First Circuit Affirms Bankruptcy Court’s Relief From Stay Decision

The United States Court of Appeals for the First Circuit affirmed the Bankruptcy Court’s granting of relief from stay to Sheehan Phinney client, Schleicher & Stebbins Hotels LLC (“S&S”), to foreclose on the remaining assets of Debtor (Tempnology LLC).  Mission Prod. Holdings, Inc. v. Schleicher & Stebbins Hotels, LLC, 2020 U.S. App. LEXIS 31228 (1st Cir. 2020).  Sheehan Phinney’s team consisted of Christopher M. Candon, Peter S. Cowan, John-Mark Turner and Ryan Lirette.

S&S was the pre-bankruptcy lender and ultimate acquirer of substantially all of the assets of the Debtor through a sale conducted in and approved by the New Hampshire Bankruptcy Court and later affirmed by the First Circuit.  Mission Prod. Holdings, Inc. v. Old Cold LLC and Schleicher & Stebbins Hotels, LLC, 879 F.3d 376 (1st Cir. 2018).  Like the appeal directly challenging the sale order, the opposing party in the appeal was once again Mission Product Holdings, Inc. (“Mission”), an unsuccessful bidder for the Debtor’s assets and former contract party.

In this latest appeal, Mission’s third to the First Circuit during the bankruptcy case, S&S was defending the Bankruptcy Court’s opinion granting S&S relief from the automatic stay to foreclose on the remaining assets of the Debtor.  At issue was S&S’s pre-bankruptcy status as a first-priority secured creditor with a lien on the asset (cash), which had been excluded from the original sale.  Mission opposed, contending that S&S’s lien had been waived during the course of the sale process.  At bottom, Mission was mounting a collateral attack on the sale order, re-arguing elements of the sale process and issues that were subject to final orders of the Bankruptcy Court.

Oral argument was held on June 3, 2020, the first virtual oral argument in the First Circuit.  On October 1, 2020, the First Circuit (Howard, Selya and Kayatta (author)) issued its opinion affirming the Bankruptcy Court’s decision, rightly concluding:  “In sum, the argument that S&S waived its lien is poppycock.”  The First Circuit summarily rejected each of Mission’s contentions that would somehow support a lien waiver without any express or even implied act.  Indeed, the Court characterized Mission’s arguments as being based on “imagined understandings that are contrary to the record and common sense.”

A full copy of the decision is available here.