Reported / Citable
Background
Rho-Chem Corporation filed for Chapter 11 in 2003, confirmed a plan that year, and obtained a discharge and injunction. Its case was closed in 2005. In 2026, successor Rho-Chem LLC reopened the bankruptcy case by agreement with K.P. Properties and La Brea R.E., Inc. to bring an adversary proceeding concerning the effect of the discharge.
The K.P. Parties were pursuing California state-court pollution claims involving property they own in Inglewood. They contend that continuing contamination creates new, separately actionable claims each day under California continuing-tort law. Rho-Chem seeks a declaration that the claims were discharged. The Bankruptcy Court denied the K.P. Parties’ request for permissive abstention, and they sought leave for an interlocutory appeal.
The Court’s Holding
The district court denied leave to appeal and dismissed the appeal. The K.P. Parties did not establish a substantial ground for difference of opinion, a required element for discretionary interlocutory review under the standard commonly applied from 28 U.S.C. § 1292(b).
The asserted circuit split did not justify review because Fifth Circuit precedent supplies the governing rule: the prepetition-relationship test for deciding when tort liability constitutes a bankruptcy claim. Disagreement with the Bankruptcy Court’s application of federal bankruptcy law, including its treatment of the California continuing-tort theory, was not a difference of opinion among courts. Nor did the issue’s novelty meet the demanding threshold for exceptional interlocutory review.
Key Takeaways
- A circuit split does not create a substantial ground for difference of opinion when controlling Fifth Circuit authority has resolved the issue.
- Arguments that the Bankruptcy Court simply erred do not support an interlocutory appeal.
- The Bankruptcy Court may continue determining whether its confirmation-order discharge injunction applies to the state-court claims.
Why It Matters
The decision reinforces the narrow availability of interlocutory bankruptcy appeals, particularly from discretionary abstention rulings. Parties challenging a bankruptcy court’s post-confirmation jurisdiction must show genuine legal uncertainty under controlling authority, not merely a novel factual application or disagreement over the result.