Puttin’ on the Ritzen: Supreme Court Rules that Stay Relief Denial is Appealable

A recent Supreme Court decision, Ritzen Group Inc. v. Jackson Masonry, LLC, has enhanced the position of secured creditors and litigants in bankruptcy cases by allowing them to promptly challenge bankruptcy court rulings concerning the automatic stay.

Background

The case grew out of a sale of real property that did not close. The buyer (Ritzen) sued the seller (Jackson), which filed a chapter 11 petition before the trial began. Ritzen filed a motion for relief from the automatic stay in order to proceed with the trial, but the motion was denied.

Ritzen did not immediately appeal the ruling. Instead, Ritzen filed a notice of appeal later, after Jackson’s chapter 11 plan had been confirmed. The district court ruled that Ritzen’s appeal was untimely, and that Ritzen’s time to appeal had expired 14 days after the entry of the order denying the lift stay motion. The Sixth Circuit Court of Appeals affirmed.

Ritzen argued that the order denying stay relief was not a final order and that consequently, the proper time to appeal did not occur until the confirmation of the plan of reorganization resolved the entire bankruptcy case. Ritzen pointed to the Court’s 2015 decision in Bullard v. Blue Hills Bank, which held that a decision rejecting a proposed chapter 13 plan was not a final order and thus was not immediately appealable.

The Decision

The Court, in a unanimous decision, ruled that the denial of a stay relief motion is a final order. It distinguished Bullard on the ground that the rejection of a proposed plan is but an intermediate step in the plan confirmation process, while the denial of a stay relief motion is a final resolution of a discrete controversy within the larger bankruptcy case.

One result of the Ritzen decision is to force creditors who file unsuccessful lift-stay motions to act promptly to preserve their right of appeal. Ritzen’s failure to file a notice of appeal within 14 days constituted a waiver of its right to contest the denial of stay relief.

More broadly, the Ritzen decision gives more options and leverage to creditors. Had Ritzen gone the other way, a creditor seeking stay relief would not have a right to have the bankruptcy court’s determination reviewed by an appellate court, and might be stuck in the bankruptcy case for a considerable period of time.