Term Law Clerk for Judge Russ Kendig
U.S. Bankruptcy Court, Northern District of Ohio
In Ritzen Group, Inc. v. Jackson Masonry, LLC, __ U.S. __, (No. 18-938, Jan. 14, 2020), the U.S. Supreme Court recently held that a bankruptcy court’s unreserved denial or grant of a motion for relief from stay constitutes a final, appealable order. Although the Court explicitly declined to decide whether an order denying stay relief “without prejudice” constitutes a final order, the decision provides a bright-line rule as to the finality of orders granting or denying stay relief. And, as the Court explained, the ruling will prevent the delay of appellate review of fully adjudicated disputes.
The case began in state court as a breach of contract dispute between Ritzen Group, Inc. (“Ritzen”) and Jackson Masonry, LLC (“Jackson”). Shortly before trial, Jackson filed a petition for relief under chapter 11 of the Bankruptcy Code, halting the state court litigation. See 11 U.S.C. § 362(a). In the bankruptcy case, Ritzen filed a motion for relief from stay to proceed with the state court trial. Ritzen argued that Jackson filed its bankruptcy petition in bad faith, warranting stay relief. The bankruptcy court disagreed and denied Ritzen’s motion.
Ritzen had 14 days after entry of the denial order to appeal the bankruptcy court’s decision, 28 U.S.C. § 158(c)(2), but failed to do so within this time period. Instead, Ritzen pursued its breach of contract claim against Jackson in the bankruptcy court, filing a proof of claim and an adversary proceeding against Jackson. But the bankruptcy court found that Ritzen, not Jackson, had breached the contract at issue, and disallowed Ritzen’s claim. The bankruptcy court subsequently confirmed Jackson’s chapter 11 plan, which effectively barred Ritzen from pursuing its claim against Jackson any further.
Ritzen appealed the bankruptcy court’s order denying relief from stay and the order resolving Ritzen’s breach of contract claim to the district court. The district court sided with the bankruptcy court on both issues. Ritzen further appealed to the U.S. Court of Appeals for the Sixth Circuit. The Sixth Circuit held that the order denying Ritzen’s motion for relief from stay was a final order, triggering the 14-day period to file a notice of appeal. Thus, Ritzen failed to timely appeal.
The issue for the Supreme Court to decide was whether orders denying motions for relief from stay are final and immediately appealable under 28 U.S.C. § 158(a)(1). A unanimous Supreme Court answered this question in the affirmative, offering several reasons: First, in Bullard v. Blue Hills Bank, 575 U.S. 496 (2015), the Court held that a bankruptcy court order denying plan confirmation with leave to amend was not final because it did not conclusively resolve the confirmation proceeding. Bullard, 575 U.S. at 499, 502-03. Analyzing the current case under this paradigm, the Court explained that adjudication of a motion for relief from stay is a “discrete proceeding,” the resolution of which constitutes a final, appealable order. Second, 28 U.S.C. § 157(b)(2)(G) describes motions to terminate, annul, or modify the automatic stay as “core proceedings”, and these are listed separately from proceedings regarding the allowance or disallowance of claims, indicating that Congress intended for stay-relief adjudications to be considered final. Third, resolution of a motion for relief from stay can be significant and consequential, resulting in more than just a determination as to the appropriate forum for claim adjudication, which lends support to the notion that such orders should be considered final. Fourth, the Court rejected Ritzen’s argument that a stay-relief denial should not be considered final when, as in this case, the bankruptcy court’s decision rested on a substantive legal issue. Finally, the Court explained that its rule will avoid delays and inefficiencies regarding appeals.
Bright-line rules are always easier to remember, and the Supreme Court’s decision in Ritzen provides one: orders granting or denying relief from stay are considered “final” under 28 U.S.C. § 158(a)(1). Bankruptcy practitioners should be aware of the decision and its effect on the timing of bankruptcy appeals. See 28 U.S.C. § 158(c)(2); Fed. R. Bankr. P. 8002(a).
* Disclaimer: None of the statements contained in this article constitute the official view or policy of any judge, court or government employee.