Eighth Circuit: Restrictive "Person Aggrieved" Test for Bankruptcy Appellant Standing Is Alive and Well, But Should It Be?

A threshold question in any bankruptcy appeal is whether the appellant has "standing" to appeal as a "person aggrieved"—a judicially imposed standing requirement distinct from "constitutional" standing that bars parties from challenging bankruptcy court orders based on general (as opposed to personal) grievances.

The U.S. Court of Appeals for the Eighth Circuit revisited this question in Mercy Health Network v. Mercy Hospital, Iowa City, IA, 178 F.4th 449 (8th Cir. 2026). A three-judge panel of the court affirmed a district court's ruling that an unsecured creditor that opted out of (and was not bound by) third-party and debtor releases in a chapter 11 plan lacked standing to appeal a bankruptcy court's order confirming the plan to challenge these releases. According to the Eighth Circuit panel, the creditor was not a "person aggrieved" by the order because it was not directly and pecuniarily harmed by the confirmation order, but instead sought to assert claims on appeal that belonged to other creditors affected by the releases. It also ruled that the creditor was not "aggrieved" merely because its claim was impaired by the chapter 11 plan. A concurring judge queried whether the restrictive "person aggrieved" test, which is holdover from the repealed Bankruptcy Act and appears nowhere in the Bankruptcy Code, should continue to apply to bankruptcy appeals. The concurrence nevertheless agreed with the result here.

Standing

"Standing" is the legal capacity to commence litigation in a court of law. It is a threshold issue—a court must determine whether a litigant has the legal capacity to pursue claims before the court can adjudicate the dispute. 

To establish "constitutional" or "Article III" standing, a plaintiff must have a personal stake in litigation sufficient to make out a concrete "case" or "controversy" to which the federal judicial power may extend under Article III, section 2, of the U.S. Constitution. See Pershing Park Villas Homeowners Ass'n v. United Pac. Ins. Co., 219 F.3d 895, 899 (9th Cir. 2000).

In bankruptcy cases, various provisions of the Bankruptcy Code confer another type of standing on various entities (e.g., the debtor, the debtor-in-possession, a bankruptcy trustee, creditors, equity interest holders, official committees, or indenture trustees) to participate generally in a bankruptcy case or commence litigation involving causes of action or claims that either belonged to the debtor prior to filing for bankruptcy or are created by the Bankruptcy Code. For example, in a chapter 11 case, section 1109 of the Bankruptcy Code provides that "[a] party in interest, including the debtor, the trustee, a creditors committee, an equity security holders' committee, a creditor, an equity security holder, or any indenture trustee may raise and may appear and be heard on any issue" in a chapter 11 case. See Truck Ins. Exchange v. Kaiser Gypsum Co., 602 U.S. 268, 272 (2024) (section 1109(b) gives every "party in interest" the right to be heard "on any issue" in a chapter 11 case; the section 1109(b) inquiry "asks whether the reorganization proceedings might directly affect a prospective party, not how a particular reorganization plan actually affects that party.") 

This "bankruptcy" or "statutory" standing is distinct from constitutional standing, which is jurisdictional—i.e., if a potential litigant lacks constitutional standing, the court lacks jurisdiction to adjudicate the dispute. See In re Wilton Armetale, Inc., 968 F.3d 273, 280 (3d Cir. 2020). The lack of statutory standing means that a party lacks the ability to maintain a lawsuit even if it has constitutional standing to bring the action. Id.

In determining whether a party has standing to appeal a bankruptcy court order or judgment, courts have generally applied a "person aggrieved" standard instead of examining whether the potential appellant has Article III standing. The "person aggrieved" standard is more exacting than traditional constitutional standing because it requires that an appellant demonstrate that it was "directly, adversely, and financially impacted by a bankruptcy order." See Matter of Highland Cap. Mgmt., L.P., 57 F.4th 494, 501 (5th Cir. 2023) (cleaned up); accord Brown v. Ellmann (In re Brown), 851 F.3d 619, 623 (6th Cir. 2017); In re Ernie Haire Ford, Inc., 764 F.3d 1321, 1325 (11th Cir. 2014).

A party does not have standing to appeal a bankruptcy court's order or judgment merely by participating in a bankruptcy case as a party-in-interest or if the order or judgment causes only indirect harm to the party's asserted interest. See In re Bay Circle Prop., LLC, 2022 WL 16002916, at *2–3 (11th Cir. Oct. 28, 2022). Further, "for a person to be aggrieved, the interest they seek to vindicate on appeal must be one that is protected or regulated by the Bankruptcy Code." See Ernie Haire Ford, 764 F.3d at 1325–26.

The "person aggrieved" standard is a "prudential" requirement initially found within the Bankruptcy Act of 1898, which permitted an appeal by any "person aggrieved by an order of a referee." 11 U.S.C. § 67(c) (1976) (repealed 1978). Even though lawmakers did not include the "person aggrieved" standard for appellate standing in the Bankruptcy Code in 1978 (or afterward), most courts continue to apply the standard. See generally Collier on Bankruptcy ¶ 5.07 (16th ed. 2026) (citing and discussing cases).

However, some courts are critical of the "person aggrieved" standard because it is not expressly authorized by the Bankruptcy Code or related appellate procedural rules. See, e.g., In re Roman Cath. Church of Archdiocese of New Orleans, 101 F.4th 400, 408 (5th Cir. 2024) (questioning the continued viability of the person aggrieved test); Clifton Capital Group LLC v. Sharp (In re East Coast Foods Inc.), 80 F.4th 901, 906 (9th Cir. 2023) (ruling that an appellant in bankruptcy must satisfy the requirements for constitutional standing in the first instance rather than the more exacting "person aggrieved" standard); In re Cap. Contracting Co., 924 F.3d 890, 896–97 (6th Cir. 2019) (questioning continued application of the "person aggrieved" test in bankruptcy); see also Krause, 637 F.3d 1160, 1168 (11th Cir. 2011) (observing that "the 'person aggrieved' phrase no longer appears" in the Bankruptcy Code).

Mercy Hospital

Mercy Hospital in Iowa City, Iowa, and related entities (collectively, the "debtors") filed for chapter 11 protection in the Northern District of Iowa in August 2023. One of the debtors' creditors was Mercy Health Network ("MHN"). MHN asserted a modest unsecured claim in the amount of approximately $32,000—less than 0.1% of the total amount of claims against the debtors.

The debtors' proposed chapter 11 plan included release provisions barring creditors and other stakeholders from asserting claims against various non-debtors, including the debtors' current and former directors, managers, officers, representatives, professionals, and advisors (collectively, the "released parties"). Under the plan, if a creditor voted against the plan and opted out of the releases, it would not be bound by them and was free to sue the released parties. The plan also included language under which the debtors agreed to release the same parties from liabilities. Finally, the plan established a liquidating trust to which any of the debtor's unreleased claims were assigned.

The plan impaired MHN's claim, but the class containing the claim (as well all other voting classes) voted to accept the plan. MHN opted out of the third-party releases and objected to confirmation of the chapter 11 plan, arguing that the third-party and debtor releases were overbroad because they barred claims against remote third parties and were therefore invalid under applicable precedent.

The bankruptcy court confirmed the debtors' chapter 11 plan. In doing so, it concluded that MHN lacked standing to challenge the validity of the releases because, having opted out of the releases, it was not bound by them and did not stand to benefit if they were invalidated. Likewise, the releases did not impair MHN's ability to recover on its claim.

MHN appealed the confirmation order to the district court, which agreed with the bankruptcy court that MHN lacked standing to challenge the releases and that its appeal should be dismissed. According to the district court, the alleged harm to MHN caused by the releases was either "purely speculative" or not supported by law, and its arguments would fail on the merits even if it did have standing to challenge them.

MHN appealed the ruling to the Eighth Circuit.

The Eighth Circuit's Ruling

A three-judge panel of the Eighth Circuit affirmed the ruling.

Writing for the panel, U.S. Circuit Judge Bobby E. Shepherd explained that appellate standing in bankruptcy is narrower than constitutional standing and requires that an appellant be a "person aggrieved" because it is "adversely affected pecuniarily" by a bankruptcy court's ruling. Mercy Hosp., 178 F.4th at 453 (cleaned up). In addition, he noted, a party does not have appellate standing "if it cannot materially benefit from the relief it is seeking." Id. (citing and discussing In re Wigley, 886 F.3d 681, 684 (8th Cir. 2018)).

In this case, the Eighth Circuit panel emphasized that MHN would gain nothing from reversal of the confirmation order because it already opted out of the third-party releases that were the subject of its appeal and was not bound by them even if they were enforceable. Moreover, Judge Shepherd wrote, "the mere fact that [MHN] wants to correct a perceived error in the plan does not give [MHN] standing to appeal." Id. at 454 (citations omitted).

The Eighth Circuit rejected MHN's argument that it had appellate standing due to the debtor releases because the liquidating trustee's inability to sue the released parties conceivably could reduce the pro rata distributions to MHN and other unsecured creditors. According to Judge Shepherd, "this theory of harm is completely speculative," and the district court below found that MHN had not identified a single claim that the debtors released that could have augmented MHN's recovery under the plan. Id. MHN's theory of harm, he noted, "is the exact type of 'indirect harm' where allowing an appeal 'would defeat the very purpose underlying our person aggrieved standard.'" Id. (cleaned up).

The Eighth Circuit also rejected MHN's contention that it had appellate standing because its claim was impaired under the debtors' chapter 11 plan. Judge Shepherd explained that MHN's appeal was not about obtaining an enhanced recovery on its claim, but instead sought invalidation of third-party releases by which it was not bound. He further note that, "whether or not [a party] is a creditor misses the point." Id. at 455. Instead, to have appellate standing, the proposed appellant must demonstrate that it has a direct and pecuniary interest in the ruling it seeks to appeal. In so ruling, the Eighth Circuit agreed with sister circuits concluding that an unsecured creditor does not have standing to appeal a bankruptcy court ruling when it was merely "theoretically possible that [it] would benefit" from an appeal. Id. (cleaned up).

The panel was similarly unconvinced by MHN's argument that it had appellate standing because confirmation of the plan could subject MHN to costly discovery requests from other stakeholders. Permitting litigation to proceed against a defendant, Judge Shepherd explained, does not make that defendant a party aggrieved because any resulting injury is merely indirect. Id.

In a concurring opinion, U.S. Circuit Judge David R. Stras agreed that MHN was not "aggrieved" by the debtors' chapter 11 plan, but queried why the restrictive "person aggrieved" test should still apply to bankruptcy appeals since it is simply a holdover from pre-Bankruptcy Code bankruptcy jurisprudence. He noted the criticisms that the "person aggrieved" test lacks any basis for authority under the current bankruptcy regime.

As an alternative, Judge Stras suggested that a "close fit" for an appropriate standard under current law would be the prohibition on third-party standing—a standard more "closely related to Art[icle] III concerns." Id. at 456 (citation omitted). This approach requires a potential appellant to assert its own legal rights and interests rather than those belonging to others and mandates that the appellant have "a sufficiently concrete interest in the outcome." Id. (cleaned up). In this case, he explained, because MHN was not bound by the plan releases, "its challenges really belong to someone else." Id. Without adopting the alternate standard he posed (noting that this issue "can await another day"), Judge Stras concurred in the majority opinion. Id.

Outlook

The Eighth Circuit's decision in Mercy Hospital is comfortably in line with the appellate standing test employed by the majority of courts in bankruptcy cases. In short, a potential appellant must be able to demonstrate that it would be directly and pecuniarily harmed if a bankruptcy court's ruling is not overturned on appeal. To be sure, some courts (including several circuits courts of appeals and the concurrence here) have questioned the continuing viability of a test that is a holdover from the Bankruptcy Code's predecessor statute and appears nowhere in the current statutory and regulatory framework. Even so, given wide application of the person aggrieved standard, potential appellants should be prepared to show something more concrete than indirect or derivative harm resulting from the bankruptcy court's ruling. This likely is also true to a large extent under the alternate test suggested by the Mercy Hospital concurrence.

Interestingly, because the creditor in MHN opted out of the releases under the plan and all voting classes affected by the releases voted to accept the plan, the bankruptcy and appellate courts never had to address the recent controversy over the invalidity of third-party releases in non-full payment chapter 11 plans ignited by the U.S. Supreme Court in Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024). Under the Eighth Circuit's ruling, it appears that MHN would have had to forego its opt-out and agreed to be bound by the releases to be able to challenge them on appeal.

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