In Re: Connolly North America LLC, Case No. 01-57090
| Decision Date | 23 December 2010 |
| Docket Number | Case No. 01-57090 |
| Parties | In re: CONNOLLY NORTH AMERICA, LLC, Debtor(s). |
| Court | U.S. Bankruptcy Court — Eastern District of Michigan |
This case is before the Court on two motions: (1) the "Motion of Mark H. Shapiro, Predecessor Trustee, for Stay of Proceedings Pending Appeal" (Docket # 986, the "Further Stay Motion"); and (2) the "Ex Parte Motion to Expedite Hearing on Motion of Mark H. Shapiro, Predecessor Trustee, for Stay of Proceedings Pending Appeal" (Docket # 994, the "Expedited Hearing Motion"). The Court concludes that a hearing is not necessary, and that both motions should be denied.
The Further Stay Motion seeks a further stay of proceedings in this bankruptcy case while the former trustee Mr. Shapiro appeals the recent decision of the district court. The district court's decision, filed on November 22, 2010 (District Court Case No. 2:09-cv-14179), 1 affirmed this Court's order, filed on October 15, 2009, removing Mr. Shapiro as trustee in this Chapter 7 case.2 Mr. Shapiro has appealed the district court's decision to the United States Court of Appeals for the Sixth Circuit. He now seeks, essentially, a renewal and continuation, until his Sixth Circuit appeal is completed, of the limited stay order that this Court entered and kept in place while Mr. Shapiro's appeal was pending in the district court. That stay automaticallyended, by its terms, on November 22, 2010, when the district court issued its decision.3 Bruce French, the successor (and current) trustee in this case ("French, Trustee"), has filed an objection to Mr. Shapiro's Further Stay Motion.4
French, Trustee argues, among other things, that this Court lacks jurisdiction to enter the requested further stay, because the order that Mr. Shapiro is now appealing is an order of the district court affirming this Court's decision, rather than a decision of this Court. This argument misconstrues the nature of the relief sought by the Further Stay Motion. Mr. Shapiro is not asking this Court to stay the district court's order, which is the subject of the pending Sixth Circuit appeal.5 Neither, for that matter, is Mr. Shapiro asking the Court to stay its own order that removed him. Rather, he is asking the Court to impose a different type of stay; the same type of stay that was in effect while the district court appeal was pending.
That stay was not a stay of the Court's order being appealed from (the order removing Mr. Shapiro as trustee). Rather, it was a stay of further proceedings in this bankruptcy case while the district court appeal was pending. That stay did not stay the Court's order removing Mr. Shapiro as trustee. If it had done that, Mr. Shapiro would have continued as trustee in this case while the district court appeal was pending, and French, Trustee, would have had no authority to do anything as trustee. Clearly, that is not what this Court ordered; and neither Mr. Shapiro nor French, Trustee have ever thought otherwise. Rather, the limited stay entered by this Court was based on this Court's broader authority and discretion, under Fed.R.Bankr.P. 8005, to "suspend or order the continuation of other proceedings in the case under the Code or make any other appropriate order during the pendency of an appeal on such terms as will protect the rights of all parties in interest."6 The bankruptcy court does not lose its discretion and authority under rule 8005 to issue a stay of the type at issue here, when the appellate process moves from the district court level to the court of appeals level. This Court retains its general control over proceedings in the bankruptcy case while the appeal process continues in the Sixth Circuit.7
For these reasons, French, Trustee's jurisdictional argument is without merit. As a result, this Court can and must consider the merits of Mr. Shapiro's Further Stay Motion.
This Court has considered all of the factors that the parties argue are relevant to the stay issue. The Court also has considered its own reasoning in granting the previous stay that was in effect pending the district court appeal. While it is a close call, the Court concludes that it should exercise its discretion at this point by denying the requested stay. Of the relevant factors, the following factors outweigh the others, and tilt the scale against a stay at this point. First, Mr. Shapiro's probability of success on his appeal to the Sixth Circuit is very low — close to zero. The Sixth Circuit is extremely unlikely to do anything but affirm the district court's decision, which this Court finds very persuasive, particularly given that the standard of review of this Court's decision to remove Mr. Shapiro as trustee is the very deferential "abuse of discretion" standard. Second, Mr. Shapiro's appeal to the Sixth Circuit is not likely to be expedited by that Court, 8 and in the normal course of business is likely to take many months, or more likely, a period of years, to conclude. The further delay in the progress of this bankruptcy case that a further stay would entail, when combined with the fact that Mr. Shapiro's appeal has virtually no chance of success (in this Court's opinion, at least,) outweigh the possibility of (a) irreparable harm to Mr. Shapiro or his law firm; and (b) the risk that the bankruptcy estate will incur administrative expenses that later turn out to be wasted; if a further stay...
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