A bankruptcy court order awarding damages for willful violation of the automatic stay is a final order that must be appealed immediately, even if the court hasn’t yet ruled on how much the debtor is entitled to recover in attorneys’ fees, the First Circuit ruled.
After a corporate debtor filed a chapter 11 petition, a creditor continued prosecuting a lawsuit against a company officer. In the separate lawsuit, the creditor attached and sold personal property belonging to the debtor.
After trial in bankruptcy court, the bankruptcy judge found a willful violation of the automatic stay under Section 362(a)(3) and assessed more than $400,000 in damages under Section 105(a). The opinion and order finding a stay violation and assessing damages did not deal with the debtor’s request for attorneys’ fees.
The creditor did not appeal.
The creditor filed a timely motion for rehearing, which the bankruptcy court denied. The creditor still did not appeal.
Finally, some six months after denial of the motion for rehearing, the bankruptcy judge awarded the debtor more than $100,000 in attorneys’ fees. At the same time, the bankruptcy court entered a separate judgment encompassing both the damages of $400,000 and the $100,000 in attorneys’ fees. The creditor appealed within days.
In district court, the debtor argued for dismissal of the appeal as untimely. The district court denied the dismissal motion without explanation but affirmed on the merits. The creditor appealed to the circuit.
In an opinion on January 28, Circuit Judge William J. Kayatta, Jr. dismissed the appeal from the award of damages and upheld the award of attorneys’ fees on the merits. He ruled that the appeal to the district court was untimely from the order awarding $400,000 in damages.
Judge Kayatta began his opinion by characterizing the Supreme Court as having ruled in two cases that “the time limit within which an appeal of a final judgment need be made starts running even if the lower court still has before it a request for attorneys’ fees or costs incurred in litigating the case.” See Ray Haluch Gravel Co. v. Cent. Pension Fund of Int’l Union of Operating Eng’rs & Participating Emp’rs, 571 U.S. 177, 186 (2014); and Budinich v. Becton Dickinson & Co., 486 U.S. 196, 202 (1988).
Judge Kayatta said that the original order awarding $400,000 in damages “fully resolved all other claims, so it was otherwise a final judgment for appeal purposes.” Crucially, he said it was “not the type of ruling on a motion for which no separate [judgment] need be entered” under Federal Rule 58(a)(1)-(5), incorporated by Bankruptcy Rule 7058.
Even if the original order had required entry of a separate judgment, the appeal still would have been untimely.
If a separate judgment should be entered but was not, Federal Rule 58(c)(2)(B), incorporated by Bankruptcy Rule 7058, provides that judgment is deemed to have been entered 150 days from the entry of the order. Thus, the appeal still would have been untimely if an extra 150 days for appeal had been tacked on following denial of the motion for rehearing.
To avoid imposition of the early appeal rule from the Supreme Court, the creditor contended that the award of counsel fees was an “element” of the claim for violation of the automatic stay. “But,” Judge Kayatta said, the Supreme Court ruled that “the treatment of a claim for attorneys’ fees as [a] collateral [order] does not turn on whether we label the fee claim to be part of the merits of the case.”
In that regard, Judge Kayatta interpreted the Supreme Court as requiring the court to determine whether the award of attorneys’ fees “could not have been determined until after the case was litigated.” Because the bankruptcy court could not have assessed counsel fees until the litigation was completed, he therefore ruled that “the bankruptcy court’s decision not to resolve the fee claim [along with the original order assessing damages] had no effect on the finality of the rest of the order for purposes of appeal.”
Dismissing the creditor’s appeal from the order awarding $400,000 in damages as being untimely, Judge Kayatta offered a recommendation: “when in doubt, file your notice of appeal, because a premature notice, unlike a late notice, can still be effective.”
Because the appeal from the order granting attorneys’ fees was timely, Judge Kayatta reviewed the order on the merits and affirmed.
Observations
There are two ways to avoid inadvertently failing to appeal on time. First, the bankruptcy court could file only an opinion finding a stay violation and withhold entering an order until ruling on the allowance of attorneys’ fees.
Second, as suggested by Judge Kayatta, the bankruptcy court could “enter an express order [under Federal Rule 58(e)] deeming a timely motion for attorneys’ fees to have the same effect as a motion under Rule 59, delaying the running of the time within which to appeal.”
A bankruptcy court order awarding damages for willful violation of the automatic stay is a final order that must be appealed immediately, even if the court hasn’t yet ruled on how much the debtor is entitled to recover in attorneys’ fees, the First Circuit ruled.
After a corporate debtor filed a chapter 11 petition, a creditor continued prosecuting a lawsuit against a company officer. In the separate lawsuit, the creditor attached and sold personal property belonging to the debtor.
After trial in bankruptcy court, the bankruptcy judge found a willful violation of the automatic stay under Section 362(a)(3) and assessed more than $400,000 in damages under Section 105(a). The opinion and order finding a stay violation and assessing damages did not deal with the debtor’s request for attorneys’ fees.
The creditor did not appeal.
The creditor filed a timely motion for rehearing, which the bankruptcy court denied. The creditor still did not appeal.
Finally, some six months after denial of the motion for rehearing, the bankruptcy judge awarded the debtor more than $100,000 in attorneys’ fees. At the same time, the bankruptcy court entered a separate judgment encompassing both the damages of $400,000 and the $100,000 in attorneys’ fees. The creditor appealed within days.