One of the more powerful tools a Chapter 11 debtor holds is the automatic stay, which prohibits actions taken against property of the estate without court approval. Violation of the stay can trigger significant damages under the right (or wrong depending upon where you stand) circumstances. In a recent opinion, a unique question was presented concerning what actions against a debtor are simply unlawful, as opposed to being unlawful and a violation of the automatic stay. See Windstream Holdings v. Charter Communications (In re Windstream Holdings), No. 21-CV-4552 (CS), 2022 U.S. Dist. LEXIS 183574, at *1 (S.D.N.Y. Oct. 6, 2022). In Windstream, the U.S. District Court for the Southern District of New York, on appeal, found that while certain business practices—a potentially false targeted advertising campaign—may be illegal, it did not follow that such actions were necessarily an attempt to exercise control of estate property. Further, and equally important, the court made clear that sanctions for a stay violation in a corporate case are only appropriate where there is no objective fair ground of doubt that a party’s action violated the automatic stay.

In March 2019, following the commencement of Windstream’s Chapter 11, Charter Communications, Inc., launched a targeted ad campaign through direct-mail advertisements aimed at the debtors’ residential customers. The envelope of the mailing read: “Important Information Enclosed for Windstream Customers.” The mailing itself was a two-sided ad for Spectrum (Charter’s residential internet brand). In large print, the first page read “Windstream Customers, Don’t Risk Losing Your Internet and TV Services” and below, elaborated:

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