Amicus Curiae Brief — David Hargreaves, Petitioner v. Nuverra Environmental Solutions, Inc., aka Heckmann Corporation, aka Rough Rider Escrow, Inc., et al.
Supreme Court briefAug 31, 2021
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No. 21-17
In the Supreme Court of the United States
DAVID HARGREAVES, PETITIONER
v.
NUVERRA ENVIRONMENTAL SOLUTIONS, INC., ET AL.,
RESPONDENTS
ON PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
BRIEF FOR PROFESSORS OF BANKRUPTCY LAW
AS AMICI CURIAE SUPPORTING PETITIONER
LAWRENCE S. ROBBINS
Counsel of Record
MATTHEW M. MADDEN
CAROLYN M. FORSTEIN
ROBBINS, RUSSELL, ENGLERT,
ORSECK & UNTEREINER LLP
2000 K Street, NW, 4th Floor
Washington, DC 20006
(202) 775-4500
lrobbins@robbinsrussell.com
TABLE OF CONTENTS
Page
Table of Authorities .......................................................... II
Interests of Amici ............................................................... 1
Argument ........................................................................... 2
I. Equitable Mootness Upends Statutory Appellate
Rights Enacted To Ensure Meaningful Review Of
Bankruptcy Court Decisions By Article III Courts ..... 3
II. Equitable Mootness Precludes The Development
And Predictability Of Bankruptcy Law ...................... 7
III. Equitable Mootness Invites Gamesmanship And
Distorts Bankruptcy Outcomes ................................. 13
IV. Equitable Mootness Is Applied Inconsistently ......... 15
Conclusion ........................................................................ 17
Appendix ......................................................................... 1A
II
TABLE OF AUTHORITIES
Page
Cases:
In re AM Int’l, Inc.,
203 B.R. 898 (D. Del. 1996) .......................................... 7
In re City of Stockton,
909 F.3d 1256 (9th Cir. 2018) .................................... 12
Colorado River Water Conservation Dist. v.
United States, 424 U.S. 800 (1976) .............................. 6
In re Continental Airlines,
91 F.3d 553 (3d Cir. 1996) .......................................... 10
Curreys of Nebraska, Inc. v. United
Producers, Inc. (In re United Producers,
Inc.), 526 F.3d 942 (6th Cir. 2008) ............................. 17
In re Financial Oversight & Mgmt. Bd. for
Puerto Rico, 989 F.3d 123 (1st Cir. 2021) .................. 16
FishDish, LLP v. VeroBlue Farms USA, Inc.
(In re VeroBlue Farms USA, Inc.),
6 F.4th 880 (8th Cir. 2021) ................................... 10, 15
In re Ford,
415 B.R. 51 (Bankr. N.D.N.Y. 2009) ............................ 8
In re Jones,
538 B.R. 844 (Bankr. W.D. Okla. 2015) ....................... 8
JPMCC 2007-C1 Grasslawn Lodging, LLC
v. Transwest Resort Props., Inc. (In re
Transwest Resort Props., Inc.),
801 F.3d 1161 (9th Cir. 2015) .................................... 16
New Orleans Pub. Serv., Inc. v. Council of
City of New Orleans,
491 U.S. 350 (1989) ...................................................... 6
Nordhoff Invs., Inc. v. Zenith Elecs. Corp.,
258 F.3d 180 (3d Cir. 2001) ........................................ 15
III
Cases—Continued:
Page
In re One2One Commc’ns, LLC,
805 F.3d 428 (3d Cir. 2015) .......................... 6, 7, 10, 11
In re Pacific Lumber Co.,
584 F.3d 229 (5th Cir. 2009) ......... 10, 12, 14, 15, 16, 17
In re Paige,
584 F.3d 1327 (10th Cir. 2009) .................................. 16
R2 Invs. v. Charter Commc’ns, Inc.
(In re Charter Commc’ns, Inc.),
691 F.3d 476 (2d Cir. 2012) .......................10, 15, 16, 17
Sprint Commc’ns, Inc. v. Jacobs,
571 U.S. 69 (2013) ........................................................ 6
Stern v. Marshall,
564 U.S. 462 (2011) ...................................................... 4
In re Tribune Media Co.,
799 F.3d 272 (3d Cir. 2015) ........................................ 16
U.S. Bank Nat’l Ass’n ex rel. CWCapital
Asset Mgmt. LLC v. Village at
Lakeridge, LLC, 138 S. Ct. 960 (2018) ......................... 4
Weber v. United States Trustee,
484 F.3d 154 (2d Cir. 2007) ........................................ 11
Statutes:
11 U.S.C. § 363(m) ............................................................. 5
11 U.S.C. § 364(e) ............................................................... 5
11 U.S.C. § 1129(b)............................................................. 8
28 U.S.C. § 157(b)(1) .......................................................... 4
28 U.S.C. § 157(b)(2)(L)...................................................... 4
28 U.S.C. § 158(a)(1) .......................................................... 4
28 U.S.C. § 158(d)(1) .......................................................... 4
28 U.S.C. § 158(d)(2) .................................................. 11, 12
28 U.S.C. § 1334 ............................................................. 4, 5
IV
Other Authorities:
Jared A. Ellias, What Drives Bankruptcy
Forum Shopping? Evidence from Market
Data, 47 J. Legal Stud. 119 (2018)............................. 12
Jared A. Ellias & Robert J. Stark,
Bankruptcy Hardball, 108 Calif. L. Rev.
745 (2020) ................................................................... 15
H.R. Rep. No. 31, 109th Cong., 1st Sess. 148
(2005) .......................................................................... 12
Melissa B. Jacoby, Corporate Bankruptcy
Hybridity, 166 U. Pa. L. Rev. 1715
(2018) ................................................................ 9, 13, 14
Adam J. Levitin, Purdue’s Poison Pill: The
Breakdown of Chapter 11’s Checks and
Balances, 100 Tex. L. Rev. (forthcoming
2021) ........................................................................... 12
Adam J. Levitin, Written Testimony Before
the H. Comm. on the Judiciary
Subcomm. on Antitrust, Commercial,
and Administrative Law (July 28, 2021) ................... 15
Timothy K. Lewis & Ronald Mann, Courts
Should Review Bankruptcy Equitable
Mootness Doctrine, Legal Intelligencer
(June 8, 2016) ............................................................... 9
Bruce A. Markell, The Needs of the Many:
Equitable Mootness’ Pernicious Effects,
93 Am. Bankr. L.J. 377 (2019) ....................5, 12, 14, 15
Troy A. McKenzie, Judicial Independence,
Autonomy, and the Bankruptcy Courts,
62 Stan. L. Rev. 747 (2010) .......................................... 9
Joseph W. Mead, Stare Decisis in the
Inferior Courts of the United States, 12
Nev. L.J. 787 (2012) ................................................. 7, 8
Robert Miller, Equitable Mootness:
Ignorance is Bliss and Unconstitutional,
107 Ky. L.J. 269 (2018) ................................................ 7
In the Supreme Court of the United States
No. 21-17
DAVID HARGREAVES, PETITIONER
v.
NUVERRA ENVIRONMENTAL SOLUTIONS, INC., ET AL.,
RESPONDENTS
ON PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
BRIEF FOR PROFESSORS OF BANKRUPTCY LAW
AS AMICI CURIAE SUPPORTING PETITIONER
INTEREST OF AMICI CURIAE
Amici curiae, whose names and affiliations are set
forth in the attached Appendix, are 21 professors of
law who have expertise bearing directly on the
question presented in this case. They regularly teach
courses in bankruptcy law and principles, and have
authored numerous articles, treatises, and textbooks
on bankruptcy law. Amici have an interest in the
orderly development of bankruptcy law and practice,
including through the robust and thoughtful appellate
review of hard questions posed by complex cases. 1
All parties have consented to the filing of this brief. No
counsel for a party authored this brief in whole or in part and no
counsel or party made a monetary contribution intended to fund
the preparation or submission of this brief. No person or entity,
other than amici curiae or their counsel, has made a monetary
contribution to this brief’s preparation or submission. The
institutional affiliations of the amici are for identification only.
1
2
ARGUMENT
The judge-made doctrine of equitable mootness
has the extraordinary effect of causing Article III
courts to refuse to review meritorious, live appeals
from bankruptcy court orders. It does so even though
there is nothing genuinely “moot” about cases in
which effective relief is indisputably available, nor
anything genuinely “equitable” about immunizing
erroneous bankruptcy court decisions from appellate
scrutiny.
As Judge Krause explained in this case, equitable
mootness is a “problematic doctrine” that “lure[s]”
appellate courts into “abdicating [their] jurisdiction
when [they] should be exercising it, and stunting the
development of * * * bankruptcy jurisprudence when
it’s [their] duty to promote it.” Pet. App. 18 (quotation
and alteration marks omitted). Indeed, the lower
courts’ application of this purported doctrine has left
vexing questions of bankruptcy law persistently
unresolved by those courts that have the authority—
and responsibility—to decide them. The ultimate
effect of the impoverished record in the courts of
appeals is that important ambiguities and controversies in bankruptcy law never percolate up to
this Court for review and definitive decision.
The consequence is bankruptcy law that varies
from bankruptcy courtroom to bankruptcy courtroom,
depending on the presiding judge. Legal analysis of
consequential questions is concentrated in the
handful of bankruptcy courts that regularly handle
the country’s most complex corporate bankruptcies.
What is more, sophisticated parties in those highstakes cases know how to wield equitable mootness to
their advantage, by advocating aggressive legal
3
positions to receptive bankruptcy judges and then
rushing to consummate confirmed reorganization
plans before appeals have run their course. The
resulting uncertainty ripples through the capital
markets.
None of this is consistent with Congress’s carefully
tailored scheme of appellate review in bankruptcy
cases, nor with the federal courts’ duty to decide cases
that are within their jurisdiction and properly before
them. This Court should grant the petition to rein in
the lower courts’ abdication of their jurisdictional
obligations, promote the development of bankruptcy
law, and level the playing field in bankruptcy cases.
I. Equitable Mootness Upends Statutory Appellate
Rights Enacted To Ensure Meaningful Review Of
Bankruptcy Court Decisions By Article III Courts
Congress has explicitly provided for Article III
courts’ appellate review of final orders and judgments
entered by non-Article III bankruptcy judges. That
review equips district courts to oversee the bankruptcy judges to whom they refer cases, and facilitates
the courts of appeals’ issuance of binding, precedential
rulings on important legal questions under the
Bankruptcy Code.
The equitable-mootness doctrine thwarts that
scheme of appellate review, however, by excusing
courts from exercising those responsibilities. It is a
judge-made doctrine of abstention from hearing and
deciding appeals over which Congress has indisputably vested courts with jurisdiction. Bankruptcy
court decisions—no matter how unlawful—thereby
evade the Article III scrutiny that Congress intended.
The equitable-mootness doctrine has no basis in the
4
statutes governing bankruptcy appeals, or in the
abstention principles strictly limited by this Court’s
decisions.
1. Bankruptcy judges are authorized to “hear and
determine all cases under title 11 and all core
proceedings arising under title 11, or arising in a case
under title 11” that are referred to them by the district
courts vested with original jurisdiction over those
matters. 28 U.S.C. § 157(b)(1); see also id. § 1334.
Bankruptcy courts “may enter appropriate orders and
judgments” in such cases and core proceedings,
including ordering the “confirmation of plans” of
reorganization. Id. § 157(b)(1), (b)(2)(L).
Not surprisingly, Congress made bankruptcy
judges’ orders and judgments “subject to review” by
Article III courts. 28 U.S.C. § 157(b)(1). To that end,
Congress enacted a robust scheme of appellate oversight of bankruptcy judges’ decisions. District courts
have “jurisdiction to hear appeals” from, among other
things, bankruptcy judges’ “final judgments, orders,
and decrees.” Id. § 158(a)(1). Parties thus have the
statutory right to “appeal final judgments of a
bankruptcy court in core proceedings to the district
court, which reviews them under traditional appellate
standards.” Stern v. Marshall, 564 U.S. 462, 474-75
(2011).
The courts of appeals, in turn, “have jurisdiction of
appeals from all final decisions, judgments, orders,
and decrees” entered by the district courts. 28 U.S.C.
§ 158(d)(1). They review the bankruptcy or district
courts’ legal conclusions de novo. See U.S. Bank Nat’l
Ass’n ex rel. CWCapital Asset Mgmt. LLC v. Village at
Lakeridge, LLC, 138 S. Ct. 960, 965 (2018). This tiered
scheme of appellate review empowers district courts
5
to supervise the bankruptcy judges in their districts,
and authorizes the courts of appeals to address the
legal issues presented in bankruptcy cases and
establish binding circuit precedent on them.
2. Congress has authorized only limited exceptions
to the appellate review of bankruptcy court orders
required by statute. The Bankruptcy Code states that
certain orders entered by a bankruptcy judge, in
specific situations, are not subject to reversal on
appeal because that would be unfair to the settled
expectations of innocent third parties. Specifically,
sections 363(m) and 364(e) of the Bankruptcy Code, 11
U.S.C. §§ 363(m), 364(e), “provide that certain
components of sales and loans cannot be attacked on
appeal if undertaken in good faith.” Bruce A. Markell,
The Needs of the Many: Equitable Mootness’
Pernicious Effects, 93 Am. Bankr. L.J. 377, 403 (2019);
see also 28 U.S.C. § 1334 (expressly providing for
permissive and mandatory abstention by district
courts in certain specified bankruptcy cases within
their original jurisdiction).
But Congress did not enact any similar carve-out
from statutory appellate rights for the confirmation of
Chapter 11 reorganization plans. As Professor Bruce
Markell, a former bankruptcy judge, has explained,
“this lacuna means that confirmation orders should
not have the presumptions of finality without review
that sale orders and lending orders enjoy.” Needs of
the Many, 93 Am. Bankr. L.J. at 404. The equitablemootness doctrine nevertheless inserts a judge-made
rule against disturbing confirmed, consummated
reorganization plans that is untethered to anything in
the Bankruptcy Code.
6
3. As petitioner correctly observes (Pet. 20), the
lower courts’ creation of a doctrine of appellate
abstention in bankruptcy cases is irreconcilable with
those courts’ “virtually unflagging obligation * * * to
exercise the jurisdiction given them.” Colorado River
Water Conservation Dist. v. United States, 424 U.S.
800, 817 (1976); see also Sprint Commc’ns, Inc. v.
Jacobs, 571 U.S. 69, 72 (2013) (“In the main, federal
courts are obliged to decide cases within the scope of
federal jurisdiction.”). This Court has made clear that
federal courts may abstain from hearing cases that
are properly brought before them “only [in]
exceptional circumstances.” New Orleans Pub. Serv.,
Inc. v. Council of City of New Orleans, 491 U.S. 350,
368 (1989). Accordingly, “[a]bstention from the
exercise of federal jurisdiction is the exception, not the
rule.” Colorado River, 424 U.S. at 813.
The limited circumstances in which the federal
courts may permissibly abstain from exercising the
jurisdiction granted to them are those in which some
“deference to the States” favors “the withholding of
authorized equitable relief because of undue
interference with state proceedings.” New Orleans,
491 U.S. at 359, 368. Such withholding is justified
“only in the exceptional circumstances where the
order to the parties to repair to the state court would
clearly serve an important countervailing interest.”
Colorado River, 424 U.S. at 813.
But equitable mootness does nothing of the sort.
Bankruptcy appeals dismissed as equitably moot are
not then heard and resolved somewhere else. Rather,
they are never heard and resolved at all. There is,
therefore, “no analogue for equitable mootness among
the abstention doctrines.” In re One2One Commc’ns,
7
LLC, 805 F.3d 428, 440 (3d Cir. 2015) (Krause, J.,
concurring). Because equitable mootness involves “no
other forum and no later exercise of jurisdiction * * *
relinquishing jurisdiction is not abstention; it’s
abdication.” Ibid.; see also Robert Miller, Equitable
Mootness: Ignorance is Bliss and Unconstitutional,
107 Ky. L.J. 269, 290 (2018) (identifying the “strong
tension” between equitable-mootness dismissals and
the “duty of federal courts to fully exercise their
jurisdiction under statute and the Constitution”).
II. Equitable Mootness Precludes The Development
And Predictability Of Bankruptcy Law
The all-too-routine invocation of equitable mootness to dismiss appeals deprives bankruptcy law of
the thoughtful analysis and predictable precedent
that appellate review provides. In so doing, it leaves
the development of that jurisprudence to a relatively
small number of non-Article III bankruptcy judges
who sit in the jurisdictions where the most complex
bankruptcy cases are concentrated.
1. Although bankruptcy courts publish many pages
of rulings analyzing and applying the Bankruptcy
Code, those decisions lack any binding effect in future
cases. Even a given bankruptcy judge is not bound to
adhere to his or her own prior decisions in other cases.
See, e.g., In re AM Int’l, Inc., 203 B.R. 898, 905 (D. Del.
1996) (“[T]he Bankruptcy Court is not bound by its
previous decisions.”). The binding force of district
courts’ decisions in bankruptcy appeals, too, is
generally limited to “the immediate parties to a case.”
8
Joseph W. Mead, Stare Decisis in the Inferior Courts
of the United States, 12 Nev. L.J. 787, 827 (2012). 2
The development of bankruptcy law thus depends
on appeals reaching the courts of appeals for decision
on their merits. And for that to happen, parties must
have meaningful access to the full scope of appellate
review that Congress provides to them.
Equitable mootness stunts that normal process of
jurisprudential development by blocking appellants’
ability to exercise their statutory appellate rights. See
Pet. App. 17 (Krause, J., concurring) (equitable
mootness “precludes the development of bankruptcy
law”). This case is a prime example: The Bankruptcy
Code prohibits judicial confirmation of Chapter 11
reorganization plans that “discriminate unfairly”
among creditors. 11 U.S.C. § 1129(b). Respondents’
reorganization plan affords petitioner only 5 cents on
the dollar of his unsecured claims, while other
unsecured creditors receive 100 cents on the dollar of
their claims. Pet. 12-13. Over petitioner’s objection,
the bankruptcy court held that this is not unfair
discrimination because the favored unsecured
2 Bankruptcy courts regularly view themselves as being “free
to disagree with and disregard district court precedent.” Mead,
Stare Decisis, 12 Nev. L.J. at 827; see also In re Jones, 538 B.R.
844, 848 (Bankr. W.D. Okla. 2015) (“Under principles of stare
decisis, a decision of a federal district court judge or bankruptcy
court is not binding precedent in either a different judicial
district, the same judicial district, or even upon the same judge
in a different case.”); In re Ford, 415 B.R. 51, 60 (Bankr. N.D.N.Y.
2009), aff’d sub nom. Community Bank N.A. v. Ford, No. 5:09-cv633 (GLS), 2009 WL 9540679 (N.D.N.Y. Dec. 8, 2009) (“[J]ust as
there is no ‘law of the district’ mandated for district judges to
follow, bankruptcy judges are likewise not bound by decisions of
a single district court judge.”).
9
creditors’ additional recovery was “gift[ed]” to them by
the debtors’ senior creditors out of estate property
that otherwise would have gone to those senior
creditors. Pet. App. 5.
Amici take no position—and likely disagree among
themselves—on whether the bankruptcy court
correctly held that there is a “horizontal gifting”
exception to the Bankruptcy Code’s confirmation
requirements. But amici each agree with Judge
Krause that this is among a “series of open issues”
presented by petitioner’s case that deserve
authoritative resolution by the court of appeals. Pet.
App. 17. By dismissing petitioner’s appeal without
ruling on its merits, the decision below contributed to
a troublesome deficit of binding precedent on these
and other disputed questions of bankruptcy law.
This case is hardly an aberration in that respect.
Indeed, “[t]he larger and more complicated the case,
the more likely the appeal will be equitably moot.”
Melissa B. Jacoby, Corporate Bankruptcy Hybridity,
166 U. Pa. L. Rev. 1715, 1734 (2018). The equitablemootness doctrine thus especially precludes appellate
review of the “central disputes in the largest business
bankruptcies,” as “courts commonly use the doctrine
to sidestep” those questions. Timothy K. Lewis &
Ronald Mann, Courts Should Review Bankruptcy
Equitable Mootness Doctrine, Legal Intelligencer
(June 8, 2016); see also Troy A. McKenzie, Judicial
Independence, Autonomy, and the Bankruptcy Courts,
62 Stan. L. Rev. 747, 789-791 (2010) (observing that
equitable mootness “can be dispositive in even the
most important bankruptcy matters”).
Some of those questions go to the heart of the
bankruptcy process itself. The Fifth Circuit, for
10
example, felt “constrain[ed]” by the “judicial anomaly”
of equitable mootness not to resolve the merits of an
appeal from a confirmed plan that appeared to divide
unsecured claims arbitrarily into separate classes “in
order to gerrymander an affirmative vote on
reorganization.” In re Pacific Lumber Co., 584 F.3d
229, 240, 251 (5th Cir. 2009). Likewise, the Second
Circuit declined to review challenges to a confirmed
plan’s embedded settlement of billions of dollars of
claims against a powerful insider for fear that any
modification of that settlement on appeal—even to
remove any illegal terms—would have “seriously
threaten[ed]” the parties’ ability to compromise on a
new plan. R2 Invs. v. Charter Commc’ns, Inc. (In re
Charter Commc’ns, Inc.), 691 F.3d 476, 486 (2d Cir.
2012). In these and other cases, “equitable mootness
merely serve[d] as part of a blueprint for implementing a questionable plan that favors certain
creditors over others without oversight by Article III
judges.” One2One Commc’ns, 805 F.3d at 448 (Krause,
J., concurring).
Indeed, and since the petition was filed, the Eighth
Circuit expressly recognized the incongruity of the
equitable-mootness doctrine and a litigant’s right to
appellate review of bankruptcy-court decisions on
their merits. FishDish, LLP v. VeroBlue Farms USA,
Inc. (In re VeroBlue Farms USA, Inc.), 6 F.4th 880,
888-891 (8th Cir. 2021). “Writing on a clean Eighth
Circuit slate,” and distinguishing the en banc Third
Circuit’s approach in In re Continental Airlines, 91
F.3d 553 (3d Cir. 1996) that was applied in this case,
the court of appeals held that at least some inquiry
into whether a “confirmed plan must be set aside on
the merits” is “required before equitable mootness
11
may be invoked.” Id. at 890. It reached that conclusion
in express agreement with Judge Krause that
“‘[m]erits review is particularly important for complex
questions, like whether a plan comports with the
Bankruptcy Code’s cram down provisions, an issue
that often cries out for appellate review . . . or claims
involving conflicts of interest or preferential
treatment that go to the very integrity of the
bankruptcy process.’” Ibid. (quoting One2One
Commc’ns, 805 F.3d at 454 (Krause, J., concurring)).
The Eighth Circuit also explained that such merits
review is necessary to provide “supervisory review of
the merits of [a] plan by an Article III court that has
an ‘unflagging obligation’ to exercise its appellate
jurisdiction.” Ibid.
Nevertheless, the growing frequency with which
many other courts continue to invoke equitable
mootness obstructs Congress’s efforts to encourage
appellate precedent in bankruptcy cases. See
One2One Commc’ns, 805 F.3d at 438 (Krause, J.,
concurring) (bemoaning that courts are regularly
“dismiss[ing]
appeals
in
the
simplest
of
bankruptcies”). In fact, Congress responded to
“widespread unhappiness at the paucity of settled
bankruptcy-law precedent” by trying to encourage
more, not less, binding appellate precedent in
bankruptcy cases. Weber v. United States Trustee, 484
F.3d 154, 158 (2d Cir. 2007). As part of the
Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005 (BAPCPA), Congress
authorized courts of appeals to hear direct appeals
from certain consequential bankruptcy court
decisions, including ones involving “a question of law
as to which there is no controlling decision” or “a
12
question of law requiring resolution of conflicting
decisions.” 28 U.S.C. § 158(d)(2). The purpose of fasttracking certain bankruptcy appeals for direct review
by the courts of appeals was “to settle unresolved
questions of law where there is a need to establish
clear binding precedent at the court of appeals level.”
H.R. Rep. No. 31, Pt. 1, 109th Cong., 1st Sess. 148
(2005). Equitable mootness, however, has the
countervailing effect of leaving many such questions
unsettled—in both the standard, two-tier appeals and
the newer, direct ones. See, e.g., In re City of Stockton,
909 F.3d 1256 (9th Cir. 2018) (claims raised on direct
appeal were equitably moot); In re Pacific Lumber Co.,
584 F.3d 229 (same).
2. The absence of robust appellate review of
reorganization-plan confirmation orders gives bankruptcy judges outsized influence on the interpretation
of the Bankruptcy Code. And that influence is not
spread evenly. A relatively narrow band of bankruptcy judges concentrated in the Southern District of
New York, the District of Delaware, and, more
recently, the Eastern District of Virginia and the
Southern District of Texas hear a large proportion of
the “mega” Chapter 11 cases. See Jared A. Ellias,
What Drives Bankruptcy Forum Shopping? Evidence
from Market Data, 47 J. Legal Stud. 119 (2018); Adam
J. Levitin, Purdue’s Poison Pill: The Breakdown of
Chapter 11’s Checks and Balances, 100 Tex. L. Rev.
(forthcoming 2021). Accordingly, a relatively narrow
group of judges is interpreting the bankruptcy laws in
big cases—with relatively few decisions subject to
review and reversal as a result of equitable mootness.
See Markell, Needs of the Many, 93 Am. Bankr. L.J.
at 408.
13
3. Equitable-mootness dismissals not only stifle
the development of the bankruptcy law, but also
weaken public perception of the system’s legitimacy.
Aggrieved parties who believe that they did not get a
fair shake in the bankruptcy court then come to find
out that no appellate court will address the merits of
their appeals. When such appeals are dismissed
without a hearing, “even fewer people get to tell their
stories to a court of higher authority, or to observe an
appellate court considering the matter.” Jacoby,
Corporate Bankruptcy Hybridity, 166 U. Pa. L. Rev. at
1735.
III. Equitable Mootness Invites Gamesmanship And
Distorts Bankruptcy Outcomes
Equitable mootness gives parties powerful incentives to advocate aggressive legal positions against
their adversaries in bankruptcy court free from
concern that an appellate court will look unkindly on
their sharp tactics. The government has acknowledged that equitable mootness is therefore “open
to substantial abuse, and invites manipulation of the
bankruptcy process.” U.S. Pet. 22-23, United States v.
GWI PCS 1, Inc., No. 00-1621 (Apr. 23, 2001).
Chapter 11 reorganization plan proponents are
keenly aware that equitable mootness will make
disputed plan terms effectively unreviewable once the
plan has been confirmed and implemented. Debtors
and other plan proponents thus have every incentive
to push the envelope of legality under the Bankruptcy
Code, which affects bargaining power and skews
outcomes in bankruptcy court. Moreover, these
parties often strategically resist the adjudication of
contentious issues until plan confirmation, and then
14
“rush to consummate a restructuring plan to insulate
the deal from further judicial scrutiny.” Jacoby,
Corporate Bankruptcy Hybridity, 166 U. Pa. L. Rev. at
1734. Parties have followed this playbook for giving
bankruptcy judges the last word on contested legal
issues in numerous large bankruptcies in recent
years.
The success of these strategies follows from plan
proponents’ control over equitable mootness’s key
levers when they decide how quickly to implement
their confirmed plan. First, they can make it less
likely that courts will stay plan confirmation pending
appeal by including aggressive deadlines in a plan
that effectively require its speedy implementation.
Moreover, unless the plan is stayed—and it almost
never is 3—debtors and other plan proponents can
push ahead with consummating plan transactions,
issuing new securities, and paying allowed claims
even while appeals are still pending. The effect—and
often the intent—of doing so is to make the dismissal
of those appeals on equitable-mootness grounds more
likely. See In re Pacific Lumber Co., 584 F.3d at 242
(confirmation appeal presented “a fait accompli, a
3 Among other reasons: courts typically require appellants to
post large financial bonds to insure debtors against any losses
they might sustain during the pendency of a stay. Equitable
mootness thus “reduces the leverage of parties financially unable
to post the bond required to obtain a stay pending appeal,”
further skewing the balance between bankruptcy parties.
Jacoby, Corporate Bankruptcy Hybridity, 166 U. Pa. L. Rev. at
1734-1735; see also Markell, Needs of the Many, 93 Am. Bankr.
L.J. at 402 (describing the bond requirements imposed in
bankruptcy cases as often being “ruinous to the point of
significantly burdening—if not crushing—the ability to appeal
an erroneous ruling”).
15
plan that was substantially consummated within
weeks of confirmation”).
Equitable mootness thus “can easily be used as a
weapon to prevent any appellate review of bankruptcy
court orders confirming reorganization plans.”
Nordhoff Invs., Inc. v. Zenith Elecs. Corp., 258 F.3d
180, 192 (3d Cir. 2001) (Alito, J., concurring in the
judgment). As Professor Adam Levitin recently told a
congressional subcommittee, “debtors have * * *
weaponized the equitable mootness doctrine, taking
care that plans go effective—and money starts
changing hands—as soon as possible after confirmation.” Adam J. Levitin, Written Testimony
Before the H. Comm. on the Judiciary Subcomm. on
Antitrust, Commercial, and Administrative Law 14
(July 28, 2021); see also Jared A. Ellias & Robert J.
Stark, Bankruptcy Hardball, 108 Calif. L. Rev. 745
(2020). This Court should review the entirely judgemade doctrine under which this unsettling state of
affairs has developed.
IV. Equitable Mootness Is Applied Inconsistently
Equitable mootness, lacking any real grounding in
bankruptcy statutes, is applied inconsistently among
the courts of appeals. For starters, the circuits have
“fashioned many different routes” for invoking
equitable mootness. In re VeroBlue Farms USA, Inc.,
2021 WL 3411834, at *6; see also Markell, Needs of
the Many, 93 Am. Bankr. L.J. at 393, 397 (describing
“confusion in the development of a consistent and
coherent doctrine” and “variances in each circuit’s
expression of the doctrine”). The Second Circuit, for
instance, considers five factors as bearing on the
equitable-mootness inquiry. See In re Charter
16
Commc’ns, Inc., 691 F.3d at 482. The Third Circuit, by
contrast, has distilled the doctrine down to “two
analytical steps.” In re Tribune Media Co., 799 F.3d
272, 278 (3d Cir. 2015). Other circuits utilize still
other tests, with the First and Fifth Circuits each
applying a different three-factor analysis, see In re
Financial Oversight & Mgmt. Bd. for Puerto Rico, 989
F.3d 123, 129 (1st Cir. 2021); In re Pacific Lumber Co.,
584 F.3d at 240 (5th Cir. 2009), and the Tenth Circuit
adhering to a six-factor analysis, see In re Paige, 584
F.3d 1327, 1339 (10th Cir. 2009).
Moreover, some circuits put the burden of
establishing equitable mootness on the party that is
seeking dismissal of an appeal, whereas others
presume that appeals from consummated reorganization plans are moot and put the burden on the
appellant to rebut that presumption. Compare In re
Charter Commc'ns, Inc., 691 F.3d at 482 (2d Cir. 2012)
(presumption of equitable mootness), with In re Paige,
584 F.3d at 1340 (10th Cir. 2009) (no presumption).
The circuits are also divided over whether equitable
mootness is available to protect the reliance interests
only of innocent third parties, or also those of creditors
who were active combatants in the bankruptcy
process. Compare In re Tribune Media Co., 799 F.3d
at 278 (3d Cir. 2015) (equitable mootness protects all
stakeholders), with JPMCC 2007-C1 Grasslawn
Lodging, LLC v. Transwest Resort Props., Inc. (In re
Transwest Resort Props., Inc.), 801 F.3d 1161, 116970 (9th Cir. 2015) (equitable mootness protects only
“innocent third parties”). The circuits also disagree on
the standard of review that a court of appeals should
apply to a district court’s equitable-mootness
17
determination, with some circuits reviewing dismissals de novo and others reviewing only for abuse
of discretion. Compare In re Charter Commc’ns, Inc.,
691 F.3d at 483 (2d Cir. 2012) (abuse of discretion),
with Curreys of Nebraska, Inc. v. United Producers,
Inc. (In re United Producers, Inc.), 526 F.3d 942, 946947 (6th Cir. 2008) (de novo).
The fractured state of the lower courts’ equitablemootness doctrine is hardly surprising. It illustrates
the pitfalls of a judge-made abstention doctrine that
has no statutory foothold. Courts can hardly be
expected to apply equitable mootness “with a scalpel”
when they are still designing the rules as they go
along. In re Pacific Lumber Co., 584 F.3d at 240.
Statutory appellate rights—and the fate of many
millions of dollars of debtors’ estate property—should
not depend on such an unsettled, unsupported rule of
jurisdictional abdication.
CONCLUSION
The petition for a writ of certiorari should be
granted.
Respectfully submitted.
LAWRENCE S. ROBBINS
Counsel of Record
MATTHEW M. MADDEN
CAROLYN M. FORSTEIN
ROBBINS, RUSSELL, ENGLERT,
ORSECK & UNTEREINER LLP
2000 K Street, NW, 4th Floor
Washington, DC 20006
(202) 775-4500
lrobbins@robbinsrussell.com
AUGUST 2021
1A
APPENDIX
Jared A. Ellias
Bion M. Gregory Chair in Business Law
and Professor of Law
University of California Hastings College of the Law
Christopher G. Bradley
Wyatt, Tarrant & Combs Associate Professor of Law
J. David Rosenberg College of Law at the University
of Kentucky
Ralph Brubaker
James H.M. Sprayregen Professor of Law
University of Illinois College of Law
Kara J. Bruce
Professor of Law
University of Toledo College of Law
Diane Lourdes Dick
Professor of Law
Seattle University School of Law
Pamela Foohey
Professor of Law
Cardozo School of Law
John Patrick Hunt
Professor of Law
and Martin Luther King, Jr. Research Scholar
UC Davis School of Law (King Hall)
2A
Melissa B. Jacoby
Graham Kenan Professor of Law
University of North Carolina at Chapel Hill
Robert M. Lawless
Max L. Rowe Professor of Law
University of Illinois College of Law
Adam J. Levitin
Anne Fleming Research Professor
and Professor of Law
Georgetown University Law Center
Jonathan C. Lipson
Harold E. Kohn Professor of Law
Temple University-Beasley School of Law
Lynn M. LoPucki
Security Pacific Bank Distinguished Professor
of Law
UCLA School of Law
Joshua C. Macey
Assistant Professor of Law
University of Chicago
Ronald Mann
Albert E. Cinelli Enterprise Professor of Law
Columbia Law School
Peter V. Marchetti
Associate Professor of Law
Texas Southern University-Thurgood Marshall
School of Law
3A
Bruce A. Markell
Visiting Professor of Practice
Cornell Law School
Professor of Bankruptcy Law and Practice
and Edward Avery Harriman Lecturer in Law
Northwestern Pritzker School of Law
Michael Ohlrogge
Assistant Professor of Law
New York University School of Law
Robert K. Rasmussen
J. Thomas McCarthy Trustee Chair in Law
and Political Science
USC Gould School of Law
Paige Marta Skiba
Professor of Law and Professor of Economics
Vanderbilt Law School
Richard Squire
Professor of Law & Alpin J. Cameron Chair in Law
Fordham Law School
Frederick Tung
Professor of Law
and Howard Zhang Faculty Research Scholar
Boston University
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.