In Beem v. Ferguson (In re Ferguson), 2017 BL 101650 (11th Cir. Mar. 30, 2017), the U.S. Court of Appeals for the Eleventh Circuit addressed the distinction between constitutional mootness (a jurisdictional issue that precludes court review of an appeal) and equitable mootness (which allows a court to exercise its discretion to refuse to hear an appeal under certain circumstances). The Eleventh Circuit ruled that an appeal from an order confirming a chapter 11 plan was not constitutionally moot because an "actual case or controversy" existed. Although the court declined to dismiss the appeal under the doctrine of equitable mootness, it ultimately held on the merits that the district court did not err in dismissing the appeal.
Mootness
"Mootness" is a doctrine that precludes a reviewing court from reaching the underlying merits of a controversy. In federal courts, an appeal can be either constitutionally, equitably, or statutorily moot.
Constitutional mootness is derived from Article III of the U.S. Constitution, which limits the jurisdiction of federal courts to actual cases or controversies and, in furtherance of the goal of conserving judicial resources, precludes adjudication of cases that are hypothetical or merely advisory. A case is moot "when the issues presented are no longer 'live' or the parties lack a legally cognizable interest in the outcome." Fla. Pub. Interest Research Grp. Citizen Lobby, Inc. v. EPA, 386 F.3d 1070, 1086 (11th Cir. 2004). A case generally becomes constitutionally moot "only when it is impossible for a court to grant any effectual relief whatever to the prevailing party." Cook v. Bennett, 792 F.3d 1294, 1299 (11th Cir. 2015) (internal quotation marks and citation omitted).
In contrast, the judge-fashioned remedy of "equitable mootness" bars adjudication of an appeal when a comprehensive change of circumstances occurs such that it would be inequitable for a reviewing court to address the merits of the appeal. In bankruptcy cases, appellees often invoke equitable mootness as a basis for precluding appellate review of an order confirming a chapter 11 plan. See, e.g., In re LCI Holding Company, Inc., 802 F.3d 547, 554 (3d Cir. 2015) (stating that the doctrine "comes into play in bankruptcy (so far as we know, its only playground) after a plan of reorganization is approved" and ruling that equitable mootness would not cut off the authority to hear an appeal outside the plan context).
Several circuit courts of appeal have formally adopted the doctrine of equitable mootness in considering whether to hear appeals of plan confirmation orders. For example, in Search Market Direct, Inc. v. Jubber (In re Paige), 584 F.3d 1327 (10th Cir. 2009), the Tenth Circuit considered six factors in determining whether the doctrine should moot appellate review of a confirmation order: (i) whether the appellant sought and/or obtained a stay pending appeal; (ii) whether the plan has been "substantially consummated"; (iii) whether the rights of innocent third parties would be adversely affected by reversal of the confirmation order; (iv) whether the public policy need for reliance on confirmed bankruptcy plans—and the need for creditors generally to be able to rely on bankruptcy court decisions—would be undermined by reversal of the confirmation order; (v) the likely impact upon a successful reorganization of the debtor if the appellant's challenge is successful; and (vi) whether, on the basis of a brief examination of the merits of the appeal, the appellant's challenge is legally meritorious or equitably compelling.
Substantially similar tests for equitable mootness have been adopted by the Second, Third, Fifth, Sixth, Ninth, and Eleventh Circuits. See Frito-Lay, Inc. v. LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944 (2d Cir. 1993); Nordhoff Invs., Inc. v. Zenith Elecs. Corp., 258 F.3d 180 (3d Cir. 2001); TNB Fin., Inc. v. James F. Parker Interests (In re Grimland, Inc.), 243 F.3d 228 (5th Cir. 2001); Ochadleus v. City of Detroit (In re City of Detroit), 838 F.3d 792 (6th Cir. 2016) (applying the doctrine in a chapter 9 case); JPMCC 2007-C1 Grasslawn Lodging, LLC v. Transwest Resort Props. Inc. (In re Transwest Resort Props., Inc.), 801 F.3d 1161 (9th Cir. 2015); JMC Memphis, LLC v. Kapila (In re JMC Memphis, LLC), 655 Fed. Appx. 802, 2016 BL 234000 (11th Cir. 2016). In In re Philadelphia Newspapers, LLC, 690 F.3d 161, 168–69 (3d Cir. 2012), however, a panel of the Third Circuit adopted a more nuanced approach, holding that the foremost consideration is "whether allowing an appeal to go forward will undermine the plan, and not merely whether the plan has been substantially consummated."
Section 1101(2) of the Bankruptcy Code provides that "substantial consummation" of a chapter 11 plan occurs when substantially all property transfers proposed by the plan have been completed, the reorganized debtor or its successor has assumed control of the debtor's business and property, and plan distributions have commenced.
The Second Circuit reaffirmed the doctrine of equitable mootness in In re Charter Commc'ns, Inc., 691 F.3d 476 (2d Cir. 2012), but its ruling deepened a split among the...
