Stewart Mayer v. Robert J. Harrington ( 2022 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE STEWART NEIL MAYER, No. 20-56340
Debtor,
D.C. No.
3:20-cv-01376-
ROBERT J. HARRINGTON, TWR
Appellant,
v. OPINION
STEWART NEIL MAYER,
Appellee.
Appeal from the United States District Court
for the Southern District of California
Todd W. Robinson, District Judge, Presiding
Argued and Submitted January 10, 2022
Pasadena, California
Filed March 8, 2022
Before: A. Wallace Tashima, Milan D. Smith, Jr., and
Paul J. Watford, Circuit Judges.
Opinion by Judge Tashima
2 IN RE MAYER
SUMMARY*
Bankruptcy
The panel reversed the district court’s order denying a
debtor’s motion for leave to appeal the bankruptcy court’s
order denying without prejudice a creditor’s request for relief
from the automatic stay.
The panel held that under Ritzen Grp., Inc. v. Jackson
Masonry, LLC, 140 S. Ct. 582 (2020), an order denying a
stay-relief motion is immediately appealable when it
conclusively resolves the movant’s entitlement to the
requested relief. The panel concluded that, under the
circumstances presented here and the considerations set forth
in Ritzen and Ninth Circuit precedent, the bankruptcy court’s
order was final and appealable because the bankruptcy court’s
denial of the creditor’s motion conclusively resolved the
request for stay relief.
In a concurrently filed memorandum disposition, the
panel concluded that the bankruptcy court did not abuse its
discretion in denying stay relief.
The panel reversed the order of the district court and
remanded with instructions to affirm the order of the
bankruptcy court denying relief from the automatic stay.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
IN RE MAYER 3
COUNSEL
R. Alan Fryer (argued), The Badger Law Group, Needham,
Massachusetts; James P. Hill and Gary B. Rudolph, Sullivan
Hill Rez & Engel, San Diego, California; for Appellant.
L. Scott Keehn (argued), Keehn Law Group, La Mesa,
California, for Appellee.
OPINION
TASHIMA, Circuit Judge:
In Ritzen Group, Inc. v. Jackson Masonry, LLC, 140
S. Ct. 582 (2020), the Supreme Court addressed the finality
of a bankruptcy court order denying a creditor’s request for
relief from the automatic stay. The Court held that an order
denying a stay-relief motion is immediately appealable when
it “conclusively resolve[s] the movant’s entitlement to the
requested relief.” Id. at 591. The Court, however, did “not
decide whether finality would attach to an order denying stay
relief if the bankruptcy court enters it ‘without prejudice’
because further developments might change the stay
calculus.” Id. at 592 n.4. Here, we address the finality of an
order denying stay relief without prejudice. We conclude
that, under the circumstances presented here and the
considerations set forth in Ritzen and our precedent, the
bankruptcy court’s order was final and appealable because the
bankruptcy court’s denial of the creditor’s motion
conclusively resolved the request for stay relief. We
4 IN RE MAYER
therefore reverse the district court’s order denying the motion
for leave to appeal.1
I.
Robert J. Harrington and Stewart Neil Mayer formed two
real estate companies in the 1990s, Nexum Development
Corp. and Terrian, LLC. In September 2010, Mayer sued
Harrington in Massachusetts state court, alleging breach of
fiduciary duty and seeking to dissolve Nexum. Harrington
filed a counterclaim, demanding a jury trial and alleging
breach of fiduciary duty, breach of contract, fraudulent
misrepresentation, and other violations of Massachusetts law.
In August 2011, Mayer’s sister filed a complaint in
Massachusetts state court on behalf of the Mayer Family
Trust against Terrian, Harrington, Janet Harrington in her
capacity as manager of Terrian, and Mayer.2 Harrington filed
a counterclaim against Mayer and his sister and demanded a
jury trial. The state court consolidated the actions in October
2011. Following lengthy and contentious discovery, a jury
trial was set to commence on October 4, 2017.
On September 29, 2017, Mayer filed a Chapter 7 petition
for bankruptcy in the Southern District of California. The
Massachusetts court placed the state cases on inactive status
because of the bankruptcy case.
Harrington filed a complaint in the bankruptcy court for
denial of the discharge of debt under 11 U.S.C. §§ 523(a) and
1
In a concurrently filed memorandum disposition, we conclude that
the bankruptcy court did not abuse its discretion in denying stay relief.
2
Janet Harrington and Mayer were named as Rule 19 defendants.
IN RE MAYER 5
727(a). The complaint reiterated the allegations Harrington
made against Mayer and Mayer’s sister in the state actions
and sought a determination of nondischargeability of Mayer’s
debts due to his alleged fraud and breach of fiduciary duty.
Harrington also filed a proof of claim against Mayer for over
$2 million, based on his state law claims for breach of
fiduciary duty, breach of contract, fraud, and other violations
of Massachusetts law.
In September 2018, Harrington filed a motion for relief
from the automatic stay in order to allow the state court
action to proceed. On July 1, 2019, the bankruptcy court
entered a tentative ruling granting the motion, reasoning that
judicial economy would be served because the state court,
which was already familiar with the facts and issues, would
determine the Mayer’s liability to Harrington and liquidate
Harrington’s claim against the estate.
The bankruptcy trustee, Gerald Davis, urged the court to
grant relief from the stay, in conjunction with approving two
agreements he had reached with Harrington, granting the
bankruptcy estate part of any proceeds recovered by
Harrington in the state actions. Davis believed that the estate
had a valid claim against the Stewart Mayer exempt portion
trust because of an allegedly fraudulent transfer and that
allowing the state cases to proceed would allow the estate to
recover without incurring the expense of litigation by, as the
bankruptcy court described it, “piggyback[ing]” onto
Harrington’s lawsuit. The bankruptcy court requested further
information about the fraudulent conveyance claims before it
would approve the agreements and therefore denied without
prejudice the motions to approve the agreements. The court
also vacated the tentative ruling as to the motion for relief
from the stay and lifted the stay for the “limited purpose” of
6 IN RE MAYER
allowing Mayer’s counsel to take Harrington’s deposition and
Harrington’s counsel to take Mayer’s deposition. The court
continued the hearing to September 19, 2019.
The court continued the matter several more times, on its
own motion and for reasons including illness, negotiations
between the parties, and discovery issues. On June 16, 2020,
the bankruptcy court tentatively denied without prejudice the
motion for relief from the stay to proceed with the
Massachusetts litigation. Following a hearing, the court
affirmed the tentative ruling, denying without prejudice
Harrington’s motion for relief from the stay as to the
Massachusetts litigation, but granting Davis’ motion.
Harrington filed a motion for leave to appeal. The district
court denied leave to appeal on the grounds that the
bankruptcy court’s denial of the motion for relief from the
stay was without prejudice and that Harrington failed to
establish his entitlement to an interlocutory appeal. The
district court accordingly remanded the matter to the
bankruptcy court. The district court granted the parties’ joint
motion to hold the adversary proceeding in abeyance pending
Harrington’s appeal. Harrington now appeals, arguing that the
bankruptcy court’s denial of relief from the stay as to the
Massachusetts litigation is a final order that is immediately
appealable and that the denial of stay relief was an abuse of
discretion.
II.
“We review de novo the district court’s ruling that a
bankruptcy court’s decision is not an appealable, final order.”
Alexander v. Compton (In re Bonham), 229 F.3d 750, 761
(9th Cir 2000). Whether we have jurisdiction to review the
IN RE MAYER 7
merits of the bankruptcy court’s order also depends on
whether the order was final. Id.; see also 28 U.S.C. § 158(d).
“We have jurisdiction to determine our own jurisdiction and
consider the issue de novo.” Phillips v. Gilman (In re
Gilman), 887 F.3d 956, 961 (9th Cir. 2018).
III.
In contrast to “ordinary civil litigation,” the rules of
finality in bankruptcy are “somewhat relaxed.” Bank of N.Y.
Mellon v. Watt, 867 F.3d 1155, 1157 (9th Cir. 2017); see
Eden Place, LLC v. Perl (In re Perl), 811 F.3d 1120, 1125
(9th Cir. 2016) (stating that in bankruptcy cases, “a pragmatic
approach is warranted; the court uses a more flexible
standard”). This is because “[a] bankruptcy case
encompasses numerous ‘individual controversies, many of
which would exist as stand-alone lawsuits but for the
bankrupt status of the debtor.’” Ritzen, 140 S. Ct. at 586
(quoting Bullard v. Blue Hills Bank, 575 U.S. 496, 501
(2015)). Thus, “[o]rders in bankruptcy cases qualify as
‘final’ when they definitively dispose of discrete disputes
within the overarching bankruptcy case.” Id.In Ritzen, similar to this case, the parties were embroiled
for over a year in state litigation regarding breach of contract.
Id. at 587. As here, “just days before trial was to begin,” one
party filed for bankruptcy. Id. The other party moved for
relief from the stay in order to allow the state trial to proceed.
The bankruptcy court denied the motion and, unlike here, the
creditor did not immediately appeal the denial. Id. Instead,
“[i]n pursuit of the breach-of-contract claim initially
commenced in state court,” the creditor filed a proof of claim.
Id. After conducting an adversary proceeding, the bankruptcy
court disallowed the claim against the bankruptcy estate. Id.8 IN RE MAYER
at 587–88. Only then did the creditor appeal, challenging
both the order denying relief from the automatic stay and the
bankruptcy court’s resolution of the breach-of-contract claim.
Id. at 588.
The Supreme Court agreed with the district court and the
Sixth Circuit that the appeal of the stay-relief motion was
untimely because the order denying stay relief was final and
therefore immediately appealable. Id. The Court held that
“the adjudication of a motion for relief from the automatic
stay forms a discrete procedural unit within the embracive
bankruptcy case,” and that the decision “yields a final,
appealable order when the bankruptcy court unreservedly
grants or denies relief.” Id. at 586.
Here, although the bankruptcy court stated that the denial
was without prejudice, the record makes clear that the court
“unreservedly denied relief.” At the June 2020 hearing, the
court told Harrington’s counsel, “if the only purpose for your
motion to stay relief is to go back [to the Massachusetts
court] as to . . . Mayer-related issues that are being dealt with
in the 727 action and the 523 action, then no, you’re not
getting relief from stay [for] that.” The court further stated
that “this matter is now ready for trial on the
nondischargeability complaint in the [bankruptcy court] and
should be scheduled for same.” The bankruptcy court thus
indicated its intention to address the claims at issue in the
state litigation. The record shows that there are no “further
developments” that “might change the stay calculus.” Id.at 592 n.4.
The “relevant ‘procedural unit’” in Harrington’s appeal is
the request for relief from stay in order to proceed to trial
against Mayer in state court. Id. at 591. The court’s decision
IN RE MAYER 9
conclusively resolved the discrete issue of whether
Harrington could obtain relief from the stay to proceed
against Mayer in state court. As the Court explained in
Ritzen, “[r]esolution of a motion for stay relief can have large
practical consequences,” including “the manner in which
adversary claims will be adjudicated.” Id. at 590. These
consequences “are not matters of minor detail; they can
significantly increase creditors’ costs.” Id.By determining that Harrington’s claims would be
litigated in bankruptcy court in California rather than state
court in Massachusetts, the decision “resolves and seriously
affects substantive rights and . . . finally determines the
discrete issue to which it is addressed.” SS Farms, LLC v.
Sharp (In re SK Foods, L.P.), 676 F.3d 798, 802 (9th Cir.
2012) (quoting Dye v. Brown (In re AFI Holding), 530 F.3d
832, 836 (9th Cir. 2008))). The court’s order thus is final and
appealable. See Ritzen, 140 S. Ct. at 590 (“Orders denying a
plaintiff the opportunity to seek relief in its preferred forum
often qualify as final and immediately appealable, though
they leave the plaintiff free to sue elsewhere.”); In re Perl,
811 F.3d at 1126–27 (explaining that where the bankruptcy
court order was “a substantive ruling with real effects” and
“determined the discrete issue of whether there was a stay
violation,” the order was “a final decision under our
pragmatic approach to finality in the bankruptcy context”); In
re Bonham, 229 F.3d at 762 (concluding that the bankruptcy
court order was final and appealable where it “‘resolve[d] and
seriously affect[ed] substantive rights’ of the parties,” and
was “of the sort that ‘can cause irreparable harm if the losing
party must wait until the bankruptcy court proceedings
terminate before appealing’” (quoting Allen v. Old Nat’l Bank
of Wash. (In re Allen), 896 F.2d 416, 418–19 (9th Cir.1990))).
10 IN RE MAYER
The bankruptcy court’s statement that the denial of stay
relief was without prejudice indicates that the court was
willing to consider stay relief if sought for a different
purpose, but not for the purpose of resolving Harrington’s
state claims against Mayer. It does not mean the order was
not final and appealable. The decision of the district court
concluding otherwise is reversed.
We reverse the order of the district court and remand with
instructions to affirm the order of the bankruptcy court
denying relief from the automatic stay.
REVERSED and REMANDED with
INSTRUCTIONS.