The U.S. Supreme Court Holds that Orders Granting or Denying Lift Stay Motions are Final

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[co-author: Casey Norman, Law Clerk]

The consequences of an order or judgement being final or interlocutory are enormous. An order from an interlocutory order requires leave since these orders are not appealable as of right. In addition, a failure to obtain leave may result in the issue becoming moot. This is especially so when motions to lift the stay are involved: if the motion is denied and is not immediately appealable, by the time the case is concluded, the issues will most likely be moot.

Since bankruptcy cases involve a series of distinct disputes, in addition to the umbrella case itself, an order is deemed final if it finally resolves a distinct dispute. Whether or not the resolution of motions to lift the stay qualify as such has been continuously litigated and has exposed parties to uncertainties – should they appeal as of right or seek leave to appeal? Would they lose their right to appeal if they do neither? The Supreme Court in Ritzen Group v. Jackson Masonry finally resolved the issue in a 9-0 opinion holding that an order granting or denying lift stay motions are final.

Background

Ritzen Group, Inc. (“Ritzen”) agreed to purchase land from Jackson Masonry, LLC (“Jackson”). The land sale was never completed, and Ritzen sued Jackson for breach of contract in Tennessee state court. Shortly before trial, Jackson filed for Chapter 11 bankruptcy, triggering the Bankruptcy Code’s automatic stay. Ritzen subsequently filed a motion for relief from the automatic stay, but the motion was denied. Ritzen did not appeal or seek leave to appeal, but filed a proof of claim. The Bankruptcy Court held that Ritzen, not Jackson, had breached the contract and disallowed Ritzen’s claim. Ritzen filed two appeals in the District Court. The first challenged the Bankruptcy Court’s denial of stay relief, and the second challenged the Court’s breach-of-contract resolution. The District Court ruled against Ritzen on both grounds, holding that the appeal from the denial of stay relief was untimely filed, and on the merits with regard to the second appeal. The Sixth Circuit affirmed, concluding that the denial of Ritzen’s motion for relief from the automatic stay qualified as a “final” order and that Ritzen, therefore, had been required to file an appeal within 14 days following entry of the order, which he failed to do.

Discussion

Under Section 158(a) of the Judicial Code, appeals as of right may be taken from final orders and judgements entered in cases or proceedings.

In Bullard v. Blue Hills Bank, the Court held that orders qualify as “final” whenever the Bankruptcy Court’s orders “definitively dispose of discrete disputes within the overarching bankruptcy case.” Applying Bullard to the stay-relief context, the Court concluded that the adjudication of a creditor’s motion for relief from the automatic stay was just such an order. The Court concluded that a stay-relief motion “initiates a discrete procedural sequence, including notice and a hearing” of the kind that would constitute a distinct “proceeding” under Bullard.

The Court agreed with Ritzen that “proceedings” under Section 158(a) should not include “disputes over minor details about how a bankruptcy case will unfold.” The Court rejected Ritzen’s contention that the denial of stay relief determined “nothing more than the forum for claim adjudication.” On the contrary, the Court pointed out that the disposition of stay-relief motions can have large consequences, including the delay of debt collection, significant increases in creditors’ costs and the determination of whether a creditor can “isolate its claim from those of other creditors and go it alone outside of bankruptcy.”

Ritzen also contended that an order denying stay relief is nonfinal when the bankruptcy court’s decision turns on a substantive issue that might be raised later in the litigation. The Court rejected this argument, concluding that finality turns on whether an order “terminates a procedural unit separate from the remaining case,” rather than whether the “bankruptcy court has resolved a substantive issue.”

Conclusion

The Supreme Court’s decision in Ritzen Group lends clarity to parties, as well as the lower courts, on the finality of orders granting or denying lift stay motions, and eliminates the waste of judicial resources and the risk of procedural foot faults by counsel.

Read the opinion >>

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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