The filing of a bankruptcy petition tolls the time for both the debtor and a creditor to file a notice of appeal or a cross appeal in a suit that was pending at the time of filing, according to the Tenth Circuit.
A manufacturer of nutritional supplements sued a competitor for false advertising in violation of the Lanham Act and similar Utah state law. After a bench trial, the district court found violations of state and federal law and entered a $9.5 million judgment in favor of the plaintiff, plus attorneys’ fees for discovery violations.
The district court denied the plaintiff’s request for punitive damages and an injunction.
The defendant filed a notice of appeal, followed a few days later by a chapter 11 petition. After the automatic stay was dissolved, the plaintiff quicky filed a cross appeal.
The plaintiff had filed its cross appeal more than one year after the debtor had filed the initial appeal. Under F.R.A.P. 4(a)(3), the plaintiff’s cross appeal was due within 14 days after the defendant had appealed. Was the cross appeal timely? Did the appeals court have jurisdiction with regard to the cross appeal?
The plaintiff argued that the automatic stay in Section 362(a) precluded the filing of a cross appeal until the stay terminated.
Tenth Circuit Judge David M. Ebel first quoted Section 362(a)(1), which says that the filing of the petition “operates as a stay” of “the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case . . . .”
“If there is a pending non-bankruptcy deadline when the stay takes effect,” Judge Ebel said, “this deadline is tolled until the later of either ‘the end of such period’ or ‘30 days after notice of the termination or expiration of the stay,’” citing Section 108(c)(1)(2).
Judge Ebel was persuaded by the Eighth Circuit, which, he said, had held that “‘an appeal . . . in a case in which the debtor originally was the defendant is a “continuation” of a “proceeding against the debtor’” such that § 108(c) tolls the deadline of an appeal against a debtor.” In re Hoffingers Inds., Inc., 329 F.3d 948, 952 (8th Cir. 2003).
“This makes sense,” Judge Ebel said, citing the Norton treatise.
“This core purpose would plainly be frustrated if a creditor could engage a debtor on appeal during the stay period,” Judge Ebel said. He went on to observe that “this conclusion accords with our precedent, as we have held that the automatic stay bars even a debtor in bankruptcy from appealing an adverse judgment.”
“If a debtor cannot appeal an adverse judgment during the bankruptcy stay, then surely a creditor is not permitted to file an appeal when a stay is in place,” Judge Ebel said. [Emphasis in original.]
Judge Ebel held “that filing a cross-appeal constitutes the ‘commencement or continuation’ of a judicial action or proceeding, and so the deadline to file a cross-appeal is tolled by § 108(c)(2) during a bankruptcy proceeding of the cross-appellee.” Because the plaintiff had cross appealed fewer than 30 days after the stay terminated, he held that the cross appeal was timely.
The appeals court upheld the judgment of liability under federal and state law together with the assessment of attorneys’ fees. The circuit further ruled in favor of the plaintiff by remanding for the district court to decide whether the plaintiff was entitled to punitive damages and an injunction.
The filing of a bankruptcy petition tolls the time for both the debtor and a creditor to file a notice of appeal or a cross appeal in a suit that was pending at the time of filing, according to the Tenth Circuit.
A manufacturer of nutritional supplements sued a competitor for false advertising in violation of the Lanham Act and similar Utah state law. After a bench trial, the district court found violations of state and federal law and entered a $9.5 million judgment in favor of the plaintiff, plus attorneys’ fees for discovery violations.
The district court denied the plaintiff’s request for punitive damages and an injunction.
The defendant filed a notice of appeal, followed a few days later by a chapter 11 petition. After the automatic stay was dissolved, the plaintiff quicky filed a cross appeal.