Council of Appellate Lawyers

In June 2008, after a five-year hiatus, the U.S. Supreme Court returned to the subject of excessive punitive damage awards in Exxon Shipping Co. v. Baker, 128 S. Ct. 2605 (2008).  The Court developed a “guidepost” analysis in 1996 to define the substantive constitutional limitations that the Due Process Clause places on the size of punitive awards.  See BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996).  It applied that analysis in Gore and again in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), to strike down punitive awards as unconstitutionally excessive.

The Court’s next major punitive damages decision, however, did not reach the question whether the award was excessive.  See Philip Morris USA v. Williams, 127 S. Ct. 1057 (2007).  Instead, the Court vacated and remanded because the lower courts had failed to recognize that a jury may not constitutionally punish a defendant for harm to persons who were not parties to the litigation.  The last edition of Appellate Issues included two interesting articles discussing the implications of Philip Morris and the course of the litigation on remand.  As discussed at the end of this article, the Supreme Court recently granted certiorari in Philip Morris again and it will hear argument in late 2008 or early 2009.

Exxon Shipping gave the Court an opportunity to address the size of punitive damage awards again—this time from the perspective of the common law.  Putting aside the narrower constitutional role of defining the “outer limit [of punitive awards] allowed by due process,” the Court held as a matter of federal maritime common law that an award of punitive damages that is greater than the compensatory damages will be excessive in the ordinary case.  128 S. Ct. at 2626, 2633.  This holding may be persuasive to courts reviewing punitive damages for excessiveness under state common law, and it is likely to influence the constitutional excessiveness analysis.

The history of Exxon Shipping
Exxon Shipping was a set of consolidated civil cases in which classes of commercial fisherman, Native Alaskans, and landowners sought to recover damages caused by the 1989 grounding of the Exxon Valdez supertanker and the resulting oil spill.²  The issues that ultimately reached the Supreme Court concerned when punitive damages may be imposed on a company for conduct by its employee, whether punitive damages are available when Congress has specified relevant civil and criminal penalties by statute, and what limits maritime law places on the size of punitive damage awards. 

In the first phase of the trial in Alaska federal court, the jury heard evidence about the tanker captain’s alcoholism, Exxon officials’ knowledge of his condition, and the captain’s drinking on the night of the spill.  The jury was instructed that a corporation is responsible for reckless acts by managerial employees acting in the scope of their employment, and it found both Exxon and the captain reckless and thus potentially liable for punitive damages. 

In a later phase of the trial concerning the amount of punitive damages, the parties offered testimony about the acts and omissions of Exxon management regarding the spill.  The jury was instructed to consider the reprehensibility of defendants’ conduct, their financial condition, the magnitude of the harm, and any mitigating facts, and it awarded $5 billion in punitive damages against Exxon and $5,000 against the captain.  The district court denied Exxon leave to file a late motion for judgment arguing that the common-law rule of maritime punitive damages had been preempted by the water pollution penalties in the Clean Water Act (“CWA”).

On appeal, the Ninth Circuit upheld the jury instruction on recklessness.  It recognized that Exxon’s CWA argument was late but decided not to treat it as waived because preemption had been an issue throughout the litigation and the question was of massive significance.  It rejected that argument on the merits, however.  Finally, the Ninth Circuit remitted the award against Exxon to $2.5 billion on constitutional excessiveness grounds. 

The Supreme Court’s decision
The Supreme Court granted certiorari.  As to recklessness, the Court divided four to four (with Justice Alito recused) regarding whether federal maritime law makes shipowners responsible for the reckless acts of shipmasters.  Thus, the Ninth Circuit’s holding that they are responsible remained in place.  With respect to the CWA, the Court declined to hold that the Ninth Circuit had abused its discretion in considering Exxon’s preemption argument, and it agreed that the argument failed given the CWA’s broad saving clause reserving other damage obligations.

The Court next took up Exxon’s argument that, as a matter of federal maritime common law, the size of the punitive award exceeded the bounds justified by the goals of punitive damages.  The Court began by considering the history of punitive damages, their twin goals of punishing and deterring reckless (or worse) conduct, and various factors that affect the amount of punishment.  For example, the court noted that “[a]ction taken or omitted in order to augment profit represents an enhanced degree of punishable culpability,  as of course does willful or malicious action, taken with a purpose to injure.”  128 S. Ct. at 2622.  In addition, “heavier punitive awards have been thought to be justifiable when wrongdoing is hard to detect . . . when the value of injury and the corresponding compensatory award are small . . . [and] in order to induce private litigation to supplement official enforcement that might fall short if unaided.”  Id.

The Court then reviewed modern state regulation of punitive damages, their limited availability in other countries, and recent studies analyzing punitive awards.  Based on these studies, it concluded that “discretion to award punitive damages has not mass-produced runaway awards,” noting that “by most accounts the median ratio of punitive to compensatory awards has remained at less than 1:1.  Nor do the data substantiate a marked increase in the percentage of cases with punitive awards over the past several decades.”  Id. at 2624. 

Instead, the Court found that “[t]he real problem . . . is the stark unpredictability of punitive awards.”  Id. at 2625.  Statistical studies revealed “a median ratio of punitive to compensatory awards of 0.62:1, but a mean ratio of 2.90:1 and a standard deviation of 13.81”—in other words, “the spread is great” and “outlier cases subject defendants to punitive damages that dwarf the corresponding compensatories.”  Id.  The Court concluded that this problem made it desirable to regulate the common law remedy of punitive damages:

[T]he unpredictability of high punitive awards . . . is in tension with the function of the awards as punitive, just because of the implication of unfairness that an eccentrically high punitive verdict carries . . . .  Thus, a penalty should be reasonably predictable in its severity, so that even Justice Holmes’s “bad man” can look ahead with some ability to know what the stakes are in choosing one course of action or another.  And when the bad man’s counterparts turn up from time to time, the penalty scheme they face ought to threaten them with a fair probability of suffering in like degree when they wreak like damage.³

The Court then considered three potential approaches to judicial review of punitive awards that go beyond traditional “shock the conscience” or “passion and prejudice” tests.  First, some state courts review the awards using multi-factor verbal tests, parts of which echo BMW’s constitutional guideposts.  Yet these judicial review criteria, like the instructions typically given to juries, offer only general guidance for reaching an appropriate penalty.  The Court expressed skepticism that such verbal tests could produce systemic consistency given their failure to do so in the analogous context of federal criminal sentencing, where judicial discretion was eventually abandoned in favor of a system of detailed quantitative guidelines.  Id. at 2627-29. 

Second, the Court considered some states’ practice of setting a hard dollar cap on punitive damages.  It rejected that approach as well, noting the difficulty of settling on a particular figure as appropriate across the board and courts’ inability to index that figure for inflation.  Id. at 2629.  The Court found more promising a third alternative adopted by many states:  “pegging punitive to compensatory damages using a ratio or maximum multiple.”  Id. 

As to the appropriate multiple, the Court rejected a 3:1 ratio as too high for cases involving more than negligent but less than malicious behavior.  Id. at 2631-32.  It also rejected 2:1, noting that federal treble-damage statutes yield a 2:1 ratio but observing that they govern areas far afield from maritime concerns and that their purpose is often to supplement official enforcement by inducing private litigation, which was unnecessary here.  Id. at 2632.

Ultimately, the Court held that 1:1 is a “fair upper limit” in maritime cases “with no exceptional earmarks of blameworthiness within the punishable spectrum (cases like this one, without intentional or malicious conduct, and without behavior driven primarily by desire for gain, for example) and cases (again like this one) without the modest economic harm or odds of detection that have opened the door to higher awards.”  Id. at 2633.  The Court found support for this conclusion in the studies showing a median ratio of less than 1:1, which “reflect[s] what juries and judges have considered reasonable across many hundreds of punitive awards.”  Id. at 2632.  It also noted that the CWA provision doubling the maximum fine for knowing violations of pollution restrictions confirmed that a punitive award greater than 1:1 would be excessive.  Id. at 2634.

Finally, the Court observed that “our explanation of the constitutional upper limit confirms that the 1:1 ratio is not too low.”  Id.  In particular, it pointed to State Farm’s statement that “‘[w]hen compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.’”  Id. (quoting State Farm, 538 U.S. at 425).  In a footnote, the Court explained that this reference to “‘substantial’ takes into account the role of punitive damages to induce legal action when pure compensation may not be enough to encourage suit.”  Id. at 2634 n.28.  It concluded that class actions address this concern and thus the class recovery—not individual awards—were the touchstone for determining substantiality.  Id.  Here, the class recovery of more than $500 million was substantial, so “the constitutional outer limit may well be 1:1.”  Id.

Applying this ratio, the Court took as given the district court’s calculation that the relevant compensatory damages were $507.5 million, and it vacated and remanded for the Ninth Circuit to remit the punitive damages to that amount.  Id.  In its judgment, the Court said that the Ninth Circuit should also address the parties’ dispute about whether the plaintiffs were entitled to interest on the reduced punitive award and, if so, from what date.

Implications of Exxon Shipping
Aside from its obvious impact in the maritime arena, the Exxon Shipping decision is likely to affect the law of punitive damages in at least two ways.  First, it provides a persuasive roadmap for any court to follow in deciding whether and how to conduct more searching common law excessiveness review of punitive awards.  Much of the Supreme Court’s reasoning appears applicable to any case in which punitive damages are recoverable under state or federal statutes or decisional law.

When the amount of punitive damages has been limited by statute, however, Exxon Shipping may not support more restrictive common law limits.  In response to Justice Stevens’ argument in dissent that those limits should be left to Congress, the Court noted that maritime law is “a common law landscape largely of our own making.”  128 S. Ct. at 2630 n.21.  Thus, “we may not slough off our responsibility for common law remedies because Congress has not made a first move,” though of course “Congress retains superior authority” to revise “a judicially derived standard.”  Id.  When statutory limits are already in place, this justification for judicial regulation of punitive damages loses some force.

Second, Exxon Shipping is likely to influence constitutional excessiveness review of punitive awards.  For example, one theme of the decision is that our “commonly held notion of law,” which “rests on a sense of fairness,” requires a penalty scheme that threatens wrongdoers “with a fair probability of suffering in like degree when they wreak like damage.”  128 S. Ct. at 2627.  Advocates can use this theme to encourage courts applying BMW’s reprehensibility and ratio guideposts to compare the size of the award at issue to punitive awards upheld or reduced in other cases involving similar conduct. 

In addition, the Court’s analysis of the appropriate ratio is likely to be imported into the constitutional context because it employs many of the same variables that courts consider in applying the constitutional excessiveness guideposts.  Thus, 1:1 may become the default constitutional maximum in cases of reckless conduct “with no earmarks of exceptional blameworthiness”—such as “intentional or malicious conduct” or “dangerous activity carried on for the purpose of increasing a tortfeasor’s financial gain”—unless “modest economic harm or odds of detection . . . open[] the door to higher awards.”⁴  Moreover, the Court made clear that the criterion of “substantial” versus “modest” economic damages simply “takes into account the role of punitive damages to induce legal action when pure compensation may not be enough to encourage suit.”  Exxon Shipping, 128 S. Ct. at 2634 n.28.  When other mechanisms—such as class actions—are available to encourage suit, modest awards of economic damages to individual plaintiffs are unlikely to support a punitive award exceeding the 1:1 ratio.  Id.

Finally, while Exxon Shipping did not expressly address “the constitutional significance of the unpredictability of high punitive awards,” 128 S. Ct. at 2627, its reasoning suggests that unpredictability also raises constitutional concerns.  Exxon Shipping decided that unpredictability should not be tolerated because it is in tension with the goals of knowing the stakes when choosing a particular course of action and imposing like punishment for like damage.  Id.  In other cases, the Court has indicated that fair notice and similar treatment of similarly situated persons are important factors in due process analysis.⁵  Thus, Exxon Shipping’s reasoning regarding unpredictability could easily be used to support an increased focus on the ratio guidepost in conducting constitutional excessiveness review.  As the Court observed, “eliminating unpredictable outlying punitive awards . . . will probably have to take the form . . . of quantified limits” rather than “verbal formulations.”   Id. at 2628-29.

Coming up next: Philip Morris (again)
The Court’s next opportunity to address punitive damages will come when it revisits the Philip Morris case in the coming months.  Because the Court has limited its grant of certiorari to procedural issues, however, the next Philip Morris decision is unlikely to shed additional light on constitutional excessiveness review of punitive awards.
On remand following the U.S. Supreme Court’s original decision in Philip Morris, the Oregon Supreme Court held that the trial court did not err in failing to give Philip Morris’s proposed jury instruction on harm to non-parties because it was not “clear and correct in all respects” as required by Oregon law.  Williams v. Philip Morris Inc., 176 P.3d 1255, 1261 (Or. 2008).  For example, the court held that even if the instruction correctly articulated the due process standard regarding harm to non-parties, it erroneously suggested that the jury had discretion whether to consider Oregon’s statutory factors for determining punitive damages, and it misstated the statutory factor regarding profitability.  Id. at 1262-63. 

Philip Morris filed another certiorari petition (No. 07-1216), arguing that the Oregon Supreme Court did not follow the U.S. Supreme Court’s mandate, and that the preservation rule it invoked is neither firmly established nor regularly followed and thus cannot provide an independent and adequate state-law ground for the judgment.  At minimum, Philip Morris argued, the U.S. Supreme Court should decide the second question presented by its prior certiorari petition but not reached in the original decision: whether the $79.5 million award of punitive damages (which is 97 times the compensatory damages) is unconstitutionally excessive.  When the Court granted certiorari, however, it excluded this second question.  Thus, the Court’s next Philip Morris decision probably will not have a significant impact on the law of punitive damages.

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¹Brett Busby is a partner in the appellate practice group of Bracewell & Giuliani LLP in Houston, Texas.  He has briefed cases and presented oral argument in the U.S. Supreme Court and numerous federal and state appellate courts, and his specialties include punitive damages and crafting the jury charge.  Brett can be reached at (713) 221-1160 or brett.busby@bgllp.com.  For more information, visit www.bgllp.com/appellate.

²This summary of the facts and lower court proceedings is taken from the Supreme Court’s opinion.  See Exxon Shipping, 128 S. Ct. at 2613-14.

³128 S. Ct. at 2627 (citations omitted).

⁴Exxon Shipping, 128 S. Ct. at 2631, 2633; cf. State Farm, 538 U.S. at 419 (considering whether conduct was malicious or threatened physical danger in applying reprehensibility guidepost); id. at 425 (considering whether injury is hard to detect or caused small economic damages in applying ratio guidepost).

⁵Cf. United States v. Williams, 128 S. Ct. 1830, 1845 (2008) (“A conviction fails to comport with due process if the statute under which it is obtained fails to provide a person of ordinary intelligence fair notice of what is prohibited, or is so standardless that it authorizes or encourages seriously discriminatory enforcement.”); State Farm, 538 U.S. at 417 (due process requires “that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose”); Lyng v. Castillo, 477 U.S. 635, 636 & n.2 (1986) (applying “guarantee of equal treatment in the Due Process Clause”).

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The first lesson in persuasive legal writing is “know your audience.”  When drafting a legal brief to an appellate court, maybe you envision the judge methodically pouring over the niceties and nuances of your prose.  But in many appellate courts a law clerk or other staff member takes the first crack at your brief.  Below are a few notes from a former federal appellate law clerk and current appellate court staff attorney that might broaden your influence with the judge by communicating through her staff.

Study memos and bench memos

            The great majority of appellate courts assign study memos or bench memos to law clerks and staff attorneys.  Sometimes a law clerk’s review of your brief will only result in a preliminary summary of the dispute.  But more often than not, courts require staff to compile a comprehensive analysis – including a recommendation.  A law clerk’s memo may be the first words a judge reads about your case.  As a result, you want the law clerk’s memo to parrot your writing as much as possible.

            For example, if the study memo calls for a one-sentence presentation of each issue, you have a much better chance of a law clerk adopting your characterization of the issue if you frame it in one sentence – rather than as a deep issue.  Similarly, study memos may require a separate section on error preservation or jurisdiction.  The appellate advocate who includes a discrete subsection on error preservation is far more helpful to court staff than an advocate who argues preservation sporadically throughout the brief.

           With regard to substantive law, a humble advocate will sacrifice a few pages educating the reader.  Most staffers don’t have a working knowledge of off-shore maritime law or the scope of regulatory power over oil and gas leases.  While your expertise makes you fluent, an esoteric brief serves only your ego.  If, due to mastery of a topic, you write as though everyone else is on your level, you risk clear communication, and by extension you risk persuasion.  That said, it is often impossible to avoid jargon and vital technicalities in a byzantine dispute.  Conveying meaning with clarity in those cases is the art of appellate advocacy.  At minimum, include a footnote or citation to a reputable secondary source, pointing a law clerk to a treatise or digest so he can get up to speed.

Telling your story

            The statement of facts is arguably the most important part of your brief.  The judges probably know the law, but they are complete strangers to the facts, making it particularly important to convey a comprehensive and persuasive narrative.  One pitfall stems from the fact that you’ve been living with the case a long time.  It’s easy to omit facts you’ve long since taken for granted.  Have a lawyer who is unfamiliar with the case read your brief before you file it.
           
            While your statement of the facts persuades through telling your story, keep an eye out for over-zealous advocacy.  In particular, the statement of the case traditionally conveys procedural history.  Insulting opposing counsel or injecting superlatives when the reader expects an objective recitation of the procedural background only undermines your credibility.  Judges quickly recognize and disfavor ad hominem attacks and over-broad claims unsupported by the record; although less attuned, law clerks sense it too.  Objective representation of law and fact is far more persuasive to both audiences.    

            Finally, think visually.  Buttress your narrative by saying it twice, in two forms.

• In an alter ego case, or dispute including various parent, subsidiary, affiliate entities – include a diagram connecting the corporate cousins.

• In an easement dispute or condemnation appeal, include a map.

• In a probate contest, include a family tree.

• In a specific jurisdiction debate, include a chronology of defendant’s contacts.

           You say more in a one-page diagram than four pages of rambling prose.  I’ve seen judges try to persuade colleagues with crude diagrams of their own making.  Better to have a judge lift up your diagram than anyone else’s.  

The record, the research and the appendix

            The Record

           As a rule of thumb, include record cites often and with precision.  Law clerks are routinely admonished to never stray outside the record.  If you state a “fact” without a record reference, you risk losing that fact in the law clerk’s study memo or bench memo.  Also, record references ought to be precise.  Several clerks express frustration at references like the following:  (CR 154, Exhibit B).  When Exhibit B is 79 pages, a pinpoint cite to an exact bates page within the exhibit is highly valued.   

           Consider telling the court what is not in the record.  The court expects counsel to support all factual claims with record references.  It’s an added bonus to read “the trial court’s judgment is nowhere in the appellate record.”  I’ve scoured voluminous records looking for documents that weren’t there.  Sometimes, omitted documents are outcome determinative.   

           Finally, don’t forget how technology facilitates the task of tying your case to the record.  Your judge may be sixty-four, but his law clerk is closer to twenty-four.  Electronic briefs that provide computerized links to the record delight law clerks.  When a brief says: “The joint agreement was signed by all parties. (CR at 403),” if a law clerk can instantly pull up the joint agreement on his computer by clicking “403,” he is thankful for the time saved and impressed with your techno-savvy.  Warning: metadata (data about data) often attends electronic filings.  Microsoft Office, for example, includes metadata beyond printable content, including the original author’s name, the creation date of the document, and the amount of time spent editing it.  Unintentional disclosure of such information can be awkward or even raise confidentiality and malpractice concerns.  

The Research

            Run-of-the-mill research (i.e., case law and statutes) are strong suits for law clerks.  Even if you imperfectly cite a case, the clerk can pull it up electronically.  But sloppy citation is not suggested.  If a law clerk knows anything on his first day on the job, it’s the Blue Book.  You win instant credibility if you adhere to the Blue Book’s strictures -- the more arcane, the better.  Mis-citing the Third Circuit, for example, by using “3rd Cir.” rather than “3d Cir.” miffs many ex-law review editors.

           While you may think it irrelevant, courts often want to know how other states have ruled.  If you have an issue of first impression, tell the court how the federal courts and the other states have decided the issue.  Not infrequently, judges assign 50-state surveys to court staff.  If your briefing already includes a survey, law clerks inevitably start with your cases rather than from scratch. 

           For statutory interpretation cases, courts often examine legislative history (even if they don’t say so in the opinion).  Researching legislative history requires hours in a state capitol library listening to committee tapes or reviewing transcripts.  By including that research in your brief, you ensure your brief will be at the top of the stack when the law clerk prepares his memo.    

           Finally, most law clerks research legal issues independent of the authorities listed in the briefing.  Err on the side of including those authorities that might be viewed as adverse.  Your credibility is at risk otherwise.

The Appendix

            The appendix can be a clerk’s best friend.  Depending on local appellate rules, err on the side of including key documents:  the insurance policy in a coverage dispute; the will in a probate matter; the service papers in a default judgment challenge.  Many times, appeals turn on a statute that has since been amended or repealed.  Clerks fret about finding the precise statutory language as it existed prior to amendment.  If relatively short, include it in the appendix.  That said, do not over-clutter with case law.  Most clerks have access and are adept at electronic case law research.  Appending twenty-three cases that arguably affect your claims is not helpful.

            Before you write one word in a brief to an appellate court, consider that your task might be more difficult than you think: instead of one target audience, you have two.  An adroit appellate advocate speaks to both.

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¹McKay Cunningham is a staff attorney at the Texas Supreme Court.  After clerking at the Eleventh Circuit Federal Court of Appeals he practiced litigation and appellate law for three years with Rose Walker LLP in Dallas, Texas. Contact at McKay.Cunningham@courts.state.tx.us or (512-463-7125). 

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Making Your Case: The Art of Persuading Judges by Antonin Scalia and Bryan A. Garner (Thomson-West 2008).

Reflecting on his years as an appellate lawyer, Justice Robert H. Jackson of the United States Supreme Court wrote:
“I used to say that, as Solicitor General, I made three arguments of every case. First came the one that I planned--as I thought, logical, coherent, complete. Second was the one actually presented--interrupted, incoherent, disjointed, disappointing. The third was the utterly devastating argument that I thought of after going to bed that night.”²

Every appellate attorney dreams of making the devastating oral argument or writing the perfect brief, and there is no shortage of books, articles, and continuing legal education programs which assure the attorney that it is possible.
The book under review is the latest addition to the how-to appellate literature. It is briskly written, informative and entertaining. Its stated purpose is to take the advice on rhetoric offered by the likes of Aristotle, Cicero, and Quintilian, and update it for the modern lawyer. The fact that it is co-authored by a sitting Justice of the United States Supreme Court guarantees the attention it has received.

Making Your Case offers up much of the advice an appellate attorney has heard before: know the record thoroughly, answer a judge’s question when it is asked, dress for the courtroom and not for the local tavern. But even the experienced advocate can benefit from the reminders.

Among the book’s many recommendations and cautions I cite three. First, the twofold importance of the appellant’s reply brief: it can set the agenda for the oral argument, and, as the authors note, there are judges who read the reply brief first. While the book emphasizes the importance of using the reply brief to answer the appellee’s arguments while keeping the appellant’s claims in the forefront, I thought it omits one use that actually helps to shape the later oral argument: identifying those critical facts or matters of law that the appellee does not dispute or implicitly concedes.

Second, while the authors note the role and importance of rebuttal at oral argument, I think they might have drawn attention to Justice Jackson’s caution: “One who returns to his feet exposes himself to an accumulation of questions. Cases have been lost that, before counsel undertook a long rebuttal, appeared to be won.”³

Third, it cannot be repeated too often that an attorney must be familiar with the rules of the court in which the case will be heard. For example, my state, New York, has four intermediate appellate courts. Each has its own rules of practice so that the procedure for requesting oral argument in one is not necessarily the same procedure for requesting it in another. More than one New York attorney has come to court primed for oral argument only to learn on the call of the calendar that his case is marked ”submitted” because he failed to follow that court’s rule for requesting oral argument. The lessons one takes from this book about oral argument are of no use if one, even inadvertently, waives oral argument.

For me the book has one major disappointment. There is less in the book of Justice Scalia--less of the judicial point of view--than I had hoped, or one would assume from the fact that his name is on the cover. He does plainly disagree with his co-author on two stylistic matters: he rejects Garner’s recommendation that case citations should be in footnotes and not in the body of the brief (I agree with Justice Scalia), and he disagrees with Garner’s view that contractions can be used in a legal brief (here, too, I agree with Justice Scalia).

But absent is the judicial point of view. It is one thing to write, as the authors do, that the skepticism many lawyers have about the effect of oral argument on the outcome of a case “has proved false in every study of judicial behavior we know.” It is another matter entirely to hear from Justice Scalia his personal views on oral argument: has oral argument ever changed his mind or the outcome of a Supreme Court case; what in his experience distinguishes the outstanding appellate advocate from the mediocre one; how does an attorney argue before an ideologically divided court. All of these questions, and many more, Justice Scalia could have addressed without identifying particular Supreme Court cases or particular lawyers, and without breaching the confidentiality of the Court’s deliberations. With all the books, articles, and continuing legal education programs on appellate advocacy, I purchased this book with the expectation that Justice Scalia would share the personal insights gleaned from hearing hundreds of oral arguments in the nation’s highest court. Those insights are sorely missing.

But if one approaches the book with the understanding that those judicial insights are absent, it is a good investment: briskly written, concise yet thorough, a valuable and entertaining tool for the novice and the experienced advocate.  

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¹ Norman A. Olch is a member of the Executive Committee of the Council of Appellate Lawyers, and maintains an appellate practice in New York City representing clients in civil and criminal appeals in federal and state courts. From 2003 to 2006 he was chair of the appellate courts committee of the New York Bar Association.

² Jackson, R.H., Advocacy Before the United States Supreme Court, 37 Cornell L.Q. 1 (1951), reprinted in 5 J. App. Prac. & and Process 219, 225 (2003).

³ 5J. App. Prac. & and Process at 228.

The 2005 Bankruptcy Code Amendments

In 2005, as a part of the Bankruptcy Abuse and Consumer Protect Act of 2005 (“BACPA”), Congress amended section 158(d) (the jurisdictional statute for bankruptcy appeals brought in the court of appeals) to provide for a discretionary direct appeal from the bankruptcy court to the Circuit Court of Appeals.  This new provision took effect 180 days after enactment (October 17, 2005) and applies only to bankruptcy cases filed after on or after October 17, 2005.  BACPA, § 1501(a); In re McKinney, 457 F.3d 623, 624 (7th Cir. 2006) (dismissing attempted direct appeal under BACPA because the amendments do not apply “to bankruptcy proceedings filed before the effective date of the provision, which was October 17, 2005”); In re Blumeyer, No. 4:06CV1681 CDP, 2007 U.S. Dist. LEXIS 5037, at *4 (Bankr. E.D. Mo. Jan. 24, 2007) (same); In re Berman, 344 B.R. 612, 615 (B.A.P. 9th Cir. 2006) (same). 

One of the principal reasons for this change was “widespread unhappiness with the paucity of settled bankruptcy-law precedent.”  Weber v. United States Trustee, 484 F.3d 154, 158 (2d Cir. April 13, 2007).  Congress also enacted the direct appeal provision because (i) of “the time and cost factors attendant to the present appellate system,” and (ii) “decisions rendered by a district court as well as a bankruptcy appellate panel are generally not binding and lack stare decisis value.”  H.R. Rep. 109-31, at p. 148 (House Judiciary Committee Report by Rep. Sensenbrenner) (April 18, 2005); see also Weber, 484 F.3d at 158-59 (stating direct-appeal provision designed to resolve legal – not fact-intensive – questions and that “Congress hoped that [this provision] would permit us to resolve controlling legal questions expeditiously and might foster the development of coherent bankruptcy-law precedent”).

Under 28 U.S.C. § 158(d)(2)(A), the Circuit Court has jurisdiction over appeals “described in the first sentence of subsection (a) if the bankruptcy court, the district court, or the bankruptcy appellate panel” or the parties jointly certify that (i) the judgment “involves a question of law as to which there is no controlling decision of the court of appeals of the circuit or of the United States Supreme Court, or involves a matter of public importance,” (ii) the judgment “involves a question of law requiring resolution of conflicting decisions,” or (iii) “an immediate appeal [would] . . .  materially advance the progress of the case or proceeding in which the appeal is taken.”  28 U.S.C. 158(d)(2)(A)(i)-(iii).  Only one of the three certification requirements must be met for the lower court to certify a direct appeal to the court of appeals.

The bankruptcy court, district court, or Bankruptcy Appellate Panel “shall” make the certification if (i) on its own or on a party’s motion the court determines that any of the above circumstances are satisfied, or (ii) the court receives a request by a majority of appellants and majority of appellees to make the certification.  Thus, the lower courts have no discretion to decline to certify an appeal if one of the certification requirements is satisfied or a majority of appellants and a majority of appellees agree that certification is appropriate.  A party seeking certification under this provision must file such a motion within 60 days of the judgment.  28 U.S.C. § 158(d)(2)(E).  The notice of appeal, however, is due within 10 days – not 60 days.  See Fed. R. Bankr. P. 8002; See In re Virissimo, 332 B.R. 208, 208 n.1 (Bankr. D. Nev. 2005) (certification without perfection of appeal does not allow a party to obtain direct-appeal review by the circuit court); Interim Rule 8001(f), Committee Note (noting that a notice of appeal is required in direct appeals of bankruptcy court orders).  An appeal under section 158(d) “does not stay any proceeding of the bankruptcy court, the district court, or the bankruptcy appellate panel from which the appeal is taken, unless the respective [court] . . . issues a stay of such proceeding pending the appeal.”  28 U.S.C. § 158(d)(2)(D).
 
Review at the Circuit Court is discretionary.  28 U.S.C. § 158(d)(2)(A).  To obtain review direct appellate review, the appellant must file a petition for permission to appeal in the court of appeals under Federal Rule of Appellate Procedure 5.  BACPA, § 1233(b)(3).  That petition must – in addition to complying with Rule 5 –  (i) “be filed with the circuit clerk not later than 10 days after the certification is entered on the docket of the bankruptcy court, the district court, or the bankruptcy appellate panel from which the appeal is taken; and (ii) have attached a copy of the certification.”  Id., § 1233(b)(4).  Section 158(d)(2) does not create any standards applicable to the appellate court’s decision to dispose of the petition for permission to appeal.    

Procedural Rules

Until final rules are adopted, section 1233(b) of the Act establishes temporary procedural rules for direct appeals to the court of appeals, the majority of which address the application of Federal Rule of Appellate Procedure 5 to direct appeals.  BACPA, Pub. L. No. 109-8, § 1233(b), 119 Stat. 23, 202-04 (uncodified temporary procedural rules).  The Advisory Committee and Committee on Rules of Practice and Procedure issued Interim Rules to provide guidance on various aspects of BACPA, including some parts of the new direct appeal provision, pending adoption under the Rules Enabling Act.  Interim Rules 8001(f) & 8003(d).  The highlights of these interim rules are:

• Under Rule 8001(f)(1), certification by the bankruptcy court is not effective until a notice of appeal is filed.  Because of the “short time limit to file the petition with circuit clerk [10 days], subdivision (f)(1) provides that entry of a certification on the docket does not occur until an effective appeal is taken under Rule 8003(a) or (b).”  Committee Note.
• Rule 8001(f)(2) addresses where the certification is to be made:  If the case is pending in the bankruptcy court, only the bankruptcy court can certify the case for direct appeal.  Likewise, if the case is pending in the district court, only the district court can certify the case for direct appeal.  This rule “adopts a bright-line test for identifying the court in which the matter is pending.”  Committee Note. 
• Rule 8001(f)(2) outlines the procedure for a joint certification by the appellants and appellees, urging parties to use the official form
• Rule 8001(f)(3) sets forth the requirements, in terms of form, contents, service, and filing, for a party’s certification request and any response to that request.
• Rule 8001(f)(4) addresses the court’s power to certify on its “own initiative.”
• Rule 8003(d) “solve[s] the jurisdictional problem that could otherwise ensue when a district court or bankruptcy appellate panel has not granted leave to appeal under 28 U.S.C. § 158(a)(3).”  Committee Note.   Under the rule, if the court of appeals authorizes a direct appeal, that authorization is “deemed to satisfy the requirement for leave to appeal.”  

 

Decisions Under the New Direct Appeal Provision

Cases Certified for Direct Appeal

Nuvell Credit Co., LLC v. Dean (In re Dean), No. 07-14163, 2008 U.S. App. LEXIS 16625 (11th Cir. Aug. 7, 2008):  The Eleventh Circuit agreed to accept a direct appeal on the issue of whether a claim that comes under the “hanging paragraph” of Section 1325(a)(9) of the Bankruptcy Code is an allowed secured claim, permitting payment in full, plus postpetition interest to the creditor. 

Drive Fin. Serv., L.P. v. Jordan, 521 F.3d 343 (5th Cir. 2008):  The Fifth Circuit allowed direct review of another “hanging paragraph” issue and resolved the legal question of whether BAPCPA’s “hanging paragraph” superseded the United State’s Supreme Court’s cramdown decision in Till v. SCS Credit Corp., 541 U.S. 465 (2004)

Ad Hoc Group of Timber Noteholders v. Pacific Lumber Co. (In re Scotia Pacific Co. LLC), 508 F.3d 214 (5th Cir. 2007):  The appellee asked the Fifth Circuit to revisit the motion panel’s decision to grant direct-appeal review because the case was pending in the bankruptcy court when the district court certified the case for direct appeal.  The court agreed that the bankruptcy court – not the district court – should have certified the case for direct appeal because the appeal had not yet been docketed in the district court.  Nevertheless, the Fifth Circuit conclude that this was not a jurisdictional defect and therefore “this procedural glitch” did not deprive the court of jurisdiction:  “[T]his error is technical in nature, does not affect the substantial rights of the parties, and prompts us to exercise our discretion in favor of proceeding to the merits of this appeal.”  508 F.3d at 220.

In re Salazar, 339 B.R. 622 (Bank. S.D. Tex. 2006):  The bankruptcy court was presented with a novel Chapter 13 question – whether “ineligible” debtors who did not first seek credit counseling (as the revised Bankruptcy Code requires) are entitled to the protection of the Bankruptcy Code’s automatic-stay provision – and on its own certified the case for direct appeal to the Fifth Circuit.  The bankruptcy court focused on the importance of the questions presented and the lack of authority on that question in the Fifth Circuit in opting to certify a direct appeal under section 158(d)(2)(A)(i):

Pursuant to 28 U.S.C. § 158(d)(2), the Court certifies this decision for direct appeal to the United States Court of Appeals for the Fifth Circuit. Based on a review of case law in this and other jurisdictions, as well as a consideration of the importance of this matter for many consumer debtors and their creditors, the Court believes that direct appeal of the present order is appropriate under § 158(d)(2)(A)(i). . . .

Id. at 634.  The bankruptcy court, however, cautioned the parties that “certification in no way alters a party's ordinary requirements in filing a notice of appeal” and also reminded the parties that a supplement, containing a short statement of the basis of the bankruptcy court’s certification may be appropriate.  Id.  The Fifth Circuit subsequently denied the petition for permission to appeal as moot because “Petitioners consented to an Agreed Order essentially settling the dispute.”  In re Salazar, 193 Fed. Appx. 281, 283 (5th Cir. 2006).

In re Jones, 352 B.R. 813 (Bankr. S.D. Tex. 2006):  The bankruptcy court, on its own initiative, certified for direct appeal to the Fifth Circuit its order dismissing debtors’ bankruptcy petition for failure to complete a credit counseling course within 180 before filing for bankruptcy, acknowledging that its decision “creates a split between bankruptcy judges in this district.”  352 B.R. at 814. 

In re Elmendorf, 345 B.R. 486 (Bankr. S.D.N.Y. 2006):  The bankruptcy court certified its order striking – but not dismissing – debtors’ Chapter 7 and 13 bankruptcy cases based on their failure to obtain credit counseling before seeking bankruptcy protection, as required by BACPA.  Because the bankruptcy court’s decision was “at odds” with the results reached in other bankruptcy courts within the Second Circuit, the bankruptcy court “determined that it is appropriate to certify these questions to the Second Circuit Court of Appeals pursuant to 28 U.S.C. § 158(d)(2)(A)(ii) and Interim Fed. R. Bankr. R. 8001(f)(4).”  345 B.R. at 505.  The bankruptcy trustee, however, declined the invitation to appeal the bankruptcy court’s refusal to dismiss directly to the Second Circuit and instead sought review from the district court in the first instance.  Adams v. Finlay, 06 Civ. 6039 (CLB), 2006 U.S. Dist. LEXIS 81591, at * 3 (S.D.N.Y. Nov. 3, 2006) (“The Bankruptcy Court certified three related questions directly to the Court of Appeals for the Second Circuit, but the Trustee did not pursue the certification, seeking instead appellate review in the first instance in the District Court.”) (appeal dismissed for lack of standing).

In re Virissimo, 332 B.R. 208 (Bankr. D. Nev. 2005):  The bankruptcy court, again on its own, certified the following question to the Ninth Circuit:  Do the 2005 revisions to the Bankruptcy Code, which limit the amount of the homestead available to those who have owned their homestead less than 1215 days, apply to Nevada debtors?  332 B.R. at 209:

This court fully recognizes and appreciates the work done by, and expertise of, the bankruptcy appellate panel and the district court in hearing and deciding appeals from the bankruptcy court.   This court is also fully cognizant of the tremendous workload of the Ninth Circuit Court of Appeals.   However, the issue presented in this case is one which will recur in Nevada as well as other districts in the Ninth Circuit and will impact the administration of bankruptcy estates until the issue is ultimately decided.   As this involves the statutory construction of a hotly contested provision of BACPA and is a matter of first impression, there is no question that the Court of Appeals will ultimately be required to determine the question.   Hence not merely one, but all three, of the criteria specified in § 158 exist and justify an immediate appeal in this case.

Id.  

Although the use of section 158(d) has thus far been limited to certification of issues arising under the recent changes to the Bankruptcy Code (such as the credit counseling requirements), as time passes, parties will likely use this provision for direct appeals of long-standing, unresolved questions and other important bankruptcy issues.

                       
Decisions Declining to Certify for Direct Appeal

In re Davis, 512 F.3d 856 (6th Cir. 2008):    The Sixth Circuit declined to accept a certified appeal on whether – in the Chapter 13 context – a vehicle ownership expense is an allowable expense if the debtor has no loan or lease payment.  The court noted that “material advancement” was not a factor and that the “extent of the conflict is unclear.”  Therefore, the court declined to
“exercise [its] discretion” to decide the appeal.  The court also noted at least two procedural infirmities:  (i) the failure to attach the bankruptcy court’s order to the petition as required under Federal Rule of Appellate Procedure 5; and (ii) the failure to file a notice of appeal to the district court or bankruptcy appellate panel as required by Interim Rule 8001(f)(1). 

Weber v. United States Tr., 484 F.3d 154 (2d Cir. 2007):  Despite certification by the bankruptcy court, the Second Circuit declined to exercise its discretionary jurisdiction to decide whether an increase in the New York homestead exemption should apply retroactively because the Court did not “perceive a conflict of such a nature that creates uncertainty in the bankruptcy courts.”  Id. at 161 (observing that “all three of the courts within this circuit to have considered the question have held that New York’s homestead exemption applies retroactively”).  This decision contains an extensive discussion of the legislative history and purpose of the direct-appeal provision and provided the following guidance of when the Second Circuit would be most likely to accept a direct appeal: 

We will be most likely to exercise our discretion to permit a direct appeal where there is uncertainty in the bankruptcy courts (either due to the absence of a controlling legal decision or because conflicting decisions have created confusion) or where we find it patently obvious that the bankruptcy court’s decision is either manifestly correct or incorrect, as in such cases we benefit less from the case’s prior consideration in the district and we are more likely to render a decision expeditiously, thereby advancing the progress of the case.  On the other hand, we will be reluctant to accept cases for direct appeal when we think that percolation through the district court would cast more light on the issue and facilitate a wise and well-informed decision.

484 F.3d at 161.

In re Berman, No. 04-45436, 2007 Bankr. LEXIS 65 (Bankr. D. Mass. Jan. 5, 2007):  The bankruptcy court denied a request to certify because “the Court does not find that any of the circumstances enumerated in clause (i), (ii), or (iii) exist here.”

In re Fields, Case No. 05-60595/JHW, 2006 Bankr. LEXIS 4090 (Bankr. D. N.J. Oct. 24, 2006):  The bankruptcy court declined to certify a question related to the violation of the automatic-stay provision because:  “The question of law involved in this case is directly answered by the statutory provisions cited above.  I am not aware of conflicting decisions regarding the termination of the automatic stay by operation of law following abandonment of property by the trustee.  The material advancement of the progress of the case is not implicated.” 

In re Waczewski, Case No. 6:06bk-00620-KSJ, 2006 Bankr. LEXIS 1234 (Bankr. M.D. Fla. May 5, 2006):  Although noting that section 158(d)(2) did not apply, the court nevertheless addressed the availability of direct appeal and concluded that it would not certify its order for direct appeal, noting “a party seeking a direct appeal certainly must show something more than that a direct appeal would expedite the resolution of the appellate issues.”

In re Marrama, 345 B.R. 458 (Bankr. D. Mass. 2006):  The bankruptcy court refused to certify its order dismissing a debtor’s Chapter 13 case because he had an already-pending Chapter 7 case in which he was denied a discharge.  The bankruptcy court analyzed the 158(d)(2) factors as follows:

I granted the motion to dismiss because I determined that the Debtor could not meet the eligibility requirements. I did not address what constitutes a contingent debt because none of the debts which I used in my calculation were debts that the Debtor described as contingent. It appears that the Debtor's issue with the decision is that I could not look to the amounts of the outstanding  nondischargeable debts set forth in his pending Chapter 7. While there is no controlling case law in this circuit, the case law above reflects that there is no significant dispute regarding the applicable standard for looking at pending cases. This is not an issue of significant proportion or one that is certain to arise repeatedly. Therefore, I cannot conclude that the Debtor has met the first criteria. As for the second, I am not convinced that the purpose behind certification is to enable a litigant to obtain a binding decision from a circuit court on every adverse ruling from this court. As for the third prong, I cannot determine that a ruling from the First Circuit, as opposed to an appeal to the BAP or the district court would materially advance this appeal. Accordingly, I will not certify the matter to the First Circuit.

345 B.R. at 474.

Simon & Schuster, Inc. v. Adv. Mktg. Serv., Inc., 360 B.R. 429 (Bankr. D. Del. Feb. 27, 2007):  This decision in explores an issue that can arise when the underlying order is interlocutory in nature and the only way to effectively prosecute an appeal is to request certification under section 158(d)(2) and file a motion for leave to appeal under section 158(a)(3) and Rule 8003.  That is precisely what Simon & Shuster did here in seeking review of an order denying its motion for a temporary restraining order.  360 B.R. at 431 (noting the simultaneous filing of a notice of appeal, motion for leave to appeal, and request for certification).  The motion for leave to appeal was transmitted to the district court for disposition there.  The request for certification remained pending in the bankruptcy court.  Id. at * 9 (stating that under Interim Rule 8001(f)(2), a matter remains pending in the bankruptcy  until the district court grants leave to appeal under section 158(a)(3)).  The bankruptcy court ultimately deferred consideration of the request for direct appeal certification so that the district court could decide whether (i) an interlocutory appeal should be permitted under section 158(a)(3), and (ii) direct appeal was available.  Id. at 434-35. 

The court reached this conclusion apparently based on its assessment that standards for both a 158(a)(3) motion and 158(d)(2) certification are “virtually identical.”  Id. at 434  (emphasis in original); id. at 434 (requiring the bankruptcy court “to perform the same analysis generally reserved for the district court”).  That is, there is no reason for the bankruptcy court to step on the district court’s toes and decide the certification question before the district court has that opportunity (after first granting leave to appeal).  Id. at 434 (asserting that ruling otherwise “is contrary to the hierarchy of the court system”).

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¹ Ben L. Mesches, Haynes and Boone, L.L.P., 901 Main Street, Suite 3100, Dallas, Texas 75202; 214-651-5234, (Fax) 214-651-5940 (www.haynesboone.com)

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