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The Delaware Bankruptcy Insider is a premier blog designed to bring its readers a comprehensive analysis of the latest Delaware corporate bankruptcy news and rulings. Brought to you by Ashby & Geddes, P.A.
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- Third Circuit Reversal Paves the Way For NextEra to Potentially Recover Administrative Expenses Incurred in Connection With Failed Merger
- Delaware District Court Disagrees with Bankruptcy Court’s Ruling and Holds That Committee’s Challenge Rights Survived Entry of the Sale Order and Consummation of Sale
Third Circuit Takes Rare Opportunity to Explore the Four Factors Balanced When Ruling on a Stay Pending Appeal Request
In re Revel AC, Inc., No. 15-1253, 2015 WL 5711358 (3d Cir. Sept. 30, 2015)
Although seemingly clear cut and established under controlling law, the Third Circuit Court of Appeals recently took the opportunity it is so seldom given to focus on how to balance the four factors that determine whether to grant a stay pending appeal under Bankruptcy Rule 8007. See Fed. R. Bankr. P. 8007. As a reminder to our readers, the four factors relevant to a stay pending appeal analysis are: (1) whether the stay applicant has made a strong showing that it is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies. Following an in-depth examination into these factors and the case precedent addressing their balancing, the Court set forth the following principles:
- All four stay factors are interconnected and require a delicate balancing.
- A court’s consideration of a stay request does not require an “all-or-nothing” proposition. In other words, not all four factors must be satisfied to secure a stay.
- The most critical factors to a Bankruptcy Rule 8007 analysis are the first two (i.e. a strong showing of the likelihood of success and that the movant will suffer irreparable harm), with the first arguably being the more important piece of the analysis.
- An analysis under Bankruptcy Rule 8007 should proceed as follows:
First, did the applicant make a sufficient showing that (a) it can win on the merits (significantly better than negligible but not greater than 50%) and (b) it will suffer irreparable harm absent a stay (not merely a possibility but likelihood)?
If so, then second, a court must balance the relative harms considering all four factors using a “sliding scale” approach, meaning that the necessary level or degree of possibility of success will vary according to a court’s assessment of the other stay factors. The more a movant is likely to prevail on the merits, the less the balance of harms must tip in its favor and vice versa. For example, should a movant demonstrate a strong meritorious case, it may obtain a stay even if the balance of harms and public interest weigh against it.
If the requisite showing under the first part of the analysis above has not been made, the inquiry ends, no examination into the balance of harms and the public interest in necessary, and the stay request should be denied.