Chizzali v. Gindi (In Re Gindi)
642 F.3d 865
10th Cir.2011Background
- Gindi filed Chapter 11 bankruptcy while state appellate proceedings involving Chizzali were ongoing.
- Chizzali sued Gindi in Colorado state court; arbitration yielded a $2.16 million award against Gindi; state court affirmed the award and entered judgment.
- Chizzali obtained a writ of garnishment against Bank of the West for $328,070.30; the bank later sought to set aside a clerk's default entry.
- Gindi’s Chapter 11 filing triggered the automatic stay, but the bankruptcy court initially denied relief for Chizzali’s state-court appeal; Gindi’s appeal proceeded.
- The BAP affirmed in part and reversed/remanded in part, holding the stay applied to certain contempt issues, and addressing relief from stay under §§ 362(d)(1) and (2); the court reserved ruling on the other issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the automatic stay barred Chizzali’s appeal of the contempt ruling. | Chizzali: stay applies to civil contempt appeal; civil contempt is stayed. | Gindi: certain contempt appeals fall outside the stay per 11 U.S.C. § 362(b)(1). | Stay applied to the civil-contempt appeal. |
| Whether § 362(d)(1) relief was proper for the garnishment-appeal proceeding. | Chizzali argued cause to lift stay due to potential prejudice and likelihood of success. | Gindi/Bank argued no likelihood of success or prejudice insufficient for relief. | Relief under § 362(d)(1) denied. |
| Whether § 362(d)(2) relief was proper for lifting stay to allow appeal of the default-settlement. | Chizzali established no equity; funds not necessary to reorganization; relief should be granted. | Gindi/Bank contended funds could be needed for reorganization. | Relief under § 362(d)(2) warranted; remanded for entry of relief from stay. |
| Whether Gindi’s state-court appeal remains stayed despite the bankruptcy filing. | Chizzali asserted stay prevented appeal. | Lyngholm precedent permits debtor to pursue appeal. | Court followed Lyngholm; allowed Gindi’s appeal to proceed. |
Key Cases Cited
- In re Warren (Mathai v. Warren), 512 F.3d 1241 (10th Cir. 2008) (standard of review in bankruptcy appeals; law reviewed de novo, facts for clear error)
- In re Lyngholm, 24 F.3d 89 (10th Cir. 1994) (debtor in possession may pursue appeals under Rule 6009; stay principles for appeals depend on circuit precedent)
- SEC v. Vescor Capital Corp., 599 F.3d 1189 (10th Cir. 2010) (likelihood-of-success test adopted for stay relief in receivership context applied to bankruptcy stays)
- In re Sonnax Indus., Inc., 907 F.2d 1280 (2d Cir. 1990) (cause standard under § 362(d)(1) evaluated case by case)
- United Sav. Assoc. of Texas v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365 (1988) (equity and need for property in reorganization analysis under § 362(d)(2))