Second Circuit Denies Appeal of Windstream Debtors’ Confirmation Order on Equitable Mootness Grounds
On October 25, 2022, the Second Circuit Court of Appeals, in a non-precedential ruling, denied an appeal of a district court decision that, among other things, confirmed the chapter 11 plan of Windstream Holdings, Inc. (“Windstream”) on equitable mootness grounds. The equitable mootness doctrine allows a court to dismiss a bankruptcy appeal when implementation of effective relief would be inequitable, even if it could be fashioned. The doctrine’s purpose is to avoid disturbing a chapter 11 plan once implemented, and it is presumed to apply only when a debtor’s plan has been substantially consummated. The Second Circuit held that the appellant failed to satisfy the grounds for overcoming the presumption of equitable mootness in Windstream’s case because, among other things, it failed to diligently seek a stay of the chapter 11 plan pending appeal as required under governing Second Circuit law. U.S. Bank, N.A. v. Windstream Holdings, Inc. (In re Windstream Holdings, Inc.), Ch. 11 Case No. 21-1754 (2d. Cir. Oct. 25, 2022).
Second Circuit Reinstates Ruling Directing Refund of Unconstitutional Chapter 11 US Trustee Fees
On November 10, 2022, the Second Circuit issued an amended opinion reinstating its judgment in In re Clinton Nurseries, Inc., 998 F.3d 56 (2d. Cir. 2021) in which the Second Circuit awarded the debtors a refund of chapter 11 statutory fees that it had found unconstitutional. On October 25, 2022, the Supreme Court remanded the Clinton Nurseries decision for further consideration in light of its ruling in Siegel v. Fitzgerald, 142 S.Ct. 1770 (2022), also finding the fee statute at issue unconstitutional but declining to rule on the appropriate remedy. In its amended opinion, the Second Circuit affirmed its ruling that a refund of any overpayment of unconstitutional fees was the appropriate remedy for the Clinton Nursery debtors.
