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<b><i>In Re Revel AC, Inc.:</i></b> The Third Circuit's Roadmap Around Equitable Mootness

BY Brian L. Shaw
December 31, 2015

It is well established that courts consider the following four factors in determining whether to stay the effect of an order pending appeal: 1) whether the movant has made a strong showing of the likelihood of success on the merits; 2) whether the movant will suffer irreparable injury absent a stay; 3) whether a stay would substantially harm other parties with an interest in the litigation; and 4) whether a stay is in the public interest. Recently, in In re Revel AC, Inc., 802 F.3d 558 (3d Cir. 2015), the U.S. Court of Appeals for the Third Circuit revisited these considerations and provided guidance on “how to conduct a balancing of the stay factors.” While the court's analysis in Revel was not a shocking revelation, it provides significant guidance on the most effective way to avoid losing appeal rights to the hard-to-pin-down doctrine of equitable mootness.

Case History

Revel AC, Inc. (“Revel”) opened a casino in Atlantic City in April 2012. Revel, 802 F.3d at 561. As part of its plans for the casino, Revel entered into a lease agreement with IDEA Boardwalk, LLC (“IDEA”) to run two upscale nightclubs and a beach club at Revel's casino. Id. The lease was originally for a 10-year term, and required IDEA to contribute $16 million to the projected $80 million cost of construction for the clubs, in addition to making monthly rental payments as Revel's lessee. Id. In June 2014, Revel filed a “Chapter 22″ bankruptcy, and in its first-day filings, requested permission from the bankruptcy court to sell its casino business free and clear of all liens and interests, including IDEA's lease. Id. IDEA filed an objection to the proposed sale, requesting that the bankruptcy court block Revel from selling the casino stripped of IDEA's lease, and citing 11 U.S.C. ' 365(h) in support of its request. Id. at 562. IDEA also filed a lawsuit against Revel seeking to enjoin it from engaging in any conduct that would prevent IDEA from operating its clubs on the leased premises, and seeking a declaratory judgment that, “under applicable law, the Lease is a lease of non-residential real property … and as such, is entitled to all relevant statutory protections … of 11 U.S.C. ' 365(h).” Id.

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