By Hannah Albarazi

Law360 (January 15, 2021, 5:16 PM EST ) A Pittsburgh-area restaurant that has been operating in defiance of Pennsylvania's COVID-19-related mask mandate asked a federal bankruptcy judge Thursday to extend a stay on the Allegheny County Health Department's effort to shut it down, citing its appeal to the U.S. District Court.

The Cracked Egg urged U.S. Bankruptcy Judge Jeffery Deller to put back in place a stay on the county's enforcement action pending the restaurant's district court appeal of his order, or until a pending action in federal court challenging the constitutionality of Pennsylvania's mask mandate is resolved.

The restaurant said Judge Deller erroneously held that his court lacked the authority to decide whether the exercise of the police power was legitimate.

Attorneys representing the Cracked Egg argue the judge relied on the U.S. Supreme Court's decision in Board of Governors of Fed. Reserve System v. MCorp Financial, Inc. , which they say has been "overruled" by the U.S. Supreme Court's decision in Celotex Corp. v. Edwards.

Cracked Egg attorney, James R. Cooney of the Robert O. Lampl Law Office, told Law360 in a telephone interview Friday that "[w]e believe the Celotex case implicitly overruled that."  

The restaurant's attorneys also maintain that its constitutional claims are supported by a Pennsylvania federal judge's September ruling in the case, County of Butler v. Wolf, which struck down emergency COVID-19 business closure and crowd-size restrictions imposed by Gov. Tom Wolf. In that case, a Third Circuit panel reinstated the restrictions while the court hears an appeal from Gov. Wolf.

Sy O. Lampl of the Robert O. Lampl Law Office, who is also representing the restaurant, told Law360 that the Third Circuit hasn't issued a decision in that case yet, and therefore the district court's ruling still stands.

Lampl said the restaurant remains open and is following all "validly enacted" laws, but is not following the COVID-19 mandates ordered by Gov. Wolf, which he describes as an "improper use of legislative authority" and a "violation of our constitutional rights."

A voice recording at the Cracked Egg on Friday said: "Here at the Egg, we do not follow any of the edicts of the tyrannical government. The Allegheny County Health Department is aware of this."

The health department, which declined to comment on the pending litigation Friday, filed a lawsuit against the Cracked Egg and its parent company The Cracked Egg LLC in state court in September, stating the county had cited the restaurant repeatedly and revoked its operating permit, but that the owners kept it open anyway.

The county said the restaurant ignored statewide mandates that all employees wear face coverings and that customers cover their faces when not eating or drinking, and it had operated at full capacity despite mitigation orders limiting indoor occupancy.

But the Cracked Egg filed a federal countersuit attempting to overturn the mitigation measures, claiming violations of its civil rights.

The restaurant's owners said in an online legal defense fundraising campaign that they complied with the orders for the first five months of the pandemic, but "took a stand" in July when they resumed normal operations.

But in early October, the restaurant filed for bankruptcy, bringing all the litigation to a halt.

In December, the health department asked the bankruptcy judge to lift the automatic stay imposed when the restaurant filed for Chapter 11 protection so it could pursue its injunction in state court. The Cracked Egg, however, argued the pandemic mandates that the health department sought to enforce were illegal, and therefore the department's lawsuit was not an enforcement action exempt from the bankruptcy stay.

The bankruptcy judge lifted the stay on Jan. 7, allowing the health department to proceed with its lawsuit. Judge Deller said it was not for the bankruptcy court to decide whether the state's COVID-19 control measure orders were legal and said the automatic bankruptcy stay does not provide a debtor "with a carte blanche excuse to avoid health and safety regulations."

The health department's case against The Cracked Egg was remanded to the Allegheny County Court of Common Pleas, and a hearing on the county's motion for a preliminary injunction is currently scheduled for Jan. 22.

The Cracked Egg told the bankruptcy court in its expedited bid Thursday that it "will be irreparably harmed if the case is not stayed pending appeal." The restaurant said the health department has indicated it intends to shut it down, which would negatively impact its ability to reorganize under Chapter 11.

"Unless this matter is heard on an expedited basis, the injunction will put the Cracked Egg out of business," the restaurant told the court.

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 20-22889, 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.

--Additional reporting by Matthew Santoni. Editing by Philip Shea.

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