Opinion ID: 3006049
Heading Depth: 2
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Heading: The Sliding-Scale Approach to Balancing the

Text: Stay Factors Under Federal Rule of Bankruptcy Procedure 8007, a party can move to stay the effect of a bankruptcy court order pending a resolution on appeal. See Fed. R. Bankr. P. 8007. The factors considered “overlap” the familiar ones courts look to in ruling on applications for preliminary injunctions. See Nken v. Holder, 556 U.S. 418, 434 (2009) (observing that “similar concerns arise whenever a court order may allow or disallow anticipated action before the legality of that action 17 has been conclusively determined”). To repeat essentially what was already noted above, the following factors come into play: (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. Hilton v. Braunskill, 481 U.S. 770, 776 (1987). In order not to ignore the many gray shadings stay requests present, courts “balance[e] them all” and “consider the relative strength of the four factors.” Brady v. Nat’l Football League, 640 F.3d 785, 789 (8th Cir. 2011) (quoting Fargo Women’s Health Org. v. Schafer, 18 F.3d 526, 538 (8th Cir. 1994) (internal quotation marks omitted)); see also 16A Charles Alan Wright et al., Federal Practice and Procedure § 3954 (4th ed. 2008) (“The four factors should be balanced; thus, for example, if the balance of harms tips heavily enough in the stay applicant’s favor then the showing of likelihood of success need not be as strong, and vice versa.” (footnotes omitted)). “[T]he most critical” factors, according to the Supreme Court, Nken, 556 U.S. at 434, are the first two: whether the stay movant has demonstrated (1) a strong showing of the likelihood of success and (2) that it will suffer irreparable harm—the latter referring to “harm that cannot be prevented or fully rectified” by a successful appeal, Roland Mach. Co. v. Dresser Indus., 749 F.2d 380, 386 (7th Cir. 1984) (Posner, J.). Though both are necessary, the former is arguably the more important piece of the stay analysis. As Judge Posner has remarked, it isn’t enough that the failure to obtain a stay will be “a disaster” for the stay movant but only a “minor 18 inconvenience to the defendant,” as “[e]quity jurisdiction exists only to remedy legal wrongs; [thus,] without some showing of a probable right[,] there is no basis for invoking it.” Id. at 387. Just how strong of a merits case must a stay applicant show? The “formulations used to describe the degree of likelihood of success that must be shown” vary widely. Mohammed v. Reno, 309 F.3d 95, 100 (2d Cir. 2002) (emphasis in original). To give but a sampling of the range that exists, some require a showing that the underlying appeal is “more likely to succeed than fail.” Abdul Wali v. Coughlin, 754 F.2d 1015, 1026 (2d Cir. 1985) overruled on other grounds by O’Lone v. Estate of Shabazz, 482 U.S. 342 (1987). Others call for a “substantial possibility, although less than a likelihood, of success.” Dubose v. Pierce, 761 F.2d 913, 920 (2d Cir. 1985)9 (quoting Hayes v. City Univ. of N.Y., 503 F. Supp. 946, 963 (S.D.N.Y 1980)) vacated on other grounds 108 S.Ct. 2890 (1988); see also generally John Y. Gotanda, The Emerging Standards for Issuing Appellate Stays, 45 Baylor L. Rev. 809, 813–15 (1993). For our Court, a sufficient degree of success for a strong showing exists if there is “a reasonable chance, or probability, of winning.” Singer Mgmt. Consultants, Inc. v. Milgram, 650 F.3d 223, 229 (3d Cir. 2011) (en banc). Thus, while it “is not enough that the chance of success on the merits be ‘better than negligible,’” Nken, 556 U.S. at 434 (citation omitted), the likelihood of winning on appeal need not be “more likely than not,” Singer Mgmt. Consultants, 650 F.3d at 229; see also Wash. Metro. Area Transit Comm’n v. Holiday Tours, Inc., 559 F.2d 841, 844 (D.C. Cir. 1977) (noting that the trouble 9 Yes, we realize this is the same Circuit Court in the same year. Read on and realize that we are not immune from internal tensions in our opinions. 19 with a “strict ‘probability’ requirement is [] it leads to an exaggeratedly refined analysis of the merits at an early stage in the litigation”). On the second factor, the applicant must “demonstrate that irreparable injury is likely [not merely possible] in the absence of [a] [stay].” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008) (emphasis in text). While a reference to “likelihood” of success on the merits has been interpreted by courts to cover the generic range of outcomes, for irreparable harm we understand the Supreme Court’s use of “likely” to mean more apt to occur than not. See generally Michigan v. U.S. Army Core of Engineers, 667 F.3d 765, 788 (7th Cir. 2011) (holding that for harm to be likely “there must be more than a mere possibility that harm will come to pass … but the alleged harm need not be occurring or be certain before a court may grant relief”) (citation omitted). “Once an applicant satisfies the first two factors, the traditional stay inquiry calls for assessing the harm to the opposing party and weighing the public interest.” Nken, 556 U.S. at 435. We weigh the likely harm to the movant (absent a stay) (factor two) against the likely irreparable harm to the stay opponent(s) if the stay is granted (factor three). This is called the balancing of harms or balancing of equities. We also take into account where the public interest lies (factor four)—in effect, how a stay decision has “consequences beyond the immediate parties.” Roland Mach., 749 F.2d at 388. In this context, a number of outcomes are possible. Where the balance of harms and public interest weigh in favor of a stay and the court deems that the stay movant has made a sufficient showing of success on appeal, a stay should be granted. Where the opposite is true—i.e., the merits, balance of harms, and public interest favor the stay 20 opponent—a stay should be denied. Between these easy examples are the more difficult cases, such as “where the merits favor one party and the balance of harms favors the other.” Gotanda, supra, at 821. There (along with the public interest) we must “evaluate the degree of irreparable injury with the prospects of prevailing on the merits.” Id. In deciding how strong a case a stay movant must show, we have viewed favorably what is often referred to as the “sliding-scale” approach. See Constructors Ass’n of W. Pa. v. Kreps, 573 F.2d 811, 815 (3d Cir. 1978); Del. River Port Auth. v. Transamerican Trailer Transp., Inc., 501 F.2d 917 (3d Cir. 1974). Under it, “[t]he necessary ‘level’ or ‘degree’ of possibility of success will vary according to the court’s assessment of the other [stay] factors.’” Mohammed, 309 F.3d at 101 (second alteration in original) (quoting Wash. Metro., 559 F.2d at 843). Stated another way, “[t]he more likely the plaintiff is to win, the less heavily need the balance of harms weigh in [its] favor; the less likely [it] is to win, the more need it weigh in [its] favor.” Roland Mach., 749 F.2d at 387. As we described in Kreps (in considering all four factors though in the context of deciding whether to grant a preliminary injunction), in a situation where factors of irreparable harm, interests of third parties and public considerations strongly favor the moving party, an injunction might be appropriate even though plaintiffs did not demonstrate as strong a likelihood of ultimate success as would generally be required. In contrast, where the threatened irreparable injury is limited or is balanced to a substantial degree by countervailing injuries which would result to third parties, or to the public interest from the issuance of an injunction, greater significance 21 must be placed upon the likelihood that the party will ultimately succeed on the merits of the litigation. 573 F.2d at 815 (footnotes omitted) (internal quotation marks omitted); see In re A & F Enters., Inc. II, 742 F.3d 763, 766 (7th Cir. 2014) (“As with a motion for a preliminary injunction, a ‘sliding scale’ approach applies; the greater the moving party’s likelihood of success on the merits, the less heavily the balance of harms must weigh in its favor, and vice versa.”); Mohammed, 309 F.3d at 101 (“The probability of success that must be demonstrated is inversely proportional to the amount of irreparable injury plaintiff[] will suffer absent the stay. Simply stated, more of one excuses less of the other.” (alteration in original) (quoting Mich. Coal. of Radioactive Material Users, Inc. v. Griepentrog, 945 F.2d 150, 153 (6th Cir. 1991). Keeping in mind that the first two factors are the most critical, if “the chance of success on the merits [is only] better than negligible” and the “possibility of irreparable injury” is low, a stay movant’s request fails. Nken, 556 U.S. at 434 (internal quotation marks omitted). Likewise, “even if a movant demonstrates irreparable harm that decidedly outweighs any potential harm to the [stay opponent] if a stay is granted, [it] is still required to show, at a minimum, ‘serious questions going to the merits.’” Mich. Coal. of Radioactive Material Users, 945 F.2d at 153–54 (quoting In re DeLorean Motor Co., 755 F.2d 1223, 1229 (6th Cir. 1985)). Our dissenting colleague criticizes the “sliding-scale” approach as “fail[ing] to honor” Third Circuit precedent. Dissenting Op. 1. In her view, there is no balancing—a court’s consideration of a stay request is an all-or-nothing proposition. To merit a stay, she believes, the stay applicant 22 must “demonstrate,” id., that it will “satisfy,” id. at 3, each of the four stay factors. If it doesn’t, then, even if the stay applicant’s chances of success on appeal are assured (let alone more probable than not) and the applicant will likely suffer an irreparable injury, a stay must be denied if, for example, it isn’t in the public interest. That approach is not only impractical, it has the potential to be deeply unfair, and is one we have explicitly disavowed. In Delaware River Port Authority v. Transamerican Trailer Transport, for example, we couldn’t have been clearer in establishing that “consideration of [the four] factors by the district court requires a ‘delicate balancing.’” 501 F.2d at 920. We reaffirmed that concept in Kreps in observing that “no one aspect” of the stay analysis “will necessarily determine its outcome,” 573 F.2d at 815, assuming, we pause to note, that the party seeking a stay has made a sufficient showing on the first two factors. Therefore, where the balance of harms and public interest “strongly favor[]” a stay, a court may enter it even if the applicant didn’t “demonstrate as strong a likelihood of ultimate success as would generally be required.” Del. River Port Auth., 501 F.2d at 923. Relatedly, “when considerable injury will result from either the grant or denial of a preliminary injunction, these factors [i.e., the balance of harms] to some extent cancel each other and greater significance must be placed upon the likelihood that each party will ultimately succeed on the merits of the litigation.” Id. at 924. To the extent later statements in our opinions suggest the opposite—that “a complete failure to satisfy any one of [the stay] factors precludes a stay,” Dissenting Op. 2—they are not binding. See United States v. Rivera, 365 F.3d 213, 213 (3d Cir. 2004) (“This Circuit has long held that if its cases conflict, the earlier is the controlling authority and the latter is ineffective as precedents.”). To sum up, all four stay factors are interconnected, and thus the analysis should proceed as follows. Did the applicant 23 make a sufficient showing that (a) it can win on the merits (significantly better than negligible but not greater than 50%) and (b) will suffer irreparable harm absent a stay? If it has, we “balance the relative harms considering all four factors using a ‘sliding scale’ approach. However, if the movant does not make the requisite showings on either of these [first] two factors, the [] inquiry into the balance of harms [and the public interest] is unnecessary, and the stay should be denied without further analysis.” In re Forty-Eight Insulations, 115 F.3d at 1300–01 (internal citation omitted). But depending on how strong a case the stay movant has on the merits, a stay is permissible even if the balance of harms and public interest weigh against holding a ruling in abeyance pending appeal.