Monday, June 20, 2022

Preservation of Error, Civil Plain Error Exception, and Bankruptcy

"The recent Middle District of Florida decision in In re Nabavi, 2014 WL 3939595 (D.C. M.D. Florida, August 12, 2014) made reference to the 11th Circuit Court of Appeal’s longtime adoption of the "civil plain error rule" - an exception to the general rule that an appellate court will not consider an issue not raised in the lower court.  In the Nabavi  appeal to the District Court from the Bankruptcy Court, the creditor raised arguments which it had failed to bring before the Bankruptcy Court. The District Court held that the creditor waived its right to bring his arguments on appeal as the “civil plain error rule” exception did not apply.

Preservation of Error 

The U.S Supreme Court held in Hormel v. Helvering, 312 U.S. 552 (1941) that “[o]rdinarily an appellate court does not give consideration to issues not raised below.”  In Hormel, Justice Black explained that
[O]ur procedure scheme contemplates that parties shall come to issue in the trial forum vested with authority to determine questions of facts. This is essential in order that parties may have the opportunity to offer all the evidence they believe relevant to the issues which the trial tribunal is alone competent to decide; it is equally essential in order that litigants may not be surprised on appeal by final decision there of issues upon which they have had not opportunity to introduce evidence.
According, the 11th Circuit held in Narey v. Dean, 32 F.3d 1521 (11th Cir. 1994)  that "appellate courts generally will not consider an issue or theory that was not raised in the district court."  

Exception: Civil Plain Error Rule

But the Supreme Court in Hormel held that its general principle is not unyielding and “[t]here may always be exceptional cases or particular circumstances which will prompt a reviewing or appellate court, where injustice might otherwise result, to consider questions of law which were neither pressed nor passed upon by the court or administrative agency below.” Justice Black added that
Rules of practice and procedure are devised to promote the ends of justice, not to defeat them. A rigid and undeviating judicially declared practice under which courts of review would invariably and under all circumstances decline to consider all questions which had not previously been specifically urged would be out of harmony with this policy. Orderly rules of procedure do not require sacrifice of the rules of fundamental justice

11th Circuit 

In the case of In re Lett, 632 F. 3d 1216 (11th Cir. 2011), the 11th Circuit  reviewed its prior adoption of Hormel's “civil plain error rule” and its exceptions.  The 11th Circuit explained that the rule's exception permits consideration of a pure question of law not raised below, if the failure to consider that issue on appeal would result in a "miscarriage of justice."  The In Re Lett Court explained  that a “miscarriage of justice” is a decision or outcome of a legal proceeding that is prejudicial or inconsistent with the substantial rights of a party. Another 11th Circuit case explained that “[a]ny wrong result resting on the erroneous application of legal principles is a miscarriage of justice in some degree.”

The recent case of In re Biscayne Park, LLC, 540 Fed. Appx. 952 (11th Cir. 2013) cited In Re Lett and further explicated the circumstances in which the "plain error rule" will apply. The Court explained that it will consider an issue not raised in the lower courts under five circumstances:

  1. it involves a pure question of law and if refusal to consider it would result in a clear miscarriage of justice
  2. where the appellant raises an objection to an order which he had no opportunity to raise at the lower court level
  3. where the interest of substantial justice is at stake
  4. where the proper resolution is beyond doubt
  5. if the issue presents significant questions of general impact or of great public concern

Bankruptcy Context

The In re Lett Court explained that the “civil plain error rule” is particularly true in the bankruptcy context. The Court stated that “[o]rdinarily an appellate court does not give consideration to issues not raised below” because “bankruptcy cases are to be tried in front of bankruptcy court.”  The Court cited a prior decision that related that it is within the court’s discretion to resolve an issue decided in the bankruptcy court “if the record thoroughly presents the issue”  but “if the record reflects an issue that was presented in a cursory manner and never properly presented to the Bankruptcy Court, the issue is not preserved for appeal.” This decision further explained that “it is not enough that the record provides facts which may permit the resolution of an issue; rather the record must be adequately developed, to the point that the Bankruptcy Court could have passed on the issue …”

Certain Bankruptcy Code Provisions Never Waived?

The author of a 2011 post on Weil Gotshal's "Bankruptcy Blog", wrote that the In re Lett decision suggested that certain provisions of the Bankruptcy Code may never be waived, such as in the context of a chapter 11 confirmation order, even if the party could have raised - but did not raise the argument before the bankruptcy court.  The blog post points out that the In re Lett Court "ultimately concluded that the district court had actually erred in relying on the civil plain error rule in declining to address whether the plain complied with the absolute priority rule" as that the involved confirmation related issue had been preserved for appeal because the requirement of section 1129(b) of the Bankruptcy Code had "sufficiently present[ed] the absolute priority rule in the bankruptcy court as to preserve the issue for review..."  and that the debtor himself had placed the absolute priority rule squarely before the court when he proffered compliance with section 1129(b) and sought confirmation of the chapter 11 plan.


As related in this short video,  preservation of the record can make the difference between life and death in a criminal proceeding.  

Jones Day blog post on In re Lett

Rogers Towers blog post.  (implications of substantial consummation as barrier to appeal)
Attached: Untitled document

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