On November 15, 2011, the US Court of Appeals for the 10th Circuit (10th Circuit) issued an order overruling its prior interpretation of section 362(a)(1) of the Bankruptcy Code relating to the automatic stay. In TW Telecom Holdings Inc. v. Carolina Internet Ltd., Carolina Internet appealed a default judgment against it and then filed a voluntary Chapter 11 petition. Section 362 automatically stays judicial proceedings against the debtor that were or could have been initiated before the bankruptcy petition was filed. For more information on the automatic stay, see Practice Note, Automatic Stay: Overview.

In earlier decisions, the 10th Circuit took the position that the automatic stay does not prevent a debtor from pursuing an appeal, even if the original action was brought against it. This interpretation extends the judicially crafted exception to the automatic stay that exists for actions originally brought by a debtor (including all subsequent appeals in those actions).

Acknowledging that at least nine other circuit courts of appeals disagree with its prior position and that Collier on Bankruptcy explicitly rejected the 10th Circuit's reliance on it to support its minority position, the 10th Circuit overruled its prior interpretation of section 362(a)(1). The 10th Circuit will now read section 362

(Ass'n of St. Croix Condo. Owners v. St. Croix Hotel Corp., 682 F.2d 446 (3d Cir. 1982).)

The en banc court unanimously agreed to this interpretation after the order was circulated to them. Accordingly, Carolina Internet's appeal was stayed under section 362(a)(1).