Appellate Standing of Bankruptcy Matters is More Restrictive

In a recent Chapter 7 District Court Decision out of New Jersey, the Appellant who was the managing member of a LLC was  deemed not to have standing to appeal a motion to remove the Appellee as Trustee.  In a somewhat convoluted case, the Debtor filed a Chapter 13 case and at the time of the filing owned at least a 51% interest in real property.  The remaining interest was owned by a LLC.  The Debtor filed an adversary case against the LLC to seek complete title to the Real Property.  Upon conversion to a Chapter 7, the Chapter 7 trustee was added as the real property in interest and a new managing member was appointed for the LLC.  The managing member, in his individual capacity, filed a motion to remove the Trustee which was denied.  The managing member appealed that decision.  The Court noted that the managing member was not a creditor of the Estate nor had a proprietary interest in the real property.  The Court found that in bankruptcy appeals, court have adopted the person aggrieved doctrine which marginal parties involved in proceeding, who, even though they may be expose to some potential hard incident to the bankruptcy court's orders are not directly affected by that order, lack standing to appeal.  In this case, the managing members only interest was that of a defendant in the adversary proceeding.  Accordingly, the Court dismissed the appeal on lack of standing. 

Forman v. Youngman

United States District Court for the District of New Jersey

June 17, 2014, Decided; June 18, 2014, Filed

Civ. No. 13-5877