In Re: ASHINC Corporation, et al.
Filing
34
MEMORANDUM OPINION. Signed by Judge Colm F. Connolly on 8/2/2021. Associated Cases: 1:21-cv-00994-CFC, 1:21-cv-00995-CFC(fms)
Case 1:21-cv-00994-CFC Document 34 Filed 08/02/21 Page 1 of 9 PageID #: 20154
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
IN RE: ASHINC CORPORATION, et al.,
Debtors.
CATHERINE E. YOUNGMAN,
LITIGATION TRUSTEE FOR ASHINC
CORPORATION, ET AL., AS
SUCCESSOR TO THE OFFICIAL
COMMITTEE OF UNSECURED
CREDITORS OF ASHINC
CORPORATION, AND ITS AFFILIATED
DEBTORS,
Chapter 11
Banlcr. No. 12-11564-CSS
(Jointly Administered)
Adv. No. 13-50530-CSS
Civ. No. 21-994-CFC
Plaintiff,
BDCM OPPORTUNITY FUND II, LP,
BLACK DIAMOND CLO 2005-1 LTD.,
and SPECTRUM INVEST:rvtENT
PARTNERS, L.P.,
Intervenors,
v.
YUCAIPA AMERICAN ALLIANCE FUND:
L.P., AND YUCAIPA AMERICAN
ALLIANCE (PARALLEL) FUND I, L.P.,
Defendants.
Case 1:21-cv-00994-CFC Document 34 Filed 08/02/21 Page 2 of 9 PageID #: 20155
CATHERINE E. YOUNGMAN,
LITIGATION TRUSTEE FOR ASIDNC
CORPORATION, ET AL., AS
SUCCESSOR TO BDCM OPPORTUNITY
FUND II, LP, BLACK DIAMOND
COMMERCIAL FINANCE, L.L.C., as
co-administrative agent, and SPECTRUM
COMMERCIAL FINANCE LLC, as
co-administrative agent,
Adv. No. 14-50971-CSS
Civ. No. 21-995-CFC
Plaintiff,
YUCAIPA AMERICAN ALLIANCE FUND:
I, L.P., and YUCAIPA AMERICAN
ALLIANCE (PARALLEL) FUND I, L.P.,
Defendants.
Laura Davis Jones, David M. Bertenthal, Peter J. Keane, PACHULSKI STANG
ZIEi-IL & JONES LLP, Wilmington, Delaware; Patricia L. Glaser, Gali Grant,
Matthew P. Bernstein, GLASER WEIL FINK HOWARD AVCHEN & SHAPIRO
LLP, Los Angeles, California,
Counsel for Appellants.
Seth A. Niederman, FOX ROTHSCHILD LLP, Wilmington, Delaware; Gregory P.
Joseph, Douglas J. Pepe, Gila S. Singer, JOSEPH HAGE AARONSON LLC, New
York, New York; Jeffrey H. Zaiger, Judd A. Lindenfeld, ZAIGER LLC, Stamford,
Connecticut,
Counsel for Appellee.
MEMORANDUM OPINION
August 2, 2021
Wilmington, Delaware
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CONNOLLY,CHIEF
Appellants Yucaipa American Alliance Fund I, L.P. and Yucaipa American
Alliance (Parallel) Fund I, L.P. have appealed a $130 million judgment issued
against them by the Bankruptcy Court on June 23, 2021 in an adversary
proceeding. Under Federal Rule of Civil Procedure 62(b), a party that files an
appeal in this Court from a bankruptcy court judgment "may obtain a stay [of the
execution of the judgment and proceedings to enforce it] by providing a bond or
other security." (Bankruptcy Rule 7062 makes Rule 62 applicable to adversary
proceedings.) The Yucaipas want a stay of the enforcement of the judgment while
their appeal is pending. But they don't want to post any bond or other security.
Instead of offering to post a bond of some amount, they filed the Emergency
Motion for Stay ofEffectiveness and Enforcement ofJudgment Pending Appeal
(D.1. 4) pending before me. They ask by their motion that I stay the enforcement
of the Bankruptcy Court's judgment pursuant to Bankruptcy Rule 8007.
Alternatively, they ask that pursuant to Rule 62(h) I either stay the enforcement of
the judgment or waive the bond requirement of Rule 62(b).
I.
The Bankruptcy Court issued the judgment from which the Yucaipas filed
this timely appeal pursuant to Rule 54(b). The judgment disposed of some but not
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all claims alleged against the Yucaipas by Appellee Catherine E. Youngman in two
adversary proceedings: the so-called "Estate Action" (Adv. Proc. No. 13-50530CSS) and the so-called "Lender Action" (Adv. Proc. No. 14-50971-CSS).
Youngman is the Litigation Trustee for ASHINC Corporation and its affiliated
debtors.
The Yucaipas intend to argue on appeal that I should overturn the
Bankruptcy Court's judgment because the court made "numerous material errors."
D.I. 4 at 2. The Yucaipas' primary argument-and the only argument that bears on
the pending motion-is their contention that the Bankruptcy Court lacked the
constitutional authority to grant summary judgment and award the Trustee $118
million in damages for a "non-core" breach of contract claim in the Estate Action.
According to the Yucaipas, they never consented to the Bankruptcy Court's
exercise of jurisdiction over that claim and therefore the Bankruptcy Court's
adjudication of the claim violated their constitutional right to a jury trial in this
Court. D.I. 4 at 26.
II.
Bankruptcy Rule 8007(b)( 1) permits a party to move in the district court for
a stay of a bankruptcy court judgment pending the appeal of the judgment. When
presented with a Rule 8007 motion, courts consider "( 1) whether the appellant has
made a strong showing of the likelihood of success on the merits; (2) will the
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appellant suffer irreparable injury absent a stay; (3) would a stay substantially
harm other parties with an interest in the litigation; and (4) whether a stay is in the
public interest." In re Revel AC, Inc., 802 F.3d 558, 565 (3d Cir. 2015). "The
most critical factors ... are the first two: whether the stay movant has
demonstrated (1) a strong showing of the likelihood of success and (2) that it will
suffer irreparable harm-the latter referring to harm that cannot be prevented or
fully rectified by a successful appeal." Id. (internal quotation marks and citations
omitted). "[I]fthe movant does not make the requisite showings on either of these
[first] two factors, the [] inquiry into the balance of harms [and the public interest]
is unnecessary, and the stay should be denied without further analysis." Id. at 571
(first alteration added) (citation omitted).
The Yucaipas do not allege, let alone show, that requiring them to post a
bond of some amount greater than zero would cause them harm that could not be
prevented or fully rectified by a successful appeal. The Yucaipas say not one word
about their finances; nor do they allege, let alone show, that they are incapable of
paying the $118 million award, not to mention a bond of a lesser amount. They do
state that if the Trustee were permitted to enforce the judgment at this time, they
"would likely be dismembered well before this Court could resolve the appeal."
D.I. 4 at 2; see also D.I. 4 at 26 (arguing that "the Trustee is likely to dismantle
[the] Yucaipa[s] before" the appeal is adjudicated). But they allege no facts from
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which it could be inferred that execution of the judgment would result in their
"dismember[ment]." And in any event, speculation about what the Trustee might
do does not constitute irreparable harm. See In re Revel, 802 F.3d at 571 {"To
establish irreparable harm, a stay movant must demonstrate an injury that is neither
remote nor speculative, but actual and imminent." (internal quotation marks and
citation omitted)).
The Yucaipas argue that they are entitled to a finding of irreparable harm
because the Bankruptcy Court deprived them of a constitutional right. See D.I. 4 at
26 {"Inasmuch as [the] Yucaipa[s] ha[ve] an unqualified right to have [the Estate
Action] claims decided in the first instance by a jury, the failure to stay the
Judgment pending appeal would cause them irreparable harm."); D.I. 4 at 25
(arguing that "an alleged constitutional violation constitutes irreparable harm")
(citation omitted). But "[c]onstitutional harm is not necessarily synonymous with
the irreparable harm necessary for issuance of a [stay on appeal]." Hohe v. Casey,
868 F.2d 69, 73 (3d Cir. 1989). The Yucaipas cite numerous cases where courts
have stated that alleged constitutional violations constitute irreparable harm. But
those statements were all made in the context of a preliminary injunction
application where the alleged constitutional violation was either threatened or
ongoing. Here, the alleged constitutional violation has already occurred; it is not
ongoing, and there is no threat that it will occur again. If the Yucaipas were
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deprived of their right to a jury trial, that harm will be fully rectified by my
overturning the Bankruptcy Court's judgment and giving the Yucaipas the
opportunity to try their claims before a jury.
Because the Yucaipas have failed to make the requisite showing of
irreparable harm, I need not and do not address the remaining factors relevant to a
stay application.
III.
The Yucaipas argue in the alternative that "[f]or the same reasons that a stay
pending appeal should be granted under Rule 8007, the Court should also stay the
enforcement of the Rule 54(b) judgment pursuant to Rule 62(h)." D.I. 4 at 27.
Accordingly, I will deny this alternative request for the same reasons that a stay
should not be granted under Rule 8007.
The Yucaipas also argue in the alternative that I "should exercise [my]
discretion [under Rule 62(h)] and not impose a bond on Yucaipa as a condition of a
stay pending appeal." D.I. 4 at 27. Rule 62(h) provides that
[a] court may stay the enforcement of a final judgment
entered under Rule 54(b) until it enters a later judgment
or judgments, and may prescribe terms necessary to
secure the benefit ofthe stayed judgment for the party in
whose favor it was entered.
Fed. R. Civ. P. 62(h) (emphasis added). The Yucaipas argue that the second clause
of Rule 62(h) (the "may prescribe terms necessary" clause) empowers me to
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dispense with a bond in this case. But the second clause of Rule 62(h) applies only
if the court grants a stay pursuant to the first clause of the Rule, and, as already
noted, I have decided to deny the Yucaipas' request for a stay under Rule 62(h).
Finally, I note that to the extent I otherwise have discretion to waive the
bond requirement under Rule 62(b), I would decline to do so in this case. "[I]t is
generally recognized that such discretion should be exercised only in exceptional
circumstances and where there exists an alternative means of securing the
judgment creditor's interest." United States v. Beeman, No. 1: 1O-CV-237-SJM,
2011 WL 3021789, at *4 (W.D. Pa. July 22, 2011). The Yucaipas have not
demonstrated exceptional circumstances that would make it impossible or
impractical for them to post an appropriate bond to secure the Trustee's interest in
the judgment at issue. See In re W.R. Grace, 415 B.R. 34,209 (D. Del. 2012)
(recognizing that "if the movant seeks the imposition of a stay without a bond, the
applicant has the burden of demonstrating why the court should deviate from the
ordinary full security requirement") (internal quotations and citations omitted);
Ryan v. Asbestos Workers Union Loe. 42 Pension Fund, 2002 WL 87470, at* 1
(D. Del. Jan. 22, 2002) (denying motion to stay bond requirement because "[t]he
defendants have made no showing that posting the bond would be impossible or
impractical.").
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IV.
For the reasons discussed above. I will deny the Yucaipas' motion (D.I. 4).
The Court will issue an Order consistent with this Memorandum Opinion.
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