Treasures and Gems, Ltd. v. Treasures and Gems, Ltd.

Background

The appellants were commercial leaseholders whose leased property was slated for sale as a result of a bankruptcy proceeding. On January 28, 2025, the Bankruptcy Court orally authorized the sale. It issued a written order on January 31 reflecting that ruling and stayed the order’s effect until midnight on February 7. The sale was scheduled to close shortly thereafter.

The appellants appealed the Bankruptcy Court’s order. They then moved in the district court for a stay pending appeal, meaning an order pausing the Bankruptcy Court’s ruling while the appeal continued. They filed the motion on the afternoon of February 6, less than twelve hours before the Bankruptcy Court’s order was to become effective. They had previously asked the Bankruptcy Court for a longer stay, but that request was rejected because of the harm a longer pause would cause the debtor and the appellants’ lack of likelihood of success on the merits.

Legal standard

The court applied a four-factor test for a stay pending appeal: whether the appellants had a substantial possibility of success on appeal, whether they faced irreparable injury without a stay, whether granting a stay would substantially harm another party, and what effect a stay would have on the public interest.

The appellants also argued that any stay should not require a bond. The court explained that a party seeking a stay without the ordinary full security must show why the court should make an exception. The appellants relied on brief references to the absence of a money judgment, while the appellees argued that a stay without a bond would cause serious and possibly irreversible financial harm.

Court’s reasoning

The court concluded that the appellants had fallen far short of showing that they were entitled to any stay. Although the court acknowledged that the appellants might suffer irreparable injury, it said the other factors plainly weighed against a stay. The appellees had explained why the appellants had no likelihood of success on the merits, much less a substantial probability of success, and why delaying the sale could harm other stakeholders and imperil the scheduled property sale.

The court also considered the appellants’ delay. It noted that they had not participated in the bankruptcy process until its end and had waited until the final few hours before the sale to seek relief from the district court. The court stated that this conduct did not communicate the urgency expected from parties facing imminent and irreparable harm.

The court further found that the appellants had not given convincing reasons to waive a bond. It credited the appellees’ explanation that a stay without a bond could cause serious financial harm.

Disposition

The court denied the appellants’ motion for a stay pending appeal. It also denied their request for a temporary stay that would have allowed them to seek emergency relief from the Second Circuit. The Clerk of Court was directed to terminate the motion at Dkt. 3.