- In re Tribune Media Company, Case Nos. 14-3332 and 14-3333 (3d Cir. August 19, 2015)
- The Court determined that Aurelius’s appeal, which would undo a crucial component of the plan, the settlement of LBO related causes of action that were the economic underpinning of the plan upon which creditors had relied, was equitably moot. The Court reversed and remanded the Law Debenture Trust Company and Deutsche Bank Trust Company America'sthat (the "Trustees") appeal seeking disgorgement of $30 million that the Trustees contended they were contractually entitled to receive under a subordination agreement. The Court ruled that the relief sought by the Trustees the would neither jeopardize the $7.5 billion plan of reorganization nor harm third parties who have justifiably relied on plan confirmation and thus the Trustees appeal was not equitably moot. In a concurring opinion by Judge Ambro, in which Judge Vanaskie joined, the Court reviewed the principal challenges to the equitable mootness doctrine, three principal challenges to the equitable mootness doctrine: constitutional (Article III of the Constitution requires supervision of decisions by Article I bankruptcy judges); statutory (the Bankruptcy Code does not authorize equitable mootness); and prudential (it is unfair to appellants to deny them relief when a bankruptcy or district court has made an error of law) and declined to reexamine the recognition of the doctrine which has been accepted by every Circuit Court.
- Procedural context:
- Appeal to the Third Circuit Court of Appeals from the District Court’s dismissal, as equitably moot ,of the appeals of Aueelius Capital Management LP and Law Debenture Trust Company and Deutsche Bank Trust Company Americas from the Bankruptcy Court’s order confirming the Debtor's Chapter 11 plan of reorganization.
- The central issue in the two plans of reorganization before the Bankruptcy Court was the disposition of fraudulent conveyance litigation to avoid a pre-petition leveraged buyout transaction. The plan filed by Aurelius provided for the continued litigation of the claims. The Debtors plan settled the claims. After a full hearing, the Bankruptcy Court confirmed the Debtor's plan and Aurelius appealed.Aurelius moved for a stay pending appeal and the Bankruptcy court granted the motion and later required Aurelius to post a $1.5 billion dollar bond. Aurelius moved to expedite the appeals and the motion was denied. On December 31, 2012, the Plan was consummated and in January 2013, the Debtor moved to dismiss the appeal as equitably moot. Law Debenture Trust Company and Deutsche Bank Trust Company America (the "Trustees") also appealed arguing that subordination agreements with the holders of two series of pre-LBO notes Tribune issued, called the HONES Notes and the EGI Notes, worth a total of about $30 million. According to the subordination agreements, if Tribune went bankrupt, any recovery by the PHONES and EGI Notes would be payable to the Trustee's However, under the Plan, any recovery from those Notes will be distributed pro rata between Class in which the Trustees were classified and Class 1F , a class consisting of 700 creditors, the majority of whom “are individuals and small-business trade creditors.” The Trustees contended that the Plan gives Class 1F $30 million dollars that should go to Trustee's class and the Trustee's proposed several ways in which their class could recover that money without fatally unravelling the Plan. The Court reviewed the District Court's finding of equitable mootness for an abuse of discretion.
- AMBRO, VANASKIE, and SHWARTZ, Circuit Judges
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