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Bankruptcy Standing: An Introduction to a Multitude

In legal parlance, the term “standing” embraces several discrete doctrines that govern the capacity of a party to sue and appear before a particular court. These concepts' fluidity should not obscure their importance: a party’s standing is a perpetual jurisdictional question, open to review throughout the lifespan of a particular case or matter and at every appellate level.

Types of Standing

Two Generally Applicable Forms

Two standing doctrines apply to all parties in all cases pending before any federal trial and appellate court.

First, as construed by federal courts, most especially the U.S. Supreme Court, over two plus centuries, Article III of the U.S. Constitution imposes a three-part constitutional minimum (“constitutional standing” or “Article III Standing”). Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). First, a party must point to an “injury in fact,” which is an invasion of a legally protected interest that is (a) “concrete,” (b) “particularized,” and (c) “actual or imminent.” Lujan, 504 U.S. at 560; see also Raines v. Byrd, 521 U.S. 811, 820 (1997). Second, “there must be a causal connection between the injury and the complained conduct that is “fairly trace[able] to the challenged action.” Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 41–42 (1976); see also Lujan, 504 U.S. at 560–61. Stated differently, the relevant harm must not result from the independent action of some absent third party. Simon, 426 U.S. at 41–42. Third, a likelihood that a favorable decision will redress the injury must be shown. Lujan, 504 U.S. at 561; see also Simon, 426 U.S. at 38.

Second, several judicially self-imposed limits on the exercise of federal jurisdiction together comprise “prudential standing” doctrine. The latter concerns whether a litigant (1) asserts the rights and interests of a third party and not his, her, its, or their own; (2) presents a claim arguably falling outside the zone of interests protected by the specific law invoked; and/or (3) advances abstract questions of wide public significance. See Allen v. Wright, 468 U.S. 737, 750–51 (1984).

Bankruptcy-Specific Forms

Beyond these generally applicable requirements, the Bankruptcy Code imposes its own bevy of limitations on who can appear before a bankruptcy court in the first instance. These constraints often depend upon the nature of the case or proceeding, when and why the relevant party got or seeks to get involved, and similar factors. For example, pursuant to § 1128(b) and § 1109(b), only “a party in interest” may contest the merits of a chapter 11 plan at or before the hearing on its confirmation. 11 U.S.C. §§ 1109(b), 1128(b). As an extensive jurisprudence attests, federal courts both generously construe this term and determine a person’s status on a case-by-case basis. Still, a broad consensus holds that “a party in interest” is any constituency that may reasonably be impacted by or that actually possesses either (1) a practical stake or (2) pecuniary interest in a pending case, matter, or motion. See, g., Savage & Assocs. P.C. v. K&L Gates LLP (In re Teligent, Inc.), 640 F.3d 53, 60–61 (2d Cir. 2011); Nintendo Co. v. Patten (In re Alpex Computer Corp.), 71 F.3d 353, 356–57 (10th Cir. 1995).

A party’s decision to appeal a bankruptcy court order triggers the application of yet another standard, one without any constitutional or statutory grounding behind it and borrowed from pre-Code law. Specifically, only “a party aggrieved” by a bankruptcy court order possesses the standing to appeal it first to the United States District Court and next to the United States Court of Appeals with jurisdiction over that bankruptcy tribunal. “Generally, only persons who are directly and adversely affected pecuniarily by an order of the bankruptcy court have been held to have standing to appeal that order.” Bayoud v. Med. Ctr. Hosp. (In re Am. Dev. Int’l Corp.), 188 B.R. 925, 932 (N.D. Tex. 1995) (internal quotation marks omitted); cf. In re Salant Corp., 176 B.R. 131, 133 (S.D.N.Y. 1994). The possibility of harm from that edict will not do; rather, “only those with a direct, financial stake in a given order can appeal it.” Furlough v. Cage (In re Technicool Sys., Inc.), 896 F.3d 382, 385 (5th Cir. 2018).

This “aggrieved person” standard is more exacting the criteria imposed by Article III. See, e.g., In re Alpex Computer Corp., 71 F.3d at 357 n.6; In re Andreuccetti, 975 F.2d 413, 416 (7th Cir. 1992). The reasons for this lie in the sprawling quality of many bankruptcy proceedings, which “often involve numerous parties who may seek to assert the rights of third parties for their own benefit.” In re Ampal-Am. Isr. Corp., 502 B.R. 361, 369 (Bankr. S.D.N.Y. 2013). A strict appellate standing doctrine is thus viewed as essential to avoiding “‘endless appeals’” by the necessarily “‘myriad of parties who are indirectly affected by every bankruptcy court order.’” Lopez v. Behles (In re Am. Ready Mix, Inc.), 14 F.3d 1497, 1500 (10th Cir. 1994).


jurisdiction, party-in-interest, aggrieved person, restructuring & insolvency, prudential standing, constitutional standing, standing doctrine, article iii