Windstream Holdings, Inc. v. Charter Communications Operating, LLC (In re Windstream Holdings, Inc.)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 6 months 2 weeks ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- No. 22-2891-bk (2nd Circuit, Jun 24,2023) Published
- Tag(s):
-
- Ruling:
- The U.S. Court of Appeals for the Second Circuit affirmed a district court's ruling overturning a bankruptcy court's order holding the debtor's competitor in contempt. It held: 1) the Taggart "no fair ground of doubt" standard applies to a contempt action under 11 U.S.C. § 105(a) for a stay violation; 2) a business's customer contracts and goodwill may constitute estate property; and 3) a fair ground of doubt existed as to whether the competitor exercised control over estate property under § 362(a)(3) by sending advertisements to the debtor's customers about its bankruptcy.
- Procedural context:
- The Second Circuit explained why the no "fair ground of doubt" standard (offered in Taggart v. Lorenzen, 587 U.S. 554, 557 (2019)) for violations of the discharge injunction applies to claims for automatic stay violations by corporate debtors that seek to hold an offender in contempt under 11 U.S.C. § 105(a). But, on appeal, neither party disputed that the Taggart standard applies to such claims.
- Facts:
- Debtor/Appellant Windstream Holdings, Inc., a telecommunications provider, filed a chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for the Southern District of New York. Shortly thereafter, the Appellees ("Charter"), one of Debtor's competitors, sent direct-mail advertisements to about 800,000 of Debtor's customers that advised of Debtor's bankruptcy and encouraged its customers to switch providers. in response, Debtor filed an adversary proceeding against Charter alleging, inter alia, a violation of the automatic stay. The bankruptcy court granted Debtor a temporary restraining order and a preliminary injunction enjoining the direct mail campaign. At summary judgment, the bankruptcy court held Charter violated the automatic stay via the direct advertisements. After a trial, the bankruptcy court held Charter in contempt for violating the automatic stay via a “false and intentionally misleading advertising campaign that wrongfully interfered with [Windstream’s] customer contracts and goodwill.” The bankruptcy court levied a sanction exceeding $19 million. Charter appealed to the U.S. District Court for the Southern District of New York, which "found that the bankruptcy court erred in concluding that Charter’s advertising campaign constituted 'an act to exercise control' over Windstream’s property and that Charter should be held in contempt for that conduct." Debtor appealed this ruling to the Second Circuit.
- Judge(s):
- Livingston, Cabranes, and Kahn
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