Better Never Than Late: The Limitations of Bankruptcy Rule 8002(a)’s “Relate Forward” Provision

Contributed by Dana Hall

“Live on Fisher Island, get buried in Palm Beach, that way you’ll have the best of Florida.”
– The Birdcage (1996)

The sage advice of Albert “Starina” Goldman’s mother seems apt, except with respect to certain creditors of the holding company of Fisher Island, whose recent appeal was buried in the United States Bankruptcy Court for the Southern District of Florida.  In a recent decision arising out of Fisher Island Investments, Inc.’s involuntary chapter 11 case, the bankruptcy court rejected certain creditors’ belated attempt to challenge one of its orders, finding that Rule 8002(a) of the Federal Rules of Bankruptcy Procedure does not permit a late notice of appeal to be deemed timely filed simply because it relates to another order from which an appeal has already been timely filed.
In Fisher Island, the court entered an order in October 2012 directing certain of the alleged debtors and the petitioning creditors, jointly and severally, to pay more than $350,000 in fees and expenses incurred by an examiner appointed in the case.  The creditors subsequently filed notices of appeal from the fee order, but the fee order was not stayed pending appeal.  As a result of the creditors’ continued failure to comply with the fee order and pay the ordered fees and expenses, the examiner filed a motion to show cause and, following a contested hearing, the bankruptcy court entered an order and final judgment against each of the creditors in May 2013.  The creditors then filed their notices of appeal 27 days after entry of the 2013 judgment.  Bankruptcy Rule 8002(a), however, requires notices of appeal to be filed within fourteen days after entry of the judgment, order, or decree appealed from.
Despite their failure to timely appeal from the 2013 judgment, the creditors nonetheless argued in response to the examiner’s motion to dismiss the appeal that their earlier, timely filed appeal from the 2012 fee order constituted a timely appeal of the later 2013 judgment.  The creditors relied on that portion of Bankruptcy Rule 8002(a) which provides that a “notice of appeal filed after the announcement of a decision or order but before entry of the judgment, order, or decree shall be treated as filed after such entry and on the day thereof.”  The creditors argued that because the 2013 judgment related to the earlier fee order, the notices of appeal timely filed in connection with the earlier fee order should be treated as an appeal timely filed with respect to the later judgment.
The court summarily rejected the creditors’ arguments as “belied by a plain reading of the [sic] Bankruptcy Rule 8002(a), common sense and the Petitioning Creditors’ decision to file the Notices of Appeal” and distinguished FirstTier Mortgage Co. v. Investors Mortgage Ins. Co. – a case in which an appellant filed a notice of appeal following a lower court’s bench ruling but prior to that court’s entry of judgment.  In FirstTier Mortgage, the U.S. Supreme Court held that the lower court’s ruling was a “decision” as contemplated by the Federal Rules of Appellate Procedure and that, as a result, the notice of appeal constituted a timely appeal of the subsequent judgment.  In contrast, the 2012 fee order in Fisher Island was itself a final order constituting a judgment of the bankruptcy court, and, therefore, the “relate forward” provision of Bankruptcy Rule 8002(a) was inapplicable to the 2013 judgment.
Further, although it does not appear that the appellants filed any opposition papers to the examiner’s motion to dismiss their appeals and the hearing transcript is unavailable at this time, the bankruptcy court’s opinion and order suggest that the appellants offered no explanation in court for why, given their interpretation of Bankruptcy Rule 8002(a)’s “relate forward” provision, they nonetheless proceeded with filing their late notices of appeal.  In light of their interpretation of Bankruptcy Rule 8002(a), the notices of appeal filed with respect to the 2012 fee order would have seemingly obviated the need to file notices of appeal with respect to the 2013 judgment.  The appellants’ actions, accordingly, appear to be inconsistent with the arguments that they apparently offered in court.  In light of the foregoing, the bankruptcy court dismissed the notices of appeal for failure to comply with Bankruptcy Rule 8002(a).