Case No. 18-938 | 6th Cir.
Preview by Michael Fischer, Online Editor
In 2013 Ritzen Group, Inc. (“Ritzen”) entered into a contract to buy a piece of real property from Jackson Masonry, LLC (“Jackson”). After the sale failed to close, however, Ritzen brought suit against Jackson alleging breach of contract. After a year of litigation, Jackson filed for bankruptcy less than twenty minutes before a scheduled hearing on Ritzen’s repeated motions to compel discovery. The filing triggered an automatic stay under 11 U.S.C. § 362(a), which prevents a creditor from collecting debts from the debtor. In response, Ritzen filed a motion in bankruptcy court to lift the stay, alleging that Jackson had filed for bankruptcy merely to interrupt the breach of contract litigation. Ritzen’s motion was denied and, after the parties continued litigating the breach of contract dispute in the bankruptcy forum, the court found for Jackson. Ritzen subsequently appealed the judgment and the court’s previous denial of Ritzen’s motion to lift the automatic stay.
The district court declined to review the denial of Ritzen’s stay-relief motion. Likewise, the Sixth Circuit refused to hear the appeal, holding that Ritzen was required to make an immediate appeal of that denial instead of waiting until the litigation concluded. The court reached this conclusion by reasoning that denials of motions for stay relief must be appealed immediately since it commences a discrete proceeding within a bankruptcy case and, when denied, concludes the proceeding. Ritzen appealed to the U.S. Supreme Court which granted certiorari on May 20, 2019. The issue before the Court is whether an order denying a motion for relief from the automatic stay due to a bankruptcy filing is a final order under 28 U.S.C. § 158(a)(1).
On appeal, Petitioner Ritzen argues that for bankruptcy appellate purposes a stay-relief motion must be treated as part of the claims-adjudication process since the only practical effect of its denial is that the litigation must proceed in the bankruptcy court. Brief for Petitioner at 25–34, Ritzen Group, Inc. v. Jackson Masonry, LLC, No.18-938 (U.S. filed Aug. 5, 2019). In addition, Ritzen contends that Congress did not intend for orders denying stay relief, which determine where the parties litigate their dispute, to be final and immediately appealable since it patterned the relevant provisions of the Bankruptcy Code off of the § 1291 general appellate statute. Id. at 35. According to Ritzen, the finality requirement of this statute requires that an order denying relief is treated as interlocutory if its effect is only to resolve where the parties will litigate a dispute. Id. Finally, Ritzen asserts that, in order to ensure the successful administration of bankruptcy relief, debtors should not be permitted to discharge liabilities in bad faith. Id. at 43–45. Ritzen concludes that because this requirement is present throughout the entire bankruptcy case, the stay-relief motion has not been decided conclusively until the bankruptcy court determines that the nonmoving party has acted in good faith. Id. at 45.
Respondent Jackson contends that the Sixth Circuit correctly applied the standard set forth in Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (2015) for determining whether a denial of a motion in bankruptcy court constituted a final order. Brief in Opposition at 4, Ritzen Group Inc. v. Jackson Masonry, LLC, No.18-938 (U.S. filed Apr. 12, 2019). Furthermore, Jackson argues that inferior courts have consistently applied this standard without serious deviation. Id. at 7–8. Lastly, Jackson asserts that the Sixth Circuit did not apply a per se rule regarding stay relief but instead acknowledged exceptions where “it appears that changing circumstances could change the stay calculus.” Id. at 8–9.