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In re Color Spot Holdings, Inc.

United States District Court, D. Delaware

August 21, 2018

IN RE COLOR SPOT HOLDINGS, INC., et al, Debtors.
v.
COLOR SPOT HOLDINGS, INC., et al, Appellees. WINTERS NURSERY LLC, FOREST GROVE NURSERY LLC, WINTERS FOREST GROVE LLC, BLOOMING FARM, INC., and FALLBROOK NURSERY LLC, Appellants,

         Chapter 11

          MEMORANDUM ORDER

         Before the Court is the Emergency Motion (D.I. 3, 4, 12) of the above-captioned Appellants seeking entry of an order granting a limited stay pending appeal of the Bankruptcy Court's order, dated August 10, 2018 (B.D.I. 290)[1] ("Second Supplemental Order"), which, inter alia, approved the Debtors' assumption and assignment of certain leases ("Leases") to winning bidder and designated purchaser TreeSap Farms, LLC as part of a sale of substantially all of the Debtors' assets. The Debtors (D.I. 10, 11), TreeSap (D.I. 13), and Wells Fargo Bank (D.I. 15, 16) have each filed briefs in opposition. For the reasons set forth below, the Emergency Motion is denied.

         1. Relevant background.

         On May 29, 2018, each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. On June 4, 2018, Debtors filed a motion to approve the sale of substantially all of their assets, including the assumption and assignment of certain executory contracts and unexpired leases, and to approve procedures in connection therewith. (B.D.I. 64).

         2. On June 25, 2018, the Bankruptcy Court entered an order scheduling a hearing on the approval of the sale and approving bid procedures. (B.D.I. 134). On July 13, 2018, Appellants filed an initial objection (B.D.I. 201) to the assumption and assignment of the Leases. An auction was held on July 19-20, 2018, at which the only two bidders for substantially all of the Debtors' assets were Black Diamond Commercial Finance[2] and Wells Fargo.[3] Debtors ultimately determined that Wells Fargo's final bid was the highest and best. (See D.I. 11 at Ex. E, 7/20/18 Hr'g Tr.).

         3. On July 25, 2018, the Bankruptcy Court entered an order approving the asset purchase agreement (B.D.I. 243) (the "Sale Order"). On July 27, 2018, the Appellants filed a supplemental objection to the assumption and assignment of the Leases. (B.D.I. 253). On August 1, 2018, the Bankruptcy Court held an evidentiary hearing in connection with the Sale Order. At the conclusion of the hearing, the Bankruptcy Court required TreeSap, Wells Fargo's designee for the Leases, to provide Appellants with additional information with respect to TreeSap's financial wherewithal. (D.I. 4 at Ex. G, 8/1/18 Hr'g Tr. at 141:7-21). TreeSap provided the additional information to Appellants in an unredacted form and on a "professionals eyes only" basis. (D.I. 4 at Ex. H, 8/9/18 Hr'g Tr. at 6:2-8). On August 3, 2018, the Bankruptcy Court entered a supplemental sale order, which approved the assumption and assignment of certain contracts, resolved certain cure amounts, and continued the evidentiary hearing with respect to Appellants' objections. (B.D.I. 276; D.I. 16 at Ex. 3). On August 9, 2018, the Bankruptcy Court resumed and concluded the evidentiary hearing, taking the matter under advisement. On August 10, 2018, the Bankruptcy Court issued a ruling from the bench, approving the assumption and assignment of the Leases to TreeSap and overruling Appellants' objections. The Bankruptcy Court's detailed ruling on the record outlined its analysis of the facts and law in support of its decision and cited the detailed evidentiary record. (D.I. 4 at Ex. I, 8/10/18 Hr'g Tr.) That day, the Bankruptcy Court entered the Second Supplemental Order approving the sale (B.D.I. 290). On August 14, 2018, Appellants filed their notice of appeal (D.I. 1), along with an emergency motion for limited stay pending appeal (B.D.I. 302) (the "Bankruptcy Stay Motion"). On August 15, 2018, the Bankruptcy Court held a hearing and denied the Bankruptcy Stay Motion. (D.I. 12, 8/15/18 Hr'g Tr. at 48:2-53:9). Appellants filed the Emergency Motion with respect to its appeal in this Court the same day -August 15, 2018 - seeking a "limited stay pending appeal" in light of the scheduled August 17, 2018 sale closing date. (D.I. 3).

         4. The Emergency Motion (D.I. 3) and accompanying Declaration, which attaches transcripts from the evidentiary hearings on this matter (D.I. 4), were filed contemporaneously with a motion for permission to seal (D.I. 5). According to Appellants, the Emergency Motion and transcripts contain certain confidential financial information provided by TreeSap to Appellants under the "professional eyes only" confidentiality designation. In addition, on August 1, 2018, the Bankruptcy Court previously granted a prior motion filed by TreeSap to file an exhibit to the Declaration of Jeffrey Pettit, CFO of TreeSap and its newly formed subsidiary TSH Opco, under seal. (B.D.I. 272). The Court cites to pleadings and transcripts herein to avoid any specific reference to financial information which might be deemed confidential.

         5. Jurisdiction.

         Appeals from the Bankruptcy Court to this Court are governed by 28 U.S.C. § 158. District courts have jurisdiction to hear appeals "from final judgments, orders, and decrees." 28 U.S.C. § 158(a)(1).

         6. Discussion.

         The granting of a motion for stay pending appeal is discretionary with the court. See In re Trans World Airlines, Inc., 2001 WL 1820325, at *2-3 (Bankr. D. Del. Mar. 27, 2001). Appellant bears the burden of proving that a stay of the Confirmation Order is warranted based on the following criteria: (1) whether the movant has made "a strong showing" that it is likely to succeed on the merits; (2) whether the movant will be irreparably injured absent a stay; (3) whether a stay will substantially injure other interested parties; and (4) where the public interest lies. Republic of Philippines v. Westinghouse Electric Corp., 949 F.2d 653, 658 (3d Cir. 1991). The most critical factors, according to the Supreme Court, 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. In re Revel AC, Inc., 802 F.3d 558, 568 (3d Cir. 2015) (citing Nken v. Holder, 556 U.S. 418, 434 (2009). The Court's analysis should proceed as follows:

Did the applicant make a sufficient showing that (a) it can win on the merits (significantly better than negligible but not greater than 50%) and (b) will suffer irreparable harm absent a stay? If it has, we balance the relative harms 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.

Revel AC, 802 F.3d at 571 (emphasis in text) (internal quotations and citations omitted).

         7. Likelihood of ...


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