The automatic stay is one of the most extraordinary features of the Bankruptcy Code,[1] and the scope of the prohibition against the initiation or continuation “of a judicial, administrative, or other action or proceeding against the debtor” is extremely broad.[2] While the stay may be terminated by order of the bankruptcy court pursuant to § 362(d) of the Bankruptcy Code, the Supreme Court recently held that a bankruptcy court’s denial of relief from stay is a final, appealable order.[3]
Ritzen Group Inc. v. Jackson Masonry LLC involved a state court breach-of-contract litigation. Ritzen had filed a lawsuit for breach of contract in state court against Jackson Masonry. Prior to the state court trial, Jackson Masonry, LLC filed for bankruptcy relief, triggering the automatic stay. The bankruptcy court denied Ritzen’s motion for relief from stay with prejudice. Consequently, Ritzen did not have the right to renew the request for relief in the same case. Ritzen proceeded to file a proof of claim, to which Jackson Masonry objected. The bankruptcy court sustained the objection and disallowed Ritzen’s claim. Approximately 10 months after the bankruptcy court denied Ritzen’s motion for relief from stay,[4] and after having its claim disallowed, Ritzen appealed these orders to the district court. The district court dismissed the appeal as untimely. On further appeal, the U.S. Court of Appeals for the Sixth Circuit affirmed. Due to a split in the circuit courts, the Supreme Court granted certiorari.
Justice Ginsburg, writing for a unanimous Court, held that a bankruptcy court’s order unreservedly denying relief from the automatic stay is a final, immediately appealable order.[5] The court stated that the order constitutes a discrete dispute within the bankruptcy that creates a basis for a final, appealable ruling.[6]
The Court noted that a final order is one that “ends the litigation and leaves nothing for the court to do but execute the judgment.”[7] An interlocutory order, on the other hand, decides some intervening matter that requires some other action to enable the court to adjudicate the cause on the merits.[8] Hence, an appellate court has no authority to consider interlocutory orders without the appellant first filing for leave of court,[9] whereas an appeal of a final order may be taken simply by filing a notice of appeal with the bankruptcy clerk within 14 days of the entry of the order.[10]
The Court held that a bankruptcy petition may encompass various controversies in one case, and accordingly, orders become final when the orders “definitively dispose of discrete disputes within the overarching bankruptcy case.”[11] In other words, once the controversy is decided, it is final.[12] The Court found that a motion for relief from the automatic stay is a distinct procedural component within the bankruptcy case that is final upon adjudication, which renders it immediately appealable.
The Court rejected Ritzen’s argument that the order could in certain circumstances be deemed nonfinal, such that the creditor could wait to get a ruling on the allowance of its claim before it seeks appellate review of the stay-relief issue. The Court cited 28 U.S.C. § 158(a), which makes orders appealable if they finally dispose of discrete disputes within the larger bankruptcy case, noting that the statutory language provides for appeals from final decisions in bankruptcy “proceedings” as distinguished from bankruptcy “cases.” The Court opined that postponing appeals would delay appellate review of fully adjudicated disputes, which could increase cost to the estate. Finally, the Court distinguished its prior opinion in Bullard v. Blue,[13] in which it held that an order denying confirmation of a chapter 13 plan is not final because the plan could be amended.
Overall, the decision provides certainty to creditors as to when the relief-from-stay order is appealable. Certainly, any appeal of the order will have to be filed within 14 days, pursuant to Rule 8002 of the Federal Rules of Bankruptcy Procedure. Nevertheless, the decision does not meet the realities of a bankruptcy case in that a determination that the order is final might prevent a creditor from seeking relief from stay at a later time in the bankruptcy proceedings, even where newly discovered evidence or additional circumstances may justify a grant of relief.[14]
A motion for relief from stay usually is filed to continue or commence collection or court proceedings on a claim that is not being disputed. These motions usually seek to terminate or modify the stay on validly perfected liens other interests in debtor or estate property for cause, including a lack of adequate protection. A debtor may resolve the motion either under a modified plan or directly with the creditor through an agreed order without affecting the case as a whole. In practice, a change of circumstance usually permits another motion for relief from stay to be filed. Numerous opportunities to maintain a business relationship are provided to a debtor and a creditor by denying a motion for relief from stay without prejudice, especially where the debtor falls behind in post-petition payments, like in the case of a mortgagor and a mortgagee. The dynamics of the case allow for the stay to be granted with conditions or denied depending on the challenges presented at the moment of the proceedings. The bankruptcy court may be inclined to support “cause” for granting relief at a later time upon new or re-occurring circumstances where collateral is being placed at risk.
In light of Ritzen, the best practice may require treatment of an order denying relief as final and consequently will require an appeal. Missing the deadline could be hugely detrimental. As Judge Ginsburg put it, there is “no second bite.”[15] In Ritzen, the Court held that an order is final when it unconditionally resolves the dispute.[16] Going forward, parties should get a clear determination from the bankruptcy court as to the finality of the decision. In addition, where the parties wish the matter to be heard again or renewed, the parties should request that the order be entered without prejudice to its rights to bring the matter back before the bankruptcy court. Moreover, local rules may be amended to propose that denials of orders for relief from stay filed by secured creditors with validly perfected interests are to be entered without prejudice unless clearly stated otherwise. Similarly, a finding of adequate protection should clarify whether it will impact a future request for relief from stay for “cause” or other.
If a party is not certain whether the order represents a final or interlocutory order, it may be appropriate to appeal and safeguard the rights of the appellant by filing both the notice to appeal and a motion for leave to appeal before the 14-day deadline. Also, the parties that entertain agreed or consent orders or stipulations to the relief motion should be cautious to add language as to whether or not they consider the agreement sought to be final. Lastly, movants should consider that meeting the deadline [to appeal] is not good enough and that beating the deadline is the expectation.[17]
[1] In re Soares, 107 F.3d 975 (1st Cir. 1997).
[2] See Balaber-Strauss v. Reichard (In re Tampa Chain Co.), 835 F.2d 54, 55 (2d Cir. 1987); Ellison v. Nw. Eng’g Co., 707 F.2d 1310, 1311 (11th Cir. 1983); Grabek v. Worldwide Specialty Merch. Inc., 611 So. 2d 590, 591 (Fla. 4th DCA 1993) (Farmer, J., concurring).
[3] Ritzen Group Inc. v. Jackson Masonry LLC, No. 18-938, ––– U.S. –––, 140 S. Ct. 582, 205 L. Ed. 2d 419, 2020 WL 201023 (U.S. Jan. 14, 2020).
[4] Brief of Appellee, Jackson Masonry LLC, 2018 WL 2394062 (6th Cir. 2018).
[5] Jackson Masonry, LLC, 140 S. Ct. at 582.
[6] Id. at 586.
[7] Coopers & Lybrand v. Livesay, 437 U.S. 463, 467 (1978); In re IBI Sec. Serv. Inc., 174 B.R. 664, 668 (E.D.N.Y. 1994).
[8] Thomas v. Grigsby, 556 B.R. 714, 718 (D. Md. 2016) (citing to In re Rood, 426 B.R. 538, 546 (D. Md. 2010).
[9] 28 U.S.C. § 158(a)(3) (2019); see also Ocwen Loan Servicing v. Marino (In re Marino), 949 F.3d 483, 489 (9th Cir. 2020).
[10] Fed. R. Bankr. P. 8001(b) (2019).
[11] Ritzen Group Inc. v. Jackson Masonry LLC, No. 18-938, ––– U.S. –––, 140 S. Ct. 582, 205 L. Ed. 2d 419, 2020 WL 201023 (U.S. Jan. 14, 2020) (citing Bullard v. Blue Hills Bank, 575 U.S. 496, 501, 135 S. Ct. 1686, 191 L. Ed. 2d 621 (2015)).
[12] 28 U.S.C.A. § 158(a) and Fed. R. Civ. P. 8002(a)(1) (2019).
[13] Bullard v. Blue Hills Bank, 575 U.S. 496, 135 S. Ct. 1686, 1692-93, 191 L. Ed. 2d 621 (2015).
[14] In re Wright, 186 B.R. 394, 396 (Bankr. D. Md. 1995). See also In re Chesapeake Contractors Inc., 413 B.R. 254 (Bankr. D. Md. 2008) (holding that assignee would not be permitted to retry a final judgment on relief from stay adding evidence not provided at prior trial.)
[15] Jackson Masonry LLC, 140 S. Ct. at 591.
[16] See n. 7.
[17] Dhirubhai Ambani.