In Re: MORROW GA INVESTORS, LLC
- Summarized by Jonathan Batiste , Rensselaer Polytechnic Institute
- 6 months 1 week ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- No. 23-13134 (11th Circuit, Aug 14,2025) Not Published
- Tag(s):
-
- Ruling:
- The circuit court affirmed the district court’s decision to dismiss Plaintiffs’ appeal of a bankruptcy court order that approved a settlement between Debtor and Creditor. The appellate courts found the appeal equitably moot; however, Judge Newsom’s concurrence argues that the appeal was statutorily moot. Courts employ equitable mootness—a judicial invention—in response to challenges to plans of reorganization that have been substantially consummated. Statutory mootness is more applicable here as 11 U.S.C. § 363(m) bars appellate courts from unwinding bona fine purchases of estate property.
- Procedural context:
- Debtor filed for bankruptcy and, along with the trustee, reached a settlement with Creditor that the bankruptcy court blessed. Plaintiffs appealed the court’s order approving the settlement; however, Creditor and Debtor arranged and consummated the sale of Debtor’s property. The district court dismissed Plaintiff’s appeal as equitably moot, and Plaintiffs appealed the district court’s decision to the circuit court.
- Facts:
- Marrow GA Investors, LLC (“Debtor”) filed for bankruptcy after defaulting on a loan from 1590 Adamson (“Creditor”) that it used to buy an office building. The Katebians (“Plaintiffs”) were guarantors of the loan and gained a subrogation right against Debtor—giving them a financial stake in the bankruptcy estate. Debtor, Creditor, and the bankruptcy trustee reached a settlement that reduced Creditor’s secured claim to $3,999,000.00. Creditor bought the building from the estate via credit bid when no other buyers came forward. Plaintiffs were unsatisfied and appealed the bankruptcy court’s order approving the settlement, arguing that the court overvalued Creditor’s secured claim. They sought to reduce Creditor's secured claim, creating a deficit owed to the bankruptcy estate that Creditor would need to resolve. Plaintiffs, however, did not move to stay the bankruptcy proceedings; the credit-bid sale closed while Plaintiffs’ appeal was pending. The district court denied Plaintiffs’ appeal as equitably moot: Plaintiffs did not request a stay of the bankruptcy proceedings, other parties had acted in reliance on the settlement, and the requested relief contradicted notions of equity and fairness. Plaintiffs appealed the district court’s decision, but the circuit court affirmed it.
Judge Newsom argued that the appeals should have been dismissed as statutorily moot instead of equitably moot. Equitable mootness is used to dismiss appeals of bankruptcy court orders confirming plans of reorganization and related appeals that seek to modify or amend such plans. The doctrine’s purpose is to prevent reorganizations from getting bogged down by endless appeals—providing protection for debtors and creditors with interests bound up in plans of reorganization. Judge Newsom advocated for confining the use of equitable mootness to disputes surrounding plans of reorganization. Statutory mootness was more applicable here because 11 U.S.C. § 363(m) bars appellate courts from unwinding bona fine purchases of estate property. Using statutory mootness aligns with Congress’s intent for the courts, considering its reliance on legislation instead of judicial invention.
- Judge(s):
- Newsom, Grant, and Abudu
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