Stays Pending Appeal- Another Anniversary

With relatively rare exceptions, stays pending appeal do not get a lot of attention in published cases. That is because decisions on applications for such stays, by their nature, are generally made quickly and without necessarily resulting in a published (or any formal written) opinion. But in Brundage v. New Jersey Zinc Co., 48 N.J. 450 (1967), decided on this date 53 years ago, the issue of a stay pending appeal was front and center.

‘The case involved a Chancery action seeking to enjoin a merger. The Chancery Division dismissed plaintiff’s complaint. Plaintiff then appealed to the Appellate Division but did not seek a stay pending appeal or an accelerated hearing on their appeal. The merger was quickly consummated on the second day after the entry of dismissal in the Chancery Division. The Supreme Court then certified the case on its own motion before argument in the Appellate Division.

Plaintiff’s counsel “acknowledged that the determination not to apply for a stay was a deliberate one. As he saw it, the choice was a very high bond or a very early hearing of the appeal on the one hand or, on the other hand, reliance on the court’s inherent jurisdiction to restore the status quo in the event it is determined that the defendants improperly proceeded with the merger.” Thus, plaintiff’s strategy was a deliberate, though unusual, one.

Defendants moved to dismiss the appeal as moot since the merger had already occurred. Writing for a unanimous Court, Justice Jacobs disagreed that the matter was moot. But he stated that the Court would consider “intervening third party interests” and all other factors that would assist in “reaching a sound determination as to whether equitable considerations now call for complete undoing of the merger, as the plaintiffs seek.”

The Court noted that the grant or denial of a stay pending appeal is discretionary and “to be exercised with proper regard to the particular circumstances of each case.” Justice Jacobs said that “[i]f the plaintiffs had made timely application to us for early hearing with interim stay without bond, their application would undoubtedly have been granted.” The Court stated that “plaintiffs should have made such application rather than have relied on their notice of appeal and hearing in ordinary course.”

But that did not mean that defendants’ position won the day. Justice Jacobs expressed a lack of sympathy with “defendants’ unseemly haste in consummating their merger on the second day after the entry of the judgment of dismissal and the taking of the appeal. When it became evident to them that the plaintiffs were not applying for early appellate hearing [defendants] could easily have made such application on their own.” Thus, from an equitable perspective, neither side conducted itself completely properly.

The Court then turned to the issue of whether “where the plaintiff is denied injunctive relief against a proposed merger and takes an appeal without applying for a stay, his appeal may be dismissed as moot upon a showing that the merger has been consummated.” Justice Jacobs cited cases elsewhere that disagreed on this issue. Some held that an appeal such as this one was moot, while others took the position that “the defendants’ consummation of the merger during the pendency of the appeal is at their own peril and does not render the appellate proceeding moot.” The Court sided with the latter view. “[W]here the circumstances equitably call for such action the court may order the merger undone.”

Here, the Justices said, “plaintiffs had the undoubted right to an appeal and they took it in timely fashion. Although they also had the right to seek a stay, there is nothing in the terms or the underlying purposes of our practice rules to suggest that upon failure to do so the defendants may by their own voluntary action render the appeal wholly fruitless.”

Despite that, “in the circumstances at hand the plaintiffs should have applied for a stay and early hearing, and while they remain at liberty to seek what would now amount to mandatory injunctive relief we may, in weighing all of the  equities, properly bear in mind the consummation of the merger with its intervening interests and the very heavy burdens of its undoing as relevant factors.” That made plaintiffs’ task on the merits difficult, and the Court ultimately rejected their substantive arguments and allowed the merger to stand.

Subsequent cases, in varying contexts, have criticized parties who have made a “hasty effort to attempt to acquire an unassailable position to which [they] equitably should not be entitled.” E.g., Lizak v. Faria, 96 N.J. 482, 499 (1994) (quoting Donadio v. Cunningham, 58 N.J. 309, 323 (1971)). In Brundage, the circumstances were such that upholding the rapid consummation of the merger did not produce an inequitable result. Plaintiffs’ decision not to seek a stay contributed to those circumstances. Brundage teaches that there are very fine equitable and other considerations that are or ought to be part of any decision as to whether to seek a stay pending appeal.