Article courtesy of Margaret G. Parker-Yavuz (Akin Gump)
Ritzen Group, Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 205 L. Ed. 2d 419 (2020)
The Supreme Court affirmed Sixth Circuit and lower court decisions holding that a bankruptcy court’s order denying relief from the automatic stay constitutes a final, immediately appealable order and therefore is subject to the 14-day appeal period under Federal Rule of Bankruptcy Procedure 8002.
Ritzen Group, Inc. and Jackson Masonry, LLC entered into a contract pursuant to which Ritzen agreed to buy land from Jackson. The sale was not effected, and Ritzen sued Jackson for breach of contract in Tennessee state court. Shortly before the trial was scheduled to begin, Jackson filed for bankruptcy under Chapter 11. The breach of contract litigation was put on hold by operation of the Bankruptcy Code’s automatic stay provision (11 U.S.C. §362(a)), which provides that the filing of a bankruptcy petition automatically “operates as a stay” of creditors’ debt collection efforts outside of the bankruptcy case. Ritzen filed a motion in the bankruptcy case for relief from the automatic stay, seeking an order allowing the trial to proceed in state court. The bankruptcy court denied Ritzen’s motion. Ritzen did not appeal the decision; instead, Ritzen filed a proof of claim against the bankruptcy estate. The bankruptcy court disallowed the claim and confirmed Jackson’s plan of reorganization. Ritzen then filed an appeal in district court challenging the bankruptcy court’s order denying relief from the automatic stay; the appeal was filed more than 14 days after the bankruptcy court had entered the order. The district court rejected Ritzen’s appeal on the grounds that it was untimely under 28 U.S.C. §158(c)(2) and Federal Rule of Bankruptcy Procedure 8002(a), which require that appeals from a bankruptcy court order be filed within 14 days after entry of the order. The Sixth Circuit affirmed, finding that the bankruptcy court’s order denying Ritzen’s motion to lift the automatic stay was a final order under §158(a), and that the 14-day appeal period therefore ran from entry of that order.
The Supreme Court affirmed the Sixth Circuit, holding that a bankruptcy court’s order unreservedly denying relief from the automatic stay constitutes a final, immediately appealable order under 28 U.S.C. §158(a). The court concluded that the adjudication of a creditor’s motion for relief from the automatic stay is itself a discrete dispute that qualifies as an independent “proceeding” within the meaning of §158(a), because it is a procedural unit that occurs before and is separate from the proceedings on the merits of creditors’ claims. In arriving at its decision, the court applied Bullard v. Blue Hills Bank, 575 U.S. 496, 135 S. Ct. 1686, 191 L. Ed. 2d 621, in which the court held that a bankruptcy court’s order rejecting a proposed plan was not final because it did not conclusively resolve the relevant “proceeding”, which would continue until approval of a plan. Applying Bullard, the court noted that the central question is how to define the immediately appealable “proceeding” in the context of a motion for relief from an automatic stay. The court reasoned that, unlike civil litigation generally in which a court’s decision typically becomes final for purposes of appeal when the entire case is completed, a bankruptcy case is an aggregation of individual controversies. In a bankruptcy case, an order is “final” if it definitively disposes of a discrete dispute within the larger bankruptcy case. Delaying appeals from bankruptcy court decisions on discrete disputes could excessively postpone appellate review and, since disputes in a bankruptcy case may be linked, could result in the bankruptcy court having to unravel later adjudications that were rendered in reliance on an earlier decision if the earlier decision were to be reversed on appeal.
The Ritzen decision underlines the need for creditors to assess carefully when to file a motion for relief from the automatic stay and whether the motion is likely to be granted, since an appeal would need to be filed immediately and could potentially preclude the creditor from filing a similar motion at a later point in the case. Ritzen also highlights more generally the need for creditors to assess correctly whether a bankruptcy court decision constitutes a final order under §158(a) to which the 14-day appeal period applies.