This decision is particularly notable because of an issue that neither the parties nor the court raised.

In In re Endi Plaza LLC, Case No. 25-20002, the Bankruptcy Court for the Southern District of New York granted a stay pending an appeal of its prior order dismissing a bankruptcy case for bad faith but required the debtor to post a bond of more than $3 million during the pendency of the stay period.

Background

In June 2025, Endi Plaza LLC (the debtor), a single asset real estate developer of a rental property in Duluth, Minnesota, filed its second bankruptcy case in less than one year (the prior case was dismissed less than three months earlier).

Shortly after the bankruptcy filing, the debtor’s mortgage holder/secured lender filed a motion to dismiss the bankruptcy case. The mortgage holder/secured lender alleged the debtor lacked authority to file a petition because a state court entered an order appointing a receiver just hours before the debtor filed a bankruptcy petition. The bankruptcy court dismissed the debtor’s case in October 2025, albeit on grounds not argued in the briefing (as discussed below) and ordered a bar on the debtor filing an additional bankruptcy petition for one year. The debtor appealed the bankruptcy court’s order to the Southern District of New York and moved before the bankruptcy court for a stay pending such appeal.

The Bankruptcy Court’s Decision

The bankruptcy court analyzed the debtor’s request for a stay pending appeal under the four-factor test employed by courts within the United States Court of Appeals for the Second Circuit, with a particular emphasis on the debtor’s likelihood of success on appeal and the potential irreparable harm to the debtor if the stay is denied.

The bankruptcy court previously dismissed the debtor’s bankruptcy case under Section 1112 “for cause” on the basis that the debtor had filed its petition in “bad faith.” The bankruptcy court, however, had raised that issue sua sponte and it had not been addressed in the secured creditor’s motion. Because there was “some basis to argue whether a sufficiently fact-intensive examination of the record was undertaken,” the bankruptcy court found that this factor weighed in favor of a stay.

Regarding the debtor’s potential irreparable harm, the case’s unique procedural posture was especially relevant to the bankruptcy court’s analysis. A state court had issued an order appointing a receiver approximately one and a half hours prior to the debtor filing its bankruptcy petition, but that order had not yet been docketed. Consequently, the bankruptcy court found that the debtor would be immediately divested (i.e., with no need for any foreclosure proceedings) of control over its real property upon dismissal of the bankruptcy case. The court found those circumstances again to weigh in the debtor’s favor.

On the other hand, the bankruptcy court found that a stay would substantially harm the secured creditor because (a) the loan had been accruing interest at a default rate (with the lender having received no post-petition payments) for nearly two years along with other costs that may not be recoverable based on the value of the collateral, and (b) the debtor had failed to convincingly explain its prior misuse of the secured creditor’s cash collateral earlier in the bankruptcy case.

Consequently, because a stay would likely endanger the secured creditor and “there is no good reason not to require posting of a bond,” the bankruptcy court ordered the debtor to post a $3.3 million bond, which represented the daily interest of the creditor’s loan over an expected seven-month appeal period.

The debtor was unable to secure a bond in the time required by the bankruptcy court and subsequently moved to voluntarily dismiss its appeal.

Takeaways

This decision is particularly notable because of an issue that neither the parties nor the court raised. Under Section 362(c)(3) of the Bankruptcy Code, if a Chapter 11 case of a debtor had been dismissed within one year of a subsequently filed petition, the Bankruptcy Code’s automatic stay terminates within 30 days of the subsequent petition unless a motion for continuation is filed and heard prior to expiration of that 30-day period. No such motion was filed by the debtor here. In other words, to the extent that the secured creditor in this case was intending solely to enforce its rights against the debtor’s property through dismissal of the case, further motion practice regarding the separate stay of the bankruptcy court’s dismissal order was not strictly necessary. Secured lenders, particularly lenders to borrowers that have repeatedly sought bankruptcy protection to delay the exercise of state law remedies, should be aware of this Bankruptcy Code provision and the burden that it places on a debtor, and consider whether additional motion practice on dismissal is necessary.

Further, and perhaps because of the unusual procedural posture of this case discussed above, this decision warrants attention because a stay pending appeal was granted at all. Under the Federal Rules of Bankruptcy Procedure, a party seeking a stay pending appeal must first move before the bankruptcy court. A bankruptcy court will rarely issue a stay pending appeal of its own decision because, under the factor-driven test discussed above, a bankruptcy court is more likely than not to conclude that a movant would not be successful on appeal.

Setting aside the case-specific quirks, this decision is also informative for secured lenders broadly regarding the potential pitfalls of pursuing relief from the bankruptcy case of an uncooperative borrower/debtor. Lenders should be aware that case-dispositive motions (e.g., dismissal, relief from stay to pursue foreclosure of a debtor’s sole asset) can and likely will be appealed, with a debtor seeking stay relief during the pendency. Notwithstanding the delay and headaches that may result, secured lenders should take comfort in the fact that the need for a movant to provide a bond is the default, and the inability for a movant to post that bond effectively moots the stay.

Finally, secured lenders seeking speedy resolution of their claims should consider whether alternatives to dismissal can be pursued, including but not limited to arguments under Section 362(c)(3) where applicable. Here, the bankruptcy court was not able to rule on the secured creditor’s motion to dismiss for nearly one year. If the debtor had been able to procure a bond, the appeal could have continued for several more months. Secured lenders should similarly assess whether it may be more efficient to guide a case through a plan of reorganization that results in the disposition of property in which that lender has a security interest as compared with pursuing state law remedies for ultimately the same desired outcome.

For More Information

If you have any questions about this Alert, please contact Robert E. Grossman, Brad Lenox, any of the attorneys in our Business Reorganization and Financial Restructuring Practice Group or the attorney in the firm with whom you are regularly in contact.

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