Abuse of Discretion – Bankruptcy

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7^th Circuit Court of Appeals

Case Name: Donald Wayne Bush, et al. v. United States America

Case No.: 16-3244

Officials: FLAUM, EASTERBROOK, and SYKES, Circuit Judges.

Focus: Abuse of Discretion – Bankruptcy 

This appeal presents the question whether a bankruptcy court can determine the amount of a debtor’s tax obligations, when the debtor is unlikely to pay them. Bankruptcy Judge Carr answered yes and scheduled a trial on the merits, 2015 Bankr. LEXIS 4494 (Bankr. S.D. Ind. July 7, 2015), but a district judge disagreed. 2016 U.S. Dist. LEXIS 106671 (S.D. Ind. Aug. 12, 2016). The interlocutory appeal to the district judge was authorized by 28 U.S.C. §158(a)(3). Because the district judge blocked further proceedings in the bankruptcy court, his decision is final and appealable to us under 28 U.S.C. §1291, for, outside of bankruptcy, tax obligations are stand-alone mahers independently appealable. See Bullard v. Blue Hills Bank, 135 S. Ct. 1686, 1692 (2015). See also In re Anderson, 917 F.3d 566 (7th Cir. 2019).

Although the bankruptcy judge was right to hold that he had authority to resolve the tax dispute while the Bushes’ bankruptcy was ongoing, the exercise of that authority is no longer appropriate. We vacate the district judge’s decision, based as it was on an erroneous jurisdictional view, and remand with instructions to remand to the bankruptcy judge for the entry of an order under §1334(c)(1), which will mark the final step in the Bushes’ bankruptcy proceeding.

Vacated and remanded

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Derek A Hawkins is trademark corporate counsel for Harley-Davidson. Hawkins oversees the prosecution and maintenance of the Harley-Davidson’s international trademark portfolio in emerging markets.