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The Bankruptcy StrategistFeaturesBankruptcyLitigation

Third Circuit Clarifies Appeal Process in Settlement and Reorganization Plan Disputes

By Michael L. Cook
September 01, 2019

The Third Circuit recently took a "pragmatic approach" when affirming lower court orders denying a stay of bankruptcy settlement distributions pending appeal. In re S.S. Body Armor I, Inc., 2019 WL 2588533 (3d Cir. June 25, 2019). After holding that the district court's "stay denial order" was "final" for jurisdictional purposes, it also confirmed "the applicable standard of review" on motions for stays pending appeals.

Relevance

The Third Circuit's jurisdictional ruling was timely. First, the Circuit had "no direct precedent on the finality of the" order before it. Second, the U.S. Supreme Court recently granted certiorari in Ritzen Group, Inc., v. Jackson Masonry, LLC, 2019 WL 266853 (May 20, 2019), agreeing to address whether an order denying relief from the automatic stay is "final" under the bankruptcy appeals statute, 28 U.S.C. §158(a)(i). The Sixth Circuit had held in Jackson that an order denying stay relief was "final," rejecting "vague" and "unpredictable" tests adopted by other circuits. 906 F.3d 494, 498 (6th Cir. 2018), citing In re Atlas IT Export Corp., 761 F.3d 177, 185 (1st Cir. 2014)("Everything depends on the circumstances …").

A party appealing from a bankruptcy court's approval of a settlement or confirmation of a reorganization plan must ordinarily seek a stay pending appeal. Otherwise, as the Third Circuit noted in Body Armor, if the "settlement proceeds are distributed before resolution of" the appeal, "that appeal is 'all but assured' to become moot." Id. at 3, quoting In re Revel AC, Inc., 802 F.3d 558, 567 (3d Cir. 2015).

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