Over the summer, four appellate court decisions addressed the doctrine of equitable mootness: In re Tribune Media Co., 799 F.3d 272 (3d Cir. 2015); In re One2One Commc’ns, LLC, No. 13-3410, 2015 WL 4430302 (3d Cir. July 21, 2015); In re Sagamore Partners, Ltd., No. 14-11106, 2015 WL 5091909 (11th Cir. Aug. 31, 2015); and In re Transwest Resort Props., Inc., 801 F.3d 1161 (9th Cir. 2015). These decisions indicate a trend away from the doctrine’s application, or at least the presumption that it should be determinative.
“‘Equitable mootness’ is a narrow doctrine by which an appellate court deems it prudent for practical reasons to forbear deciding an appeal when to grant the relief requested will undermine the finality and reliability of consummated plans of reorganization.” Tribune, 799 F.3d at 277–78.
Courts analyzing a claim of equitable mootness weigh two considerations: whether a confirmed plan has been substantially consummated and, if so, whether granting the relief requested in the appeal would fatally scramble the plan and/or significantly harm third parties who have justifiably relied on plan confirmation. Id.
Equitable mootness encouraged debtors to hurry to consummate a plan when they knew an appeal was likely—if the plan was substantially consummated, the appeal of the confirmation order was presumed equitably moot. The scaling back of equitable mootness in these Circuits acknowledges that appellate courts have a “virtually unflagging obligation” to exercise the jurisdiction conferred upon them. One2One Commc’ns, 2015 WL 4430302, at *3 (internal citations omitted). It is important to note that while its application has been curtailed, the Third Circuit has made clear that it is not at this time willing to abandon the doctrine entirely (see concurring opinion of Judge Ambro in Tribune).
The take-away for creditors is this: appellate courts are more likely than ever to consider an appeal on its merits, even when the plan has been substantially consummated and third parties have relied thereupon. A claim of equitable mootness, on its own, may no longer be a death knell for aggrieved parties under the plan.