Restructuring

In every bankruptcy case, debtors and creditors must remain cognizant of pertinent filing deadlines to avoid waiving substantive rights.  Many filing deadlines are located in federal statutes, the Bankruptcy Code, and the Federal Rules of Bankruptcy Procedure.  A very important deadline to remember is the time to file a notice of appeal of a bankruptcy court order or judgment.  28 U.S.C. § 158(c), which provides district courts subject matter jurisdiction over bankruptcy court appeals, states that appeals must be taken in the time provided by Bankruptcy Rule 8002.  Bankruptcy Rule 8002 generally provides that, unless otherwise extended by court order pursuant to Bankruptcy Rule 8002(c), a party must file a notice of appeal within 14 days of the entry of the relevant order or judgment.  Even if the 14-day filing deadline expires, Bankruptcy Rule 8002(c) still permits a party to request an extension no later than 21 days after the original filing deadline on the basis that non-compliance was due to “excusable neglect.”  Some deadlines in a bankruptcy case may be waived or extended, either by agreement or pursuant to a court order, and others are mandatory.  In In re Caterbone, No. 07-2151, 2011 WL 1226462 (3d Cir. April 4, 2011), the Third Circuit Court of Appeals held that the failure to file a notice of appeal within the time limits set forth in Bankruptcy Rule 8002, including not obtaining an extension under Bankruptcy Rule 8002(c), deprives appellate courts of subject matter jurisdiction to consider the appeal.
Caterbone involved a debtor, Stanley J. Caterbone, whose chapter 11 case was dismissed by a bankruptcy court order dated October 3, 2006.  Before December 1, 2009, Bankruptcy Rule 8002(a) required parties to file a notice of appeal within 10 days of the entry of the order, which for Caterbone was October 13, 2006 (since the amendments to the Bankruptcy Rules that became effective on December 1, 2009, the deadline is 14 days).  Caterbone did not timely file a notice of appeal or request an extension under Bankruptcy Rule 8002(c).  Instead, on October 16, Caterbone sent a notice of appeal to the District Court by first class mail and electronic mail.  The clerk of the court filed the appeal notice with the District Court on October 19, thus rendering Caterbone’s appeal untimely.  Despite the untimely filing, the District Court docketed Caterbone’s appeal.  The District Court, however, subsequently sua sponte dismissed the appeal for reasons unrelated to the untimely filing.  Caterbone appealed the District Court’s dismissal to the Third Circuit Court of Appeals.
On appeal to the Third Circuit, the U.S. Trustee, for the first time, moved to dismiss the appeal because Caterbone did not timely file the initial notice of appeal to the District Court.  Specifically, the U.S. Trustee argued that 28 U.S.C. § 158(c) imposes a mandatory jurisdictional deadline that incorporates Bankruptcy Rule 8002’s timeline.  Thus, by failing to comply with the deadlines stated in Bankruptcy Rule 8002, the U.S. Trustee argued that the District Court and the Third Circuit Court of Appeals did not have jurisdiction to consider Caterbone’s appeal.  In support, the U.S. Trustee cited to the U.S. Supreme Court’s holding in Bowles v. Russell, 551 U.S. 205 (2007).  In Bowles, the Supreme Court held that the time to file an appeal in a civil case is mandatory and non-waivable because it implicates jurisdictional issues.  Bowles further held that failing to timely file a notice of appeal deprives subsequent reviewing courts of jurisdiction to consider the appeal and bars an appellant from relying on forfeiture or waiver to excuse non-compliance with the applicable time limitation.  Caterbone disagreed with the U.S. Trustee and argued, among other things, that the court should evaluate his untimely filing applying the “excusable neglect” standard articulated by the U.S. Supreme Court in Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380 (1993).
The court focused on the U.S. Supreme Court’s holdings in Kontrick v. Ryan, 540 U.S. 443 (2004) and Bowles.  In Kontrick, the U.S. Supreme Court affirmed that requirements only contained in a bankruptcy rule do not implicate jurisdictional issues (and, thus, are potentially waivable).  The court held that, although Bankruptcy Rule 8002 provides the time to file a notice of appeal (thus making it arguably waivable under Kontrick), the statutory incorporation of Bankruptcy Rule 8002 into 28 U.S.C. § 158(c) renders Bankruptcy Rule 8002’s time limitations jurisdictional and, therefore, mandatory and non-waivable.  As such, in accordance with the Supreme Court’s holding in Bowles and past precedent in the Third Circuit, the court held that it and the District Court did not have subject matter jurisdiction to consider Caterbone’s appeal.  The court did not consider Caterbone’s “excusable neglect” argument because it lacked jurisdiction over the appeal and, in accordance with Bowles, Caterbone was barred from asserting his appellate arguments.  Finally, the court noted that its holding was consistent with holdings by sister courts in the Tenth Circuit, In re Latture, 605 F.3d 830 (10th Cir. 2010); the Ninth Circuit, In re Wiersma, 483 F.3d 933 (9th Cir. 2007); and the Second Circuit, In re B.A.R. Entm’t Mgmt., Inc., 2010 WL 4595554 (2d Cir. Nov. 15, 2010).
The Caterbone decision serves as a firm reminder that it is better to comply with a deadline, or timely request an extension, than to later discover that it was mandatory and non-waivable.  Indeed, Caterbone may still have a viable appeal if he had requested an extension under Bankruptcy Rule 8002(c).  Caterbone also highlights the importance of carefully reading a statute to determine when legal documents must be filed with a court.  As Caterbone shows, mailing or emailing a pleading to a court does not guarantee the court clerk will file it on the same day received or, if late-filed, but still docketed, that an appellate court won’t subsequently dismiss the appeal for lack of subject matter jurisdiction.  Thus, although it may seem obvious, the simple lesson of the day is: file your notice of appeal on time (and if you don’t, make sure to seek an extension); otherwise, you may be forced to pay an unanticipated price.