In Re: DeGennaro

Background

Debtor-Appellant Charles DeGennaro, III asked the District Court for an emergency stay, meaning a temporary pause, of a September 4, 2020 order from the U.S. Bankruptcy Court for the Southern District of New York. That order imposed sanctions for DeGennaro’s failure to comply with discovery orders. It required him to pay $2,800 in attorney’s fees and $22,500 in discovery-related sanctions at a rate of $250 per day for each day he failed to produce all directed documents. The sanctions were capped at 90 days.

Authority to Consider the Request

Federal Bankruptcy Rule 8007 ordinarily requires a party seeking a stay pending appeal to ask the Bankruptcy Court first. DeGennaro did not file formal motion papers there, but during an August 27, 2020 hearing he asked whether the Bankruptcy Court would consider a stay. Judge Morris responded, “Absolutely not.” The District Court concluded that treating this as no prior request would elevate form over substance and held that it had jurisdiction to consider DeGennaro’s application.

Stay Standard and Analysis

The court applied the Second Circuit’s standard requiring irreparable harm and either a likelihood of success on the merits or sufficiently serious questions warranting litigation with the balance of hardships decidedly favoring the movant.

The court found that DeGennaro’s statement that he could not pay the sanctions ordinarily would not establish irreparable harm, and he did not identify specific irreparable injuries that would result from paying. The court nevertheless concluded that denying a stay would moot the appeal. It also found little apparent prejudice to Crescent from a stay because interest would continue accruing and Crescent could collect the money within a few weeks if DeGennaro lost the appeal.

The court determined that DeGennaro had not shown that he was likely to succeed, but had identified sufficiently serious questions to argue that the sanctions were an abuse of discretion. He argued that he could not comply with the discovery order because he lacked access to, and could not obtain, several requested documents. He also argued that the order was overbroad because Crescent’s proceeding concerned goods sold to DeGennaro’s company in 2017, while the order required documents dating back to 2011.

Ruling and Schedule

Judge Colleen McMahon granted a stay of the September 4 sanctions order. The stay was conditioned on expedited briefing and would expire at 5:00 p.m. on October 9, 2020, unless DeGennaro filed his appeal brief on the District Court’s electronic filing system. If he filed by that deadline, the stay would continue through 5:00 p.m. on October 30. Crescent’s opposition brief was due October 16, and DeGennaro’s reply was due October 21. The court also directed the parties to try to transmit the appeal record promptly and cancelled the October 5 conference.