In re Philadelphia Newspapers, LLC

Citation:
In re: Philadelphia Newspapers, LLC, Case No. 11-3257 (3d Cir. July 26, 2012) (unpublished) (Ambro, J.)
Tag(s):
Ruling:
EQUITABLE MOOTNESS: When deciding whether an appeal is equitably moot, a Court must consider all five factors set forth in In re: Continental Airlines, 91 F.3d 553, 560 (3d Cir. 1996). In particular, a Court must consider whether allowing the appeal to go forward would undermine the plan, an analysis that the Court must undertake even if the plan has already been "substantially consummated." REPUBLICATION OF DEFAMATORY SPEECH: Under applicable Pennsylvania law, the Debtor’s post-petition publication of an article that included hyperlinks to a previously-published allegedly defamatory article was not a “republication” such that it could be deemed a separate act of defamation. Therefore, the tort claimant did not sustain its burden to show its entitlement to a 503(b)(9) administrative expense claim based on the Debtor’s post-petition publication.
Procedural context:
Third Circuit affirmed judgment from the U.S. District Court for the Eastern District of Pennsylvania that affirmed the Bankruptcy Court's denial of a tort claimant's request for allowance as an administrative expense pursuant to 11 U.S.C. Sec. 503(b)(9) of the estimated value of a tort claim against Debtor for alleged post-petition defamatory conduct.
Facts:
Appellants ("CSMI") filed a tort action against, among others, Philadelphia Media Holdings, LLC (“PMH”), for the online and print publication of allegedly defamatory articles. After CSMI filed the tort action, PMH and certain affiliates (collectively, the "Debtors") filed for relief under Chapter 11 of the Bankruptcy Code. CSMI then asserted administrative expense claims against the Debtors, alleging that PMH's post-petition publication of an article that included hyperlinks to the original, allegedly defamatory articles constituted a separate act of defamation that entitled CSMI to administrative expense status for its post-petition defamation claims. The Bankruptcy Court denied CSMI’s request, holding, without explanation, that CSMI did not establish its entitlement to administrative expense status for these claims. On appeal, the District Court held that the appeal was equitably moot because the Debtors’ Plan of Reorganization “had been substantially consummated” and because CSMI had not sought a stay pending appeal. Although the District Court found the appeal to be equitably moot, it considered the merits of the underlying tort claims and affirmed the Bankruptcy Court’s denial of administrative expense status, explaining that the post-petition publication of an article that merely had hyperlinks to the previously-published, allegedly defamatory articles was “not distinct tortious conduct upon which a defamation claim can be grounded” and, therefore, there was no cognizable post-petition claim. On appeal, the Third Circuit first disagreed with the District Court’s holding that the appeal was equitably moot and provided a lengthy analysis of equitable mootness in the context of an appeal to a confirmed Plan. Although the Plan in this case had already been “substantially consummated,” the Court held that allowing CSMI's appeal to go forward would not undermine the Plan because the administrative claims, if allowed, would be paid by the Debtors and would amount to “only 1.7% of the monies ($105 million) coming into the Debtors’ estates from the purchase of their assets . . . .” Therefore, the Third Circuit held, the appeal was not equitably moot. However, the Third Circuit then affirmed the District Court’s denial of administrative expense status for the post-petition defamation claims, stating that under applicable Pennsylvania law, the publication of a hyperlink to a previously-published allegedly defamatory article could not be considered a “republication” that would be deemed a separate act of defamation. The Court explained the necessity for the limitation on the definition of "republication" in the context of defamation lawsuits involving websites and the internet. "Websites are constantly linked and updated. If each link or technical change were an act of republication, the statute of limitations [for defamation suits] would be retriggered endlessly and its effectiveness essentially eliminated.” Therefore, CSMI could not be successful on a defamation claim for PMH’s publication of a link to the original, allegedly defamatory articles. Thus, because CSMI did not set forth a valid claim for defamation under applicable law, CSMI did not set forth a "sustainable cause of action" sufficient to support administrative status for its claims.
Judge(s):
Circuit Judges Ambro, Fuentes, and Hardiman.

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