By Sarah E. Wenrich –
“Equitable Mootness” is a court-created doctrine unique to bankruptcy cases. This doctrine limits appeals of bankruptcy court orders and, when applied, results in a complete loss of appeal rights. Its application is limited, and it most notably relates to chapter 11 plan confirmation orders, though some courts have extended its application to orders related to a sale of a debtor’s property, order regarding cash collateral, and even settlements and distributions in chapter 7 cases.
Though it includes the term “mootness,” equitable mootness bears no relationship to constitutional mootness and, in a sense, is the opposite of the traditional understanding of the word “mootness.” Constitutional mootness occurs where the parties involved lack an interest in the outcome, making that issue “moot.” On the other hand, equitable mootness applies when a court is unwilling to provide the required relief as opposed to be unable to grant the relief with the rationale that overturning the confirmation order would do too much and would, in many cases, be impracticable. This is due to the nature of a chapter 11 plan of reorganization which constitutes a global settlement of many different issues through interconnected agreements. Equitable mootness has been justified as a doctrine required to protect those deals made in the plan against appellate challenge.
Since its inception out of the Ninth Circuit in 1981, all circuits have adopted this doctrine in one way or another, differing slightly on the factors considered. Cases in the Third Circuit consider two analytical steps in determining whether equitable mootness is applicable to an appeal of a confirmation order:
- Whether a confirmed Plan has been substantially consummated; and – if so –
- Whether granting the relief requested in the appeal will (a) fatally scramble the plan and/or (b) significantly harm third parties who have justifiably relied on plan confirmation.
If a court considers these issues and determines the appeal of the confirmation is equitably moot, it will dismiss the appeal without determining whether the basis for the appeal is meritorious.
Within the last decade, the doctrine of equitable mootness has come under fire for a couple of different reasons. First, Bankruptcy Judges are not Article III Judges and appellate review by an Article III Judge (i.e., a District Court Judge) is important to the determination of whether Bankruptcy Judges have encroached upon the power reserved for Article III Judges. The doctrine of equitable mootness therefore impedes the ability of Article III courts to oversee bankruptcy courts’ decisions. Second, some judges have expressed their displeasure over the use of equitable mootness in recent years. What was once intended to be an exception to the general rule permitting appeals in very complex cases has become the rule and has been wielded by parties in power to push plans to confirmation and then prevent appeals.
There have been numerous petitions for writs of certiorari filed in the last year related to the doctrine of equitable mootness. The Supreme Court has not granted any petition for writs of certiorari related to equitable mootness at this time, though one petition is currently pending and sets forth concerns regarding the current state of the doctrine. Given the volume of recent cases considering the issue in many circuits and the splitting of judicial opinions supporting and critiquing the implications of equitable mootness, this issue is ripe for consideration by the Supreme Court.
For more information regarding the doctrine of equitable mootness and potential effects it may have on your or your clients’ rights, please contact us.
 See In re Roberts Farms, Inc., 652 F.2d 793 (9th Cir. 1981)
 See In re Tribune Media Co., 799 F.3d 272 (3d Cir. 2015); In re SemCrude, L.P., 728 F.3d 314, 321 (3d Cir. 2013).
 Cf. Tribune, 799 F.3d at 289-290) (Ambro, J., concurring) (“though we should always presume that appeal merits be reached and act with the utmost care when we turn aside an appeal, equitable mootness remains a last-ditch discretionary device for protecting the finality of an unstayed plan that has been consummated”).
 See In re Nuverra Envtl. Solutions, Inc., 834 Fed. Appx. 729 (3d Cir 2021), cert. denied, 2021 U.S. LEXIS 4984 (U.S., Oct. 12, 2021).