptcy abstention.

Appellate review of a bankruptcy abstention rulings is limited:

denial of a mandatory abstention motion can be appealed; but
all other types of abstention rulings cannot be appealed to a circuit court of appeals or to the U.S. Supreme Court.

That’s the conclusion in Cal-Tex Compression Services, L.L.C. v. LTM Consulting, L.L.C., Case No. 25-50854, U.S. Fifth Circuit Court of Appeals (decided June 4. 2026).

Facts

Debtor sues Defendant in a Texas state court, alleging breach of contract, usury, and tortious interference. Defendant counterclaims, asserting breach of contract, fraud, conversion, civil conspiracy, and other state law claims. Defendant also adds third party defendants (“Third Parties”) to the lawsuit.

Then, Debtor files a voluntary Chapter 7 bankruptcy in the Southern District of Texas.

Shortly thereafter, Third Parties file a notice of removal in the bankruptcy court. But since 28 U.S.C. § 1452(a) requires removal to the district court where the state action is pending, the bankruptcy court sua sponte transfers the case to the U.S. District Court for Western Texas.

In the District Court, Defendant moves for abstention and remand to the state court. Defendant argues that abstention is mandatory, under § 1334(c)(2), because the removed case:

involves non-core, state-law claims between nondiverse parties; and
has no independent basis for federal jurisdiction apart from Debtor’s bankruptcy.

The District Court finds that abstention is mandatory and orders remand of the lawsuit to the Texas state court. And an appeal is taken to the U.S. Fifth Circuit Court of Appeals.

No Appellate Jurisdiction—28 U.S.C. § 1334

On appeal, the Fifth Circuit declares that it has no jurisdiction to hear this appeal. Here’s why.

–Bankruptcy Jurisdiction & Abstention

28 U.S.C. § 1334 gives federal courts jurisdiction over bankruptcy proceedings, including removed state-court proceedings. But such jurisdiction is limited, to prevent an overbroad construction of § 1334 sweeping into federal court matters that should be left for state courts to decide.

Also, § 1334 specifies when a district court is to abstain:

§ 1334(c)(1) permits abstention “in the interest of justice, or in the interest of comity with State courts or respect for State law”; whereas
§ 1334(c)(2) requires abstention when its statutory conditions are met.

–Limited Appellate Review

Appellate jurisdiction over abstention rulings is limited: § 1334(d) provides,

“Any decision to abstain or not to abstain made under subsection (c) (other than a decision not to abstain in a proceeding described in subsection (c)(2)) is not reviewable by appeal or otherwise by the court of appeals . . . or by the Supreme Court of the United States.”

The effect of § 1334(d) is that a circuit court of appeals:

may review a district court’s refusal to abstain under the mandatory grounds of § 1334(c)(2); but
may not review a district court’s decision to:
- grant abstention—whether the decision is permissively under § 1334(c)(1) or mandatorily under § 1334(c)(2); or
- not abstain under the permissive grounds of § 1334(c)(1).

–Ruling

In this case, appellate review is barred because, (i) the District Court expressly invoked mandatory abstention, (ii) analyzed the mandatory-abstention requirements, and (iii) concluded that it is required to abstain under § 1334(c)(2).

So, § 1334(d) bars appellate review of such a decision.

Further, appellate jurisdiction cannot be manufactured by recasting an unreviewable abstention order as a due-process challenge.

“Were it otherwise, § 1334(d) would have little work to do: any disappointed litigant could obtain review of an abstention order simply by incanting magic words and constitutionalizing an objection to the proceedings that produced it.”

Conclusion

According to the U.S. Fifth Circuit Court of Appeals in Cal-Tex v. LTM:

no appellate jurisdiction exists over an abstention ruling in either the circuit court of appeals or the U.S. Supreme Court; and
the only exception is for a decision to not abstain (i.e., to retain the case for resolution in bankruptcy) when mandatory abstention grounds are involved.

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