11-2967-cv (L)
In re Lehman Bros. Holdings Inc.



                       UNITED STATES COURT OF APPEALS
                           FOR THE SECOND CIRCUIT

                               August Term 2011

      (Argued: May 18, 2012            Decided: October 4, 2012)

         Docket Nos. 11-2967-cv (Lead), 11-2992-cv (CON)


                  IN RE: LEHMAN BROTHERS HOLDINGS INC.,

                                              Debtor.


   LIQUIDATORS    OF   LEHMAN BROTHERS AUSTRALIA LIMITED, LIQUIDATOR,
                              DANTE NOTEHOLDERS,

                                              Appellants,

                                      v.

                 LEHMAN BROTHERS SPECIAL FINANCING INC.,

                                              Appellee.



Before:
             JACOBS, Chief Judge, and
             CHIN and DRONEY, Circuit Judges.

             Appeal from a judgment of the United States

District Court for the Southern District of New York

(McMahon, J.) dismissing appellants' appeal from an order of

the United States Bankruptcy Court for the Southern District
of New York (Peck, Bankr. J.) denying without prejudice

their motions for leave to intervene in an adversary

proceeding.

          VACATED and REMANDED.

                    ANDREW K. GLENN, Kasowitz, Benson,   Torres &
                          Friedman LLP, New York, New    York
                          (Eric Foster Leon, Kirkland    & Ellis
                          LLP, New York, New York, on    the
                          brief), for Appellants.

                    RICHARD W. SLACK (Ralph I. Miller, Peter
                          Gruenberger, Meredith B. Parenti, on
                          the brief), Weil, Gotshal & Manges
                          LLP, New York, New York, for
                          Appellee.

PER CURIAM:

          Appellants Liquidators of Lehman Brothers

Australia Limited ("LB Australia") and Dante Noteholders

appeal from a judgment of the United States District Court

for the Southern District of New York (McMahon, J.)

dismissing their appeal from an order of the United States

Bankruptcy Court for the Southern District of New York

denying without prejudice their motions for leave to

intervene in an adversary proceeding.    We hold that in the

circumstances here the bankruptcy court's denial of


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appellants' motions to intervene was a final appealable

order.   Accordingly, we vacate and remand.

                           BACKGROUND

          The relevant facts are largely undisputed.    In

2002, Lehman Brothers International Europe ("LBIE") created

the "Dante Programme" by which certain special purpose

entities issued notes of collateralized debt obligations

(the "Notes").   The Notes were purchased by appellants as

well as other investors.    The same special purpose entities

entered into a swap agreement with appellee Lehman Brothers

Special Financing Incorporated ("LBSF") whereby LBSF agreed

to pay amounts due under the Notes in exchange for certain

interests in the collateral that secured the Notes (the

"Collateral").

          Appellants and LBSF had competing interests in the

Collateral.   Under the transaction documents governing the

Dante Programme, in certain circumstances appellants had

priority with respect to the Collateral, and in other

circumstances LBSF had priority.




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         On September 15, 2008, Lehman Brothers Holdings

Incorporated ("LBHI") and LBSF filed for bankruptcy

protection pursuant to Chapter 11 of the Bankruptcy Code.

According to appellants, the bankruptcy filings constituted

events of default giving them priority with respect to the

Collateral.

         On September 14, 2010, LBSF commenced an adversary

proceeding in the bankruptcy court against the trustees of

the Dante Programme and the issuers of the Notes (the "Dante

Adversary Proceeding"), seeking declaratory relief with

respect to priority in the Collateral.   LBSF filed adversary

proceedings against many other defendants as well,

apparently to preserve certain claims prior to the

expiration of the applicable statute of limitations.

         LBSF moved to stay the Dante Adversary Proceeding

(as well as the other proceedings) to pursue alternative

dispute resolution.   On October 20, 2010, the bankruptcy

court granted a stay until July 20, 2011.   Thereafter, the

bankruptcy court extended the stay three times, through

January 20, 2013, subject to further extensions.     See In re


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Lehman Bros. Holdings Inc., No. 08-13555, ECF No. 29506, at

3.   The stay order provided that only the debtors and named

defendants could apply to lift the stay.     As appellants were

not parties to the Dante Adversary Proceeding, they could

not challenge the stay order.

          On January 23 and 25, 2011, Dante Noteholders and

LB Australia moved respectively to intervene in the Dante

Adversary Proceeding pursuant to 11 U.S.C. § 1109(b), Rule

24 of the Federal Rules of Civil Procedure, and Rule 7024 of

the Federal Rules of Bankruptcy Procedure.     Appellants

argued that they should be allowed to intervene because they

were parties in interest, their interest in the Collateral

was being affected by the proceedings, and they would be

bound by any judgment rendered against their trustee, who

they claimed was not adequately representing them.

          At a hearing on February 16, 2011, the bankruptcy

court orally denied the motions to intervene without

prejudice, concluding that the motions to intervene were in

actuality motions to vacate the stay.   The court also held

that appellants failed to comply with Rule 24(c) of the


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Federal Rules of Civil Procedure, which requires an

intervention motion to be accompanied by a proposed

pleading.    On February 18, 2011, the bankruptcy court issued

a written order denying the intervention motions without

prejudice.

            Appellants appealed to the United States District

Court for the Southern District of New York.    LBSF moved to

dismiss the appeal, arguing that the bankruptcy court's

denial of intervention was not a final appealable order.

The district court agreed, and on June 21, 2011, it

dismissed the appeal for lack of appellate jurisdiction.

The district court reasoned that the bankruptcy court's

order, issued without prejudice, did not resolve the

intervention motions on the merits, and that appellants

could renew their motions upon the lifting of the stay.    The

district court found that appellants faced no risk of

prejudice because no substantive ruling would be made in the

underlying proceedings until the stay was lifted.

            This appeal followed.




                               -6-
                         DISCUSSION

         The district court's determination that the

bankruptcy court's order was not appealable is a conclusion

of law that we review de novo.    See Royal & Sun Alliance

Ins. Co. of Can. v. Century Int'l Arms, Inc., 466 F.3d 88,

92 (2d Cir. 2006); Mentor Ins. Co. (U.K.) v. Brannkasse, 996

F.2d 506, 513 (2d Cir. 1993).

         We hold that in the circumstances here the

bankruptcy court's denial of appellants' motions to

intervene was a final appealable order.

         First, while we have not previously addressed the

appealability of denials of intervention in the bankruptcy

context, we have held as a general matter that denials of

intervention are final appealable orders.    See Bridgeport

Guardians, Inc. v. Delmonte, 602 F.3d 469, 473 (2d Cir.

2010); MasterCard Int'l Inc. v. Visa Int'l Serv. Ass'n, 471

F.3d 377, 384 (2d Cir. 2006); Ionian Shipping Co. v. British

Law Ins. Co., 426 F.2d 186, 189 (2d Cir. 1970) (noting a

"practical rather than a conceptual" view of finality

(internal quotation marks omitted)).    See generally 7C


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Charles Alan Wright et al., Federal Practice and Procedure §

1923 (3d ed. 2012).    These decisions are based on the

reasoning that the denial of the opportunity to be heard

concludes the matter for all practical purposes for the

would-be intervenor.    See In re Marin Motor Oil, Inc., 689

F.2d 445, 447-48 (3d Cir. 1982) (analyzing appealability of

denials of intervention under the old 28 U.S.C. § 1293(b),

now superseded by 28 U.S.C. § 158); 7C Charles Alan Wright

et al., Federal Practice and Procedure § 1923.

          Second, in the bankruptcy context, the standard

for finality is more flexible than in other civil

litigation.   See In re Pegasus Agency, Inc., 101 F.3d 882,

885 (2d Cir. 1996); In re Chateaugay Corp., 922 F.2d 86, 90

(2d Cir. 1990) (noting the "pragmatic approach to finality"

in the bankruptcy context).    See generally 16 Charles Alan

Wright et al., Federal Practice and Procedure § 3926 (2d ed.

2012).   Because bankruptcy cases frequently entail

protracted proceedings involving many parties, finality is

viewed functionally, focusing on pragmatic considerations

rather than on technicalities.      See In re Amatex Corp., 755


                              -8-
F.2d 1034, 1039 (3d Cir. 1985); see also In re Marvel Entm't

Grp., Inc., 140 F.3d 463, 470 (3d Cir. 1998) ("A finality

determination in a bankruptcy appeal involves consideration

of such factors as the impact of the matter on the assets of

the bankruptcy estate, the preclusive effect of a decision

on the merits, and whether the interests of judicial economy

will be furthered." (internal quotation marks omitted)).

            Third, the circumstances here call for a pragmatic

approach.    The Dante Adversary Proceeding has been stayed

since October 2010 and the stay will remain in place until

January 20, 2013, with the possibility of still further

delays.   Appellants have not been permitted to intervene,

nor can they even ask again for leave to intervene as long

as the stay is in place.    Yet, they contend that the stay is

prejudicing their interests.    Although the bankruptcy court

denied appellants' motions without prejudice, they may renew

their motions only upon the lifting of the stay.    Hence, the

bankruptcy court's order is tantamount to a denial with

prejudice, as appellants are effectively being denied the

opportunity to argue that the stay should be lifted.


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Crucial bankruptcy negotiations are ongoing, and the

potential intervenors have reason to expect that, unless

their appeal from the denial of their motions to intervene

is considered, they may ultimately arrive at the scene of a

fait accompli, or be foreclosed altogether from proceedings

that they may be entitled to join.

         Of course, we express no view as to the merits of

appellants' application to the bankruptcy court for leave to

intervene.   We hold only that the bankruptcy court's order

was a final appealable order that should have been

considered by the district court on the merits.

                          CONCLUSION

         For the foregoing reasons, the judgment of the

district court is VACATED and the case is REMANDED with

instructions to reinstate the appeal.




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