In a published opinion entered on April 8, 2016, the Eleventh Circuit Court of Appeals held that District Courts are obliged to use and apply the Federal Rules of Bankruptcy Procedure rather than the Federal Rules of Civil Procedure when trying a case that “arises under” Title 11 (28 U.S.C. §1334).  In Rosenberg v. DVI Receivables, LLC, et al., No. 14-14620, 2016 WL 1392642 (11th Cir. April 8, 2016) (click here for .pdf of opinion), the issue before the Court was the timeliness of the Defendants’ Motion for Judgment as a Matter of Law after a jury trial.  Pursuant to Civil Procedure Rule 50(b), the deadline to file the Motion was 28 days after the entry of judgment.  However, under Federal Rule of Bankruptcy Procedure 9015(c) the deadline is reduced to only 14 days after the entry of the judgment.  The Defendants’ Motion was filed 28 days after the judgment against them was entered, making it timely under the Civil Rules, but not the Bankruptcy Rules.  The District Court granted the Motion on the merits, and the Plaintiff appealed.

The underlying case involved an involuntary petition filed against the Plaintiff by the Defendants.  The case was dismissed, but the Bankruptcy Court retained jurisdiction to determine damages pursuant to 11 U.S.C. §303(i).  Plaintiff filed an adversary proceeding to recover damages, and requested a jury trial.  The District Court withdrew the reference and conducted a jury trial that resulted in an award of $1,120,000 in compensatory damages and $5,000,000 in punitive damages. Defendants subsequently filed their Motion 28 days after entry of the judgment. The District Court granted the Motion on the merits, and the Plaintiff appealed and argued the Motion was filed out of time.

The Court held that the plain language of both the Rules of Civil Procedure and Bankruptcy Procedure require that the Bankruptcy Rules apply to the case.

[Bankruptcy] Rule 1001 was amended in 1987 for  the specific purpose of expanding the reach of the rules beyond the bankruptcy courts to all courts hearing bankruptcy matters. Thus, the advisory committee notes to the rule read, “This amended Bankruptcy Rule 1001 makes the Bankruptcy Rules applicable to cases and proceedings under title 11, whether before the district judges or the bankruptcy judges of the district.” Fed. R. Bankr. P. 1001 advisory committee’s note to 1987 amendments.

There is no dispute that this case arises under title 11. [Plaintiff] asserted claims under 11 U.S.C. § 303, and we think it is beyond debate that a case arises under title 11 when it involves a cause of action created or determined by the statutory provisions found in title 11. At no point in these proceedings has any party disputed that the case arises under title 11; nor, indeed, have they offered any reason why Rule 1001 would not apply.

In addition, the Court noted that Federal Rule of Civil Procedure 81(a)(2) expressly provides for the applicability of the Bankruptcy Rules in Bankruptcy proceedings adjudicated in District Court.

These rules apply to bankruptcy proceedings to the extent provided by the Federal Rules of Bankruptcy Procedure.

Fed. R. Civ. P. 81(a)(2) (emphasis added).  “A plain reading of the rules means that in bankruptcy proceedings, the Federal Bankruptcy Rules have primacy while the Federal Civil Rules only apply to the extent they have been explicitly incorporated by the Federal Bankruptcy Rules.”  When the Rules are read in context, Fed.R.Bankr.P. 9015(c) provides that “the deadline for filing a Rule 50(b) motion for judgment as a matter of law in bankruptcy proceedings is 14 days after the entry of judgment, not the 28 days that Rule 50 would ordinarily contemplate.”

The defendants argue that applying Fed. R. Bankr. P. 9015 would create a conflict with the Federal Rules of Appellate Procedure. But there is no conflict. It is perfectly compatible to require that a Rule 50(b) motion for judgment as a matter of law be filed within 14 days of the entry of judgment and require that an appeal from judgment be filed within 30 days. There is no actual conflict and no reason to disregard the plain meaning of the rules…

Nor do we see any force in the argument that application of Fed. R. Bankr. P. 9015(c) would prevent a district court from ruling on a matter it is best-positioned to decide. Nothing about setting a 14-day timeframe for filing a Rule 50(b) motion (any more than application of a 28-day deadline) would prevent “the just, speedy, and inexpensive determination of every case and proceeding.” Fed. R. Bankr. P. 1001. The application of a 14-day window does not create an overly onerous obligation on parties proceeding in district court any more than it does in bankruptcy court. While it is true that application of the rule in this case will prevent the district court from ruling on the merits of the defendants’ Rule 50(b) motion, the same could be said any time a party files a motion outside of the timeframe supplied by a rule of procedure. But as we see it, it is the consistent application of these deadlines — not their ad hoc abandonment — that actually promotes the “just, speedy, and inexpensive determination” of cases.

The Court also dismissed the Defendants’ argument that the time did not start running until the judgment was entered by the Bankruptcy clerk on the Bankruptcy case docket, as that would lead to an absurd result.  A District Court trying a case would have an obligation to file their judgments with a different court, and it could nullify the Court of Appeals jurisdiction over the appeal pursuant to 11 U.S.C. §1291.

Because the Defendants’ Motion was not timely filed, the Court reversed the District Court and remanded the case with instructions to reinstate the jury award in favor of the Plaintiff.  As the District Court had granted the Motion and reduced the award to $360,000, this was a very expensive error for the Defendants.

Scott Riddle’s practice focuses on bankruptcy and litigation. Scott has represented Chapter 7 and 11 debtors, creditors, creditor committees, trustees, court-appointed receivers and other interested parties in bankruptcy cases and bankruptcy litigation.  For more information, click here.

Photo Credit: Michigan Legal Publishing Ltd.: Federal Rules of Bankruptcy Procedure, 2016 Edition.