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Ritzen Group, Inc. v. Jackson Masonry, LLC

United States District Court, M.D. Tennessee, Nashville Division

January 25, 2018

RITZEN GROUP, INC., Appellant,


          ALETA A. TRAUGER United States District Judge.

         Before the court are two appeals filed by Ritzen Group, Inc. (“Ritzen”) from orders in the bankruptcy proceedings of Jackson Masonry, LLC (“Jackson Masonry”) (Bankr. No. 3:16-bk-02065). Ritzen's first Notice of Appeal relates to a ruling made following a June 14, 2016 hearing, in which Ritzen sought relief from the automatic stay. (No. 3:17-cv-00806 (“Ritzen I”), Docket No. 1.) Ritzen has filed an Appellant's Brief (Ritzen I, Docket No. 11), to which Jackson Masonry has filed an Appellee's Brief in response (Ritzen I, Docket No. 15), and Ritzen has filed a Reply Brief (Ritzen I, Docket No. 17). Ritzen's second Notice of Appeal relates to the bankruptcy court's later disposition of two consolidated adversary proceedings between Ritzen and Jackson Masonry. (No. 3:17-cv-00807 (“Ritzen II”), Docket No. 1.) Ritzen has filed an Appellant's Brief (Ritzen II, Docket No. 11), to which Jackson Masonry has filed an Appellee's Brief in response (Ritzen II, Docket No. 20), and Ritzen has filed a Reply Brief (Ritzen II, Docket No. 23). For the reasons stated herein, Ritzen's first appeal will be dismissed as untimely, and the Bankruptcy Court's judgment in the second appeal will be affirmed.


         A. Initial Dispute and Chancery Court Action

         In 2013, Jackson Masonry and Ritzen entered into a contract for Ritzen to purchase a piece of Jackson Masonry's Nashville real property for $1.55 million. (Ritzen II, Docket No. 5 at 2680-90 (“Contract”), at 1-10.) The contract provided that “[t]he consummation of the transaction contemplated by this Agreement (‘Closing') shall take place on a mutually agreeable day and time, ” as calculated within a framework set forth in the contract. (Id. at 2.) Although the parties have disputed the calculation of some aspects of the timeline of obligations under the contract, they agree that the parties eventually faced a closing date of December 15, 2014, after which the sale could not be completed without an extension. The contract imposed particular obligations for the parties to perform “at Closing, ” including Jackson Masonry's providing Ritzen with a number of documents related to the property. (Id. at 2-3.)

         The sale did not go through, and each party blames the other. Jackson Masonry suggests that Ritzen was unable to finalize its financing for the purchase in time and that December 15, 2014 therefore came and went with no financing in place and no payment conveyed. (Ritzen II, Docket No. 20 at 6.) Ritzen disputes that account and argues that it did have a financing deal in place with Amber Lane Development, LLC (“Amber Lane”), which was prepared to provide the funds once Ritzen and Jackson Masonry were otherwise ready to close. Ritzen claims, instead, that the deal fell apart because Jackson Masonry failed to act in good faith in providing the required documentation. Specifically, Ritzen argues that Jackson Masonry unreasonably and improperly withheld key documents until the eve of the final closing date and then provided copies that contained errors, omissions, and irregularities that stood in the way of completing the sale. (Ritzen II, Docket No. 11 at 10.) On December 23, 2014, Ritzen sued Jackson Masonry in Davidson County Chancery Court for breach of contract. (Ritzen I, Docket No. 12-1 at 43.)

         Discovery in the Chancery Court case was contentious. On February 11, 2016, the Chancery Court entered an order for sanctions against Jackson Masonry, concluding that the company had “failed to provide full and candid responses” to Ritzen's discovery requests. (Id. at 52.) Specifically, the court ordered Jackson Masonry to pay Ritzen attorney's fees related to the discovery dispute, granted Ritzen supplemental discovery, and granted Ritzen the opportunity to supplement its previously filed motion for summary judgment. (Id. at 53.) Although an April 4, 2016 trial date was rapidly approaching, the discovery disputes continued, and another such hearing was scheduled for March 24, 2016. Ritzen suggests that Jackson Masonry was likely to face further sanctions in the wake of that hearing. Instead, minutes before the scheduled start of the hearing, Jackson Masonry filed for Chapter 11 bankruptcy, triggering an automatic stay of pending litigation. (Compare Id. at 4 (showing 8:43 electronic filing stamp on bankruptcy petition) with Id. at 46 (noting 9:00 AM motion hearing on Chancery Court docket)).

         B. Ritzen's April 14, 2016 Motion

         On April 14, 2016, Ritzen filed a motion in the Bankruptcy Court styled “Ritzen Group Inc.'s Motion to Modify or Lift the Automatic Stay.” (Ritzen I, Docket No. 6 at 30-53 (“Stay Motion”), at 1-24.) Because the precise scope of the relief requested in that motion is contested, see infra, the court will describe the motion's contents and structure in greater detail than would typically be necessary, with a particular eye to the degree to which Ritzen's motion can be characterized as having raised, and the Bankruptcy Court can be characterized as having considered, the issue of dismissing the Chapter 11 petition on the basis of bad faith filing.

         The motion's opening paragraph characterizes Ritzen's request for relief as Ritzen's “mov[ing] the Court to modify or lift the automatic stay in [Jackson Masonry's] bankruptcy related to pending state court litigation.” (Id. at 1.) Neither the motion's title nor the introductory paragraph suggests that Ritzen is seeking any relief other than a lift or modification of the stay.

         After a summary of its contents, the motion proceeds to a section under the header “Business, Property, and Litigation Facts.” (Id. at 4.) For the most part, this section presents a straightforward recitation of the facts and procedural history leading up to the motion. (Id. at 4- 12.) The final paragraph of the section, however, reads as follows: “This Court should lift the stay to allow the state court to adjudicate these important evidentiary issues and to allow trial to proceed. In addition, the Court should dismiss the bankruptcy as a bad faith filing.” (Id. at 12 (emphasis added).)

         The motion's eventual “Argument” section does not include any arguments specifically devoted to dismissal. Rather, Ritzen's argument is presented under two subheadings: “I. The Court Should Grant Relief From Stay for Judicial Economy”; and “II. The Court Should Grant Relief From Stay ‘For Cause' Under Section 362(d)(1).” (Id. at 15, 18.) The second of those sections does discuss a number of cases regarding dismissal, but only after explaining that “there is ‘no substantive difference between the cause requirement for dismissal of a petition under Section 1112(b) and the cause requirement for relief from stay under Section 362(d)(1).'” (Id. at 18 (quoting In re Lady Bug Corp., 500 B.R. 556, 562 (Bankr.E.D.Tenn. 2013)).) The dismissal cases, therefore, appear to be presented as persuasive authority on the question of relief from the stay, not in support of any distinct request for dismissal.

         Finally, in the motion's “Conclusion” section, Ritzen characterizes the relief requested in the motion as follows:

For the reasons set forth above, Ritzen Group requests that the Court enter an order granting relief from the automatic stay provisions of 11 U.S.C. § 362, for the provision of Rule 4001(a)(3) to be waived, and grant such other and further relief as this Court deems as just and appropriate.

(Id. at 23.)

         On June 14, 2016, the Bankruptcy Court held a hearing on the motion. (See Ritzen I, Docket No. 1-1.) Following the presentation of proof, the court explicitly addressed the relationship between Ritzen's arguments related to the stay and the potential for an argument in favor of dismissal for bad faith filing. Addressing Ritzen's counsel, Judge Keith Lundin stated:

You've tried a case to dismiss a Chapter 11 for bad faith filing. That's the case you've tried. Whether you know it or not, that's-and no criticism intended, I'm just telling you that's the issue you put up here. And I understand because I've been here long enough to know that the criteria for relief from a stay sometimes overlaps the motion to dismiss.

(Ritzen I, Docket No. 12-2 at 116.) The court, however, stressed that it was considering the motion only as having sought relief from the stay:

I haven't been asked to dismiss the case. I don't have a motion to dismiss. I haven't tried a motion to dismiss but the very first thing I said to you is your case here today has been more like a motion to dismiss the case than like a relief statement. But, trust me, I don't have a motion to dismiss and I'm not going to dismiss the Bankruptcy case today.

(Id. at 118.) The court's ensuing judicial economy analysis was explicitly premised on the assumption that, even if the court granted Ritzen's motion, the bankruptcy proceeding as a whole would continue:

You're going to come right back here [if the stay is lifted and you succeed in state court]. I've got exclusive jurisdiction over the property of the estate. You go to state court, say you get an order for specific performance. The ...

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