In Re: Capital Contracting Company, Debtor.
Kenneth A. Nathan, Trustee, Appellee. Carl F. Schier PLC, Appellant,
from the United States District Court for the Eastern
District of Michigan at Detroit. No. 2:18-cv-11227-Denise
Page Hood, Chief District Judge.
States Bankruptcy Court for the Eastern District of Michigan
at Detroit; No. 2:14-bk-58920-Mark A. Randon, Judge.
F. Schier, CARL F. SCHIER PLC, Ypsilanti, Michigan, for
S. Sher, JACOB & WEINGARTEN, P.C., Southfield, Michigan,
Before: MOORE, SUTTON, and MURPHY, Circuit Judges.
MURPHY, CIRCUIT JUDGE.
that "jurisdiction" "is a word of many, too
many, meanings," the Supreme Court in recent years has
criticized the cavalier way in which earlier cases invoked
the term. Arbaugh v. Y&H Corp., 546 U.S. 500,
510 (2006) (citation omitted). The Court has sought to
clarify the divide between truly jurisdictional
requirements (those that concern whether a court has the
power to resolve a dispute) and non-jurisdictional
merits requirements (those that concern whether a
party has asserted a valid claim). Id. at 510-12.
The decision in Lexmark International, Inc. v. Static
Control Components, Inc., 572 U.S. 118 (2014)-which
jettisoned the label "prudential standing"-suggests
that the Court has started down the same path for the word
"standing." Id. at 125. In this case, a
bankruptcy court held that a law firm lacked standing to
object to a trustee's final report in a Chapter
7 bankruptcy case, and the district court held that the firm
also lacked standing to appeal under a test tailored
to bankruptcy appeals. Given the post-Lexmark
uncertainty about various standing concepts, we hold that the
firm lacked the one type of standing that Lexmark
undoubtedly does not affect: Article III standing. We affirm
the district court's order dismissing the appeal on that
Schier PLC represented Capital Contracting Co. in a suit
filed by Longhorn Estates, LLC, in Michigan state court. The
litigation did not turn out well for Capital Contracting. It
was hit with over a $5-million judgment and landed in
bankruptcy a month later. Its proceedings under Chapter 7 of
the Bankruptcy Code stayed its litigation against Longhorn
with post-trial motions pending. But that state-court
judgment turned Longhorn into Capital Contracting's
biggest creditor, so Longhorn filed a claim in the bankruptcy
proceedings. When Schier also filed a claim for unpaid legal
fees owed by Capital Contracting, the trustee representing
the estate countered with a malpractice suit against Schier
for its handling of the Longhorn litigation. The trustee and
Schier eventually settled. Schier agreed to pay the estate
$600, 000 and to withdraw its attorney's fees claim; the
trustee released Schier of further malpractice liability. The
bankruptcy court approved this settlement, and Schier
formally withdrew its claim. All's well that ends well.
it seemed. When the trustee filed a final report detailing
the distribution of Capital Contracting's assets, 11
U.S.C. § 704(a)(9), Schier reemerged with an objection.
The firm alleged that Capital Contracting's right to
appeal the state-court judgment in the Longhorn suit
qualified as an "asset" of the estate that the
trustee should have administered or abandoned. Cf. Croft
v. Lowry (In re Croft), 737 F.3d 372, 376-77
(5th Cir. 2013). The bankruptcy court overruled Schier's
objection and approved the final report. It explained that
Schier should have raised this issue by objecting to
Longhorn's claim when Schier had a pending fees request-a
point in time at which Schier remained a "creditor"
with "standing." Because Schier had withdrawn its
claim for attorney's fees, the bankruptcy court
continued, the firm failed to qualify as a "party in
interest" with a "pecuniary interest or stake in
the outcome," and did not "have standing to object
to the trustee's final report and account."
appealed to the district court. The district court dismissed
its appeal on a related but distinct "standing"
ground-that Schier lacked standing to appeal.
"It is well-established law," the district court
reasoned, that "[i]n order to have standing to appeal a
bankruptcy court order, an appellant must have been directly
and adversely affected pecuniarily by the order."
Carl F. Schier, PLC v. Nathan (In re Capital
Contracting Co.), No. 18-11227, 2018 WL 4492240, at *2
(E.D. Mich. Sept. 19, 2018) (internal quotation marks
omitted). This "person-aggrieved" test for appeals,
the district court continued, demands more than Article III
standing. Id. The court concluded that Schier could
not meet that test because its "direct and immediate
interest in the bankruptcy proceeding ceased when" it
withdrew its attorney's fees claim. Id.
case's many "standing"-related issues would
make it worthy of inclusion in a final exam for a
federal-courts class. As a refresher, Article III of the
Constitution delegates the "judicial Power" to the
Supreme Court and any "inferior Courts" that
Congress may create, and it allows these courts to decide
"Cases" or "Controversies." U.S. Const.
art. III, §§ 1-2. For a suit to qualify as a
"case" falling within Article III, the party who
seeks relief must have standing. Steel Co. v. Citizens
for a Better Env't, 523 U.S. 83, 101-04 (1998). This
Article III standing requires a party to have "(1)
suffered an injury in fact, (2) that is fairly traceable to
the challenged conduct of the defendant, and (3) that is
likely to be redressed by a favorable judicial
decision." Spokeo, Inc. v. Robins, 136 S.Ct.
1540, 1547 (2016). In addition to Article III's standing
floor, the Supreme Court also once adopted "judicially
self-imposed limits on the exercise of federal
jurisdiction" that Article III otherwise would permit.
Allen v. Wright, 468 U.S. 737, 751 (1984). While the
Court used to refer to these limits collectively as the
"'prudential' branch of standing," it has
since called that generic label "misleading"
because each of these limits raises distinct ...