In re BGM Pasadena, LLC

Filing 14

MINUTES (IN CHAMBERS) - AMENDED EMERGENCY MOTION FOR STAY PENDING APPEAL (Dkt. 7 in CV16-3178, and Dkt. 6 in CV16-3172, filed May 12, 2016) by Judge Christina A. Snyder: In accordance with the foregoing, debtor-appellant BGMs Emergency Motion for Stay Pending Appeal, dkt. 7 in CV16-3178, and dkt. 6 in CV16-3172, is hereby DENIED. Accordingly, the Courts temporary stay (dkt. 10 in CV16-3178, and dkt. 9 in CV16-3172, entered May 19, 2016) of the Bankruptcy Courts Orders Granting Motions for Relief of the Automatic Stay Under 11 U.S.C. § 362, Bankruptcy Docket Nos. 188 and 189, is hereby lifted. IT IS SO ORDERED. (clee)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Title

In re BGM Pasadena, LLC

Present: The Honorable

Date

‘O’

June 2, 2016

CHRISTINA A. SNYDER, U.S. DISTRICT JUDGE

CONNIE LEE
Deputy Clerk

Not Present
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

N/A

N/A

Proceedings:

I.

(IN CHAMBERS) - EMERGENCY MOTION FOR STAY
PENDING APPEAL (Dkt. 7 in CV16-3178, and Dkt. 6 in CV163172, filed May 12, 2016)

INTRODUCTION

On April 21, 2016, the bankruptcy court in bankruptcy case no.
2:15-BK-27833-BB (“the bankruptcy case”) entered orders granting secured creditor
Pasadena, Apts-7, LLC’s (“PA7,” “creditor,” or “appellee”) motions for relief from the
automatic stay proscribed by 11 U.S.C. § 362. See Bankruptcy Dkts. 188, 189. On April
22, 2016, debtor BGM Pasadena, LLC (“BGM,” “the debtor,” or “appellant”) filed an
Emergency Motion for Stay Pending Appeal with the bankruptcy court. See Bankruptcy
Dkt. 191. On April 27, 2016, the bankruptcy court denied the debtor’s motion for a stay
pending appeal and entered a Memorandum Decision Regarding Motion for Stay Pending
Appeal. Bankruptcy Dkts. 202, 201.
On May 3, 2016, appellant BGM filed its Notices of Appeal. See B.A.P. Case
Nos. 16-1127, 16-1126. On May 5, 2016, appellee PA7 filed its Elections to Proceed in
District Court. Appeal Nos. 16-03172 and 16-03178.
On May 12, 2016, appellant BGM filed the instant “Emergency Motion for a Stay
Pending Appeal.” See District Ct. Dkt. (hereinafter, “Dkt.”) 7. (“Motion”). On May 17,
2016, appellee PA7 filed an opposition to appellant’s motion. Dkt. 8 (“Opp’n”). Having
carefully considered the parties’ arguments, the Court finds and concludes as follows.
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 1 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Title

In re BGM Pasadena, LLC

II.

Date

‘O’

June 2, 2016

BACKGROUND

In 2005, the debtor acquired two lots that were part of a development project in
Pasadena, California (the “Property”). See Bankruptcy Dkt. 68-2 (Galletly Decl.) at ¶ 4.
On October 22, 2009, the Debtor filed a voluntary petition under Chapter 11 of Title 11
of the United States Code (the “Bankruptcy Code”), initiating the bankruptcy case
entitled In re BGM Pasadena LLC, case number 2:09-bk-39135-RN (closed) in the
United States Bankruptcy Court for the Central District of California. Id. at ¶ 5. On
December 22, 2011, the bankruptcy court in the 2009 bankruptcy action entered an Order
Approving a Settlement Agreement (the “Settlement Agreement”) between the debtor and
City Ventures’ and/or its wholly owned entity Pasadena Apts-7, LLC, (the appellee in
this action), which had acquired the second and fifth deeds of trust on the Property. Id. at
¶ 6. On March 27, 2012, the bankruptcy court in the 2009 bankruptcy action entered an
Order Approving Chapter 11 Plan of Reorganization, (the “2012 Plan”) (see Case No.
09-39135, Docket No. 309), and on February 26, 2013, the bankruptcy court entered the
Final Decree, (see Case No. 09-39135, Docket Nos. 330 and 354). Id. at ¶ 7. The case
was closed on March 18, 2013 (see Case No. 09-39135, Docket No. 356). Id.
Following several mediation agreements and arbitration awards arising out of the
Site Development Agreement and/or the Settlement Agreement, on February 9, 2015,
City Ventures recorded a Notice of Default and Election to Sell Under Deeds of Trust
based upon what it averred was a “non-curable” default resulting from a change in the
debtor’s ownership structure. Galletly Decl. at ¶ 9. Specifically, PA7 argued that the
debtor had “surreptitiously transferred the beneficial ownership of the Property without
notice to, or permission of[,] PA7,[thereby] triggering the debtor’s obligation to
immediately pay the entire balance due under both the 2005 and 2007 notes.”
Bankruptcy Dkt. 92 (Motion for Relief from Stay), at 13; see also Bankruptcy Dkt. 125,
at 3. The parties unsuccessfully attempted to resolve the alleged defaults through
additional arbitration and mediation, and on November 20, 2015, the debtor filed its
second voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Galletly
Decl. at ¶ 10; Bankruptcy Dkt. 1.
Two months later, on January 22, 2016, the debtor filed a Plan of Reorganization.
Galletly Decl. at ¶ 10; Bankruptcy Dkt. 55. On February 10, 2016, the Debtor filed a
Motion to Confirm the Plan and it was set for hearing on April 13, 2016. Galletly Decl.
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 2 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC

at ¶ 11; Bankruptcy Dkts. 66, 80. On March 29, 2016, the debtor filed a Second
Amended Plan of Reorganization Dated February 29, 2016 (the “Plan”). Galletly Decl. at
¶ 12; Bankruptcy Dkt. 110.
On March 15, 2016, before the hearing scheduled on confirmation, PA7 filed two
motions for relief from the automatic stay proscribed by 11 U.S.C. § 362. See
Bankruptcy Dkts. 92-93. On April 12, 2016, the bankruptcy court issued its tentative
rulings, and on April 21, 2016, the bankruptcy court entered orders granting the motions
for relief from the section 362 automatic stay. See Bankruptcy Dkts. 188, 189.
On April 22, 2016, pursuant to Fed. R. Bankr. P. 8013(d)(2)(B), the debtor filed an
Emergency Motion for Stay Pending Appeal with the Bankruptcy Court. On April 27,
2016, the bankruptcy court entered a Memorandum Decision Regarding Motion for Stay
Pending Appeal and an Order denying the request for a stay pending appeal. Bankruptcy
Dkts. 202 (memorandum), 201 (order).
In the instant “emergency motion,” the debtor seeks review of the bankruptcy
court’s denial of the request for a stay pending appeal of the bankruptcy court’s order
lifting the automatic stay.
III.

LEGAL STANDARD

Federal Rule of Bankruptcy Procedure 8005 provides that a district court may
order a stay of a judgment, order, or decree of a bankruptcy court pending appeal. See
Fed. R. Bankr. P. 8005. “When deciding whether to issue a discretionary stay pending a
bankruptcy appeal, courts use the following four factors, which “were imported from the
standard for deciding preliminary injunctions or staying them pending appeal”: (1)
movant’s likelihood of success on the merits of the appeal; (2) significant and/or
irreparable harm that will come to movant absent a stay; (3) harm to the adverse party if a
stay is granted; and (4) where the public interest lies. In re North Plaza, LLC, 395 B.R.
113, 119-20 (S.D. Cal. 2008) (citing Hilton v. Braunskill, 481 U.S. 770, 776 (1987)).
It is “well-established that on appeal to the district court from bankruptcy court,
issues of law are reviewed de novo while the district court is constrained to accept the
bankruptcy court’s findings of facts unless they are clearly erroneous.” In re Irwin, 338
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 3 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC

B.R. 839, 844 (E.D. Cal. 2006) (citing In re Blackwell, 162 B.R. 117, 119 (E.D. Pa.
1993)). Where, as here, “a bankruptcy court has [already] ruled on the issue of a stay of
its order pending appeal, the district court, sitting as an appellate court, reviews that
decision for abuse of discretion.” In re Universal Life Church, Inc., 191 B.R. 433, 437
(E.D. Cal. 1995) (citing In re Wymer, 5 B.R. 802, 807 (9th Cir. B.A.P. 1980)).
“A bankruptcy court abuses its discretion if [1] it applies an incorrect legal
standard or misapplies the correct legal standard, or [2] if its fact findings are illogical,
implausible or not supported by evidence in the record.” In re City of Stockton,
California, 542 B.R. 261, 272 (B.A.P. 9th Cir. 2015). Ultimately, “discretion is abused
only where no reasonable man would take the view adopted by the [bankruptcy]
court”––stated differently, “[i]f reasonable men could differ as to the propriety of the
action taken by the [bankruptcy] court, then it cannot be said that the [bankruptcy] court
abused its discretion.” In re Irwin, 338 B.R. at 844 (citation omitted).
IV.

DISCUSSION

11 U.S.C. § 362(a)(1) automatically stays the commencement or continuation of
certain actions or proceedings, as well as the recovery of certain claims, against a debtor
following the debtor’s initiation of chapter 11 bankruptcy proceedings. See 11 U.S.C. §
362(a)(1). Here, the bankruptcy court granted relief from the section 362(a) automatic
stay pursuant to both 11 U.S.C. § 362(d)(1) and 11 U.S.C. § 362(d)(3). The debtor
appealed the bankruptcy court’s lift of the automatic stay, and further moved the
bankruptcy court for a stay of the court’s ruling pending adjudication of the appeal. In
denying the debtor’s request for a stay pending the appeal, the bankruptcy court
considered the following factors: (1) the debtor’s likelihood of success on the merits of
the appeal; (2) the debtor’s likelihood of suffering irreparable harm absent a stay; (3) the
harm of a stay to adverse parties; as well as (4) where the public interest lies. Here, the
Court reviews for abuse of discretion the bankruptcy court’s decision regarding the
appropriateness of a stay pending appeal. In re Universal Life Church, 191 B.R. at 437.
A.

Likelihood of Success on the Merits

The “most critical” of the four factors in the Court’s analysis are (1) the likelihood
of success on the merits and (2) irreparable harm. Lair v. Bullock, 697 F.3d 1200, 1204
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 4 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC

(9th Cir. 2012). Regarding the first factor, it is not enough that the likelihood of success
on the merits is “better than negligible” or that there is a “mere possibility of relief.”
Nken v. Holder, 556 U.S. 418, 434 (2009) (internal quotation marks omitted). Because
the Supreme Court in Nken did not specify “the exact degree of likely success that stay
petitioners must show, . . . courts routinely use different formulations to describe this
[factor].” Leiva–Perez v. Holder, 640 F.3d 962, 966 (9th Cir. 2011) (per curiam). The
Ninth Circuit has “concluded that many of these formulations, including ‘reasonable
probability,’ ‘fair prospect,’ ‘substantial case on the merits,’ and ‘serious legal questions .
. . raised,’ are largely interchangeable.” Id. at 967-68.
Here, the debtor contends that it has a substantial likelihood of demonstrating on
appeal that the bankruptcy court erred in concluding that relief from the automatic stay
was warranted under both 11 U.S.C. § 362(d)(1) and 11 U.S.C. § 362(d)(3). However,
upon a review of the bankruptcy court’s memorandum opinion and the complete record in
this matter, the Court finds that the debtor has failed to demonstrate that there is a
“substantial case for relief on the merits,” Leiva–Perez, 640 F.3d at 966.
1.

11 U.S.C. § 362(d)(1)

Section 362(d)(1) allows a bankruptcy court to grant relief from the automatic stay
“for cause.” See 11 U.S.C. § 362(d)(1); In re Delaney-Morin, 304 B.R. 365, 368 (B.A.P.
9th Cir. 2003). “Because there is no clear definition of what constitutes ‘cause,’
discretionary relief from the stay must be determined on a case by case basis.”
MacDonald v. MacDonald (In re MacDonald), 755 F.2d 715, 717 (9th Cir. 1985). In the
instant case, the bankruptcy court found “cause” for relief based upon its finding that the
debtor had––in a court-approved Settlement Agreement that arose from its prior
bankruptcy case––expressly waived the right to the automatic stay imposed by 11 U.S.C.
§ 362. The court relied upon section 16.2 of the Settlement Agreement, which reads in
relevant part as follows:
[I]n the event of the filing of any [subsequent] bankruptcy case
[that may be filed by Debtor], Debtor agrees that sufficient
cause exists for the bankruptcy court having jurisdiction over
such bankruptcy case to grant Creditors relief from the
automatic stay based upon, among other things, lack of
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 5 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC
adequate protection. Debtor irrevocably consents and waives
any right to object, and Creditors shall be entitled, to an order
granting relief from any and all stays, including the automatic
stay imposed by 11 U.S.C. §362 or equitable relief under 11
U.S.C. §105, or other applicable law, so as to permit Creditors
to foreclose upon the Property and to exercise any and all other
rights and remedies of Creditors under applicable law, this
Agreement or any other Loan Document.

Bankruptcy Dkt. 92, Ex. 8 (Settlement Agreement), at 9 (emphasis added).
It is true, as the debtor argues here and previously argued before the bankruptcy
court, that it is generally “against public policy for a debtor to waive the prepetition
protection of the Bankruptcy Code.” Bank of China v. Huang (In re Huang), 275 F.3d
1173, 1177 (9th Cir. 2002). “This prohibition of prepetition waiver has to be the law;
otherwise, astute creditors would routinely require their debtors to waive.” Id. Indeed,
“any attempt by a creditor in a private pre-bankruptcy agreement to opt out of the
collective consequences of a debtor's future bankruptcy filing is generally unenforceable.
The Bankruptcy Code preempts the private right to contract around its essential
provisions.” In re Pease, 195 B.R. 431, 434-35 (Bankr. D. Neb. 1996) (emphasis added).
However, as the bankruptcy court rightly noted, “waivers that are approved after
notice and an opportunity for hearing in the context of an earlier bankruptcy case” are not
per se (or even generally) unenforceable. Bankruptcy Dkt. 202, at 5. As the bankruptcy
court further explained,
When such a waiver is made a part of a confirmed plan or a
court-approved settlement agreement, either with the consent of
unsecured creditors or after they have received notice and an
opportunity to object, absent changed circumstances, such
waivers have routinely been enforced. The Debtor in this case
has not identified any facts or circumstances that should make
this Court unwilling to enforce the parties’ earlier courtapproved settlement. That agreement contemplated that the
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 6 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC
Secured Creditor would be entitled to relief from the automatic
stay if the Debtor filed another bankruptcy case.

Id. at 6.
Although the bankruptcy court’s order does not cite to any cases enforcing prepetition waivers, there is no shortage of authority supporting the court’s statement of the
law. See, e.g., In re Frye, 320 B.R. 786, 796 (Bankr. D. Vt. 2005) (enforcing a prepetition agreement); In re Excelsior Henderson Motorcycle Mfg. Co., 273 B.R. 920
(Bankr. S.D. Fla. 2002) (enforcing a pre-petition agreement); In re Shady Grove Tech
Ctr. Assoc. Ltd. P’ship, 216 B.R. 386 (Bankr. D. Md. 1998) (setting forth several factors
as to whether cause exists to warrant relief from stay); In re Atrium High Point Ltd.
P'ship, 189 B.R. 599 (Bankr. M.D. N.C. 1995) (holding that pre-petition waivers are
enforceable in appropriate cases); In re Priscilla Cheeks, 167 B.R. 817 (Bankr. D. S.C.
1994) (enforcing a pre-petition forbearance agreement); In re Jenkins Court Assoc. Ltd.
P'ship, 181 B.R. 33 (Bankr. E.D. Pa. 1995) (holding that a pre-petition agreement would
not be enforced without further development of the facts); In re Sky Group Int'l, Inc., 108
B.R. 86 (Bankr. W.D. Pa. 1989) (holding that a pre-petition waiver was not
self-executing or per se enforceable); In re Club Tower, L.P., 138 B.R. 307 (Bankr. N.D.
Ga. 1991) (holding that pre-petition waivers are enforceable).
The debtor in the instant case, like the debtors in In re Frye, In re Atrium, and In re
Excelsior, “entered into [a] pre-petition agreement[] as a result of a negotiated provision
of a plan of reorganization in a prior bankruptcy case.” In re Frye, 320 B.R. 786, 789
(Bankr. D. Vt. 2005) (emphasis added). “Enforcing the Debtor’s agreement under these
conditions does not violate public policy concerns,” as this “is not a situation where a
prohibition to opposing a motion to relief was inserted in the original loan documents . . .
.” In re Excelsior, 273 B.R. at 924; see also In re Frye, 320 B.R. at 789 (noting that the
waiver in that case was not in the original loan documents but rather was part of the
Forbearance Agreement to which the parties entered after the debtor’s first bankruptcy
case was filed). Still, to the extent any such waivers are enforceable, the debtor argues
that the bankruptcy court impermissibly “failed to implement any recognized balancing
test” in finding the wavier to be valid. The bankruptcy court in In re Frye, for example,
listed the following factors as relevant to the question whether relief from a stay should
be granted based on a waiver:
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 7 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC
(1)

the sophistication of the party making the waiver;

(2)

the consideration for the waiver, including the creditor’s
risk and the length of time the waiver covers;

(3)

whether other parties are affected including unsecured
creditors and junior lienholders;

(4)

the feasibility of the debtor’s plan;

(5)

whether there is evidence that the waiver was obtained by
coercion, fraud or mutual mistake of material facts;

(6)

whether enforcing the agreement will further the
legitimate public policy of encouraging out of court
restructurings and settlements;

(7)

whether there appears to be a likelihood of
reorganization;

(8)

the extent to which the creditor would be otherwise
prejudiced if the waiver is not enforced;

(9)

the proximity in time between the date of the waiver and
the date of the bankruptcy filing and whether there was a
compelling change in circumstances during that time;

(10) whether the debtor has equity in the property and the
creditor is otherwise entitled to relief from stay under §
362(d).
Id. at 790-91.
The “weight given to each factor will vary on a case-by-case basis and must be left
to the sound discretion of the court, based upon the equities, facts and circumstances
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 8 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC

presented.” Id. at 791. Here, the debtor, who is represented by able counsel, appears to
be fairly sophisticated and further appears to have received consideration for the prepetition waiver that arose from the prior bankruptcy proceeding. The debtor cites no
evidence of coercion, fraud, or mutual mistake, nor does the debtor indicate that any
compelling change in circumstances has occurred since the agreement was entered and
approved in the prior bankruptcy proceeding. Indeed, the waiver is embodied in a
bankruptcy-court approved settlement agreement that is only a few years old and whose
subject is the same property at issue in the instant bankruptcy proceeding. Finally,
enforcement of the waiver will further the legitimate public policy of encouraging out-ofcourt restructurings and settlements.
While it is true that the bankruptcy court did not individually balance each of these
factors in its memorandum disposition, the court’s ultimate conclusion is supported by
the record and does not constitute an abuse of discretion. In arguing otherwise in the
instant motion, the debtor has failed to meet “its burden to make a strong showing that
success on the merits [of its appeal] is likely.”1 Lair, 697 F.3d at 1204; see In re N. Plaza,
LLC, 395 B.R. 113, 121 (S.D. Cal. 2008) (“Showing a ‘likelihood of success’ requires
that the movant raise questions going to the merits so serious, substantial, difficult and
doubtful as to make them a fair ground for litigation and thus for more deliberate
inquiry.”) (citing County of Alameda v. Weinberger, 520 F.2d 344, 349 n.12 (9th Cir.
1975)).
2.

11 U.S.C. § 362(d)(3)

1

The Court rejects the debtor’s contention that it was not previously provided an
opportunity to address the issue of pre-petition waiver before the bankruptcy court. As
the bankruptcy court noted in its memorandum opinion, the original motion for relief
from the automatic stay sought relief for “cause” under section 362(d)(1) and further
attached a copy of the Settlement Agreement to the motion. Bankruptcy Dkt. 202, at 5.
Furthermore, the bankruptcy court indicated that it had provided the debtor with an
opportunity to present its arguments regarding the waiver, but nonetheless found these
arguments unavailing. In any event, this Court has also considered, and rejected, the
debtors’ arguments regarding the waiver.
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 9 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC

Section 362(d)(3) requires that courts grant relief from the section 362 automatic
stay for secured creditors to proceed against “single asset real estate,” like the Property
here, unless the debtor, within 90 days of the date the petition is filed, files a chapter 11
plan “that has a reasonable possibility of being confirmed within a reasonable time.” 11
U.S.C. § 362(d)(3). The purpose of section 362(d)(3) is to “ensure that the automatic
stay provision [is] not abused” by the debtor, while also “giving the debtor the
opportunity to create a workable plan of reorganization” within ninety days. In re
Leeward Subdivision Partners, LLC, 2010 WL 6259983, at *4 (B.A.P. 9th Cir. June 11,
2010) (citation omitted). Thus, section 362(d)(3) helps prevent “debtors with little hope
of successfully reorganizing delay the bankruptcy process while secured creditors are left
helplessly on the sidelines.” Id. (citation omitted).
Here, the bankruptcy court concluded that the debtor’s various plans had “no
prospect whatsoever of being confirmed.” Bankruptcy Dkt. 202, at 4. More specifically,
the court found that the debtor had filed “an unrealistic bare-bones plan early in the case,
a slightly-revised version shortly thereafter[,] and an amended version . . . more than 90
days after the case was filed,” and that none of the proffered plans had “a realistic
prospect of reorganization within a reasonable period.”2 Id. The court’s conclusion
regarding the likelihood of confirmation was based upon the plans’ treatment of the
Secured Creditor: namely, the Court’s conclusion (1) that the Secure Creditor’s claims
were impaired, despite the debtor’s contention to the contrary; and (2) that the debtor’s
latest plan “understate[d] the amount of the Secured Creditor’s second priority deed of
trust by more than $600,000 and the amount of its fifth priority deed of trust by more than
$1,800,000.” Id.
In the instant motion, the debtor contends that the bankruptcy court’s analysis
“fails to acknowledge that the [final proposed plan], and its proposed payments, are based
on the Debtor’s right to cure all defaults and pay all creditors in full” pursuant to 11

2

The Court notes that a debtor may not simply “file a token plan within the 90-day
period and then defend a lift stay motion by arguing that its late-filed amended plan can
be confirmed. While 11 U.S.C. § 1127(a) allows a debtor to file an amended plan, this
general provision cannot be used as an end-run around the more specific language in
Section 362(d)(3).” In re RYYZ, LLC, 490 B.R. 29, 45 (Bankr. E.D.N.Y. 2013).
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 10 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC

U.S.C. §§ 1123(a)(5)(G)3 and 1124(2),4 as well as the Ninth Circuit’s decision in In re

3

Section 1123(a)(5)(G) provides that
(a)

Notwithstanding any otherwise applicable nonbankruptcy
law, a plan shall—
***
(5)

provide adequate means for the plan’s
implementation, such as—
***
(G)

curing or waiving of any default.

11 U.S.C. § 1123(a)(5)(G) (emphasis added).
4

Like section 1123(a)(5)(G), section 1124 describes, but does not define, what it
means to “cure” a default:
Except as provided in section 1123(a)(4) of this title, a class of
claims or interests is impaired under a plan unless, with respect
to each claim or interest of such class, the plan—
***
(2)

notwithstanding any contractual provision or applicable
law that entitles the holder of such claim or interest to
demand or receive accelerated payment of such claim or
interest after the occurrence of a default—
(A)

CV-90 (06/04)

cures any such default that occurred before or after
the commencement of the case under this title,
CIVIL MINUTES - GENERAL

Page 11 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC

Entz-White Lumber and Supply, Inc., 850 F.2d 1338 (9th Cir. 1988).
In Entz–White, a secured creditor had objected to confirmation of the debtor’s
chapter 11 plan on the grounds that the plan did not allow for the creditor’s claim for
default interest. The debtor had argued to the bankruptcy court that its plan, by paying
the arrearages on the debt, “cured” its default. Entz-White, 850 F.2d at 1340. In the
debtor’s view, this “cure” nullified any consequences of the default, including a
post-maturity higher interest rate. Id. The bankruptcy court rejected the debtor’s
argument, and the Ninth Circuit reversed, holding that “by curing the default, [the debtor
was] entitled to avoid all consequences of the default-including higher post-default
interest rates.” Id. at 1342. According to the court, “the power to cure under the
Bankruptcy Code authorizes a plan to nullify all consequences of default, including
avoidance of default penalties such as higher interest.” Id.
Here, the debtor rightly notes that the bankruptcy court did not cite to Entz-White,
11 U.S.C. § 1123(a)(5)(G), or 11 U.S.C. § 1124(2). However, the court did note in a
footnote that there are “uncured” defaults that the court considered to be “arguably
incurable.” Bankruptcy Dkt. 202, at 4 n.2. Indeed, a review of the record in this case
reveals that the parties stipulated in November 2015 that the debtor’s non-monetary
default was “not curable”:

other than a default of a kind specified in section
365(b)(2) of this title.
***
(C)

compensates the holder of such claim or interest
for any damages incurred as a result of any
reasonable reliance by such holder on such
contractual provision or such applicable law. . . .

11 U.S.C. § 1124(2).
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 12 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC
It is stipulated by the parties that a transfer of between 25% and
33% of the member ownership interest in BGM was made . . .
[and was] not permitted under the notes and trust deeds . . . .
The parties further stipulated that the acts are “not curable.”

Bankruptcy Dkt. 92, Ex. 12, at 3; see also Dkt. 125, at 12.
Ultimately, however, the bankruptcy court’s conclusion as to section 362(d)(3) is
immaterial here, in light of the Court’s conclusion regarding the existence of ample
“cause” for relief from the automatic stay pursuant to section 362(d)(1). As the
bankruptcy court rightly noted in its memorandum order, its conclusion under 362(d)(1)
is sufficient to sustain its finding regarding the lift of the automatic stay. Thus, even if
the debtor has a “reasonable probability” or “fair prospect”of success as to the
bankruptcy court’s determination under section 362(d)(3), any such likelihood of success
would not warrant a stay pending appeal, so long as the waiver remains likely to be
enforced.5
B.

Irreparable Harm

5

In addition, the debtor also argues that the bankruptcy court “incorrectly
held that the [d]ebtor was required to seek and obtain approval of a disclosure statement
prior to confirmation, announcing what amounted to a per se rule that disclosure
statements are required in all cases before the Bankruptcy Court will consider
confirmation of a reorganization plan.” Motion at 7. The debtor contends “that a grant of
relief pursuant to section 362(d)(3) on the basis that no disclosure statement was filed is
clear error unsupported by a plain reading of the Bankruptcy Code and applicable case
law.” Motion at 7. In reality, however, the bankruptcy court did not grant relief under
section 362(d)(3) on the basis of the debtor’s failure to file a disclosure statement,
cautioning instead that its conclusion “was not based exclusively or even primarily on the
debtor’s failure to file a disclosure statement.” Dkt. 202, at 3. In other words, the
bankruptcy court did not––as the debtor contends––“effectively pre-determine[]” the
outcome of the case for relief under section 362(d)(3) by invoking a “per se rule requiring
the preparation, filing and approval of a disclosure statement . . . before entertaining
confirmation of a plan or even allowing a hearing on confirmation to be set.”
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 13 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC

“It is well-established that the loss of an interest in real property constitutes an
irreparable injury.” Park Vill. Apt. Tenants Ass’n v.Mortimer Howard Trust, 636 F.3d
1150, 1160 (9th Cir. 2011). The Property at issue here includes, inter alia, three
historical and unique buildings that have been designated as Historic Landmarks and
have received local historic preservation awards for renovations completed by the Debtor.
Galletly Decl. at ¶ 16. Accordingly, the debtor asserts that foreclosure of the Property
would result in irreparable injury. Upon consideration of the debtor’s argument
regarding irreparable harm, the bankruptcy court was “not persuaded that the Debtor has
established that irreparable injury will in fact ensue if a stay is not issued.” Dkt. 202, at
6. In light of the relevant standard requiring more than a mere possibility of irreparable
harm, this Court agrees.
First, although the debtor contends that failure to obtain a stay (1) will allow PA7
to foreclose on the Property, (2) will moot the appeal, and (3) will render any
reorganization in this matter futile, “[i]t is well settled that an appeal being rendered moot
does not itself constitute irreparable harm.” In re 203 N. LaSalle St. Pshp., 190 B.R. 595,
598 (N.D. Ill. 1995) (citation omitted); see also In re Irwin, 338 B.R. at 853 (same); In re
Fullmer, 323 B.R. 287, 304 (Bankr. D. Nev. 2005) (collecting cases).
Second, the Court notes that “both the Supreme Court and the Ninth Circuit have
raised the bar on the showing of irreparable injury, now requiring a showing that ‘an
irreparable injury is the more probable or likely outcome’ if the stay is not granted . . . .”
In re Red Mountain Mach. Co., 451 B.R. 897, 900 (Bankr. D. Ariz. 2011) (emphasis
added) (citing Leiva-Perez, 640 F.3d at 966). While the first factor regarding the merits
of the appeal asks “whether the stay petitioner has made a strong argument on which he
could win,” the second factor asks the Court to “anticipate what would happen as a
practical matter following the denial of a stay.” Leiva–Perez, 640 F.3d at 968. As
between these two factors, the Ninth Circuit has noted that the lower court “is in a much
better position to predict the likelihood of harm than the likelihood of success [on the
merits].” Id. at 967 (quoting Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127,
1139 (9th Cir. 2011) (Mosman, D.J., concurring )).
Here, again, the bankruptcy court was ultimately “not persuaded that the Debtor
has established that irreparable injury will in fact ensue if a stay is not issued.”
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 14 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC

Bankruptcy Dkt. 202, at 6. In the instant motion, the debtor has not provided any
additional argument or evidence of changed circumstances that would lead this Court to
conclude that the bankruptcy court’s finding was an abuse of discretion. Indeed, the
debtor here argues that “failure to obtain a stay will allow PA-7 to foreclose on the
Property.” Motion at 15. However, the question “whether the applicant will be
irreparably injured absent a stay” requires more than “some possibility of irreparable
injury.” Nken, 556 U.S. at 434-35 (internal quotation marks omitted). The mere
possibility of a potential foreclosure on an as-yet unknown future date is not sufficient
grounds for finding that irreparable harm is “the more probable or likely outcome if the
stay is not granted.” In re Red Mountain Mach. Co., 451 B.R. at 900 (internal quotation
marks and citation omitted).
C.

Injury to other parties interested in the proceeding

The aforementioned factors regarding likelihood of success on the merits and
irreparable harm “are the most critical” to the Court’s analysis here. Lair, 697
F.3d at 1204 (citation omitted). However, the bankruptcy court also rightfully considered
whether issuance of the stay will substantially injure the other parties’ interested in the
proceeding. The court concluded that issuance of a stay pending appeal would mean the
debtor’s “entire bankruptcy case could end up in an indefinite holding pattern, while the
[debtor] retained the Secured Creditor’s collateral and failed to make monthly payments
in exchange.” Bankruptcy Dkt. 202, at 7. The court further reasoned that issuing a stay
pending the appeal would remove any incentive for the debtor “to move forward with
confirmation of a plan of reorganization to keep the Secured Creditor from foreclosing, as
the Secured Creditor would be effectively precluded from obtaining relief from stay”
until an appellate ruling. Id.
In the instant motion, the debtor contends that a foreclosure by PA7 would
be “a disaster for most creditors of the estate” and would “eviscerate any recovery for
unsecured creditors, resulting in an irreparable harm that clearly outweighs any
injury to PA7 resulting from a stay pending appeal.” Motion at 18. Ultimately, even
assuming that these contentions are true––such that this factor weighs in favor of granting
a stay pending appeal––any such finding would not warrant a different result here, given
the debtor’s failure to demonstrate a likelihood of success on the merits or irreparable
CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 15 of 16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
AMENDED CIVIL MINUTES - GENERAL
Case No.

2:16-cv-03178-CAS
2:16-cv-03172-CAS

Date

Title

‘O’

June 2, 2016

In re BGM Pasadena, LLC

harm. C.f. Leiva–Perez, 640 F.3d at 964-66 (noting that the stay inquiry is “flexible” and
involves an equitable balancing of the stay factors).
D.

Public Interest

Finally, the bankruptcy court also appeared to consider where the public interest
lies in considering the propriety of a stay pending appeal. Among other things, the court
noted that “the tools available . . . to effectively manage the underlying bankruptcy case
and move it forward toward resolution would be significantly limited if a stay pending
appeal were issued.” Bankruptcy Dkt. 202, at 7. There is, of course, a “public interest in
the just, speedy, inexpensive, and accurate determination of every bankruptcy case . . . .”
In re N. Plaza, 395 B.R. at 126 n.15. In any event, just as with the Court’s determination
regarding factor three, a finding in the debtor’s favor regarding where the public interest
may lie cannot inform a different result where the likelihood of succeeding in the
underlying appeal appears to be fairly low.
V.

CONCLUSION

In accordance with the foregoing, debtor-appellant BGM’s “Emergency Motion for
Stay Pending Appeal,” dkt. 7 in CV16-3178, and dkt. 6 in CV16-3172, is hereby
DENIED.
Accordingly, the Court’s temporary stay (dkt. 10 in CV16-3178, and dkt. 9 in
CV16-3172, entered May 19, 2016) of the Bankruptcy Court’s Orders Granting Motions
for Relief of the Automatic Stay Under 11 U.S.C. § 362, Bankruptcy Docket Nos. 188
and 189, is hereby lifted.
IT IS SO ORDERED.
00
Initials of Preparer

CV-90 (06/04)

CIVIL MINUTES - GENERAL

:

00

CL

Page 16 of 16