Third Circuit Elucidates Sliding-Scale Approach to Evaluating Requests for Stays Pending Appeal | Practical Law

Third Circuit Elucidates Sliding-Scale Approach to Evaluating Requests for Stays Pending Appeal | Practical Law

In In re Revel AC, Inc., the US Court of Appeals for the Third Circuit elucidated how it utilizes a sliding-scale approach when balancing the four factors for considering a stay pending an appeal.

Third Circuit Elucidates Sliding-Scale Approach to Evaluating Requests for Stays Pending Appeal

by Practical Law Litigation
Law stated as of 06 Oct 2015 • USA (National/Federal)
In In re Revel AC, Inc., the US Court of Appeals for the Third Circuit elucidated how it utilizes a sliding-scale approach when balancing the four factors for considering a stay pending an appeal.
On September 30, 2015, the US Court of Appeals for the Third Circuit in In re Revel AC, Inc. elucidated how it utilizes a sliding-scale approach when balancing the four factors for considering a stay pending an appeal (No. 15-1253, (3d Cir. Sept. 30, 2015)).
In February 2015, a US bankruptcy court issued an order allowing Revel Casino in Atlantic City, New Jersey to sell its casino free and clear of a lease held by nightclub operator IDEA Boardwalk. The district court denied IDEA's emergency motion to stay the bankruptcy court's sale order. IDEA appealed and the Third Circuit reversed the ruling.
The court reiterated the four factors it considers when deciding whether to grant a stay pending appeal:
  • Whether the appellant has made a strong showing of the likelihood of success on the merits.
  • If the appellant would suffer irreparable injury absent a stay.
  • If a stay would substantially harm other parties with an interest in the litigation.
  • Whether a stay is in the public interest.
(Republic of Phil. v. Westinghouse Electric Corp. (949 F.2d 653, 658 (3d Cir. 1991).)
After emphasizing that the first two of the above factors are the most critical, the Third Circuit stated that when considering a stay, a court should begin its analysis by asking if the applicant has made a sufficient showing that it both:
  • Can win on the merits (with a likelihood that is significantly better than negligible but not greater than 50%).
  • Will suffer irreparable harm absent a stay.
If the applicant has met those requirements, the court must then balance the relative harms by considering all four factors using a sliding-scale approach. However, if the 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. Nevertheless, depending on how strong a case the movant has on the merits, a stay is still permissible even if the balance of harms and public interest weigh against holding a ruling in abeyance pending appeal.
The Third Circuit here balanced the four factors on a sliding-scale giving greater weight to the first two factors. The court found that IDEA made a strong showing that it would prevail on the merits in its appeal because nothing in the record cast doubt on the validity of its lease with Revel. The court also ruled that IDEA demonstrated sufficient irreparable injury because, without a stay, it would lose its nightclub business. The court stated that Revel could have tilted the balance of harms in its own favor, but because it offered only hollow representations of harm rather than record evidence, it had failed to do so. Furthermore, while public interest appeared to favor denial of a stay, the court found that alone did not tip the four-factor balance in Revel's favor.