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Rules of Bankruptcy Procedure Apply to Bankruptcy Proceedings in Federal District Court: Eleventh Circuit
Practical Law Legal Update w-001-8851 (Approx. 3 pages)
Rules of Bankruptcy Procedure Apply to Bankruptcy Proceedings in Federal District Court: Eleventh Circuit
by Practical Law Litigation
| Published on 12 Apr 2016 • USA (National/Federal) |
In Rosenberg v. DVI Receivables XIV, LLC, the US Court of Appeals for the Eleventh Circuit held that the Federal Rules of Bankruptcy Procedure apply to Title 11 proceedings, even when those bankruptcy proceedings take place in federal district court.
On April 8, 2016, in Rosenberg v. DVI Receivables XIV, LLC, the US Court of Appeals for the Eleventh Circuit held that the Federal Rules of Bankruptcy Procedure (FRBP), rather than the Federal Rules of Civil Procedure (FRCP), apply to Title 11 (the Bankruptcy Code) proceedings, even when those proceedings take place in federal district court ( (11th Cir. Apr. 8, 2016)).
The defendants, several companies that leased medical imaging equipment to the plaintiff, Maury Rosenberg, filed a Chapter 7 bankruptcy petition against Rosenberg. The bankruptcy court found that the defendants were ineligible creditors and dismissed the petition, but retained jurisdiction to award Rosenberg costs, reasonable attorneys' fees, and damages. Rosenberg then filed an adversary complaint against the defendants seeking those amounts.
Rosenberg demanded a jury trial on all issues in the adversary proceeding. The defendants did not consent, but instead moved the district court to withdraw the reference of the adversary proceeding so that the matter could be adjudicated in district court. The court granted the motion. At trial, the jury found that the defendants acted in bad faith when they filed the involuntary petition and awarded both compensatory and punitive damages to Rosenberg.
The district court entered a final judgment on March 14, 2013 and the defendants filed a FRCP 50(b) motion for judgment as a matter of law on April 11, 2013. Rosenberg moved to strike the motion as untimely under the FRBP's 14-day deadline for filing (FRBP 9015(c)). The district court denied Rosenberg's motion to strike, finding the defendants' motion timely under the FRCP's 28-day deadline, and reduced the damages the jury awarded. Rosenberg appealed.
The Eleventh Circuit reversed, holding that in an action under the Bankruptcy Code, district courts must apply the procedural rules in the FRBP rather than the FRCP. Because the FRBP require that Rule 50(b) motions be filed no later than 14 days after entry of a judgment, the panel found the defendants' motion to be untimely. The court explained that in bankruptcy proceedings, the FRBP have primacy while the FRCP apply to the extent they have been explicitly incorporated by the FRBP.
In determining the primacy of the FRBP in bankruptcy actions, the Eleventh Circuit looked to:
- The plain language of the FRBP, which explicitly provides that the bankruptcy rules and forms govern procedures in cases under the Bankruptcy Code (Fed. R. Bankr. P. 1001).
- The plain language of the FRCP. The FRCP confirms that the FRBP govern "bankruptcy proceedings" adjudicated in district courts (FRCP 81(a)(2)).
- The weight of authority in other jurisdictions, including:
- the US Court of Appeals for the Third Circuit (Phar-Mor, Inc. v. Coopers & Lybrand, 22 F.3d 1228, 1238 (3d. Cir. 1994)); and
- the US District Court for the District of Delaware (VFB LLC v. Campbell Soup Co., 336 B.R. 81 (D. Del. 2005)).
Practitioners involved in bankruptcy proceedings in the Eleventh Circuit should be aware that the FRBP govern bankruptcy actions.