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Tread Carefully in Bankruptcy Appeals!

This article addresses the “record on appeal.” It focuses particularly on bankruptcy appeals.


Establishing the Record on Appeal


The party appealing from an appealable bankruptcy court disposition must file “a designation of the items to be included in the record on appeal.” Fed. R. Bankr. P. 8009(a)(1). This is no minor task. It requires thought about what will be argued in the appellate brief and what documents can be used to support that argument. The touchstone for the designation of matter as part of the record is whether the matter was before the lower court (or at least considered by that court) in entering the order or judgment from which an appeal has been taken. In re Ames Dep't Stores, Inc., 320 B.R. 518, 522 (Bankr. S.D.N.Y. 2005). "The record on appeal should contain all items considered by the bankruptcy court in reaching a decision. . . . Conversely, if an item was not considered by the court, it should be stricken from the record on appeal." In re Barrick Group, Inc., 100 B.R. 152, 154 (Bankr. D. Conn. 1989) (citations omitted).


The opposing party has rights too. The appellee may file a “designation of additional items to be included in the record.” Id. R. 8009(a)(2).


If anybody is displeased by a designation there is a remedy. “If an item has been improperly designated as part of the record on appeal, a party may move to strike that item.” Fed. R. Bankr. P. 8009(e)(1).

Assuming no party challenges the documents designated for the record, the record on appeal consists of the items designated by the parties and certain mandatory items (such as the notice of appeal). See Fed. R. Bankr. P. 8009(a)(4). The bankruptcy court clerk compiles the appellate record and transmits it, or provides notice of its electronic availability, to the appellate court. See Fed. R. Bankr. P. 8010(b)(1).


The Significance of the Appellate Record


The significance of the record on appeal cannot be overstated. Except in unusual circumstances, appellate tribunals render decisions based only on the record on appeal. See Lowry v. Barnhart, 329 F.3d 1019, 1024 (9th Cir. 2003). This is a fundamental limitation on an appellate court. Id.


Moreover, it is a “basic tenet of appellate jurisprudence... that parties may not unilaterally supplement the record on appeal with evidence not reviewed by the court below." Id. The key word is “unilaterally.” On motion, courts may enlarge the record to correct inadvertent omissions from the record; to take judicial notice; to exercise inherent authority to supplement the record in extraordinary cases; and when doing so is necessary to assure jurisdiction. Id. "One constant runs through all these exceptions, however: Only the court may supplement the record." Id.


A motion to enlarge the record will almost always fail when the party is attempting to add documents to the record that were not considered by the lower court. Goelz, Ninth Circuit Civil Appellate Practice ¶ 4:24a at p. 4-6 (Rutter Group 2022) ("[w]here omitted material was submitted to and considered by the [lower] court, the court will likely grant the motion. Otherwise, such motions are rarely granted”); Daly-Murphy v. Winston, 837 F.2d 348, 351 (9th Cir. 1987) ("normally the reviewing court will not supplement the record on appeal with material not considered by the trial court").

Distinguish Excerpts


When an appellant files its opening brief, it must file “excerpts of the record as an appendix.” Fed. R. Bankr. P. 8018(b)(1) (listing items to be included in excerpts) (emphasis added). Excerpts of the record are a subset of the record on appeal. See Lowry, 329 F.3d at 1024 (“excerpts of record” are just that: “excerpts” of the “record”). The purpose of the appendix is to facilitate appellate review. The reviewing court need not waste time combing through separate documents in the full appellate record when it has a paginated compilation of critical documents at hand.


As with the process of designating the record, the appellee is not left to the tender mercies of the appellant. The appellee may file with its brief “an appendix that contains material required to be included by the appellant or relevant to the appeal... but omitted by the appellant.” Fed. R. Bankr. P. 8018(b)(2). This rule, however, is not an invitation to enlarge the appellate record! It concerns excerpts of the record, not the appellate record as a whole. It is the counterpart of the rule in federal civil appeals that appellees may file "supplemental" excerpts of record. See Ninth Cir. Local Rule 30-1.7 (authorizing appellees to file supplemental excerpts of record with their briefs "[i]f the appellee believes the excerpts of record filed by the appellant exclude items which are required... or if argument in the answering brief requires review of .... documents not included by appellant in the excerpts...."). Authority for an appellee to file with its brief an appendix consisting of documents that might have appeared in the appellant’s excerpts of record is not authority to file an appendix that includes documents that are not part of the record on appeal. "Supplemental excerpts of record" supplement the appellant's excerpts, not the record on appeal. Lowry, 329 F.3d at 1024, n.4 (9th Cir. 2003).


Expenses


Parties incur expenses when they prepare an appendix of excerpts. Recoverable costs on appeal include the cost of producing any required copy of an appendix. Fed. R. Bankr. P. 8021(c)(1). At a minimum, your client hopes to recover reimbursement for sending a “judge’s copy” of the appendix to the court.


Unless agreed or ordered otherwise, these costs on appeal are taxed against the appellant if the appeal is dismissed or if the appealed disposition is affirmed. Id. R. 8021(a). If an appellee prevails on the appeal and seeks to recover the costs of an appellee’s appendix that included documents not properly placed into the appendix, the appellant might initiate proceedings to avoid being charged for those improper costs. See Fed. R. Bankr. P. 8021(d) (objection procedure).


Sanctions


The reviewing court, such as a Bankruptcy Appellate Panel or district court … may discipline or sanction an attorney or party appearing before it for [] misconduct….” Fed. R. Bankr. P. 8020(b). Of course, it must provide due process and a hearing must take place if one is requested. See id.

Courts have long imposed sanctions in response to attempts by parties—typically appellees-- who attempt to pass off as “excerpts of the record” documents that are not part of the appellate record. Not only is this conduct a form of misrepresentation, but it is prejudicial to appellants who have filed opening briefs in reliance on a settled record. "The appellate process is… not for generating new evidence to parry an opponent's arguments.” Lowry, 329 F.3d 1019 at 1025.


The courts generally respond to violations by striking the improper “excerpts” and all arguments in the appellee brief based on those improper documents. The courts may also deny recovery of appellate costs and impose monetary sanctions against the offending counsel.


About five years before the decision in Lowry, the Ninth Circuit announced it was tired of attorneys unilaterally attempting to enlarge the record on appeal. See Dela Rosa v. Scottsdale Mem’l Health Sys., Inc., 136 F.3d 1241, 1243 (9th Cir. 1998) ("We are ... reaching the end of our patience... and therefore declare that this habit of noncompliance must end"). Lowry has become the leading decision in this area. The appellant there filed an opening brief that relied on a particular argument. The appellee then tried to undermine the argument by arguing in its brief about a letter that was not part of the record and that the appellee presented in its purported “supplemental excerpts.” Id. at 1025-26. The court deemed the offense a “particularly serious violation.” The appellees conceded they had acted improperly and moved to strike their own “supplemental excerpts.” The appellees argued monetary sanctions should not be imposed because the appellees had not intended to act inappropriately. Id. at 1026. The court rejected the argument because the appellees had acted unilaterally. “Appellees never moved to supplement the record. They merely designated the letter an excerpt of record and referred to it as such in their brief.” Id. at 1026.


The Lowry court then brought down the hammer. It effectively recognized that striking faux “excerpts” and arguments based on such documents was not really a sanction. The court granted the appellee’s motion to strike its improper “supplemental excerpts,” but stated: “[i]f the only penalty for including forbidden material in the excerpts of record is removal of that material, it’s hard to see why anyone would think twice before violating the rule.” Id. at 1025-26. The court directed that Lowry be permitted to recover his reasonable attorneys' fees for responding to the improper excerpts and preparing a supplemental brief regarding sanctions. Id. at 1026.


Conclusion


Your opportunity to designate documents for the appellate record is critical. As an appellant, that record is what you will use to show error. As an appellee, that record is what you will use to show there was no error. If you do not think hard about your appeal and the documents needed for the appeal, do not expect to be able to cure the problem by inserting documents into excerpts of record. Doing so may, and under the logic of Lowry should, result in monetary sanctions. While you may seek leave to enlarge the record, you cannot assume such a motion will succeed. It is better to save yourself problems through early appellate planning. As soon as you start thinking about an appeal (or start thinking the opponent will appeal), you should be thinking about the documents you will be designating for that record.


Copyright 2023 Charles Q. Jakob. All Rights Reserved.


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