October 20, 2015 Practice Points

Third Circuit: Bad Faith Is Independent Ground to Dismiss Involuntary Petition

The case is In re Revel AC, Inc.

By Brendan J. Schlauch

The Third Circuit Court of Appeals issued an opinion in In re Revel AC, Inc., No. 15-1253 (3d Cir. Sept. 30, 2015) providing guidance on how to balance the four factors that determine whether to grant a stay pending appeal. The court reaffirmed its adoption of a “sliding-scale” approach, noting that the greater the moving party’s likelihood of success on the merits, the less heavily the balance of harms must weigh in its favor, and vice versa. The court also indicated that the first two factors (likelihood of success on the merits and irreparable injury absent a stay) are the most critical of the four factors, noting that if a movant does not make the requisite showing on either of these two factors, the inquiry is at an end and the stay should be denied without further analysis. The court further clarified that even when the balance of harms and the public interest weigh against granting a stay, a strong showing of likelihood of success on the merits is sufficient to support the imposition of a stay. The dissent, however, contended that Third Circuit and Supreme Court precedent requires a movant to demonstrate all four factors to obtain a stay pending appeal. The dissent emphasized that a stay pending appeal is an extraordinary remedy and asserted that the majority’s interpretation weakens the existing test by permitting the grant of a stay even when monetary damages can remedy the alleged harm.

Brendan J. Schlauch – October 20, 2015