Effect of Bankruptcy Stay on a Pending Georgia Appeal

On August 26, the Georgia Court of Appeals remanded Boardman v. Brenninkmeijer, A14A1000, to be stayed due to the appellant’s filing of a bankruptcy petition. In doing so, the court overruled earlier cases allowing appeals to proceed, despite a bankruptcy filing by a party against whom a claim was pending, where the debtor in bankruptcy was an appellant rather than an appellee. As Boardman now makes clear, “Whether the party who files bankruptcy during the pendency of an appeal, i.e. the debtor, is the appellant or the appellee should be irrelevant for the purpose of applying the automatic stay.” Slip op. at 4.

Under the Bankruptcy Code, the filing of a bankruptcy petition “operates as a stay, applicable to all entities,” of many types of actions, including “a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title.” 11 U.S.C. § 362(a)(1). Under federal cases interpreting Section 362(a)(1), a bankruptcy stay prevents further action in any appeal arising from an action brought “against the debtor,” whether the debtor is the appellant or the appellee. See TW Telecom Holdings Inc. v. Carolina Internet Ltd., 661 F.3d 495, 497 (10th Cir. 2011) (joining “[a]t least nine other circuit courts of appeals” in interpreting “section 362 … to stay all appeals in proceedings that were originally brought against the debtor, regardless of whether the debtor is the appellant or appellee”) (citation and quotation marks omitted).

In most contexts, “Georgia case law is also quite clear. During the pendency of the bankruptcy stay, state courts lack the ability to exercise judicial power or discretion or otherwise proceed with the case.” Jinks v. Eastman Enters., Inc., 731 SE2d 378, 380 (Ga. App. 2012). Nonetheless, two reported Georgia decisions allowed appeals brought by a bankruptcy debtor to proceed, even where the action being appealed was one “against the debtor.” McDuffie v. Hoobler, 203 Ga. App. 325, 327 (416 SE2d 853) (1992); Accredited Assocs., Inc. v. Shottenfeld, 162 Ga. App. 575, 578 (292 SE2d 417) (1982).

Apparently, the Court of Appeals was confused in those earlier decisions by federal cases allowing appeals to proceed when the underlying action was brought by, rather than against, a bankruptcy debtor. E.g., Crosby v. Monroe Cnty., 394 F.3d 1328, 1331 n.2 (11th Cir. 2004). Actions brought by a debtor are not stayed by Section 362(a)(1), whether on appeal or in the trial court; they are not “against the debtor.” The court may have confused actions brought by a debtor with appeals brought by a debtor. The Court of Appeals’ whole court decision in Boardman explicitly overrules those earlier cases, and the rule in Georgia now coincides with near-unanimous federal authority.

One final note. Due to the two-term rule in Georgia’s Constitution, Art. VI, Sec. IX, Para. II, the Court of Appeals itself cannot effectively stay a case pending bankruptcy. Instead, the court remanded the case to the trial court to be stayed, and gave the appellant the option of refiling the appeal after the bankruptcy court lifts its stay. Slip op. at 1-2.