NATIONAL MEDICAL IMAGING, LLC

v.

LYON FINANCIAL SERVICES, INC., ETC.

Third District Court of Appeal

State of Florida

Opinion filed September 2, 2020. Not final until disposition of timely filed motion for rehearing.

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No. 3D20-730 Lower Tribunal No. 15-23495

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National Medical Imaging, LLC, et al.,

Appellants,

vs.

Lyon Financial Services, Inc., etc.,

Appellee. An Appeal from a non-final order from the Circuit Court for Miami-Dade County, Michael A. Hanzman, Judge. Genovese Joblove & Battista, P.A., and W. Barry Blum and Jessica Serell Erenbaum, for appellants. Shutts & Bowen, LLP, and Jack C. McElroy, John W. Bustard and Patrick G. Brugger, for appellee. Before FERNANDEZ, SCALES and LINDSEY, JJ.

ON MOTION FOR STAY

SCALES, J.

Appellee Lyon Financial Services, Inc. d/b/a U.S. Bank Portfolio Services seeks to stay the appeal in appellate case number 3D20-730 because of bankruptcy petitions filed by appellants National Medical Imaging, LLC and National Medical

Imaging Holding Company, LLC. Were we writing on a clean slate, we would grant the motion to stay pursuant to the automatic stay provision set forth in 11 U.S.C. §

362(a)(1).1 Nonetheless, the motion to stay is denied as we are bound by this Court’s prior decision in Shop in the Grove, Ltd. v. Union Federal Savings & Loan Ass’n of

Miami, 425 So. 2d 1138 (Fla. 3d DCA 1982).2 The instant matter, however,

illustrates why this Court should revisit and recede from Shop in the Grove.

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of – (1) the commencement or continuation, including the issuance or employment of process, of 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) (2020). 2 Unless the Florida Supreme Court overrules a prior panel’s decision, a subsequent panel of this Court is not free to disregard, and must follow, precedent of the prior panel. See Bean v. Univ. of Miami, 252 So. 3d 810, 821 (Fla. 3d DCA 2018). Only

Shop in the Grove holds that the automatic stay provision in 11 U.S.C. §

362(a)(1) is inapplicable in this Court where the debtor – who is the defendant below and who has filed for federal bankruptcy protection – is the appellant. Shop in the

Grove, Ltd., 425 So. 2d at 1138. The rationale behind Shop in the Grove is simple enough: because the automatic stay acts as a shield, a debtor-defendant who seeks affirmative, appellate relief from this Court should be estopped from benefitting from the stay. Nevertheless, in our view, Shop in the Grove’s rationale disregards the plain language of section 362(a)(1) and causes unnecessary confusion and uncertainty.

First, the federal bankruptcy code’s automatic stay provision is clear: the debtor’s filing of a bankruptcy petition stays any action or proceeding, including the

“continuation” of an “action or proceeding against the debtor.” 11 U.S.C. § 362(a)(1) (2020). When the debtor is a defendant in an action, it seems to us that the debtor-

defendant’s appeal of an adverse judgment in that action is plainly a “continuation” of a “proceeding” against the debtor-defendant. See Ass’n of St. Croix Condo.

Owners v. St. Croix Hotel Corp., 682 F. 2d 446, 449 (3d Cir. 1982) (“[S]ection 362 should be read to stay all appeals in proceedings that were originally brought against the debtor, regardless of whether the debtor is the appellant or appellee.”).

the Court, sitting en banc, may recede from a prior panel’s decision. See State v. Washington, 114 So. 3d 182, 188-89 (Fla. 3d DCA 2012).

Second, Florida’s other district courts of appeal have held that section

362(a)(1) applies when the debtor-defendant is either the appellant or the appellee,³ making Shop in the Grove an outlier. This Court did not have the benefit of the federal appellate courts’ interpretations of the automatic stay provision when Shop in the Grove issued in 1982. See Fla. E. Dev. Co., Inc. of Hollywood, 636 So. 2d at

757 (acknowledging “there was a dearth of law on the subject [of the automatic stay provision] at the time Shop in the Grove was decided in 1982”); Shop in the Grove,

Ltd., 425 So. 2d at 1138 (referring to the “automatic stay provision of the ‘new’

Bankruptcy Act”). Reasonable people can disagree on questions of statutory construction. This Court’s isolated statutory interpretation of section 362(a)(1),

however, can have significant consequences for multi-jurisdictional bankruptcy practitioners (and their clients), because tough sanctions accompany violations of the automatic stay.⁴ The instant motion to stay – filed by the appellee – states that the appellee “does not wish to violate the automatic stay.” The appellee understandably fears that filing its answer brief in this Court – a continuation of its proceeding against the debtors – may violate the automatic stay.

In light of this Court’s denial of the appellee’s stay motion, it is unlikely that the Pennsylvania bankruptcy court would sanction the appellee or its counsel for violating section 362(a)(1) for filing its answer brief in this Court. Nonetheless, the

Pennsylvania bankruptcy court rests in the United States Court of Appeals for the

Third Circuit, which has expressly and unequivocally determined that, contrary to (2) If such violation is based on an action taken by an entity in the good faith belief that subsection (h) applies to the debtor, the recovery under paragraph (1) of this subsection against such entity shall be limited to actual damages. 11 U.S.C. § 362(k)(1)-(2) (2020).

Shop in the Grove, “section 362 should be read to stay all appeals in proceedings that were originally brought against the debtor, regardless of whether the debtor is the appellant or appellee.” Ass’n of St. Croix Condo. Owners, 682 F. 2d at 449.

While the panel is bound by this Court’s prior precedent, we fear that our adherence to Shop in the Grove has needlessly placed the appellee on the horns of a dilemma.

Stay denied.