By Matthew Santoni

Law360 (January 19, 2021, 5:43 PM EST) -- A Pittsburgh-area restaurant defying Pennsylvania's pandemic-related mask requirements can't keep a pause on an Allegheny County Health Department lawsuit seeking its temporary closure, after a federal bankruptcy court judge said Tuesday that the restaurant was unlikely to succeed in appealing his earlier go-ahead for the county's case.

U.S. Bankruptcy Court Judge Jeffery A. Deller found that The Cracked Egg LLC couldn't stay his earlier order, which said that the typical halt to litigation accompanying a bankruptcy case didn't apply to the county's enforcement action. Despite the restaurant's arguments via videoconference Tuesday, he said he was not convinced that the bankruptcy court had the power to determine the legality of the state mask requirements that the county was seeking to enforce.

"A lot of the back and forth goes to the underlying constitutional claim, … but I did not reach a conclusion or conduct a full analysis of the constitutional claims," Judge Deller said. "On its face, this court does not have that gatekeeping function. … The determination of [the orders'] lawfulness is actually before the Court of Common Pleas or the pending action before the district court."

Judge Deller denied The Cracked Egg's motion to stay his decision pending its appeal to the district court, which lets the health department pursue its lawsuit in state court seeking a shutdown of the restaurant until it complies with mask requirements and occupancy limits.

In weighing the four factors necessary for considering a stay pending appeal, Judge Deller said the restaurant was unlikely to win its appeal on the merits and was unable to show irreparable harm if the county's case proceeded. In balancing the harm to the health department and the public interest, he said it would be better if the other courts ruled on the merits of The Cracked Egg's challenges to the state's orders.

"I think we all agree having everyone follow the law is in our public interest," he said. "What's in the public interest is that these constitutional issues raised by The Cracked Egg get fully decided."

Allegheny County had sued the restaurant in September over its refusal to make employees or patrons wear face coverings under the state's pandemic mitigation orders, and its refusal to obey occupancy limits that have ranged from 25% to 50% of their building's normal capacity. The Cracked Egg filed a countersuit in federal court seeking a declaration that the mitigation measures were unconstitutional, but filed for Chapter 11 protection in early October, triggering an automatic hold on all litigation.

Allegheny County asked the court to lift the automatic stay for its enforcement action, and Judge Deller agreed on Jan. 7, ruling that it was not the bankruptcy court's place to decide the legality of the orders the county was seeking to enforce. The Cracked Egg appealed to the district court and sought a stay on the judge's order lifting the stay on the county case.

James Cooney of The Law Offices of Robert O. Lampl, representing The Cracked Egg, argued that Judge Deller had relied on a case that was overruled by the U.S. Supreme Court's decision in Celotex Corp. v. Edwards when he said that the court couldn't weigh the legality of the orders. Celotex held that the court had jurisdiction to say if the regulations were arbitrary and oppressive, Cooney said, and the restaurant has challenged the underlying mask order and occupancy limits as unconstitutional.

But Judge Deller said he wasn't considering it a question of jurisdiction: The bankruptcy code was clear on exempting enforcement actions, and he compared his passing on the underlying constitutional questions to the hypothetical case of a debtor with drugs in his car who gets pulled over without strong probable cause.

"Under your view, the debtor can file for bankruptcy, and the criminal prosecution goes away because you ask the bankruptcy court to be gatekeeper of whether there was an illegal search and seizure," he said.

The judge said The Cracked Egg hadn't shown it would be harmed by lifting the stay because it still had a chance to make its case in state and federal court. If either of those courts ruled against it, it could ask them for a stay and appeal.

"They will have their day in court," he said. "Because they'll have that day in court and can present their defenses there, I don't think there's irreparable harm."

Health Department attorney Vijya Patel said the county's goal wasn't to shut down the restaurant completely — it was to close it temporarily until it came into compliance with the pandemic-mitigation measures.

The Allegheny County Health Department is represented in-house by Michael A. Parker and Vijya Patel, and by Frances Liebenguth of the Allegheny County Law Department.

The Cracked Egg LLC is represented by James R. Cooney, Robert O. Lampl, Sy O. Lampl, Alexander L. Holmquist and Ryan J. Cooney of Robert O. Lampl Law Office.

The cases are In re: The Cracked Egg LLC, case number 2:20-bk-22889, in the U.S. Bankruptcy Court for the Western District of Pennsylvania; County of Allegheny v. The Cracked Egg LLC, case number GD-20-9809, in the Court of Common Pleas of Allegheny County, Pennsylvania; and The Cracked Egg LLC v. The County of Allegheny et al., case number 2:20-cv-01434 in the U.S. District Court for the Western District of Pennsylvania.

--Editing by Steven Edelstone.

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