Residential Capital, LLC v. Federal Housing Finance Agency

12-3342 In re: Residential Capital, LLC UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. 1 At a stated term of the United States Court of Appeals 2 for the Second Circuit, held at the Thurgood Marshall United 3 States Courthouse, 40 Foley Square, in the City of New York, 4 on the 15th day of July, two thousand thirteen. 5 6 PRESENT: DENNIS JACOBS, 7 Chief Judge, 8 ROSEMARY S. POOLER, 9 DEBRA ANN LIVINGSTON, 10 Circuit Judges. 11 12 - - - - - - - - - - - - - - - - - - - -X 12-3342 13 In Re: Residential Capital, LLC, 14 15 Debtor. 16 17 - - - - - - - - - - - - - 18 19 Residential Capital, LLC, Ditech, LLC, DOA 20 Holding Properties, LLC, DOA Properties IX 21 (Lots-Other), LLC, EPRE LLC, Equity Investment 22 I, LLC, ETS of Virginia, Inc., ETS of 23 Washington, Inc., Executive Trustee Services, 24 LLC, GMAC-RFC Holding Company, LLC, GMAC Model 25 Home Finance I, LLC, GMAC Mortgage USA 26 Corporation, GMAC Mortgage, LLC, GMAC 27 Residential Holding Company, LLC, GMAC RH 28 Settlement Services, LLC, GMACM Borrower LLC, 1 1 GMACM REO LLC, GMACR Mortgage Products, LLC, 2 HFN REO Sub II, LLC, Home Connects Lending 3 Services, LLC, Homecomings Financial Real 4 Estate Holdings, LLC, Homecomings Financial, 5 LLC, Ladue Associates, Inc., Passive Asset 6 Transactions, LLC, PATI A, LLC, PATI B, LLC, 7 PATI Real Estate Holdings, LLC, RAHI A, LLC, 8 RAHI B, LLC, RAHI Real Estate Holdings, LLC, 9 RCSFJV2004, LLC, Residential Accredit Loans, 10 Inc., Residential Asset Mortgage Products, 11 Inc., Residential Asset Securities 12 Corporation, Residential Consumer Services of 13 Alabama, LLC, Residential Consumer Services of 14 Ohio, LLC, Residential Consumer Services of 15 Texas, LLC, Residential Consumer Services, 16 LLC, Residential Funding Company, LLC, 17 Residential Funding Mortgage Exchange, LLC, 18 Residential Funding Mortgage Securities I, 19 Inc., Residential Funding Mortgage Securities 20 II, Inc., Residential Funding Real Estate 21 Holdings, LLC, Residential Mortgage Real 22 Estate Holdings, LLC, RFC-GSAP Servicer 23 Advance, LLC, RFC Asset Holdings II, LLC, RFC 24 Asset Management, LLC, RFC Borrower LLC, RFC 25 Construction Funding, LLC, RFC REO LLC, RFC 26 SFJV-2002, LLC, 27 28 Plaintiffs-Appellants, 29 30 -v.- 31 32 Federal Housing Finance Agency, as 33 conservator for the Federal Home Loan 34 Mortgage Corporation, 35 36 Defendant-Appellee. 37 - - - - - - - - - - - - - - - - - - - -X 38 39 FOR APPELLANTS: DEANNE E. MAYNARD (Joel 40 C. Haims, Kayvan B. 41 Sadeghi, and Marc A. 42 Hearron, on the brief), 43 Morrison & Foerster LLP, 44 Washington, D.C. 2 1 FOR APPELLEE: MARC E. KASOWITZ (Andrew 2 K. Glenn, Kanchana 3 Wangkeo Leung, and Daniel 4 A. Fliman, on the brief), 5 Kasowitz Benson Torres & 6 Friedman LLP, New York, 7 New York. 8 9 Appeal from an order of the United States District 10 Court for the Southern District of New York (Cote, J.). 11 12 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED 13 AND DECREED that the case is REMANDED to the district court. 14 15 Appellant Residential Capital, LLC, and various related 16 entities (collectively, “ResCap”), appeal from the July 17, 17 2012, order of the United States District Court for the 18 Southern District of New York (Cote, J.), denying ResCap’s 19 motion to stay a lawsuit brought by the Federal Housing 20 Finance Agency (“FHFA”), as conservator for the Federal Home 21 Loan Mortgage Corporation (“Freddie Mac”), against ResCap’s 22 corporate parents and affiliate. We assume the parties’ 23 familiarity with the underlying facts, the procedural 24 history, and the issues presented for review. 25 26 In denying ResCap’s motion to stay the lawsuit that has 27 been brought by the FHFA against ResCap’s corporate parents 28 and affiliate, the district court concluded that the 29 Bankruptcy Code’s automatic stay provision, 11 U.S.C. 30 § 362(a), could not extend to ResCap’s corporate parents and 31 affiliate because they were not debtors in bankruptcy. The 32 district court also denied ResCap’s request for a 33 discretionary stay of the lawsuit under Section 105(a) of 34 the Bankruptcy Code. 35 36 Section 362(a)(1) provides that a bankruptcy petition 37 “operates as a stay” of “the commencement or 38 continuation . . . of a judicial, administrative, or other 39 action or proceeding against the debtor.” 11 U.S.C. 40 § 362(a)(1). Additionally, Section 362(a)(3) will stay “any 41 act to obtain possession of property of the estate or of 42 property from the estate or to exercise control over 43 property of the estate.” Id. § 362(a)(3). ResCap relies on 44 both of these provisions to support application of the 3 1 automatic stay to the non-debtor entities. “The automatic 2 stay can apply to non-debtors, but normally does so only 3 when a claim against the non-debtor will have an immediate 4 adverse economic consequence for the debtor’s estate.” 5 Queenie, Ltd. v. Nygard Int’l, 321 F.3d 282, 287 (2d Cir. 6 2003). In Queenie, for example, this Court held that the 7 automatic stay applied to proceedings against a debtor’s 8 wholly owned corporation. Id. at 287. 9 10 Here, the district court denied application of Section 11 362(a)’s automatic stay to the non-debtor entities as a 12 categorical matter, without factual findings as to whether 13 the lawsuit against those entities would have had “immediate 14 adverse economic consequence[s]” on ResCap’s estate. The 15 district court did examine some of ResCap’s arguments 16 regarding the adverse consequences of the lawsuit in the 17 context of ResCap’s request for a stay under Section 105(a), 18 but there are no explicit findings with regard to ResCap’s 19 request under Section 362(a). 20 21 Because Section 362(a)’s automatic stay may apply to 22 non-debtors in some limited circumstances, we remand the 23 case pursuant to the procedure outlined in United States v. 24 Jacobson, 15 F.3d 19, 22 (2d Cir. 1994), for the district 25 court to supplement the record and determine whether Section 26 362(a)’s automatic stay applies to the non-debtor entities. 27 It may be that the anti-injunction provision in the Housing 28 and Economic Recovery Act of 2008, 12 U.S.C. § 4617(f), bars 29 application of Section 362(a)’s automatic stay, but we do 30 not have to reach that question until the district court has 31 determined whether the automatic stay applies in the first 32 instance. 33 34 The panel retains jurisdiction to hear ResCap’s appeal 35 once the district court has made its determination. Given 36 ResCap’s ongoing bankruptcy proceedings, we invite the 37 district court to act with celerity, at the latest within 38 sixty calendar days of the date of this decision. 39 40 For the foregoing reasons, we hereby REMAND the case to 41 the district court. After the district court has made its 42 determination, either party may restore jurisdiction to this 43 Court by filing with the Clerk a letter (along with a copy 44 of the relevant order or transcript) advising the Clerk that 4 1 jurisdiction should be restored. The returned appeal will 2 be assigned to this panel and an additional notice of appeal 3 will not be needed. 4 5 FOR THE COURT: 6 CATHERINE O’HAGAN WOLFE, CLERK 7 8 9 5