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Ritzen Group, Inc. v. Jackson Masonry, LLC

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

May 14, 2018

RITZEN GROUP, INC., Appellant,
v.
JACKSON MASONRY, LLC, Appellee.

          MEMORANDUM AND ORDER

          ALETA A. TRAUGER, UNITED STATES DISTRICT JUDGE.

         Before the court are (1) appellee Jackson Masonry, LLC's Motion for Disbursement of Supersedeas Bond Funds to Appellee and Setting Case Management Conference for Hearing on Bond Damages Owed to Appellee (“Motion for Disbursement”) (Doc. No. 29) and (2) appellant Ritzen Group, Inc.'s Motion for Stay Pursuant to Currently-Posted Supersedeas Bond Funds (“Motion to Stay”) (Doc. No. 31). Both motions have been exhaustively briefed and are ripe for review. For the reasons set forth herein, the court will deny the Motion for Disbursement and grant the Motion to Stay.

         I. Factual and Procedural History

         In May 2017, appellant Ritzen Group, Inc. (“Ritzen”) appealed to this court from an order entered by the United States Bankruptcy Court for the Middle District of Tennessee (the “Bankruptcy Court”) in the Chapter 11 case filed by Jackson Masonry, LLC (“Jackson”), No. 3:16-bk-02065, resolving two consolidated adversary proceedings (the “Property Dispute”) between Ritzen and Jackson. More specifically, the Bankruptcy Court, after conducting a trial on the matter, entered a final judgment disallowing Ritzen's claim, ruling that Ritzen had materially breached the terms of a contract between Ritzen and Jackson for the purchase of a piece of real estate (the “Property”) owned by Jackson for $1.55 million, and awarding damages to Jackson in the amount of $248, 311.83, plus additional costs and expenses. (B'cy Doc. Nos. 375, 413, 423.[1])

         While briefing on the appeal in this court was proceeding, the parties filed a Joint Motion to Stay Execution and Establish Supersedeas Bond. (Doc. No. 15.) The Joint Motion proposed that Ritzen post a bond in the amount of $277, 070.69, which reflected the amount of damages awarded by the Bankruptcy Court in the Property Dispute, plus $29, 250 “in projected United States Quarterly Fees for the approximate 18-month appellate period” and an additional “$20, 000 in projected amounts the Debtor will expend in attorney fees and costs to defend the appeal, ” but minus “$20, 491.14 for amounts due and owing to Ritzen related to an allowed claim in Jackson Masonry's bankruptcy case.” (Doc. No. 15, at 1.) The parties also agreed that Jackson maintained the right to request an increase of the Bond Amount under certain circumstances. (Id. at 2.) The court granted the Joint Motion by entering the parties' Agreed Order Granting Joint Motion to Stay Execution and Establish Supersedeas Bond (“Agreed Bond Order”) (Doc. No. 16), and Ritzen deposited the sum of $277, 070.69 with the court.

         On January 25, 2018, the court issued a Memorandum and Order (Doc. Nos. 24, 25) affirming the Bankruptcy Court's disposition of the Property Dispute in all respects.[2] Ritzen filed its Notice of Appeal to the Sixth Circuit Court of Appeals on February 8, 2018. (Doc. No. 27.) On February 26, 2018, Jackson filed its Motion for Disbursement and supporting Memorandum (Doc. Nos. 29, 30), in which it argues that, under Rule 8025 of the Federal Rules of Bankruptcy Procedure, any order or final judgment in the district court that affirms a decision of the bankruptcy court on an appeal is automatically stayed for fourteen days after its entry, but that an appellant who wishes to extend the stay of execution of such a judgment beyond that fourteen days must file a motion for such a stay within the fourteen-day window and before filing its notice of appeal. Otherwise, Jackson contends, the district court loses jurisdiction to consider a motion to extend a stay of execution. (Doc. No. 30, at 2-3 (citing In re AWC Liquidation Corp., 292 B.R. 239, 241-42 (D. Del. 2003)).) Because more than fourteen days had passed since entry of this court's Judgment by the time Jackson filed its Motion for Disbursement, and Ritzen filed its Notice of Appeal without seeking to extend the stay, according to Jackson, “this Court cannot consider any further stay.” (Id. at 3.) Jackson therefore requests an order compelling the immediate disbursement of $248, 311.83[3] and setting a briefing schedule and hearing on the question of what additional damages Jackson may be entitled to recover. (Id.)

         Ritzen responded to the Motion for Disbursement by contesting Jackson's interpretation of Rule 8025 and by filing a Motion to Stay. (Doc. No. 31.) It argues that the case cited by Jackson, AWC Liquidation, is an anomaly and that a majority of courts that have considered the question have held that a district court retains jurisdiction to consider a motion to stay even after the filing of a notice of appeal. (Id. at 4-5 (citing In re Imperial Real Estate Corp., 234 B.R. 760 (9th Cir. B.A.P. 1999); Vill. Green I, GP v. Fed. Nat'l Mortg. Ass'n, No. 14-2351-STA-tmp, 2015 WL 73632 (W.D. Tenn. Jan. 6, 2015); In re Lambert Oil Co., 375 B.R. 197 (W.D. Va. 2007)).) Ritzen further argues that the supersedeas bond already posted is sufficient security to protect Jackson's interests and that the court should extend the stay of execution under the terms set forth in the parties' Agreed Bond Order pending resolution of its appeal of the Property Dispute to the Sixth Circuit. (Id. at 5.)

         In its Response to Ritzen's Motion to Stay, Jackson repeats its argument that the court lacks jurisdiction to consider the stay and further adds that, even if the court does consider the motion, Ritzen is not entitled to a stay of the monetary aspects of the judgment against it because the existing bond is “grossly insufficient.” (Doc. No. 33, at 2.) It insists that the court should not grant a further stay of Jackson's right to collect the judgment unless Ritzen supplements the already posted bond by at least an additional $100, 000. (Id. at 9-10.) It also argues that a stay of the non-monetary aspects of the judgment against Ritzen is unwarranted, because Ritzen has failed to establish any of the requisite factors for extending the stay. Thus, Jackson argues, the court should not extend the stay of Jackson's right to sell the Property or to close its bankruptcy case. (Id. at 10-11.)

         With the court's permission, Ritzen filed a Reply in support of its Motion to Stay, which also constitutes a surreply to Jackson's Motion for Disbursement. (Doc. No. 37.) Ritzen contends that: (1) the negotiated Joint Motion and Agreed Bond Order, by their terms, contemplate a continued appeal and grant Jackson a limited right to seek an increase in the bond amount under certain circumstances; (2) Jackson's arguments regarding its entitlement to additional costs and attorney's fees associated with this dispute have been mooted in part by the Bankruptcy Court's recent ruling in favor of Ritzen on another adversary proceeding between the parties (the “Lis Pendens Adversary Proceeding”), as a result of which Ritzen will be entitled to recover attorney's fees from Jackson, effectively offsetting any additional amount of fees to which Jackson believes it is entitled in connection with the appeal of the Property Dispute; (3) Jackson should not be able to recover attorney's fees associated with litigating the amount of the bond and the stay; and (4) the court should extend the stay under the terms set forth in the Agreed Bond Order.

         II. Discussion

         The first matter to be resolved is whether the court has jurisdiction to consider the Motion to Stay. As set forth below, the court concludes that it does have jurisdiction and, further, that extending the stay of execution under the terms of the Agreed Bond Order is appropriate.

         A. Jurisdiction to Consider Ritzen's Motion to Stay

         The United States District Court for the District of Delaware has held a number of times that a district court reviewing a bankruptcy court's final judgment loses jurisdiction to consider a motion to stay filed after the movant filed its notice of appeal. In re AWC Liquidation Corp., 292 B.R. at 241 (concurring with “minority precedent, ” citing In re One Westminister Co., 74 B.R. 37, 38 (D. Del. 1987)); see also In re Peregrine Sys., Inc., 312 B.R. 755, 756 (D. Del. 2004). One court outside of Delaware has followed suit. In re Netfax, Inc., 335 B.R. 85, 95 (D. Md. 2005). To this court's knowledge, every other court to consider the issue directly has reached the opposite conclusion. See, e.g., In re Miranne, 852 F.2d 805, 806 (5th Cir. 1988) (per curiam) (“After reviewing the pertinent authorities in this area, we are persuaded that the district court retained jurisdiction to grant appellant's request for a stay despite the fact that a notice of appeal to this Court was filed prior to the request for a stay. Such a conclusion is consistent with the general principle that an application for a stay of the judgment or order of a district court should ordinarily be made in the first instance in the district court.” (citing Fed.R.Civ.P. 62, 8(a); 9 Moore's Federal Practice ¶ 208.05)); In re Imperial Real Estate Corp., 234 B.R. at 762 (recognizing split of authority but holding that it could rule on a motion to stay despite the earlier filing of a notice of appeal, stating: “While Rule 8017(b) [now Rule 8025(b)] clearly contemplates that a stay may be requested before the notice of appeal to the court of appeals is filed, there is nothing in Rule 8017(b) that prohibits the issuance of a stay after the notice of appeal is filed. This conclusion is consistent with the practice under both Fed.R.Bankr.P. 8005 and Fed. R. App. P. 8(a)); In re W.R. Grace & Co., No. 01-1139, 2008 WL 5978951, at *3 (D. Del. Oct. 28, 2008) (“After examining, the history and purpose of Rule 8017, this Court sides with the majority in concluding that jurisdiction is retained to hear [the movant's] Motion to Stay.”); In re Olick, CIV. A. 96-784, 1996 WL 287344, at *1 (E.D. Pa. May 29, 1996) (following In re Miranne and “more recent district court decisions” to find that it had jurisdiction to consider post-appeal motion to stay); In re KAR Dev. Assocs., 182 B.R. 870, 872 (D. Kan. 1995) (same); In re Winslow, 123 B.R. 647, 647-48 n.1 (D. Colo. 1991) (same); see also Vill. Green I, GP, 2015 WL 73632, at *2-4 (granting motion to stay filed after a notice of appeal, without discussion of the timing, citing Fed.R.Bankr.P. 8025); In re Lambert Oil Co., 375 B.R. at 199 (same).[4]

         In the absence of binding authority from the Sixth Circuit adopting either position, this court, following the majority, holds that it has jurisdiction to consider ...


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