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Bankruptcy Litigation

Another Appellate Court Vacates A Bankruptcy Court Contempt Judgment

The Southern District of New York vacated a bankruptcy court’s judgment holding a debtor’s business competitor “in contempt for violation of the [Bankruptcy Code’s] automatic stay … and assessing sanctions” of $19.2 million.

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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.

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