Rajesh C. Patel v. Rishi M. Patel, et al

Summarized by Bradley Pearce , Pearce Law PLLC
7 months 6 days ago

Case Type:

Consumer

Case Status:

Affirmed

Citation:

23-12847 (11th Circuit, Jul 08,2025) Published

Tag(s):

Ruling:

The bankruptcy court's exercise of its power under 11 U.S.C. § 362(d) to annul the automatic stay was not subject to the Supreme Court's prohibition on nunc pro tunc orders. See Catholic Archdiocese of San Juan v. Acevedo Feliciano, 140 S.Ct. 696 (2020). In reaching this conclusion, the court concluded that Acevedo applied to cases where a district court tried to circumvent jurisdictional limitations imposed by 28 U.S.C. § 1446(d) by entering a nunc pro tunc order. Section 362(d) of the Bankruptcy Code, in contrast, specifically authorizes annulment of the automatic stay.

Procedural context:

Following the annulment of the automatic stay by the bankruptcy court, the debtor appealed to the district court. The district court discussed a split in non-precedential authority over whether annulment of the stay was barred by the Supreme Court's opinion in Catholic Archdiocese of San Juan v. Acevedo Feliciano, 140 S.Ct. 696 (2020), The district court rejected the argument that annulment of the automatic stay constituted an "impermissible nunc pro tunc order." In reaching this holding, the district court concluded that annulment of the automatic stay, which is expressly authorized by 11 U.S.C. § 362(d), is not the same as a nunc pro tunc order. The debtor then appealed to the Court of Appeals.

Facts:

The debtor, Rajesh ("R.C.") Patel and his brother, Mukesh ("Mike") Patel, moved to the United States to work in the family hotel business. Over time, the family business grew and had a net worth of $250 million. In 2008, during the "Great Recession," the brothers' businesses collapsed. Numerous judgments were entered against the brothers. Perhaps in a last gasp to protect his assets, R.C. transferred many assets to his wife, Shama. Following that, family litigation erupted, with R.C., Shama, and their children (the "Shama Party") on one side and Mike, his wife (Hasmita, now deceased_, and their children (the "Hasmita Party") on the other. Shama filed a voluntary bankruptcy petition in 2016, and a trustee was appointed. Shortly thereafter, one of R.C.'s sons, Jay Patel, filed a state court action against a member of the Shama Party. Jay agreed to arbitration. R,C, and his attorney participated in the arbitration and never mentioned the automatic stay. In the arbitration, R.C. asserted claims against the Hasmita Party, including one for $220,000, which was not disclosed in R.C.'s bankruptcy schedules, and one for $600,000 against Mike, which was valued as "unknown" in R.C.'s schedules. R.C.'s attorney submitted proposed findings of fact that did not disclose the automatic stay, and never informed the arbitrator of the automatic stay. R.C.'s attorney later admitted that he intentionally downplayed the automatic stay and, with R.C.'s consent, saved it to torpedo any arbitration award that could have been entered against R.C. A lawyer for the Hasmita Party informed the arbitrator of the automatic stay, asserting that the stay did not extend to other members of the Shama Party. Another attorney for the Hasmita Party believed that the Hasmita Party was not going to pursue any "affirmative claims" against R.C. The arbitrator entered an award in favor of the Hasmita Party. R.C. threatened to seek sanctions against the Hasmita Party unless they agreed that the arbitration was void due to the automatic stay. R.C. then asked the arbitrator to amend the judgment to state that the award did not extend to R.C. The arbitrator refused because the request was made more than 30 days after the award had been entered. R.C. then filed, in state court, a petition to vacate the award because, as R.C. argued, it was a "flagrant violation of the automatic stay." The state court ruled in favor of the Hasmita Party and affirmed the award. R.C. finally turned to the bankruptcy court, where he asked the court to stay enforcement of the arbitration award against other members of the Shama Party. The Hasmita Party moved for summary judgment, arguing that the Rooker-Feldman doctrine and res judicata barred the court from determining whether the state court's confirmation of the award violated the automatic stay. The bankruptcy court denied the Hasmita Party's summary judgment motion and directed the parties to commence discovery. At the evidentiary hearing, the Hasmita Party asked the bankruptcy court to annul the automatic stay. The bankruptcy court took notice of the sharp conduct of R.C. and his attorney and stated that their conduct "weigh[ed] heavily in favor of annulling the stay." The bankruptcy court also rejected R.C.'s argument that Catholic Archdiocese of San Juan v. Acevedo Feliciano, 140 S.Ct. 696 (2020), prohibited the bankruptcy court from granting relief that related back in time (Acevedo held that nunc pro tunc relief is not appropriate in most situations). Instead, the bankruptcy court ruled that Acevedo did not pertain to the court's power to annul the automatic stay. The bankruptcy court also rejected R.C.'s argument that an annulment of the stay was improper because the Hasmita Party did not file a motion seeking that relief.

Judge(s):

WILLIAM PRYOR, Chief Judge, and GRANT and KIDD, Circuit Judges.

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!