Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Bankruptcy StrategistFeaturesBankruptcyLitigation

Another Appellate Court Vacates A Bankruptcy Court Contempt Judgment

By Michael L. Cook
December 01, 2022

The Southern District of New York vacated a bankruptcy court's judgment holding a debtor's business competitor (C) "in contempt for violation of the [Bankruptcy Code's] automatic stay … and assessing sanctions" of $19.2 million. In re Windstream Holdings, Inc., 2022 WL 5245633, *1 (2) (S.D.N.Y. Oct 6, 2022). The bankruptcy court had erroneously sanctioned C for a "literally false and intentionally misleading advertising campaign" to lure subscribers away from the debtor, mistakenly reasoning that C's advertisements violated the automatic stay by suggesting the debtor was going out of business. Id. According to the district court, though, C's "advertisements did not violate the … stay, and, in any case, there was a fair ground of doubt whether they did so." Id. at *3.

Relevance

Appellate courts have not been afraid to overturn bankruptcy court sanctions. In re Gravel, 6 F. 4th 503, 508, 512-13 (2d Cir. 2021) (2-1) (bankruptcy court's punitive sanctions order vacated and reversed; "… a contempt order is warranted only where the party has notice of the order, the order is clear and unambiguous, and the proof of noncompliance is clear and convincing"; "… a bankruptcy court cannot hold a party in contempt for violating an order that is subject to varying interpretations.") cert denied. __ U.S. __ (June 13, 2022); Beckhart v. Newrez LLC, 31 F.4th 274, 275, 278 (4th Cir. 2022) ("neither the bankruptcy court nor the district court applied" the current standard for holding "a creditor in civil contempt" for violating a "confusing" Chapter 11 confirmation order; "any sanction that may ultimately be imposed must be supported – both in type and in amount — by a sufficient evidentiary record."); In re DeGennaro, III, 2020 WL 7231945,*9 (S.D.N.Y. Dec. 8, 2020) (bankruptcy court sanctions vacated because of an abuse of discretion; order not "clear and unambiguous"; no "clear and convincing evidence of non-compliance" with order "whose terms cannot now be created"; no willful compliance with unclear order; no advance warning of possible contempt sanction; sanctions imposed … too "quickly and without sufficient explanation."). Bankruptcy courts may still sanction parties, but their "contempt power… is narrowly circumscribed." Gravel, 6 F. 4th at 511, quoting Perez v. Danbury Hosp., 347 F.3d 419, 423 (2d Cir. 2003).

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Beach Boys Songs Written Decades Ago Triggered Current Quarrel With Lawyers Image

There's current litigation in the ongoing Beach Boys litigation saga. A lawsuit filed in 2019 against Nevada residents Mike Love and his wife Jacquelyne in the U.S. District Court for the District of Nevada that alleges inaccurate payment by the Loves under the retainer agreement and seeks $84.5 million in damages.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Transfer Tax Implications on Real Property Leases Image

The real property transfer tax does not apply to all leases, and understanding the tax rules of the applicable jurisdiction can allow parties to plan ahead to avoid unnecessary tax liability.