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Kentucky Employees Retirement System v. Seven Counties Services, Inc.

United States District Court, W.D. Kentucky, Louisville Division

February 4, 2015

KENTUCKY EMPLOYEES RETIREMENT SYSTEM and BOARD OF TRUSTEES OF THE KENTUCKY RETIREMENT SYSTEMS, Appellants,
v.
SEVEN COUNTIES SERVICES, INC., Debtor.

MEMORANDUM OPINION AND ORDER

DAVID J. HALE, District Judge.

Appellants Kentucky Employees Retirement System and the Board of Trustees of the Kentucky Retirement Systems (collectively KERS or Appellants) ask the Court to stay the January 6, 2015 orders of the Bankruptcy Court for the Western District of Kentucky confirming Appellee Seven Counties Services, Inc.'s Chapter 11 Plan of Reorganization. Appellants argue that the reorganization plan should not be allowed to go into effect until the Court has resolved their appeals of the confirmation orders and the bankruptcy court's May 30, 2014 opinion.[1] Because Appellants failed to show that they are likely to prevail on the merits of their appeals or to suffer irreparable harm if a stay is not granted, the motion to stay will be denied.

I. BACKGROUND

The bankruptcy court outlined the factual and procedural background of the Seven Counties bankruptcy in its comprehensive May 30 opinion; for present purposes, a brief procedural history will suffice. Three appeals involving KERS and Seven Counties are currently before the Court: the present appeal of the confirmation orders, KERS's appeal of the May 30 opinion, and Seven Counties' cross-appeal of the May 30 opinion.

In the May 30 opinion, which was issued following a seven-day trial of the competing adversary proceedings filed by Seven Counties and Appellants, the bankruptcy court concluded (1) that Seven Counties is not a "governmental unit" and therefore is a "person" qualifying for relief under Chapter 11 of the Bankruptcy Code; (2) that Appellants were not entitled to a permanent injunction requiring Seven Counties to continue making contributions to the retirement system; and (3) that the relationship between KERS and Seven Counties is contractual and that the contract is executory, meaning that Seven Counties may reject it under 11 U.S.C. ยง 365. In re Seven Counties Servs., Inc., 511 B.R. 431, 437 (Bankr. W.D. Ky. 2014).

Appellants moved to stay the May 30 opinion pending their appeal of it; the bankruptcy court denied the requested stay after making oral findings of fact and conclusions of law. Docket No. 6-4; see Docket No. 6-5 at 76-88. They also sought a direct appeal to the Sixth Circuit, which denied their petition. See Docket No. 6-15. Appellants then petitioned the Sixth Circuit for a writ of prohibition preventing the bankruptcy court from holding a confirmation hearing on Seven Counties' proposed reorganization plan. The Sixth Circuit denied that petition as well, finding that Appellants could obtain adequate relief by appealing the confirmation orders. See Docket No. 6-18 at 3.

Finally, after the confirmation orders were entered, KERS made the same motion before the bankruptcy court that it now makes to this Court: to stay those orders pending resolution of the various appeals. After oral argument on the motion, the bankruptcy court declined to stay the confirmation orders, incorporating its previous ruling with respect to the May 30 opinion and finding that KERS was unlikely to prevail on its appeal of the confirmation orders. Docket No. 6-21; see Docket No. 9-1 at 59-67.

KERS next made the present motion. Seven Counties filed a response in opposition, and on February 2, 2015, the Court heard oral argument. The motion is now ripe for decision.

II. STANDARD OF REVIEW

The parties disagree as to the proper standard of review. KERS presents its motion as though the Court will consider it de novo. However, KERS previously sought the same relief in bankruptcy court, and Seven Counties cites ample case law indicating that in such a situation, the district court should simply review the bankruptcy court's ruling for abuse of discretion, considering legal issues de novo and reviewing factual findings for clear error. See In re Akron Thermal, LP, 414 B.R. 193, 202 (N.D. Ohio 2009) (collecting cases). Under either standard, KERS's motion fails.

III. ANALYSIS

In the Sixth Circuit, a motion for stay pending appeal is analyzed under essentially the same test as a motion for preliminary injunction. That balancing test consists of four factors:

(1) the likelihood that the party seeking the stay will prevail on the ...

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