Klestadt & Winters v. Cangelosi

A "sanctions order issued by the district court sitting in bankruptcy, whether supported by the district court's inherent powers or Rule 9011 [of the Federal Rules of Bankruptcy Procedure], [is] not an appealable collateral order."

Silar Advisors, LP, Robert Leeds, Jay Gracin, Sara Pfrommer, and the parties’ counsel appealed the district court’s imposition of sanctions under Rule 9011 of the Federal Rules of Bankruptcy Procedure. The Ninth Circuit found that the district court’s sanctions order is not immediately appealable, and dismissed the appeal for lack of jurisdiction. Although 28 U.S.C. § 158 allows flexibility in accepting appeals from bankruptcy courts, such flexibility is not available under 28 U.S.C. § 1291, which governs acceptance of appeals from district courts. Because the finality rule applicable to civil appeals applies to this case, the Court applied the three-prong test from Cohen v. Beneficial Indus. Loan Corp. to determine whether the sanctions order falls into the “‘small class’ of interlocutory orders that are nevertheless appealable ‘final decisions.’” Such jurisdiction does not apply in this case because the sanctions order “‘neither ended the litigation nor left the court only to execute its judgment’” and “is not completely separate from the merits of the underlying bankruptcy case.” As such, the sanctions order fails the Cohen test and is not an appealable collateral order. DISMISSED.