What began as a garden variety bankruptcy claims objection has ended with a sharply-worded, sixty-page opinion, in which the Sixth Circuit’s Bankruptcy Appellate Panel ( “BAP”) affirmed a bankruptcy court’s $200,000 sanctions order entered against the creditor’s attorney.

“Bad news comes in threes.” “Third time’s the charm.” “Three strikes and you’re out.”

One of these three adages may come to characterize the outcome of a case of significant import argued before the US Supreme Court this week. The Supreme Court heard arguments on Wellness Int’l Network, Ltd. v. Sharif. The case is the third in a trilogy including Stern v. Marshall and Executive Benefits Ins. Agency v. Arkison, which examine the scope of the constitutional exercise of judicial power by bankruptcy courts.

Under section 365(f)(1), a debtor is permitted to assume and assign leases and executory contracts notwithstanding contractual limitations or “applicable law” that restricts such assignment. However, that broad general authorization begins with the limiting language, “except as provided in subsection (b) and (c) of this section….”

In ordinary civil litigation, appellate review is generally limited to “final judgments,” in order to prevent the wastefulness of appeals on rulings that are not truly dispositive of the case. That notion becomes somewhat more difficult in a bankruptcy, where there are often multiple litigations within the umbrella bankruptcy case. But does that mean that notions of finality should be different in the bankruptcy context? Not so, at least according to the Sixth Circuit.

Most lawyers are generally familiar with the concept of a floating lien under the Uniform Commercial Code. A secured creditor takes a lien in a collateral category that changes from time to time as items are added or subtracted. A common example is a working capital loan, in which financed inventory is produced and sold, then becoming an account, which is collected to provide the funds to produce new inventory.  A secured creditor may perfect a lien in the changing mass of inventory and receivables, as each category exists from time to time.