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Allen v. Fitzgerald

United States District Court, W.D. Virginia, Roanoke Division

August 1, 2018

JASON ROYCE ALLEN, et al. Defendants-Appellants,
JOHN P. FITZGERALD, Acting Trustee for Region Four, Plaintiff-Appellee.


          Michael F. Urbanski Chief United States District Judge

         This matter comes before the court on the Defendant-Appellants Jason Royce Allen, Kevin Chern, Law Solutions Chicago, LLC ("Law Solutions"), and UpRight Law, LLC's ("UpRight," and collectively 'Petitioners") Motion to Stay (the "Motion"), ECF No. 97. Previously, the court granted a partial temporary stay until July 2, 2018 so the parties could brief and the court could consider the underlying issues. Order, ECF No. 95. The Motion has now been fully briefed, and the court has considered the issues raised in the Motion. For the reasons discussed below, the court will DENY the Motion.

         I. Procedural Background

         On February 12, 2018, the bankruptcy court issued an Order (the "Order"), In re Williams, No. 16-07024 (Bankr. W.D. Va. Feb. 12, 2018), ECF No. 232, in favor of the U.S. Trustee for Region Four (die "Trustee") and against Petitioners.[1] At issue here, Paragraph 5 of the Order (the "Privilege Revocation") revoked the privileges of Petitioners to practice before the bankruptcy court for this District for five years. In particular, the Privilege Revocation provides:

Pursuant to the relief requested in Williams Count VI and Scott Count V, the privileges of LSC, Upright Law, LLC, Kevin W. Chern, and Jason Royce Allen to file or conduct cases, directly or indirectly, in the Western District of Virginia are revoked for a period of five (5) years. This revocation shall include any firm that Law Solutions Chicago, Upright Law, Jason Allen or Kevin Chern, directly or indirectly, have an ownership interest in or control over.

         Order ¶ 5. Simultaneously, the bankruptcy court issued a Memorandum Opinion setting forth findings of fact and explaining the legal rationale behind its Order. Memorandum Opinion ("Bankr. Op."), In re Williams. No. 16-50158 (Bankr. W.D. Va. Feb. 12, 2018), ECF No. 231.

         Petitioners asked the bankruptcy court to alter the Privilege Revocation and stay its effectiveness until sixty days after the Order became final and nonappealable. Defs.' Mot. Alter Am. J. at 2, In re Williams. No. 16-07024 (Bankr. W.D. Va. Feb. 26, 2018), ECF No. 244. The bankruptcy court altered the Privilege Revocation so that it came into effect on May 9, 2018, and, until that date, barred Petitioners from taking on new clients, filing new cases, or charging currents for services related to transitioning those clients' cases. Order Disposing Defs.' Mot. Alter Am. J. at 2, In re Williams.. No. 16-07024 (Bankr. W.D. Va. Mar. 12, 2018), ECF No. 250.

         On March 27, Petitioners filed an appeal with this court. Bankr. Notice Appeal, ECF No. 1. Almost one month later, on April 20, 2018, Petitioners filed a motion to stay the Privilege Revocation with the bankruptcy court. Defs.' Mot. Limited Stay Enforcement Bankr. Ct. Pending Appeal ("Motion to Stay Pending Appeal") at 1, In re Williams. No. 16-07024 (Bankr. W.D. Va. Apr. 20, 2018), ECF No. 264. On May 1, 2018, Petitioners filed an additional, emergency motion to stay with the bankruptcy court. Defs.' Emergency Mot. Stay J. Pending Decision Mot. Stay Pending Appeal at 1, In re Williams. No. 16-07024 (Bankr. W.D. Va. May 1, 2018), ECF No. 269. The bankruptcy court granted the emergency temporary stay. Order Granting in Part Defs.' Emergency Mot. Stay J. Pending Decision Mot. Stay Pending Appeal at 1, In re Williams. No. 16-07024 (Bankr. W.D. Va. May 3, 2018), ECF No. 271. Ultimately, however, the bankruptcy court denied the Motion to Stay Pending Appeal. Mem. Op. & Order Den. Defs.' Mot. Limited Stay Pending Appeal, In re Williams. No. 16-07024 (Bankr. W.D. Va. May 14, 2018) at 2, ECF No. 277.

         The court held a motion hearing on May 18, 2018, during which Petitioners moved for another emergency stay of the Privilege Revocation pending appeal. Minute Entry, ECF No. 94. The court granted the emergency motion in part and stayed the Privilege Revocation until July 2, 2018. Order ("Emergency Stay Order"), ECF No. 95. Subsequently, on May 18, 2018, Petitioners filed the Motion presently before this court. On July 2, 2018, due to the volume of materials submitted during briefing on the Motion, the court entered an order further staying the Privilege Revocation until August 3, 2018, with the same terms as the Emergency Stay Order. Order, ECF No. 108.

         II. Standard of Review

         The court is mindful that "a stay is an 'intrusion into the ordinary processes of administration and judicial review.'" Nken v. Holder, 556 U.S. 418, 427 (2009) (quoting Va. Petrol. Jobbers Ass'n v. FPC. 259 F.2d 921, 925 (D.C. Or. 1958) (per curiam)). "A stay is not a matter of right, even if irreparable injury might otherwise result." Id. at 433 (quoting Va. Ry. Co. v. United States. 272 U.S. 658, 672 (1926)). "Ordinarily, when a party seeking a stay makes application to an appellate judge following the denial of a similar motion by a trial judge, the burden of persuasion on the moving party is substantially greater than it was before the trial judge." Long v. Robinson. 432 F.2d 977, 979 (4th Cir. 1970).

         The parties agree that the court must apply Hilton v. Braunskill. 481 U.S. 770 (1987), and examine four factors to determine if a stay is appropriate: "(1) whether the stay applicant has made a strong showing that he 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." Id. at 776; see also Nken, 556 U.S. at 426 (citing Hilton. 481 U.S. at 776); Fitzgerald v. Alcorn. No. 5:17-cv-16, 2018 WL 709979, at *1 (W.D. Va. Feb. 5, 2018) (same).

         The first two factors "are the most critical." Nken, 556 U.S. at 434. Moreover, the petitioner must show that "[m]ore than a mere possibility of relief is required." Id. (alteration in original) (internal quotations and citations omitted). Similarly, the petitioner must show more than "some 'possibility of irreparable injury.'" Id. at 434-35 (quoting Abbassi v. INS. 143 F.3d 513, 514 (9th Cir. 1998)). When the government is the respondent, the last two factors collapse into one. Id. at 435.

         III. Likelihood of Success on the Merits

         The parties disagree over the appropriate legal genus to which the Privilege Revocation belongs. Petitioners insist that the Privilege Revocation is actually an injunction dressed in the language of bar admissions. See Mot. Petitioners Stay Pending Appeal ("Stay Br."), ECF No. 97, at 21. Petitioners believe that when issuing the Privilege Revocation, the bankruptcy court failed to engage in the analysis attendant to injunctive relief. See Id. at 21-22. By contrast, the Trustee argues that the bankruptcy court ordered the Privilege Revocation under its inherent authority to control membership of its bar. Opp. U.S. Trustee Petitioner's Mot. Stay Pending Appeal ("Stay Opp."), ECF No. 102, at 13.

         The court concludes that the Trustee is correct and Petitioner's position rests on an untenable reading of the relevant case law. Accordingly, the court holds that the Privilege Revocation is, as a matter of law, not an injunction. Moreover, the court concludes that, given the factual record before it, the court cannot find that Petitioners have shown a strong likelihood of success on the merits necessary to satisfy factor one of Hilton.

         A. The Privilege Revocation ...

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