Denial Of Stay Relief “Forms A Discrete Procedural Unit” That Must Be Immediately Appealed
Stites & Harbison Client Alert, January 15, 2020
On January 14, 2020, in a 9-0 ruling, the United States Supreme Court held that a creditor’s failure to appeal a stay relief denial within 14 days of the order’s entry renders the appeal untimely under 28 U.S.C. § 158(c)(2) and Fed. R. Bankr. P. 8002(a).1 The parties’ dispute began as a Tennessee state court breach of contract action filed by Ritzen Group, Inc., the creditor and appellant, against Jackson Masonry, LLC, the debtor and appellee. To avoid a state court sanctions hearing, Jackson Masonry, LLC filed for bankruptcy relief under Chapter 11. Ritzen Group, Inc. filed a motion for relief from the automatic stay and argued that the debtor filed in bad faith. The bankruptcy court denied the motion. The creditor next filed a proof of claim, which the bankruptcy court eventually denied. The creditor then appealed to the United States District Court both the stay relief denial and the claim denial. The District Court rejected the stay relief appeal as untimely because it was filed more than 14 days after entry of the order. The Sixth Circuit Court of Appeals concluded likewise and affirmed. The creditor then appealed to the United States Supreme Court.
In a unanimous opinion delivered by Justice Ruth Bader Ginsburg, the Supreme Court applied the key inquiry from Bullard v. Blue Hills Bank,2 being how to define the immediately appealable proceeding. Reminding the parties that bankruptcy isn’t like ordinary litigation, Justice Ginsburg described the bankruptcy arena as an “aggregation of individual controversies” that at times cannot await resolution of an entire bankruptcy case. Rather, when a bankruptcy ruling “definitively dispose[s] of discrete disputes within an overarching bankruptcy case,” that order must be appealed immediately. Justice Ginsburg noted that such a “procedural unit” is appealable because the Court conclusively denied the creditor its requested relief, and such a ruling is “anterior to” and “separate from” a claims resolution proceeding. Rejecting the creditor’s argument that the denial of its stay relief motion was nothing more than a forum for claim adjudication, the Supreme Court held that “the adjudication of a motion for relief from the automatic stay forms a discrete procedural unit within the embracive bankruptcy case.” If the unit “unreservedly grants or denies relief,” appeal of the order must immediately occur.
The Supreme Court saved for another day the issue of whether a denial without prejudice would be final if the bankruptcy court was awaiting “further development” in the case. Creditors should be wary of language in an order where the court offers to re-examine the request in light of subsequent events, as such holding could cut off the ability of the creditor to appeal, thereby giving the debtor leverage where none before existed.
1Ritzen Group, Inc. v. Jackson Masonry, LLC, Case No. 18-938.
2575 U.S. 496 (2015).