Opinion ID: 3006049
Heading Depth: 2
Heading Rank: 5

Heading: The District Court Denies IDEA’s Stay

Text: Request In considering whether to grant a stay pending appeal, courts consider the following four factors: (1) whether the appellant has made a strong showing of the likelihood of success on the merits; (2) will the appellant suffer irreparable injury absent a stay; (3) would a stay substantially harm other 11 parties with an interest in the litigation; and (4) whether a stay is in the public interest. See, e.g., Republic of Phil. v. Westinghouse Electric Corp., 949 F.2d 653, 658 (3d Cir. 1991). Because IDEA is the only party before us, we limit our examination of the District Court’s ruling to its treatment of IDEA’s objections.
On the first prong, the District Court maintained that IDEA needed to show that it had a “substantial” or “strong” case on appeal. In re Revel AC, Inc., 525 B.R. 12, 24 (D.N.J. 2015) (internal quotation marks omitted). Addressing § 365(h) first, the Court noted that, because the legal issue was the subject of an “undisputed split of authority,” IDEA at most showed a possibility and not a likelihood (which we understood the Court to mean more likely than not) of success. Id. (internal quotation marks omitted). It next addressed whether the Bankruptcy Court clearly erred in finding that Revel put forth enough evidence to show that a bona fide dispute existed as to the validity of IDEA’s lease. See id. at 26. Despite the Bankruptcy Court’s failure to mention it, the District Court emphasized that “IDEA specifically sought a declaratory judgment concerning the nature of [its] agreement with [Revel],” id. at 29, even though, as IDEA asserted, its lawsuit “principally concerned [its] request for an energy easement, rather than an effort . . . to challenge the characterization of its Agreement,” id. at 29 n.14. In the District Court’s view, the pending litigation “arguably provide[d] some objective basis . . . to find . . . some bona fide issue in dispute,” id. at 29 (emphases added), because, “in answering [the] complaint, [Revel] specifically denied that [the] Agreement constituted a lease,” id. at 29 n.14. Consequently, the District Court concluded that IDEA 12 did not “demonstrate[] a likelihood of success on the merits” of the § 363(f)(4) issue either. Id. at 30.8
On the irreparable-harm prong, the District Court considered whether IDEA had “demonstrated the potential for an actual and imminent, rather than remote or speculative, irreparable harm.” Id. at 31. IDEA posited that, absent a stay, if Revel and Polo North closed on the sale, this would render its claim statutorily moot under § 363(m), leading to the loss of its lease and the end of its business at the Casino. In the 8 The District Court came to the same conclusion regarding whether Revel satisfied § 363(e)’s adequate protection requirement. IDEA had argued that adequate protection means continued possession of its lease, not merely money damages, as the Code provides that “adequate protection may be provided by . . . granting such other relief . . . as will result in the realization by such entity of the indubitable equivalent of such entity’s interest in such property.” 11 U.S.C. § 361(3). But the Court thought otherwise, declaring that rejection damages were an adequate substitute for continued possession. See In re Revel, 525 B.R. at 31 (noting that “it is more than arguable that granting possession to [IDEA] in the present circumstances of a catastrophically failed casino-hotel concept would be no more ‘adequate’ than what [it] received, namely, the right to assert [a] claim[] for rejection damages or other relief as [an] unsecured creditor[]”). It also minimized the Bankruptcy Court’s failure to make any findings on whether IDEA’s interest would be adequately protected. In the District Court’s view, because the Bankruptcy Court found that § 363(f) was satisfied, it “necessarily found the interests of [the various tenants] adequately protected.” Id. 13 District Court’s view, a mooted claim doesn’t qualify as an irreparable injury nor does the potential loss of IDEA’s possessory rights. See id. Regarding the latter, the Court noted that IDEA effectively had been dispossessed since September 2014 and would gain nothing by retaking possession of a space “in an empty and commerciallyunproductive building.” Id. at 32; see also id. at 31 (“[T]hough the [tenants] assert that the loss of their possessory rights would result in irreparable injury, [they] ignore that they have been without valuable possessory rights since September 2014.”). Hence, as with the first prong, the Court held it did not weigh in IDEA’s favor.
For the third factor in the stay analysis, IDEA contended that, because it doesn’t seek a stay of the sale itself but only the provision of the Sale Order that terminates its lease, Revel wouldn’t be injured. The District Court, focusing only on the debtor (presumably because it was the only party opposing IDEA’s stay motion), thought otherwise. In its view, because of the “easily terminable $10 million option [of Polo North] to purchase [Revel’s] assets,” there was a good chance it “would elect not to proceed with closing” if the Court granted the stay. Id. at 32 (internal quotation marks omitted). And “the palpable risk of losing a ready buyer,” the Court maintained, “demonstrates . . . a risk of substantial harm to [Revel].” Id. (emphasis omitted); see also id. at 33 (describing Revel’s exhaustive search for a buyer that yielded only two qualified buyers). Thus it found that the third factor weighed against a stay.
Finally, IDEA asserted that the public interest favors a stay because the public has a strong interest in the correct 14 application of bankruptcy law and the continuing operation of hospitality providers at Revel. Again the District Court disagreed. In its view, even assuming that IDEA expressed valid public policy concerns, “such concerns would not sufficiently outweigh the far more prevalent interest in facilitating the success of bankruptcy proceedings,” id., along with the “permanent loss of approximately 4,000 jobs” and “substantial detriment to the City of Atlantic City and [] surrounding areas” a failed sale could trigger, id. at 34 (internal quotation marks omitted). As with the first three factors, the public interest “favors the facilitation of the asset sale, and, accordingly, weighs against the imposition of a stay.” Id. IDEA appeals.