On August 23, 2016, Judge Sue L. Robinson of the Delaware District Court issued an Order denying an appellant’s motion for stay pending appeal. The decision was issued in a appeals arising from the Molycorp Bankruptcy (which is docketed, at case 15-11357 in the Delaware Bankruptcy Court). The appeals are docketed in the District Court as Case Numbers 16-286 and 16-288. A copy of the Opinion is available here.
The background of the conflict and the appeal are not the real issue of the Opinion, nor are they necessary for this post. In short, the parties to the appeal (the “Parties”) disagree on the points of agreements they entered and the appropriateness of the order of the Bankruptcy Court. What is important for this post, is the actions taken by the Parties after the filing of the appeal. In particular, the Parties agreed to engage in mediation in September to resolve their disagreement about the percentage of control held by each Party. Counsel for the appellee represented that it would take no action that would “disparately impact Oaktree.” Then, on August 11, 2016, Oaktree received solicitation materials which it claimed forced it to pay $2.1 million to retain its 35% stake in the venture, or it would be diluted to a 5.8% stake. According to the appellee, it had been authorized by the Bankruptcy Court to determine if and when to raise capital, and that the offering was the fairest method possible to raise capital. Opinion at *4. This is what lead Oaktree to file the motion for stay pending appeal, as it hoped to have the appeal decided (or at a minimum the mediation conducted) prior to being required to make further investments in this jointly held entity.
Judge Robinson detailed the four-factor test applied to motions for a stay pending appeal, citing to the Third Circuit’s Revel opinion for the principal that:
[T]he 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. . . . Though both are necessary, the former is arguably the more important piece of the stay analysis. As Judge Posner has remarked, it isn’t enough that the failure to obtain a stay will be “a disaster” for the stay movant but only a “minor inconvenience to the defendant,” as “[e]quity jurisdiction exists only to remedy legal wrongs; [thus,] without some showing of a probable right[,] there is no basis for invoking it.
Opinion at *5 (quoting In re Revel AC, Inc., 802 F.3d 558, 568 (3d Cir. 2015)). In a quick analysis, Judge Robinson determined that she could not “conclude that Oaktree has demonstrated a
reasonable chance of winning the appeal.” Opinion at *6. She also stated that she could not “identify any evidence of record that Oaktree will suffer injuries that cannot be remedied by money damages.” Opinion at *7. And with that, she summarily concludes that she could not grant the motion for relief from the automatic stay.
A motion for relief from the automatic stay is equitable relief, and it is my experience that courts are reluctant to grant equitable relief when legal (aka financial) relief will make a party whole. I would think this tends to work against investment concerns. Money is, after all, fungible.