Commc'ns Network Int'l, Ltd. v. MCI Worldcom Commc'ns, Inc. (In re Worldcom, Inc.)

• Decision Date: 24 January 2013
• Docket Number: Docket Nos. 10–4588(L), 11–0408(XAP).
• Parties: In re WORLDCOM, INC., Debtor. Communications Network International, Ltd., Defendant–Appellant–Cross Appellee, v. MCI WorldCom Communications, Inc., f/k/a WorldCom Technologies, Inc., Plaintiff–Appellee–Cross Appellant.
• Court: U.S. Court of Appeals — Second Circuit

708 F.3d 327

In re WORLDCOM, INC., Debtor.Communications Network International, Ltd., Defendant–Appellant–Cross Appellee,

v.MCI WorldCom Communications, Inc., f/k/a WorldCom Technologies, Inc., Plaintiff–Appellee–Cross Appellant.

Docket Nos. 10–4588(L), 11–0408(XAP).

United States Court of Appeals, Second Circuit.

Submitted: Jan. 12, 2012.

Decided: Jan. 24, 2013.

William Mark Mullineaux, Astor Weiss Kaplan & Mandel, LLP, Attorney for Appellant–Cross Appellee Communications Network International, Ltd.

Mark A. Shaiken, Andrew W. Muller, Stinson Morrison Hecker LLP, Attorneys for Appellee–Cross Appellant MCI WorldCom Communications, Inc.

Before: KATZMANN and LYNCH, Circuit Judges, and KAPLAN, District Judge.^*

Judge LYNCH dissents in a separate opinion.

LEWIS A. KAPLAN, District Judge.

“[T]he taking of an appeal within the prescribed time is mandatory and jurisdictional.” ¹ Litigants, moreover, have a responsibility to monitor the docket for the entry of orders they may wish to appeal.² Nevertheless, the federal rules provide some assistance to litigants in meeting the necessary deadlines. Federal Rule of Civil Procedure 77(d) requires the clerk to send notice of the entry of judgment to the parties, and Federal Rule of Appellate Procedure 4(a)(6) permits a district court to reopen the time within which to file an appeal in circumstances in which the litigant does not receive or receives too late this notice.³ But a district court's latitude to relieve litigants of the consequences of failures to file timely notices of appeal is not boundless.

This case presents the question whether the United States District Court for the Southern District of New York properly granted relief under Rule 4(a)(6) to appellant Communications Network International, Ltd. (“CNI”) when it claimed that it never received the Civil Rule 77(d) notice and therefore failed to file a timely notice of appeal. We agree with the district court that CNI met the express preconditions of Rule 4(a)(6). Nevertheless, we hold that relief under that rule is discretionaryand its grant in this case was inappropriate. The failure to receive Civil Rule 77(d) notice was entirely and indefensibly the fault of CNI's counsel. Granting relief in such circumstances was at odds with the purposes and structure of the procedural scheme. Accordingly, we reverse the order granting the motion to reopen and dismiss CNI's appeal as untimely.

I

This litigation has had a long history, but it suffices here to summarize only the critical aspects.

Bankruptcy Court Proceedings

WorldCom, Inc., filed for relief under Chapter 11 of the Bankruptcy Act ⁴ in 2002. MCI WorldCom Communications, Inc. (“MCI”), an affiliate, subsequently commenced an adversary proceeding against CNI in the United States Bankruptcy Court for the Southern District of New York, in essence to recover for allegedly unpaid telecommunications services. CNI counterclaimed for fraud, intentional nondisclosure, breach of contract, and defamation and sought both compensatory and punitive damages.

On March 13, 2006, the bankruptcy court, insofar as is relevant here, granted MCI's motion for judgment on the pleadings to the extent that it dismissed CNI's counterclaims, but denied the motion to the extent that MCI sought recovery on its claim for unpaid services. It granted CNI's motion to file responses to the unanswered portions of the complaint nunc pro tunc and denied CNI's cross motion for judgment on the pleadings on its counterclaims. ⁵ On July 9, 2007, the bankruptcy court granted MCI's motion for summary judgment to the extent of determining that CNI had breached its contract, but denied it as to the quantum of damages.⁶ Some months later, it struck CNI's demand for a jury trial on damages and tried the damages issue, ultimately awarding MCI damages, interest and attorney's fees aggregating more than $2.4 million.⁷ CNI appealed from a number of the bankruptcy court's orders, and the appeals were consolidated by the district court.

District Court Proceedings

The district court affirmed the bankruptcy court's rulings in a memorandum decision on September 14, 2010.⁸ Judgment was entered on September 24, 2010.⁹ The rulings were entered on the electronic docket, and notice thereof automatically was emailed to CNI's sole counsel of record, Mr. W. Mark Mullineaux, at the email address wmmullineaux@ flammlaw. com, which Mr. Mullineaux previously had registered with the clerk's office for the purpose of receiving such notifications on the Southern District of New York's Case Management/Electronic Case Filing (“CM/ECF” or “ECF”) system.¹⁰

In September 2008, Mr. Mullineaux filed a motion to appear pro hac vice in this case,¹¹ which the district court granted in January 2009. ¹² Both the motion and the district court's order listed a new email address for Mr. Mullineaux, mmullineaux@ astorweiss. com. But Mr. Mullineaux did not revise his contact information or profile on the ECF system to reflect the new email address, and all notifications in the case prior to and including the notice of entry of judgment were sent to the registered address, wmmullineaux @ flammlaw. com. ¹³

On November 9, 2010, forty-six days after the entry of the judgment and fifty-six days after the entry of the memorandum decision and order, CNI filed a notice of appeal from both. By then, the time within which to file such a notice of appeal had expired. While the time within which CNI could have moved pursuant to Rule 4(a)(5) for extension of the time within which to file a notice of appeal had not run, CNI did not make such a motion. On that date, district court records reflect, Mr. Mullineaux updated his email address on the ECF system, and all subsequent filings in the case were sent to mmullineaux @ astorweiss. com.

MCI then moved in this Court on December 15, 2010, to dismiss the appeal. On December 16, 2010, CNI moved in the district court for an order, pursuant to Rule 4(a)(6), reopening the time within which to file a notice of appeal. It argued such relief was appropriate because its counsel had not received notice of the filing of the memorandum decision or of the judgment at his current email address, mmullineaux@ astorweiss. com.

On January 10, 2011, the district court concluded that CNI had not received timely notice of its affirmance of the bankruptcy court's orders under Civil Rule 77(d) because the clerk's office had sent electronic notifications to the registered but outdated email address, that MCI had not demonstrated that service of that order had been effected, and that MCI had shown no prejudice. On this basis, it granted the motion.¹⁴ On February 3, 2011, MCI filed a cross appeal from this ruling. In light of the pendency of the cross appeal, MCI moved on February 7, 2011, to withdraw its motion to dismiss CNI's appeal, and this Court granted the withdrawal on February 23, 2011. CNI's appeal and MCI's cross appeal were consolidated before this Court.

II

Under Rule 4, notices of appeal in most civil cases must be filed within thirty days of the entry of judgment.¹⁵ Civil Rule 77 requires that the clerk, immediately after entering an order or judgment, “serve notice of the entry, as provided in [Civil] Rule 5(b), on each party who is not in default.” ¹⁶ But this notice is provided “merely for the convenience of litigants.” ¹⁷In particular, “[l]ack of notice of the entry does not affect the time for appeal or relieve—or authorize the court to relieve—a party for failure to appeal within the time allowed, except as allowed by Federal Rule of Appellate Procedure 4(a).” ¹⁸

Rule 4(a) has two separate provisions in this regard: Rules 4(a)(5) and 4(a)(6). Rule 4(a)(5) provides that the district court may extend the time for filing a notice of appeal if the party (1) moves no later than thirty days after the time to file prescribed by Rule 4(a) expires and (2) shows “excusable neglect or good cause.” ¹⁹ The extension may not exceed thirty days after the prescribed time or fourteen days after the entry of the order granting the extension, whichever is later.²⁰Rule 4(a)(5) was introduced in 1967, derived from a predecessor rule introduced in 1946.²¹

In 1991, the rules were amended to create a new form of relief in Rule 4(a)(6). In its current form,²² the rule provides that the court may reopen the time to file an appeal for fourteen days from the date that it orders reopening if all of the following conditions are satisfied:

“(A) the court finds that the moving party did not receive notice under Federal Rule of Civil Procedure 77(d) of the entry of the judgment or order sought to be appealed within 21 days after entry;

“(B) the motion is filed within 180 days after the judgment or order is entered or within 14 days after the moving party receives notice under Federal Rule of Civil Procedure 77(d) of the entry, whichever is earlier; and

“(C) the court finds that no party would be prejudiced.” ²³

As the advisory committee notes explain, Rule 4(a)(6) was introduced “ ‘to permit district courts to ease strict sanctions ... imposed on appellants whose notices of appeal are filed late because of their failure to receive notice of entry of a judgment.’ ” ²⁴ After all, “ Rule 4(a)(5) ... would not aid a litigant who first learned of the entry of judgment more than 30 days after the original appeal time ran out” and “[i]t was to the plight of this litigant that the 1991 amendment to Rule 4 was addressed.” ²⁵ The advisory committee notes cite a number of cases documenting the “strict sanctions” to which such litigants had been subject.²⁶ In each of these cases, an appeal was dismissed after the clerk's office did not send—or the clerk's office sent but the appellant did not receive—notice of the entry of judgment within the time necessary to file a notice of appeal.²⁷ Thus, notwithstanding the generalobligation of litigants “to monitor the docket sheet to inform themselves of the entry of orders they wish to appeal,” ²⁸ the 1991 ...