Putting More Equity Into Equitable Mootness: Recent Cases in the Tenth and Fifth Circuits Signal More Appellate Review of Plan Confirmation Orders

Putting More Equity Into Equitable Mootness: Recent Cases in the Tenth and Fifth Circuits Signal More Appellate Review of Plan Confirmation Orders

This Emerging Issues Analysis analyzes the judicially-created doctrine of "equitable mootness." Although equitable mootness has historically been viewed as a powerful tool for debtors to limit appellate review of orders confirming their chapter 11 plans, recent decisions in the Fifth and Tenth Circuits may suggest an inclination of some appellate courts to apply a more flexible standard toward review of confirmation decisions on appeal.

Excerpt:

The bankruptcy process often moves more quickly toward a final result than litigation in other courts. In many bankruptcy cases, courts recognize that urgent and final judicial action will better preserve the value of the debtor's assets, increase the chances for the debtor's successful reorganization and maximize recoveries for creditors. Indeed, chapter 11 plans of reorganization are often consummated just days after confirmation by the court-which can undermine the efforts of an objecting party to pursue an effective appeal, in part because of the judicially-created doctrine of "equitable mootness."

Although equitable mootness has historically been viewed as a powerful tool for debtors to limit appellate review of orders confirming their chapter 11 plans, recent decisions in the Fifth and Tenth Circuits may suggest an inclination of some appellate courts to apply a more flexible standard toward review of confirmation decisions on appeal.

What is equitable mootness?

Equitable mootness is the doctrine under which appellate courts refrain from hearing bankruptcy appeals relating to plan confirmation when it would be "inequitable" to do so. Distinct from "constitutional mootness," equitable mootness does not relate to an appellate court's inability to hear a case on the ground that there is no longer a live case or controversy, but the court's unwillingness to do so on the ground that providing relief after a plan has become effective is simply impractical. See In re Pacific Lumber Co., 584 F.3d 229, 240 (5th Cir. 2009) (noting constitutional mootness "prevents adjudication when cases are no longer 'live'" and equitable mootness "abdicates appellate review of very real, continuing controversies"). As the Fifth Circuit has aptly noted, equitable mootness is "a kind of appellate abstention that favors finality of reorganizations and protects the interrelated multi-party expectations on which they rest." Id.

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See also:  James Lawniczak, The Doctrine of Equitable Mootness