Supreme Court: Denial of Relief from Bankruptcy Stay Is Immediately Appealable

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The U.S. Supreme Court recently held unanimously that bankruptcy court orders conclusively denying relief from the automatic stay are immediately appealable.

Under 28 U.S.C. § 158(c)(2), the losing party has an appeal of right from “final judgments, orders, and decrees . . . in cases and proceedings” of bankruptcy courts.  The time for such an appeal is 14 days pursuant to Federal Rules of Bankruptcy Procedure 8002(a).

Generally, court orders are final only when they dispose of the entire case “on the merits and leave[ ] nothing for the court to do but execute judgment.”  However, bankruptcy cases are unique in that they involve multiple, often co-dependent, claims.  As the Supreme Court noted in 2015 in the case of Bullard v. Blue Hills Bank, bankruptcy orders are “final when they definitively dispose of discrete disputes within the overarching bankruptcy case.”  Thus, the central issue for the Court was whether, under that standard, a bankruptcy court’s order granting or denying a creditor’s motion for relief from an automatic stay was “final” for purposes of an appeal.

Relying on Bullard, the Court found that the proper inquiry is whether an order granting or denying relief from an automatic stay was a “discrete procedural unit” or merely a first step in adjudication of the case.  Recognizing that delaying an appeal of an automatic stay could have drastic effects on claims brought by creditors in a bankruptcy proceeding, the Court found that proceedings on a motion for relief from stay are a discrete procedural unit independent of the merits of the creditor’s claim, and therefore the order is final for purposes of an appeal.

In the case at bar, the creditor had challenged the stay, arguing the bankruptcy case was filed in bad faith.  But, when the bankruptcy court denied relief from stay, the creditor did not file an appeal. Rather, the creditor merely filed a proof of claim against the estate.  On the merits of the underlying contract dispute, the bankruptcy court found for the debtor.  Following that decision, the creditor separately appealed both the denial of relief from stay and the decision on the merits.

On appeal, first the district court and then the Sixth Circuit held that the order denying relief from stay had to have been appealed within 14 days.  The Supreme Court has now affirmed those rulings and resolved a circuit split concerning when appeals of orders denying relief from stay need to be filed.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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