Opinion
No. 05 Civ. 2072 (SAS).
February 28, 2005
Denise L. Savage, Esq., Savage Associates, P.C., White Plains, NY, For Petitioner.
The Honorable Stuart M. Bernstein, United States Bankruptcy Court for the Southern District of New York, Alexander Hamilton Custom House One Bowling Green, New York, NY, For Respondent.
MEMORANDUM OPINION AND ORDER
This matter arises from a bankruptcy action before the Honorable Stuart M. Bernstein, In re Teligent Servs., Inc., in which the petitioner Savage Associates, P.C. ("Savage"), is the Unsecured Claims Estate Representative. In the proceedings below, Savage moved to disqualify Judge Bernstein for bias. In a Memorandum Decision and Order dated February 3, 2005, Judge Bernstein denied that motion. Savage has now petitioned this Court for a writ of mandamus directing Judge Bernstein to cease issuing orders, conducting hearings, or otherwise taking any action with respect to certain avoidance actions and claims in the Chapter 11 proceedings pending the determination of Savage's appeal to this Court of the February 3 decision. In the alternative, Savage has moved this Court for the same relief pursuant to Federal Rule of Bankruptcy Procedure 8005 as well as Federal Rule of Civil Procedure 65 and Federal Rule of Appellate Procedure 8. For the reasons stated below, Savage's petition and motion are hereby denied.
Because Savage's right to the relief sought is not "`clear and indisputable,'" the writ of mandamus cannot issue. Savage believes that 28 U.S.C. § 144 requires a stay of certain proceedings in the bankruptcy action pending the determination of Savage's disqualification motion. The Second Circuit has held, however, that section 144 does not apply to bankruptcy judges. Moreover, it is unclear why, even if it did apply, section 144 would continue to require a stay when Judge Bernstein has already denied Savage's motion to disqualify. Consequently, Savage cannot meet the very heavy burden required for the issuance of a writ of mandamus.
In re Aguinda, 241 F.3d 194, 201 (2d Cir. 2001) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 18 (1983)).
See Dubnoff v. Goldstein, 385 F.2d 717, 720 (2d Cir. 1967); see also In re Smith, 317 F.3d 918, 932 (9th Cir. 2002).
Savage's alternative grounds for relief also fail. As an initial matter, Federal Rule of Bankruptcy Procedure 8005 sets forth the procedure by which a party to a bankruptcy action may seek a stay pending an appeal to the district court of a bankruptcy judge's order. The Rule does not articulate, however, the standard that governs such motions. The Second Circuit has not spoken directly on this issue, and courts in this district have formulated various tests, drawing on the standard for preliminary injunction motions or, alternatively, on the standard governing stays of district court orders pending appeals to the circuit courts. The latter borrowing is more logical because the district court stands in the same relation to the bankruptcy court in this situation as does the circuit court to the district court when a party seeks a stay of a district court order under Appellate Rule 8. By contrast, the preliminary injunction standard does not assume a prior judicial ruling. Accordingly, in deciding whether to grant a stay of bankruptcy proceedings pending appeal, a district court considers the following factors: (1) whether there is a substantial possibility of success on appeal, (2) the risk of irreparable injury to the movant absent a stay, (3) the lack of substantial harm to another party if a stay is granted, and (4) the public interests that may be affected.
See, e.g., In re Chateaugay Corp., 988 F.2d 322, 326 (2d Cir. 1993). Savage's motion to stay the bankruptcy proceedings under Federal Rule of Civil Procedure 65, which by its terms applies to applications for preliminary injunctions, has no legal basis. While it is true, as discussed below, that some courts have analogized the test under Bankruptcy Rule 8005 to the criteria for issuing a preliminary injunction, no case law suggests that Rule 65 applies directly to a motion to stay bankruptcy proceedings pending appeal. Cf. Sandra Cotton, Inc. v. Bank of N.Y., 64 B.R. 262, 263 (W.D.N.Y. 1986) ("The applicable criteria [for obtaining a stay under Bankruptcy Rule 8005] are similar to those pertaining to the issuance of a preliminary injunction."). Similarly, Federal Rule of Appellate Procedure 8 also does not apply directly to a motion to stay bankruptcy proceedings. By its own terms, Appellate Rule 8 governs motions to stay district court orders and judgments. See Fed.R.App.P. 8(a)(1)(A). See also Fed.R.App.P. 1 ("These rules govern procedure in the United States courts of appeals.").
See, e.g., In re Turner Sparés, Ltd., 210 B.R. 235, 236 (S.D.N.Y. 1997).
See, e.g., In re General Credit Corp., 283 B.R. 658, 659-60 (S.D.N.Y. 2002).
See id. at 659.
See Hirschfeld v. Board of Elections, 984 F.2d 35, 39 (2d Cir. 1993) (stating factors to be considered by a circuit court before staying actions of a lower court); In re Suprema Specialties, Inc., No. M-47, 2005 WL 120352, at *1 (S.D.N.Y. Jan. 20, 2005) (applying same standard to a motion to stay a bankruptcy court).
All four factors weigh against granting a stay in this instance. After reviewing Savage's papers, it does not appear that Judge Bernstein's conduct could possibly warrant recusal; at most, Savage alleges trial errors, for which the proper remedy is an appeal seeking reversal. Therefore, Savage has little, if any, chance of success on the merits. Nor will Savage suffer irreparable harm in the absence of a stay. Even assuming that Judge Bernstein is biased against Savage and, in the absence of a stay, continues issuing orders influenced by that bias, Savage could repair the harm by means of appeal. On the other hand, other parties will be harmed if a stay is granted because the proceedings below would effectively grind to a halt, despite Savage's insistence to the contrary. Finally, the public interest favors the expedient administration of the bankruptcy proceedings, which appear to be nearing conclusion over two years after the confirmation of the debtor's plan of reorganization. Consequently, Savage is not entitled to a stay of the proceedings below under Bankruptcy Rule 8005.
In sum, Savage's petition for a writ mandamus enjoining Judge Bernstein from proceeding with the bankruptcy action is DENIED. In addition, Savage's motion for a temporary stay is also DENIED. The Clerk of the Court is directed to close this motion (docket # 3).
SO ORDERED.