Denial of Motion for Relief from Stay is Final and Appealable

Posted by NCBRC - January 16, 2020

In a unanimous decision, the Supreme Court held that a bankruptcy court’s denial of a motion for relief from stay constitutes a final, appealable order under section 158(c)(2). Ritzen Group, Inc. v. Jackson Masonry, LLC, No. 18-938, 589 U.S. ___ (2020). NACBA filed an amicus brief in support of the Respondent.

Ritzen Group and Jackson Masonry entered into a land-sales contract. The deal fell through and Ritzen filed suit against Jackson in Tennessee state court for breach of contract. On the eve of trial, Jackson filed for chapter 11 bankruptcy. Ritzen sought relief from stay to allow the state civil trial to go forward. The court denied the motion, and Ritzen did not appeal. After a hearing in which it found Ritzen at fault for the failure of the contract, the bankruptcy court also disallowed Ritzen’s claim against the bankruptcy estate. Ritzen then appealed to the district court challenging both the denial of the motion for relief from stay and the ruling on the contract dispute. The district court found the relief from stay appeal was untimely, and ruled against Ritzen on the merits of the contract appeal. The Sixth Circuit affirmed. In re Jackson Masonry, LLC, 906 F. 3d 494 (2018).

The Supreme Court accepted the appeal to determine whether the lower courts correctly found that denial of relief from stay constitutes a final, appealable order. In finding that it does, the Court discussed significant differences between civil litigation, where, in the interest of judicial economy, appeals are generally not ripe until the entire case is concluded and the court is left only with implementation of its decision, and bankruptcy cases which may involve numerous discrete actions each of which could be brought alone were it not for the umbrella of the bankruptcy structure. Because of this unique structure, the resolution of one action such as a motion for relief from stay, may have a significant impact on the ongoing bankruptcy case. For that reason, judicial economy supports early resolution of appeals.

The Court then turned to its decision in Bullard v. Blue Hills Bank, 575 U. S. 496 (2015), where it found that an order denying plan confirmation was not a final, appealable order because it did not conclude a discrete proceeding, but was merely a step in an ongoing negotiation process which would not be definitively resolved until a plan was confirmed.

The Ritzen Court reasoned that, unlike plan confirmation, a motion for relief from stay involves a “discrete procedural sequence,” requiring notice, a hearing, and application of a statutory standard, that is separate from, and prior to, a merits adjudication of the creditor’s claim. It is, therefore, a distinct dispute amenable to final resolution.

The Court rejected Ritzen’s argument that denial of relief from stay is merely a determination of the forum for claim adjudication and not the resolution of a discrete proceeding. The Court found that adjudication of a stay motion generally has broader ramifications than simply forum selection, and, in fact, may not involve forum selection at all. Moreover, even if the forum for deciding the underlying issue were the only effect of the bankruptcy court’s order, that would not necessarily render the order non-final. In some circumstances, decisions affecting forum may, themselves, be considered final and appealable.

The Court was likewise unpersuaded by Ritzen’s argument that because its motion was based on a claim that Jackson filed for bankruptcy in bad faith and that the issue of bad faith could crop up again in the bankruptcy case, the order denying relief from stay did not finally resolve the proceeding. The Court found that the fact that an issue might persist in the ongoing case, did not change the nature of the proceeding.

The Court affirmed.

Ritzen SCt Jan 2020

Tags: , ,

Post a Comment

Your email is never shared. Required fields are marked *