Stay Relief Orders Denied With Prejudice Immediately Appealable
A critical bankruptcy litigation issue has finally been resolved by the U.S. Supreme Court. Until recently, litigants had been faced with the dilemma of whether to immediately appeal a denial with prejudice of a request for stay relief or wait until the underlying matter had been fully adjudicated.
February 06, 2020 at 12:03 PM
6 minute read
A critical bankruptcy litigation issue has finally been resolved by the U.S. Supreme Court. Until recently, litigants had been faced with the dilemma of whether to immediately appeal a denial with prejudice of a request for stay relief or wait until the underlying matter had been fully adjudicated. Given the uncertainty, parties remained unsure if they risked losing the ability to challenge the denial of stay relief by a bankruptcy court if they waited to appeal. Now it is clear that they will. In Ritzen Group v. Jackson Masonry, 589 U.S. ____ (2020), the Supreme Court affirmed a U.S. Court of Appeals for the Sixth Circuit decision and ruled that "a creditor's motion for relief from the automatic stay initiates a distinct proceeding terminating in a final, appealable order when the bankruptcy court rules dispositively on the motion."
Before Jackson Masonry's bankruptcy, Ritzen Group and Jackson were parties to an agreement for Ritzen to purchase land from Jackson. Closing never occurred due to mutual allegations of contract breach. Ritzen then brought suit against Jackson in state court, however, immediately prior to trial, Jackson entered Chapter 11, which triggered the automatic stay. Ritzen sought stay relief from the bankruptcy court so that Ritzen could proceed with its state court action. Although the stay relief motion was denied, Ritzen did not immediately file an appeal.
Instead, Ritzen filed a proof of claim, asserting the same breach of contract argument, which claim was ultimately disallowed by the bankruptcy court. Only then did Ritzen file an appeal of the contract breach claim and stay relief denial order. In affirming the bankruptcy court's orders, the district court specifically ruled that Ritzen's appeal of the stay relief denial order was untimely (not having been filed within 14 days of entry of the underlying order). Ritzen appealed to the Sixth Circuit, which affirmed the district court's decisions.
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