- Nos. 13-2226, 13-2288, 13-2300
- As an issue of first impression, the Second Circuit held that the equitable mootness analysis set out in Chateaugay II applies to Chapter 11 liquidations. As with a reorganization, substantial consummation of a liquidating plan gives rise to a presumption of mootness, which can be rebutted only be satisfying the Chateaugay II factors. Equitable mootness is a prudential doctrine under which a district court may in its discretion dismiss a bankruptcy appeal “when, even though effective relief could conceivably be fashioned, implementation of that relief would be inequitable.” The presumption of equitable mootness that arises upon substantial consummation can be overcome be demonstrating the following factors:  the court can still order some effective relief;  such relief will not affect the re‐emergence of the debtor as a revitalized corporate entity;  such relief will not unravel intricate transactions so as to knock the props out from under the authorization for every transaction that has taken place and create an unmanageable, uncontrollable situation for the Bankruptcy Court;  the parties who would be adversely affected by the modification have notice of the appeal and an opportunity to participate in the proceedings; and  the appellant pursued with diligence all available remedies to obtain a stay of execution of the objectionable order[,] if the failure to do so creates a situation rendering it inequitable to reverse the orders appealed from. The equitable mootness doctrine has equal force in a liquidation because "affected parties may have devoted months of time and resources toward developing an acceptable plan; creditors with urgent needs may have been stayed from accessing assets and funds to which they are entitled; and extensive judicial resources may have been consumed. . . . In liquidation as in reorganization, substantial interests may counsel in favor of preventing tardy disruption of a duly developed, confirmed, and substantially consummated plan."
- Procedural context:
- Appeal from District Court's dismissal of appeals as equitably moot. Underlying Bankruptcy Court decision denied leave to late file claims and denied attempted pursuit of alleged class claims.
- Borders filed a Chapter 11 liquidation plan in November of 2011. Following the confirmation hearing on December 20, 2012, the plan was confirmed. Two week later, claimants/appellants, who held Borders gift cards, moved to late file proofs of claim and certify a class of all gift card holders. These motions were denied. Appeal followed.
- Kearse, Straub, and Carney
3311 in the system
1 Being Processed