Lead Opinion
OPINION OF THE COURT
Wе seldom focus on how to balance the four factors that determine whether to grant a stay pending appeal despite the practical and legal importance of these procedural standstills. So we take this opportunity to do just that.
I. BACKGROUND
In April 2012 Appellee Revel AC, Inc., et al. (“Revel”) opened a 47-story, 710-foot-high resort-casino (which we refer to simply as the “Casino”) in Atlantic City, New Jersey. The Casino was marketed as “a state of the art gaming and resort facility unlike any other in Atlantic City.” Its cost: $2.4 billion, making it the most expensive hotel ever built in Atlantic City. See Tom Corrigan, Atlantic City’s Revel Casino Files for Bankruptcy Again, Wall Street J. (June 19, 2014, available at http://www. wsj.com/articles/atlantic-citys-revel-casino-fílesfor-bankruptcy-again-14032 12625). As part of its plan for the Casino, Revel entered into a lease with Appellant IDEA Boardwalk, LLC (“IDEA”) to run two upscale nightclubs and a beach club. The lease was for a 10-year term (with a 15-year option to extend) and obligated IDEA to contribute $16 million of the $80 million projected cost of construction of the clubs (in addition to its monthly.rental payments as lessee).
Unfortunately the Casino’s $2.4 billion price tag was no indication of its future success. A sluggish Atlantic City economy and the Casino’s inability to turn a profit were too much for Revel.to overcome. After a failed sale attempt, Revel’s cash flow problems made a (second) trip to bankruptcy the only option.
A. Revel’s Attempt to Sell the Casino in Bankruptcy
The request to sell the Casino “free and clear” raised the ire of its tenants — among them, IDEA.
lessee may retain its rights under such lease ... for the balance of the term of such lease and for any renewal or extension of such rights to the extent that such rights are enforcеable under applicable nonbankruptcy law.
11 U.S.C. § 365(h)(l)(A)(ii). Alternatively, IDEA contended that even if § 365(h) did not secure its interest, § 363(f) — the Code provision that allows for the sale of an asset free and clear
Notwithstanding the objection of IDEA, Revel continued the auction process and embarked on a lengthy marketing campaign, communicating with over 200 potential investors. Unfortunately the market for Revel’s assets proved thin, and, because not a single qualified buyer came to the table, the Bankruptcy Court postponed the August 7 auction.
About a month later, on September 2, Revel closed the Casino’s doors and barred its tenants, IDEA included, from accessing the Casino premises. When that happened, IDEA gave written notice that (1) it intended to continue operating its beach club and one of its nightclubs notwithstanding the Casino’s closure and (2) it expected Revel to continue to abide by the terms of its lease. More specifically, IDEA asked that Revel “continue to honor its obligation under the Lease to provide uninterrupted utility service.” Am. Compl. ¶ 96, IDEA Boardwalk, LLC v. Revel Entm’t Grp., LLC, No. 14-01756 (Bankr.D.N.J. Sept. 26, 2014), ECF No. 6. To put its plan into action, IDEA met with representatives from various city agencies to secure approval to operate on a standalone basis and sued Revel to enjoin it from “failing to provide utilities and parking” and engaging in any other conduct “that prevents IDEA from operating the [¶] Dayclub and [¶] Nightclub in accordance with the terms of the Lease.” Id. ¶ 118. Furthermore, and to assert its rights under § 365(h), IDEA sought a declaratory judgment that, “under applicable law[,] the Lease is a lease of non-residential real property as that term is defined and governed by 11 U.S.C. § 365 and, as such, is entitled to all relevant statutory protec
B. Polo North Becomes “Stalking Horse” Bidder
Revel’s continued marketing efforts paid off when it came to terms on September 5, 2014 with Polo North Country Club, an entity controlled by a Florida-based real estate developer. Under the proposed Asset Purchase Agreement, Polo North agreed to buy the Casino for $90 million and to serve as the “stalking horse” bidder at the upcoming auction. If Polo North lost at auction, it would receive $3 million as a break-up fee. If, however, Polo North walked away from the deal, it would surrender its $10 milliоn deposit. The Bankruptcy Court approved Revel’s request to modify the auction bid procedures to allow for the payment of the breakup fee and set a revised bid deadline for September 24, 2014. At the postponed auction, which ultimately took place on October 1, the highest bidder was not Polo North but Brookfield U.S. Holdings, LLC, as its $110 million bid topped the $94.5 million all-cash bid of Polo North. The Bankruptcy Court approved the sale to Brookfield on October 7.
Reentering the picture, IDEA argued that “it has the right under Section 365(h) of the [ ] Code to elect to remain in possession and[,] in that event, [Revel] [is] obligated to provide possession and rights appurtenant thereto,” including “various easements for utilities and other services.” Objection of IDEA Boardwalk, LLC ¶¶ 74, 77, In re Revel AC, Inc., No. 14-22654 (Bankr.D.N.J. Oct. 13, 2014), ECF No. 754. IDEA also reaffirmed that, because it “has direct access to the boardwalk and the streets,” it “can operate [its clubs] without impinging ... [Revel’s] possessory rights.” Id. ¶ 78.
Before Revel could respond, Brookfield walked away from the deal, thus surrendering its $11 million deposit and bringing Polo North back into the fold as the backup winning bidder. The Bankruptcy Court thereafter granted Revel’s motion to terminate the sale to Brookfield and scheduled a hearing to approve the sale to Polo North.
C. Revel Responds to IDEA at the 11th Hour
Late on the Friday night just three days before the January 5, 2015 sale hearing, Revel filed an “Omnibus Reply” to IDEA’S objections. Regarding the latter’s § 365(h) argument, Revel urged the Court to follow the Seventh Circuit’s decision in Precision Indus., Inc. v. Qualitech Steel SBQ, LLC,
' D. The Sale Hearing
At the sale hearing, the Bankruptcy Court considered the following legal issues: (1) whether sales of property under § 363(f) can wipe out a lessee’s possessory interest under § 365(h); and (2) whеther Revel introduced enough evidence to show that the validity of IDEA’S lease was the subject of a bona fide dispute under § 363(f)(4), thus satisfying an eligibility requirement to invoke subsection (f).
On the first issue, the Bankruptcy Court pointed to a “split of authority”: some courts hold that § 363(f) doesn’t cut off a tenant’s possessory rights under § 365(h), see, e.g., In re Zota Petroleums, LLC,
The second issue, the Bankruptcy Court conceded, presented “the more difficult” legal question: whether Revel had enough evidence to show that the validity of IDEA’S lease was the subject of a bona fide dispute under § 363(f)(4). Id. at 52:21-22. The trouble was that Revel didn’t provide the purportedly disputed lease to the Bankruptcy Court or much of anything to cloud its validity, though § 363(f) places the burden squarely on Revel’s shoulders. See id. at 53:3-5 (“[Revel] didn’t give me any of the leases ... or any, really, evidence in support of its positiоn of the bona[ ]fide dis-pute_”). But, because of the need to push the sale through, the Court maintained that it “can’t look at the result totally as to what the law requires,” id. at 53:8, though, if time weren’t of the essence, it “probably would have put [the hearing] off to have more evidence presented,” id. at 55:12-13. With not much to go on, the Court concluded that, because IDEA (and the other tenants) were akin to “partners of [Revel’s] enterprise,” id. at 54:14-15, rather than mere tenants, Revel met its burden that “there is a bona[ ]fide issue in dispute” as to the leases, id. at' 55:16-17. Hence the Court approved the sale and allowed Revel to sell its assets “free and clear of existing tenancies and/or possesso-ry rights, irrespective of any rights a tenant may hold under 11 U.S.C. § 365(h), including, but not limited to, all possessory rights.” Sale Order ¶ 14, In re Revel AC, Inc., No. 14-22654 (Bankr.D.N.J. Jan. 8, 2015), ECF No. 1138.
IDEA appealed that order and moved to stay the Court’s decision pending appeal, noting the risk that, if the decision were not stayed, its appeal would be moot under 11 U.S.C. § 363(m) once the sale closed. That provision provides, in relevant part, that
[t]he reversal or modification on appeal of an authprization . ■.. of a sale or lease of proрerty does not affect the validity of a sale or lease under such authorization to an entity that purchased orleased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.
11 U.S.C. § 363(m). In a one-paragraph order, the Bankruptcy Court denied IDEA’S request. With its options dwindling and time winding down, IDEA filed an emergency motion before the District Court to stay the Bankruptcy Court’s sale order.
E. The District Court Denies IDEA’S Stay Request
In considering whether to grant a stay pending appeal, courts consider the following four factors: (1) whether the appellant has made a strong showing of the likelihood of success on the merits; (2) will the appellant suffer irreparable injury absent a stay; (3) would a stay substantially harm other parties with an interest in the litigation; and (4) whether a stay is in the public interest. See, e.g., Republic of Phil. v. Westinghouse Electric Corp.,
1. Likelihood of Success
On the first prong, the District Court maintained that IDEA needed to show that it had a “substantial” or “strong” case on appeal. In re Revel AC, Inc., 525 B.R. 12, 24 (D.N.J.2015) (internаl quotation marks omitted). Addressing § 365(h) first, the Court noted that, because the legal issue was the subject of an “undisputed split of authority,” IDEA at most showed a possibility and not a likelihood (which we understood the Court to mean more likely than not) of success. Id. (internal quotation marks omitted).
It next addressed whether the Bankruptcy Court clearly erred in finding that Revel put forth enough evidence to show that a bona fide dispute existed as to the validity of IDEA’S lease. See id. at 26. Despite the Bankruptcy Court’s failure to mention it, the District Court emphasized that “IDEA specifically sought a declaratory judgment concerning the nature of [its] agreement with [Revel],” id. at 29, even though, as IDEA asserted, its lawsuit “principally concerned [its] request for an energy easement, rather than an effort ... to challenge the characterization of its Agreement,” id. at 29 n. 14. In the District Court’s view, the pending litigation “arguably provide[d] some objective basis ... to find ... some bona fide issue in dispute,” id. at 29 (emphases added), because, “in answering [the] complaint, [Revel] specifically denied that [the] Agreement constituted a lease,” id. at 29 n. 14. Consequently, the District Court concluded that IDEA did not “demonstrate! ] a likelihood of success on the merits” of the § 363(f)(4) issue either. Id. at 30.
On the irreparable-harm prong, the District Court considered whether IDEA had “demonstrated the potential for an actual and imminent, rather than remote or speculative, irreparable harm.” Id. at 31. IDEA posited that, absent a stay, if Revel and Polo North closed on the sale, this would render its claim statutorily moot under § 363(m), leading to the loss of its lease and the end of its business at the Casino. In the District Court’s view, a mooted claim doesn’t qualify as an irreparable injury nor does the potential loss of IDEA’S possessory rights. See id. Regarding the latter, the Court noted that IDEA effectively had been dispossessed since September 2014 and would gain nothing by retaking possession of a space “in an empty and commerciálly-unproduc-tive building.” Id. at 32; see also id. at 31 (“[Tjhough the [tenants] assert that the loss of their possessory rights would result in irreparable injury, [they] ignore that they have been without valuable possesso-ry rights since September 2014.”). Hence, as with the first prong, the Court held it did not weigh in IDEA’S favor.
3.Harm to Others
For the third factor in the stay analysis, IDEA contended that, because it doesn’t seek a stay of the sale itself but only the provision of the Sale Order that terminates its lease, Revel wouldn’t be injured. The District Court, focusing only on the debtor (presumably because it was the only party opposing IDEA’S stay motion), thought otherwise. In its view, because of the “easily terminable $10 million option [of Polo North] to purchase [Revel’s] assets,” there was a good chance it “would elect not to proceed with closing” if the Court granted the stay. Id. at 32 (internal quotation marks omitted). And “the palpable risk of losing a ready buyer,” the Court maintained, “demonstrates ... a risk of substantial harm tó [Revel].” Id. (emphasis omitted); see also id. at 33 (describing Revel’s exhaustive search for a buyer that yielded only two qualified buyers). Thus it found that the third factor weighed against a stay.
4.Public Interest
Finally, IDEA asserted that the public interest favors a stay because the public has a strong interest in the correct application of bankruptcy law and the continuing operation of hospitality providers at Revel. Again the District Court disagreed. In its view, even assuming that IDEA expressed valid public policy concerns, “such concerns would not sufficiently outweigh the far more prevalent interest in facilitating the success of bankruptcy proceedings,” id., along with the “permanent loss of approximately 4,000 jobs” and “substantial detriment to the City of Atlantic City and [] surrounding areas” a failed sale could trigger, id. at 34 (internal quotation marks omitted). As with the first three factors, the public interest “favors the facilitation of the asset sale, and, accordingly, weighs against the imposition of a stay.” Id.
IDEA appeals.
II. JURISDICTION
Revel argues that we don’t have jurisdiction to entertain IDEA’S appeal from the District Comb’s stay denial under either 28 U.S.C. § 158(d)(1) or 28 U.S.C. § 1292(a)(1). We disagree. Subsection 158(d)(1) provides that “[t]he courts of appeals shall have jurisdiction of appeals from all final decisions, judgments, orders, and decrees” entered under subsections 158(a) and (b). Though a stay denial is not technically a final judgment, it is here in a
Our decision in Trans World Airlines is not to the contrary. The question there was whether the District Court’s grant of a stay was final for purposes of § 158(d). We held that it was not, “[e]ven under the most relaxed concept of finality,” because the stay grant didn’t “fully adjudicate a specific adversary proceeding between the parties.” In re Trans World Airlines,
Thus, where it is all but assured that a statute will render an appeal-moot absent a stay, a stay denial is appealable under § 158(d)(1). We express no opinion on whether we have also have jurisdiction under 28 U.S.C. § 1292(a)(1) — see generally In re Forty-Eight Insulations, Inc.,
III. STANDARD OF REVIEW
At this juncture, only the District Court’s denial of IDEA’S stay request is at issue. We generally review appeals from a denial of а stay for abuse of discretion, see Bradley v. Pittsburgh Bd. of Educ.,
IV. ANALYSIS
Despite the growing importance of stays pending appeal, we have provided little direction on how to balance the four stay factors, mostly “[b]ecause this [C]ourt ordinarily grants or denies a stay pending appeal without opinion.” Westinghouse Electric Corp.,
A. The Sliding-Scale Approach to Balancing the Stay Factors
Under Federal Rule of Bankruptcy Procedure 8007, a party can move
(1) whether the stay applicant has made a strong showing that [it] is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the ■ stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.
Hilton v. Braunskill,
“[T]he most critical” factors, according to the Supreme Court, Nken,
Just how strong of a merits case must a stay applicant show? The “formulations used to describe the degree of likelihood of success that must be shown” vary widely. Mohammed v. Reno,
On the second factor, the applicant must “demonstrate that irreparable injury is likely [not merely possible] in the absence of [a] [stay].” Winter v. Natural Res. Def. Council, Inc.,
“Once an applicant satisfies the first two factors, the traditional stay inquiry calls for assessing the harm to the opposing party and weighing the public interest.” Nken,
In this context, a number of outcomes are possible. Where the balance of harms and public interest weigh in favor of a stay and the court deems that the stay movant has made a sufficient showing of success on appeal, a stay should be granted. Where the opposite is true — i.e., the merits, balance of harms, and public interest favor the stay opponent — a stay should be denied. Between these easy examples are the more difficult cases, such as “where the merits favor one party and the balance of harms favors the other.” Gotanda, supra, at 821. There (along with the public interest) we must “evaluate the degree of irreparable injury with the prospects of prevailing on the merits.” Id.
In deciding how strong a case a stay movant must show, we have viewed favorably what is often referred to as the “sliding-scale” approach. See Constructors Ass’n of W. Pa. v. Kreps,
in a situation where factors of irreparable harm, interests of third parties andpublic considerations strongly favor the moving party, an injunction might be appropriate even though plaintiffs did not demonstrate as strong a likelihood of ultimate success as would generally be required. In contrast, where the threatened irreparable injury is limited or is balanced to a substantial degree by countervailing injuries which would result to third parties, or to the public interest from the issuance of an injunction, greater significance must be placed upon the likelihood that the party will ultimately succeed on the merits of the ■ litigation.
Keeping in mind that the first two factors are the most critical, if “the chance of success on the merits [is only] better than negligible” and the “possibility of irreparable injury” is low, a stay movant’s request fails. Nken,
Our dissenting colleague criticizes the “sliding-scale” approach as “failing] to honor” Third Circuit precedent. Dissenting Op. 575. In her view, there is no balancing — a court’s consideration of a stay request is an all-or-nothing proposition. To merit a stay, she believes, the stay applicant must “demonstrate,” id., that it will “satisfy,” id. at 576, each of the four stay factors. If it doesn’t, then, even if the stay applicant’s chances of success on appeal are assured (let alone more probable than not) and the applicant will likely suffer an irreparable injury, a stay must be denied if, for example, it isn’t in the public interest. That approach is not only impractical, it has the potential to be deeply unfair, and is one we have explicitly disavowed. In Delaware River Port Authority v. Transamerican Trailer Transport, for example, we couldn’t have been clearer in establishing that “consideration of [the four] factors by the district court requires a ‘delicate balancing.’”
To sum up, all four stay factors are interconnected, and thus the 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.” In re Forty-Eight Insulations,
B. Application
Because our assessment of how strong a case IDEA has is closely linked to. the outcome of the balancing test, we begin with the test itself (though we write from the back-end first): the stronger the balance of harms and public interest is in IDEA’S favor, the less a showing of potential success on appeal we demand (keeping in mind that the likelihood of success must be at least “a substantial case on the merits,” Hilton,
1. Whom does the balance of harms and public interest favor?
To establish irreparable harm, a stay movant “must demonstrate an injury that is neither remote nor speculative, but actual and imminent.” Tucker Anthony Realty Corp. v. Schlesinger,
IDEA asserts that, absent a stay, its appeal will be batted out of court by § 363(m), rendering the continued operation of its business at the Casino impossible. As to potential money damages, IDEA continues, the most it will receive is pennies on the dollar, which grossly undervalues its lease (and the millions it invested in reliance of it). See IDEA Br. 41 (arguing that “a money judgment will not compensate [it] for [the] loss of its posses-sory rights under § [ ]365(h) because [Revel] [is] insolvent and, as a result, [has] no ability to provide payment on any claim [IDEA] may have”). For its part, Revel responds that IDEA’S argument rests on a flawed assumption: that continued possession is substantially more valuable than the rejection damages it would receive. According to Revel (and the District Court), because Polo North would likely walk away from the sale if it were stayed, IDEA would be left with nothing but a possessory interest in a vacant building. See In re Revel,
We do not accept that assertion. First, there is nothing in the record to refute IDEA’S contention that it can operate independently of the Casino. Indeed, a principal purpose of its lawsuit against Revel was to confirm IDEA’S right of access to a power source so that it can begin running its business again. See Oral Arg. Tr. 85:4-7 (noting that IDEA needed a utility easement “to continue to operate and work with the utility company”). We thus deem unsupportable the suggestion of the District Court that, if Polo North walked away, IDEA would be left with “a possessory right in an empty and commercially-unproduetive building.” In re Revel,
That still leaves us with the lingering question of whether rejection damages would sufficiently compensate IDEA for the loss of possession (and its business). On that question, we have previously observed that, though “a purely economic injury, compensable in money, cannot satisfy the irreparable injury requirement ... an exception exists where the potential economic loss is so great as to threaten the existence of the movant’s business.” Minard Run Oil Co. v. U.S. Forest Serv.,
In assessing this side of the balance, the District Court credited Revel’s “position that the issuance of [a] stay would present ‘a real and substantial risk that Polo North would elect not to proceed with closing.’ ” In re Revel,
In our view, the adequacy of the proof provided plays an important role “[i]n evaluating the harm that will occur depending upon whether or not [a] stay is granted.” Mich. Coal. of Radioactive Material Users,
Does the public interest move the needle? We have doubts that it moves much. While the public certainly has an interest in saving jobs and helping Atlantic City’s often sullied reputation, nothing before us indicates how many jobs will be brought back of the 4,000 lost, as we were not told what use Polo North intended for the sold assets. On the other side, the public has a stake in protecting the rights of tenants in commercial properties. Furthermore, public policy strongly favors the correct application of the Bankruptcy Code, especially where property rights are at stake. Overall, though the public has an interest in preventing both outcomes, we ultimately believe the short-term gain of some jobs in a facility that is operational in some way tilts slightly in Revel’s favor.
In any event, our ultimate conclusion need not rest primarily on a rough estimation of whom the balance of harms and public interest fаvor. For, along with IDEA’S sufficient showing of irreparable harm to it should a stay not be granted, success to it on the merits was assured. We explain why below.
2. Has IDEA made a strong showing of its likelihood of success on the merits?
IDEA makes three arguments before us on the merits, but we need address only one: whether the Bankruptcy and District Courts erred in holding that Revel met one of § 363(f)’s statutorily enumerated conditions to sell its assets free and clear. Revel contends they didn’t err because IDEA twice sought to establish (via declaratory judgment actions) that it held a non-residential lease and Revel denied that IDEA had a lease. In Revel’s view, this proves that a bona fide dispute exists under § 363(f)(4), as “a declaratory judgment is only proper when an actual ‘case or controversy’ exists.” Revel Br. 34. We disagree yet again.
As an initial matter, the mere filing of a declaratory judgment action doesn’t itself create a bona fide dispute under § 363(f)(4), even if Article Ill’s “case or controversy” requirement has been met. The latter ensures only that the declaratory judgment plaintiff has standing and a redressable injury. Further, that IDEA alleged (and Revel denied) the former held a non-residential lease doesn’t mean there was a bona fide disputе as to the validity of its lease. “Bona fide dispute” in the § 363(f)(4) context means that there is an objective basis — either in law or fact — to cast doubt on the validity of IDEA’S purported lease. To satisfy that provision, Revel needed to show there was some factual or legal basis to deny that IDEA held a “true lease.” But it did nothing of the sort.
First, a review of IDEA’S complaint makes plain that its principal (and only) purpose was to invoke its rights under § 365(h) and “clarify its appurtenant rights for,” among other things, “a utility easement,” not to litigate the nature of its interest. Reply Br. 6; see also Oral Arg. Tr. 15:14-15 (counsel for IDEA noting that its suit was meant only to have the Court “declare and enforce [IDEA’s] [] rights” under § 365(h)). The relevant paragraphs alleged the following:
125. [0]n or about May 12, 2012, [Revel] and IDEA ... entered into a lease for nonresidential real property concerning certain ^premises at the Casino.
126. On August 28, 2014, [Revel] filed the Rejection Motion.
127. A hearing on the Rejection Motion is currently scheduled for Oetober[]7, 2014.
128. If the Rejection Motion is granted, IDEA will have an opportunity to make an election under Section 365(h) of the Bankruptcy Code.
129. Section 365(h) ... provides a lessee of real property under a rejectеd lease with the option of either retaining the estate, including, among other things, the continued right to possession or to treat the lease as terminated.
130. To the extent that IDEA elects to remain in possession, § 365(h) ... allows it, despite rejection, to continue to enjoy its rights under such lease that are in or appurtenant to the real property, including the right to continued possession, utilities and necessary easements.
Wherefore, [ ] IDEA seeks an order and judgment as follows:
a. Declaring that, despite rejection of the Lease, ... IDEA may continue to enjoy its right under the Lease, including the right to continued possession, utility service and necessary easements; and
b. Granting such other relief as is just. Reply Br. 5-6 (emphasis omitted) (quoting Am. Compl. ¶¶ 125-30, IDEA Boardwalk, LLC v. Revel Entm’t Grp., LLC, No. 14-01756 (Bankr.D.N.J. Sept. 26, 2014), ECF No. 6).
Moreover, even if IDEA had squarely put the validity of its lease at issue, nothing Revel said in response created an objective legal dispute. Revel’s only argument was that its agreement with IDEA doesn’t qualify as “a true lease” because it “provides for ‘rent’ payments based entirely on a percentage of the revenue derived from [IDEA’S operations]” and contains “numerous [ ] examples of provisions atypical of true leases.” Mot. to Dismiss ¶ 31, IDEA Boardwalk, LLC v. Revel Entm’t Grp., LLC, No. 14-01756 (Bankr.D.N.J. Oct. 13, 2014), ECF No. 8. Yet Revel failed to cite a single authority suggesting that a percentage-lease clause disqualifies a purported lease from being one.
To leave no doubt that a true lease exists, IDEA’S agreement with Revel bars any argument to the contrary. It provides that
[n]othing contained in this Lease shall be deemed or construed as creating the relationship of ... partnership or joint venture between the parties hereto, it being understood and agreed that neither the method of computing rent, payment of the Tenant Fees nor any other provision contained herein nor any acts of the parties hereto shall be deemed to create any relationship between the parties other than that of Landlord and Tenant. The provisions of this Lease relating to the Percentage Rent payable hereunder are included solely for the purpose of providing a method whereby adequate rent is to be measured and ascertained.
Mot. to Dismiss Ex. A, at 56, IDEA Boardwalk, LLC v. Revel Entm’t Grp., LLC, No. 14-01756 (Bankr.D.N.J. Oct. 13, 2014) (Section 21.12 of the Lease Agreement), ECF No. 8. The only conclusion from this is that any dispute regarding the validity of IDEA’S lease was fanciful if not disingenuous.
Before we conclude, we would be remiss if we did not highlight the troubling consequences of Revel’s argument. If whenever a lessee attempts to invoke its rights under § 865(h) by asserting as a predicate that it holds a nonresidential lease, every debtor would be well advised to file an answer denying that the lease exists. Revel’s only response is that, by filing a declaratory judgment action, IDEA is “affirmatively alleging, subject to Rule 11, that there is a dispute as to that issue,” as there needs to be “an actual case or controversy” in order to have a declaratory judgment action. Oral Arg. Tr. 70:10-17. That argument makes no sense. A declaratory judgment plaintiff does not fall afoul of Rule 11 by making an allegation in its complaint that it knows to be true. That rule comes into play only where a plaintiff files a complaint without basis in law or fact. Quite the opposite is what we have here.
V. Conclusion
The factors favoring a stay weigh solidly with IDEA. First, that it would prevail on the merits was all but assured because nothing in the record casts doubt on the validity of its lease with Revel, thus.prohibiting the latter from invoking § 363(f) and selling its assets free оf IDEA’S lease. Second, IDEA demonstrated that, absent a stay, it would lose its club business at the ■Casino, and this was sufficient to show irreparable harm. On the balancing of harms, perhaps Revel could have tilted the balance in its favor with its own showing of irreparable harm, but it didn’t come close, as it relied only on its counsel’s hollow representations of harm rather than record evidence. Thus, while the public interest appears to favor a stay denial, that alone doesn’t tip the four-factor balance in Revel’s favor. We thus reverse and stay only the part of the Sale Order that allows Revel to sell the Casino free and clear of IDEA’S lease.
Notes
. Because of the time-sensitive nature of this appeal, we were unable to give a full rationale for our ruling on the date we entered judgment in favor of Appellant IDEA Boardwalk, LLC, reversing the District Court’s denial of its stay request. This opinion does so.
. Revel had previously filed under Chapter 11 of the Bankruptcy Code in March 2013 and confirmed a plan of reorganization in May of that same year.
.A number of Revel’s subsidiaries also filed for bankruptcy. They include Revel AC, LLC, Revel Atlantic City, LLC, Revel Entertainment Group, LLC, NB Aсquisition, LLC, and SI LLC. For convenience, we refer to Revel and its subsidiaries jointly and severally as "Revel.”
. The other tenants include: (1) the so-called “Amenity Tenants” (made up of a group of companies that operated an array of food, liquor, and retail establishments within the Casino); and (2) ACR Energy Partners .(the provider of water and power to the Casino).
. Subsection 363(f) provides that a debtor can sell its assets free and clear of "any interest” (here a lease) if (1) applicable nonbankruptcy law so permits, (2) the interest holder consents, (3) the interest is a lien and the price at which the debtor’s assets are being sold is greater than the value of all the liens on its property, (4) the validity of the interest is in bona fide dispute, or (5) the interest holder, whether in a legal or equitable proceeding, could be compelled to accept a money judgment for its interest. 11 U.S.C. § 363(f)(1)-(5).
. In connection with Revel’s first bankruptcy case, IDEA likewise sought, among other things, essentially the same declaration. Am. Compl. ¶ 89(a), IDEA Boardwalk, LLC v. Revel AC, Inc., No. 13-2013 (Bankr.D.N.J. May 30, 2014), ECF No. 7. In its answer, Revel ’’[d]e-nied” IDEA’S allegation that it held a nonresidential lease. See Answer ¶¶ 82-89, IDEA Boardwalk, LLC v. Revel AC, Inc., No. 13-2013 (Bankr.D.N.J. June 13, 2014), ECF No. 8.
. The Bankruptcy Court did not address whether IDEA would receive adequate prоtection under 11 U.S.C. § 363(e) if the Casino were sold free and clear of its lease. Under that provision, where a tenant expects to lose its lease and asks for protection of its interest, "the court, with or without a hearing, shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest.”
. The District Court came to the same conclusion regarding whether Revel satisfied § 363(e)’s adequate protection requirement. IDEA had argued that adequate protection means continued possession of its lease, not merely money damages, as the Code provides that "adequate protection may be provided by ... granting such other relief ... as will result in the realization by such entity of the indubitable equivalent of such entity's interest in such property.” 11 U.S.C. § 361(3). But the Court thought otherwise, declaring that rejection damages were an adequate substitute for continued possession. See In re Revel,
. Yes, we realize this is the same Circuit Court in the same year. Read on and realize that we are not immune from internal tensions in our opinions.
. Polo North, though obviously having an interest in the outcome, took no significant role in advocating for or against a stay, and neither the Bankruptcy Court nor the District Court suggested that denying a stay would harm it, let alone cause irreparable harm.
. As it turns out, a limited stay didn't set off the consequences Revel and Polo North said it would. Notwithstanding the limited stay we put into place on February 6, 2015, Revel and Polo North closed two months later on April 7. See Notice of Sale Closing, In re Revel AC, Inc., No. 14-22654 (Bankr.D.N.J. Apr. 7, 2015), ECF No. 1553.
. Underscoring this is that, on June 24, 2015, the Bankruptcy Court, per another Judge, concluded that Revel’s agreement-with IDEA constitutes a "true lease” under New Jersey law and that § 365(h) protects its right "to remain in possession for the balance of the terms set forth in the Agreement[], and any renewal or extension period.” In re Revel AC, Inc.,
[Polo North] places before the Court ample case law supporting the contention that a court must not be swayed by "form over substance” when determining the existenceof a true lease. While this maxim is accurate, at some point form becomes substance. We have reached that point. The express terms of the Agreement[], together with supporting affidavits, make it clear that [Revel] and [IDEA] had the unequivocal intention of entering into true lease agreements.
Id. at 226.
Dissenting Opinion
dissenting.
Mindful of the deference we owe to the District Court under the applicable standard of review and the test for obtaining a stay, I part company with the Majority and would affirm the District Court’s order denying IDEA’S motion for a stay of the sale order pending appeal.
The Majority’s “sliding scale” approach for obtaining such equitable relief fails to honor our precedent’s conjunctive four-part test to obtain a stay and it would permit relief to be granted upon a partieu-
Contrary to the Majority’s assertion, requiring a movant to satisfy each factor is not unfair. Indeed, it is warranted; Equitable relief, including injunctions and stays, is an extraordinary remedy, Winter v. Natural Res. Def. Council, Inc.,
That is exactly what the District Court did here. The District Court carefully considered each of the factors and did not abuse its discretion in determining that none were satisfied. First, the District Court astutely acknowledged that if the sale proceeded, IDEA would be no worse off than it was at the time it made its request for relief. It was not clearly erroneous for the District Court to find, based on the facts before it, that IDEA was not conducting any business because Revel was closed, and that IDEA would be unable to conduct business if the sale fell through and Revel remained closed.
Second, it was not clearly erroneous for the District Court to conclude that staying the sale would likely cause greater harm to others, including the estate and other creditors. Each month without a sale generated millions of dollars in carrying costs to maintain the closed facility. These expenditures depleted Revel’s assets and the District Court correctly observed that a prompt sale would end these expenditures. Moreover, the sale would provide an immediate opportunity to obtain assets for the estate, which it could then use to begin to repay its creditors. Thus, it was reasonable for the District Court to conclude that a prompt sale would both preserve existing and generate additional estate assets, whereas staying the sale would continue to dissipate estate funds and, at a minimum, delay the collection of additional assets. Given Revel’s substantial challenges in finding a prospective buyer, it was far from idle speculation for Revel to fear that the loss of this buyer would significantly delay its ability to satisfy its creditors. For these reasons, the District Court acted within its discretion in denying the stay, as a stay would likely cause greater harm to others than the absence of a stay would cause IDEA.
Finally, although the preceding analysis makes it unnecessary to reach this factor, I would hold that the District Court also appropriаtely concluded that IDEA did not demonstrate a strong likelihood of success on the merits, notwithstanding the Majority’s assertion that success on the merits was “all but assured.” Since the Majority has focused only on IDEA’S argument that the Bankruptcy Court erred in holding that Revel met one of 11 U.S.C. § 363(f)’s conditions to sell its assets free and clear of IDEA’S lease, I will likewise focus on this issue.
Under 11 U.S.C. § 363(e), an entity with “an interest in property” that is proposed to be sold can request the bankruptcy court to “prohibit or condition such ... sale ... as is necessary to provide adequate protection of such interest.” 11 U.S.C. § 363(e). The trustee,' however, may sell the property “free and clear” if, among other things, “such interest is in bona fide dispute.” 11 U.S.C. § 363(f)(4). The issue before the District Court was whether the record before it supported a finding that there was a bona fide dispute about whether IDEA had a leasehold interest in the space it occupied at Revel.
The Majority discounts the propriety of relying on IDEA’S request for a declaratory judgment that it had a nonresidential lease as reflecting a bona fide dispute. While requesting a declaratory judgment alone does not automatically mean а bona fide dispute exists, the District Court here acted within its discretion to find a bona fide dispute existed based on the pleadings and the declaratory judgment IDEA sought. A declaratory judgment action asks a court to “declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). When determining whether to exercise jurisdiction under § 2201, a district court is to consider, among other things, “the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy.” Reifer v. Westport Ins. Corp.,
For these reasons, the District Court appropriately found that IDEA failed to satisfy any of the requirements needed to obtain a stay, and I would affirm the District Court’s order denying the motion to stay the sale pending appeal.
. As we must limit our review to the District Court’s decision based on the facts it had before it at the time, I do not — and cannot— consider events that arose thereafter.
. Additionally, I would reach the issue of our jurisdiction under 28 U.S.C. § 1292(a)(1) and conclude that we do have jurisdiction under that statute. See Jackson v. Danberg,
. The Majority suggests that this Court has endorsed a sliding scale approach in Constructors Association of Western Pennsylvania v. Kreps,
. In fact, in this case, the Majority granted a stay even though it concluded that the public interest factor favored the non-movant, and thus the four-factor test was not met.
. The analysis might be different if thе facility was accessible and the lessee was operating, in which case a sale free and clear of its interest could disrupt its business. This, however, is not the case here.
. I recognize that, in exceptional circumstances, economic loss that threatens a mov-ant’s business can constitute irreparable harm sufficient to enjoin an action that poses such a threat, Minard Run Oil Co. v. U.S. Forest Serv.,
.Moreover, granting IDEA a stay would allow it to interfere with the orderly collection and distribution of assets and impact other
. The Majority also notes that the Bankruptcy Court did not make explicit findings concerning the conditions needed to adequately protect IDEA’S possessory interest. Even assuming that its analysis lacked precision, this alone does not mean that the District Court abused its discretion in denying the stay,