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Summarizing by Shane Ramsey

Mission Product Holdings v. Schleicher and Stebbings Hotels LLC

Case Type:
Case Status:
19-9004 (1st Circuit, Oct 01,2020) Published
Appellate mootness rejected and bankruptcy court affirmed on the merits.
Procedural context:
The bankruptcy court granted relief from the automatic stay. Mission appealed to the BAP, which affirmed. The First Circuit also affirmed. Both the BAP and the First Circuit rejected Mission's arguments about jurisdiction and mootness.
This is the latest in a series of highly contested appeals and related litigation in a chapter 11 case. The debtor is Old Cold, LLC ("debtor"), Creditor Mission Product Holdings, Inc. ("Mission") appealed an order of the bankruptcy court granting creditor Schleicher & Stebbins Hotels, L.L.C. ("S & S") relief from the automatic stay imposed by section 362 of the Bankruptcy Code. See 11 U.S.C. § 362(a). In addition to challenging the stay relief order on its merits, Mission argues that the bankruptcy court lacked jurisdiction to issue the order because Mission's prior appeal of a bankruptcy court ruling was then still pending. The underlying facts are convoluted and complex, but pertained to debtor-in-possession from S&S. A prior appeal resulted in affirmance by the First Circuit. Mission Prod. Holdings, Inc. v. Tempnology, LLC (In re Tempnology, LLC), 879 F.3d 389, 405 (1st Cir. 2018). However, Mission sought certiorari from the Supreme Court, which was granted. SCOTUS reversed the First Circuit. Mission Prod. Holdings, Inc. v. Tempnology, LLC, 139 S. 1666 (2019). While that appeal was pending, the debtor sought to sell all its assets pursuant to §363. After seemingly rather tumultuous litigation, the sale took place. S&S filed the motion for relief from stay to liquidate its liens, to which the debtor assented. Mission, however, objected on the basis of the court lacking jurisdiction due to the pending SCOTUS appeal and because S&S allegedly no longer had a security interest. The bankruptcy court granted the motion after even more contentious litigation. Mission appealed to the BAP. The bankruptcy court granted a temporary stay so that Mission could seek a full stay from the BAP. The BAP denied a stay, however, and affirmed. Mission appealed to the First Circuit. The First Circuit's decision distinguishes this case from Soares v. Brockton Credit Union, 187 F.3d 623 (1st Cir. 1998), where the court held that "when the debtor fails to obtain a stay pending appeal of the bankruptcy court's . . . order setting aside an automatic stay and allowing a creditor to foreclose on property, the subsequent foreclosure and sale of the property renders moot any appeal." Here, the court held that the fact that the court could order the repayment of money meant that the appellate court could fashion meaningful appellate relief. Furthermore, the pending SCOTUS appeal did not deprive the court of jurisdiction. As to relief from stay, the court thoroughly reviewed the standards to be applied, and rejected Mission's claim that the bankruptcy court should have conducted an evidentiary hearing, and affirmed on the merits. Costs were awarded to S&S.
Howard, C.J.; Selya; and Kayatta (author)

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