Opposition Brief — Bank of New York v. Continental Airlines, Inc., 117 S. Ct. 686 (1997) (No. 96-662)

Supreme Court U. “i

wv Pha ae

No 96-662 ~~ | NOY 27 1996

CLERK

In The isa

Supreme Court of the United States

~--

October Term, 1996

THE BANK OF NEW YORK, as Collateral Trustee, NEW

JERSEY NATIONAL BANK, HARRIS TRUST AND

SAVINGS BANK, and BOATMEN’S FIRST NATIONAL

BANK OF OKLAHOMA, as First, Second and Third Series

Trustees, respectively,

Petitioners,

VS.

CONTINENTAL AIRLINES, INC.,

Respondent.

On Petition for a Writ of Certiorari to

the United States Court of Appeals for the Third Circuit

RESPONDENT’S BRIEF IN OPPOSITION

RICHARD P. SCHIFTER

Counsel of Record

ANDREW T. KARRON

MICHAEL L. BERNSTEIN

KARI M. DESGALIER

ARNOLD & PORTER

Attorneys for Respondent

555 Twelfth Street, N.W.

Washington, D.C. 20004-2253

(202) 942-5000

i

QUESTION PRESENTED

Whether under the facts and circumstances of this case the

courts below properly applied the doctrine of “equitable

mootness,” which has been uniformly adopted by all federal

circuit courts that have considered the question, in dismissing

Petitioners’ appeals of a bankruptcy court order confirming a

Chapter 11 plan of reorganization and incorporating prior

interlocutory orders denying Petitioners’ claims, where:

(a) Petitioners knew that the plan of reorganization would be

implemented promptly unless they obtained a stay of the

confirmation order; (b) Petitioners also knew that if the plan

were implemented, their appeals might be subject to dismissal

under the equitable mootness doctrine; (c) Petitioners nonetheless

failed diligently to seek a Stay and refused to post any bond to

support a stay; and (d) the relief sought by Petitioners would

retroactively alter the fundamental economic basis of the

confirmed plan and, therefore, be inequitable to investors and

numerous other third parties who had relied on the unstayed

confirmation order in substantially consummating the plan of

reorganization?

il

PARTIES TO THE PROCEEDING BELOW

Respondent incorporates by reference Petitioners’ list of

parties to the proceeding below.

RULE 29.6 LIST

Continental Airlines, Inc. has no parent company. Its only

non-wholly owned subsidiary is Air Micronesia, Inc.

iii

TABLE OF CONTENTS

Page

(Site SIMPY SMM RED 60. ss. s cubs. c eon. i

PARTIES TO THE PROCEEDING BELOW ........ ii

cc ii

WIR TITS ooo oes voc doiedccece..e. iii

Beemer Se RPIPPITIOS oo occ ones nce c cee. iv

ot hochcsas target coe dual EE a ae es l

STATEMENT OF JURISDICTION ................ l

SIAIEMEN? OF THE CASE .................... l

A. Background: Continental’s Chapter 11

Bankruptcy and Reorganization ............. 1

B. Nature Of Petitioners’ Claims At Issue ........ 3

C. The Bankruptcy Court’s Determinations That

Petitioners’ Claims Lacked Merit ............ 4

D. Petitioners’ Failure Diligently To Seek A Stay Of

The Confirmation Order ................... 7

E. Substantial Consummation Of The Plan ...... 10

iv

Contents

Page

G. The Third Circuit’s Affirmance Of The District

Court’s Dismissal Of TheAppeals ............ 11

1. The Jn Banc Majority Opinion .......... 11

yey SP eer eT ee rele 14

REASONS FOR DENYING THE WRIT ........... 15

I. The “Equitable Mootness” Doctrine Applied By

The Third Circuit Is Consistent With The Law In

Every Circuit That Has Addressed The Issue. .. 16

A. Nine Circuit Courts Of Appeals Have

Adopted The “Equitable Mootness” Doctrine

In Bankruptcy Appeals As An Essential

Means Of Furthering Important Bankruptcy

FUMED. sc kccbdendhctakes hee Labneedes 16

B. There Is No Conflict Among The Circuits

As To The Legal Standazd To Be Applied In

Determining Whether A Bankruptcy Appeal

RS TOE Be ons cx cdsandiaeecsoss 19

Il. Petitioners Have Waived Any Challenge To The

Legitimacy Of The Well-Established “Equitable

WECRNOEE EOORUIIIE. 5 ocak eid stdebicessiacos 22

Il. This Case Does Not Present Any Broad Issues Of

Federal Bankruptcy Law Or Policy That Require

Resolution By This Court .................. 23

CAIINGAASRIEE 6 £65 os Wb Gh aS VER Veece an uvensadeeses 24

Contents

Page

TABLE OF AUTHORITIES

Cases Cited:

Aetna Casualty & Surety Co. v. LTV Steel Co. (In re

Chateaugay Corp.), 1995 WL 386483 (S.D.N.Y. June

28, 1995), rev’d and remanded on other grounds, 94

Fue 17S Ce Ce, NSO Or ere 20, 21

Aetna Casualty & Surety Co. v. LTV Steel Co. (In re

Chateaugay Corp.), 94 F.3d 772 (2d Cir. 1996) ... 20

Central States Southeast and Southwest Areas Pension

Fund v. Central Transp., Inc., 841 F.2d 92 (4th Cir.

EER Sh s68 hoo Ode ea oa: 17, 20, 23

Colorado River Water Conservation District v. United

wees, 424 UB. G6 CSTE). eS 22

First Union Real Estate Equity & Mortgage Invs. v. Club

Assocs. (In re Club Assocs.), 956 F.2d 1065 (11th Cir.

PPPOE bas Kha oo eka tea Soe chic ene ti 17, 20

Frito-Lay, Inc. v. LTV Steel Co., Inc. (In re Chateaugay

Corp.), 10 F.3d 944 (2nd Cir. 1993) ....... 11, 17, 20, 21

Holly Farms Corp. v. NLRB, 116 S. Ct. 1396 (1996) . 22

In re Andreuccetti, 975 F.2d 413 (7th Cir. 1992) ..... 17

In re AOV Indus., Inc., 792 F.2d 1140 (D.C. Cir. 1986),

vacated on other grounds, 797 F.2d 1004 (D.C. Cir.

ce i OEE LOT E OPEN ey EDS SR Gh! FO atte nee 17, 20

vi

Contents

Page

In re Clark, 172 B.R. 701 (Bankr. S.D. Ga. 1994) .... 14

In re Continental Airlines, Inc., 146 B.R. 536 (Bankr. D.

EPs SE oo ar Ee ED 6 ES he Ae we aks bis 5

In re Continental Airlines, Inc., 154 B.R. 176 (Bankr. D.

Bi TOD ois occ s 6h 0.a0 anas cess cate hanese 7

In re Farm Bureau Services, Inc., 835 F.2d 877 (6th Cir.

BORE ss 6b euR aces Seah Peek wow oo Rhee eee 14

OORT ai a bnew hak ede 4 chk eawe ue ahaa 18

In re Meyer, 173 B.R. 419 (Bankr. D. Kan. 1994) .... 14

In re Onouli-Kona Land Co., 846 F.2d 1170 (9th Cir.

7 | RIB Sits Bee ac ne ae Pu hep at gh i Syne 18

In re Specialty Equip. Cos., 3 F.3d 1043 (7th Cir. 1993) ... 17

In re Stadium Management Corp., 895 F.2d 845 (1st Cir.

SGD nncak sah ocak oe 00 op 0b ss db aes C908 Ue tines 18

In re UNR Indus., Inc., 20 F.3d 766 (7th Cir.), cert.

denied, 115 S. Ct. 509 (1994) ............... 17, 18, 19

Manges v. Seattle-First Nat’l. Bank (In re Manges), 29

F.3d 1034 (Sth Cir. 1994), cert. denied, 115 S. Ct.

LUGE CIO cen oan tk cacine vend uaeks 0456 véeages 17, 18

vii

Contents

Page

Miami Center Ltd. Partnership v. Bank of New York, 820

F.2d 376 (11th Cir. 1987), cert. denied, 488 U.S. 823

EROMND cho sviablisiebescive ces ee 10

NLRB y. Bildisco & Bildisco, 465 U.S. 513 (1984) ... 18

Official Comm. of Unsecured Creditors of LTV Aerospace

& Defense Co. v. Official Comm. of Unsecured

Creditors of LTV Steel Co. (In re Chateaugay Corp.),

768 F206 322 (26 Clr. 1993) ..;..:........... ide Bde a

Pension Benefit Guaranty Corp. v. Braniff Airways, Inc.,

Pan wae Seo (oe Cie S008 as 9, 10

Pepper v. Litton, 308 U.S. 295 ( | MPEG Maes ee SED sp 23

Quackenbush vy. Allstate Insurance Co., 116 S. Ct. 1712

ROME Vedas ket c onions iu ee 22

Rochman vy. Northeast Utils. Serv, Group (In re Public

Serv. Co. of N.H.), 963 F.2d 469 (ist Cir.), cert.

denied, 506 U.S. 908 (1992) ................... 17, 18

Trone v. Roberts Farms, Inc. (In re Roberts Farms, Inc.),

Oe Bae tes OR Cle 10RD is, fe: 17

United States v. Salerno, 932 F.2d 117 (2d Cir. ROee? desc 18

United States v. Williams, 112 S. Ct. 1735 (1992) .... 22

viii

Contents

Page

Statutes Cited:

LE Ae BOR) i kes as nope so Rens cwksedeSadaks 5

Sh: Dib hes EDR his e's | i tance Ciles sd meewaD Oe deste 18

LEDS SOO KE a oda 4 bode k eENS Fis RNS 5

Sf RG SD ikki dies Psi eee et ie ceuse 18

EA Wide OED, oon eae) dues ad Keb be eeekin 18

BE Fi hes. BO ck cmcucachsikcvacs ye dastaeteees 3

PUBS. § SEGUE ic iss ee CEMA CAMA 11

AL UBL. EF TIZOOMAD 5 0s oh Sees Ses eine 6

TE SAA BD EIGa Do a cos ubvekes Keun scessenss 6

Rules Cited:

Supreats Comit Rel Dos ci cccisc cess ccctenseuves 15, 23

Federal Rule of Bankruptcy Procedure 7062 ......... 8

Federal Rule of Bankruptcy Procedure 8005 ......... 8

Federal Rule of Bankruptcy Procedure 9006(a) ....... 8

ix

Contents

Page

Other Authority Cited:

J. Key, The Advent of the Serial Chapter 11 Filing and

its Implications, 8 Bankr. Dev. J. 245 (1991) ...... 10

1

Respondent Continental Airlines, Inc. respectfully opposes

the Petition for Writ of Certiorari. The decision of the United

States Court of Appeals for the Third Circuit upholding the

dismissal of Petitioners’ bankruptcy appeals under the well-

accepted doctrine of equitable mootness — the legitimacy of

which Petitioners never challenged below — is consistent with

the law in every circuit court of appeals that has addressed the

issue and presents no issue of exceptional importance warranting

review by this Court.

OPINIONS BELOW

Respondent incorporates by reference Petitioners’ statement

of opinions and judgments below.

STATEMENT OF JURISDICTION

Respondent incorporates by reference Petitioners’ statement

of jurisdiction.

STATEMENT OF THE CASE

A. Background:Continental’s Chapter 11

Bankruptcy And Reorganization

This case involves a narrow dispute relating to one of the

largest successful Chapter 11 bankruptcy reorganizations in

history. For approximately two years after filing Chapter 11

bankruptcy petitions on December 3, 1990, Continental

Airlines, Inc. and 53 of its subsidiaries (hereafter collectively

referred to, along with the subsequently established reorganized

entity, as “Continental”) negotiated intensively with creditors

and prospective third-party investors to develop a viable plan

of reorganization. (Appendix (“App.”) to Petition for Certiorari

(“Pet.”) 3a, Sa).

2

Those negotiations ultimately bore fruit: on January 13,

1993, Continental filed its Revised Second Amended Joint Plan

of Reorganization (the “Plan”), which provided for the

consensual restructuring of more than $6 billion in asserted

secured debt and lease obligations and for the resolution of

approximately $3 billion in unsecured claims. (JA 614-814).

The Plan was based on an Investment Agreement by outside

investors (Air Partners, L.P. and Air Canada) to invest $450

million in the reorganized company (the “Investment”) if certain

financial and other conditions were satisfied, including

limitations on the reorganized company’s liability for

administrative claims arising out of the bankruptcy case. (App.

Sa, JA 391-414). The Investment Agreement was expressly

described in the Revised Third Amended Disclosure Statement

and appended to it. (App. 5a, JA 391, 636, 713, 718, 822).

An overwhelming majority of Continental’s thousands of

creditors supported the Plan. (JA 1546). Over 85% of the voting

holders of unsecured claims and 96 of the 100 classes of secured

creditors voted to accept the Plan.

On April 16, 1993, the United States Bankruptcy Court

for the District of Delaware (the “Bankruptcy Court”) confirmed

the Plan after a nine-day evidentiary hearing. (JA 1532-1613).

The Confirmation Order was based, among other things, on

the Bankruptcy Court’s determination that the Plan was

“feasible,” as required by section 1129(a)(11) of the Bankruptcy

Code. (App. 135a, 137a-139a, JA 1548-53 FJ 31, 35-37, 40).

The feasibility determination rested on the Bankruptcy Court’s

careful consideration of numerous facts and factors set forth in

the Confirmation Order. In particular, the court found that

because the total administrative claims against the reorganized

company would not exceed the Investment Agreement cap on

such claims, the Investors would invest the $450 million that

was essential to the Plan. (App. 19a-20a, 137a-138a).

3

Petitioners’, who were among the few groups of creditors

that did not support the Plan, appealed the Confirmation Order

and other interlocutory Bankruptcy Court orders incorporated

therein to the District Court (collectively, the “Appeals”). (App.

6a). However, Petitioners failed to obtain a stay of the

Confirmation Order, primarily because they refused to offer to

post any supersedeas bond in support of a stay.” (App. 6a, 16a,

66a, infra, p. 9).

On April 27, 1993, in reliance upon the unstayed

Confirmation Order, the Plan was consummated with the $450

million Investment and related transactions accomplished in a

consolidated closing. (App. 6a-7a, 25a-26a; infra, p. 10).

Continental successfully reorganized and emerged from

bankruptcy as the sixth largest air carrier in the United States.

(JA 1454).

B. Nature Of Petitioners’ Claims At Issue

Petitioners’ Appeals relate to only a portion of a $180

million alleged secured claim Petitioners filed in Continental’s

bankruptcy. Under the Bankruptcy Code, alleged secured claims

such as Petitioners’ have two separate components. The claim

is deemed secured up to the actual value of the collateral. 11

U.S.C. § 506(a) (1995). To the extent the amount of the claim

exceeds the value of the collateral, or is “undersecured,” the

amount in excess of the value of the collateral (the “deficiency”)

is treated as an unsecured claim. Jd. (See also App. 61a).

1. As used herein, “Petitioners” refers to Petitioners’ predecessors-in-

interest as trustees for holders of certain debt certificates issued by Continental

and secured by aircraft and aircraft engines (the “Collateral”).

2. Petitioners’. disingenuous statement that they could not post a bond

of $450 million (Pet. at 7) ignores the District Court’s invitation to propose a

lesser amount and Petitioners’ refusal thereafter to offer to post any bond.

See infra, p. 9.

4

Pursuant to the Plan, the secured component of Petitioners’

claim with respect to the Collateral was treated identically to

those of other secured claimants: Continental returned the

Collateral to Petitioners. (App. 46a). In addition, prior to

confirmation, Petitioners and Continental reached a cash

settlement concerning that portion of the undersecured

component of Petitioners’ claim which was based on alleged

“use” decline in the value of the Collateral due to use and wear

and tear. (App. 5a-6a, JA 1511).

The underlying dispute here relates solely to Petitioners’

contention that the Bankruptcy Court erred in refusing to treat

the portion of Petitioners’ unsecured claim relating to an alleged

decline in the market value of the Collateral as an administrative

priority claim — that is, a claim to be paid by the reorganized

company in cash, superior to those of other unsecured creditors.

(App. 5a-6a, 61a). Over Petitioners’ objection, this portion of

their claim was treated as a general unsecured claim and not

given any special priority status. (App. 46a).

C. The Bankruptcy Court’s Determinations

That Petitioners’ Claims Lacked Merit

On June 28, 1991, Petitioners jointly moved for “adequate

protection” of their interest in the Collateral (“Initial Motion”).

(App. 4a; JA 47-48).° In that motion, Petitioners requested

payment from the debtors-in-possession to compensate

Petitioners for alleged declines in the value of the Collateral.

However, Petitioners did not seek to lift the automatic stay so

they could repossess the Collateral. (App. 190a, JA 47-59).

Continental opposed the motions on the ground, among others,

3. Petitioners’ reference to the filing of an earlier motion by one of

Petitioners’ predecessors-in-interest (see Pet. at 3) ignores the subsequent

withdrawal of that motion (see App. 4a).

5

that Petitioners’ recovery was barred by their failure to move to

lift the automatic stay — that is, to seek return of the Collateral

and to assume the risk of market value decline. (App. 4a, 190a).

After a four-day hearing, the Bankruptcy Court denied the

Initial Motion on August 27, 1992. In re Continental Airlines,

Inc., 146 B.R. 536 (Bankr. D. Del. 1992) (App. 187a-198a).

Weighing the evidence presented at the hearing, including the

testimony of three experts, the Bankruptcy Court held that

Petitioners were not entitled to recover because the value of the

Collateral in fact had not declined since the filing of the motion.

(App. 4a, 197a).

Not until August 14, 1992, did Petitioners move under

Bankruptcy Code § 362(d) to lift the automatic Stay so that

they might repossess the Collateral. (JA 213-35). It had been

21 months since the petition date, and months since Continental

opposed the Initial Motion on the grounds that Petitioners had

failed to seek to lift the automatic stay. A month later, on

September 14, 1992, Petitioners renewed their motion for

“adequate protection” pursuant to Section 363(e), seeking

payment for alleged declines in the Collateral’s value from July

1991 forward. (JA 243-53). The Bankruptcy Court conducted

hearings on the motions on several days in late 1992, concluding

the hearings on February 2, 1993.

Once again, evidence adduced at the hearings showed that

the Collateral had not declined in market value since August

14, 1992, but — to the contrary — actually had increased in

value. (JA 292-94; 445; 464-65; 482-83; 942-43; 1133-35:

1146, Row D-E, Columns 17-20; 1146, Columns 6, 12, 15

and 16; 1169). The evidence indicated that any decline in value

had occurred between September 1991 and early August 1992.

(Id.) . ‘

6

On January 13, 1993, Continental filed its Second Amended

Plan of Reorganization, based on the Investment Agreement.

See supra, p. 2. As noted previously, the $450 million

Investment that was the linchpin of the Plan was subject to

several conditions precedent. (JA 391-414). A central condition

was that Continental’s administrative expenses, which would

be liabilities of the reorganized entity, would not exceed a

specified amount. (See Investment Agreement § 6(xi)(e), JA

408; supra, p. 2).

Although Petitioners’ pending motions were fully briefed

and argued as of March 16, 1993 — the first day of Plan

confirmation hearings — the Bankruptcy Court had not yet

decided the motions. (App. 18a). However, resolution of the

motions was critical to determining whether the proposed Plan

would be feasible. Allowance of Petitioners’ asserted $117

million administrative priority claim would result in

administrative claims greatly in excess of the Investment

Agreement cap. Under the Bankruptcy Code, administrative

expense claims would be immediately due and payable by the

reorganized entity. 11 U.S.C. § 1129(a)(9)(A). Post-

reorganization payment of such claims would substantially

deplete the cash available to the reorganized airline, which would

be operating in a volatile industry where cash reserves are critical.

If, therefore, Petitioners’ motions were granted, the Investors

would decline to invest the $450 million, and the Plan would

be infeasible and therefore unconfirmable under 11 U.S.C.

§ 1129(a)(11). (App. 19a-20a, JA 1205, 1432, 1550, 1744-

46).

Recognizing that resolution of Petitioners’ pending motions

was necessary before the prospective obligations of the

reorganized entity, and the feasibility and confirmability of the

Plan, could be assessed, Continental and the Investors asked

7

the court to rule on Petitioners’ motions in conjunction with

Plan confirmation. (JA 1455, 1458, 1473). At the conclusion

of the confirmation hearing on April 16, 1993, the Bankruptcy

Court denied both motions. It held that Petitioners were not

entitled to market decline “adequate protection” payments for

periods prior to their motion to take back their Collateral, and

that the evidence established that the value of the Collateral had

not declined after that date. Jn re Continental Airlines, Inc.,

154 B.R. 176, 180-82 (Bankr. D. Del. 1993) (App. 183a) .

In its Confirmation Order determining that the Plan was

feasible, the Bankruptcy Court necessarily relied upon its

decision denying Petitioners’ motions. (App. 137a, 138a, JA

1551-52). The Bankruptcy Court recognized that its

determination that Petitioners had no administrative claim

resolved any uncertainty concerning satisfaction of the

Investment Agreement condition limiting administrative claims

and therefore removed an obstacle to the Investment which was

essential to the Plan’s feasibility.* (App. 19a, 135a, 138a, JA

1548-51 ¥{ 31, 35). The Bankruptcy Court incorporated these

findings into the Confirmation Order because they were integral

to the required feasibility determination. The unsecured portion

of Petitioners’ claim thus was denied special status and received

the same treatment as all other unsecured claims.

D. Petitioners’ Failure Diligently To Seek

A Stay Of The Confirmation Order

Petitioners undertook limited, procedurally flawed, and

ultimately futile efforts to obtain a stay pending appeal of the

Confirmation Order. Most significantly, they refused to offer to

4. Resolution of Petitioners’ administrative claim also made it

unnecessary to require the Debtors to deposit funds in a segregated account

as Petitioners had requested. (App. 138a).

8

post a bond in any amount. (App. 107a). They made this choice

despite the District Court’s requests that Petitioners suggest a

reasonable bond and despite their knowledge that failure to

obtain a stay risked dismissal of their Appeals. (App. 16a, 24a,

59a).

The automatic stay of the Confirmation Order pursuant to

Fed. R. Bankr. P. 7062 expired on April 27, 1993, ten days

after entry of the Confirmation Order. Fed. R. Bankr. P. 9006(a).

Yet, Petitioners waited six days after entry to request a stay of

the Confirmation Order. (JA 1614-20). Moreover, when

Petitioners finally did request a stay, late on April 22, 1993,

they improperly moved in the District Court, in contravention

of Fed. R. Bankr. P. 8005, which requires that such a stay motion

first be presented to the Bankruptcy Court. For that reason, on

April 23, 1993, the District Court dismissed the stay motion

without prejudice. (JA 1668-1711, 1757-63). The District Court

concluded that dismissal was

particularly warranted under the facts of the

instant case, where the “emergency” nature

of [Petitioners’] motion was created in large

measure by [Petitioners]. [Petitioners] could

have brought an application for a stay

pending appeal in the Bankruptcy Court as

early as Monday, April 19, 1993.

(JA 1762).

Petitioners inexplicably waited three more days, until late

in the afternoon of April 26, 1993, before seeking a stay from

the Bankruptcy Court. Bankruptcy Court Docket Entry #7115.

Because the Bankruptcy Court was unavailable, the District

Court heard the stay application on April 27, 1993. (JA 1712-

54).

9

The District Court again denied the stay motion (JA 1755-

56), primarily because Petitioners were unwilling to offer to

post a bond in any amount. (JA 1725, 1729, 1756; see also

App. 16a, 66a). Contrary to Petitioners’ suggestion (see Pet. at

7), the District Court never required a bond in the amount of

$450 million. (App. 16a). Instead, it sought Petitioners’ views

as to what amount would be reasonable. (/d.). As the District

Court subsequently recognized, Petitioners’ failure to obtain a

stay was attributable to their own “choice not to post a bond”

of any sort. (App. 107a).

In refusing to post any bond in the District Court and,

thereafter, failing to pursue any further efforts to seek a stay in

the Court of Appeals, Petitioners were well aware that they risked

dismissal of their Appeals. They knew that, absent a stay, the

confirmed Plan would be implemented promptly and their

appeals from the Confirmation Order would be at risk of

dismissal pursuant to the well-established equitable mootness

doctrine. At both stay hearings, Continental expressly stated its

intention to consummate the Plan promptly on April 27, 1993,

if no stay were in effect. (JA 1692-93, 1742). Moreover, both

at the confirmation hearing and at the stay hearing, Petitioners’

own counsel explicitly recognized that, absent a stay, Continental

would seek to dismiss the Appeals as equitably moot. (JA 1403,

1752; see also App. 24a, 59a). Nonetheless, they declined to

take the action required to ensure that the Appeals would be

resolved prior to consummation of the Plan.

5. This case thus stands in stark contrast to the handling of appeals in

another airline bankruptcy. In Pension Benefit Guaranty Corp. v. Braniff

Airways, Inc., 700 F.2d 935, 938-39 (5th Cir. 1983), appellants arranged an

expedited appeal process in which appeals of a February 1, 1983, bankruptcy

court order to the district court and the Fifth Circuit were completed by

March 2, 1983, prior to the scheduled deadline for consummation of the

transaction at issue.

10

E. Substantial Consummation Of The Plan

Relying on the unstayed Confirmation Order, the Investors

invested $450 million in Continental.* The Investment was made

as part of a single integrated closing, which included the

following material transactions (among others): the merger of

54 Continental-related debtors into a new entity; the investment

of $110 million in cash by Air Partners and Air Canada into the

reorganized Continental; an additional $30 million investment

by Air Canada into the reorganized Continental; the purchase

by ASATT Corp., a designee of Air Canada, of $150 million

of secured notes issued by reorganized Continental; reorganized

Continental’s assumption of more than 600 unexpired leases

and executory contracts worth over $5.0 billion; the

abandonment of Continental’s interest in equipment collateral;

and the issuance of new debt and distributions of cash and stock

to various categories of creditors pursuant to the Plan. (App.

26a, JA 691, 708, 719, 1812-1815). As a result of these

6. Contrary to Petitioners’ insinuation, there was nothing sinister about

Continental’s prompt consummation of the Plan, which is the norm in large

bankruptcy cases. See, ¢.g., Miami Center Ltd. Partnership v. Bank of New

York, 820 F.2d 376, 378 (11th Cir. 1987), cert. denied, 488 U.S. 823 (1988);

Braniff Airways, 700 F.2d at 939 (expediting appeals in airline bankruptcy

case “[bjecause business exigencies required that the [ ] transaction be

consummated soon if it was to happen at all”); J. Key, The Advent of the

Serial Chapter 1] Filing and its Implications, 8 Bankr. Dev. J. 245, 253

(1991) (“the majority of plans are substantially consummated . . . immediately

after confirmation”). In this case, prompt implementation of the Plan was

essential to avoid a risk that one or more of the transactions would become

impossible due to changed circumstances. Cf. Braniff Airways, supra. The

Investment Agreement expressly provided that the Investment was

conditioned on consummation of the Plan by April 30, 1993. (JA 411).

11

transactions, the Plan was substantially consummated.’

F. Dismissal Of Petitioners’ Appeals

On May 6, 1993, Continental moved to dismiss Petitioners’

Appeals as equitably moot. (JA 1771-75). In opposing the

motion; Petitioners did not challenge the validity of the

equitable mootness doctrine, but merely disputed that it required

dismissal of their Appeals. (App. lla, 28a, JA 1965-1977).

The District Court granted the motion. (JA 1870-75). Petitioners

sought reconsideration, relying on Frito-Lay, Inc. v. LTV Steel

Co., Inc. (In re Chateaugay Corp.), 10 F.3d 944 (2nd Cir. 1993)

(“Chateaugay II”), a recent appellate decision applying the

equitable mootness doctrine, to argue again that the doctrine

did not require dismissal of the Appeals. (JA 1876-99). The

District Court denied the motion. (App. 101a-103a).

G. The Third Circuit’s Affirmance Of

The District Court’s Dismissal Of The Appeals

On appeal, a divided panel of the Third Circuit Court of

Appeals affirmed. (App. 75a-100a). After rehearing in banc, a

majority of the Court of Appeals similarly concluded that the

District Court properly applied the doctrine of equitable

mootness in dismissing the Appeals. (App. la-38a, 74a).

1. The In Banc Majority Opinion

The majority opinion, written by Chief Judge Sloviter,

7. The Bankruptcy Code defines “substantial consummation” as

“(A) transfer of all or substantially all of the property proposed by the plan

to be transferred; (B) assumption by the debtor or by the successor to the

debtor under the plan of the business or of the management of all or

substantially all of the property dealt with by the plan; and (C) commencement

of distribution under the plan.” 11 U.S.C. § 1101(2).

12

recognized that the dispositive issue was not Article III mootness

but, rather, the District Court’s application of the “widely

recognized” and “well-accepted” doctrine of equitable mootness

in bankruptcy appeals to the particular facts of this case. (App.

8a-9a). Under this doctrine, “ ‘[a]n appeal should . . . be

dismissed as moot when, even though effective relief could

conceivably be fashioned, implementation of that relief would

be inequitable.’ ” (App. 10a, quoting Official Comm. of

Unsecured Creditors of LTV Aerospace & Defense Co. v. Official

Comm. of Unsecured Creditors of LTV Steel Co. (In re

Chateaugay Corp.), 988 F.2d 322, 325 (2d Cir. 1993)

( “Chateaugay I” ). The majority cited opinions from seven other

circuit courts of appeal (for the First, Fourth, Fifth, Seventh,

Ninth, Eleventh, and D.C. Circuits) which had recognized and

applied the doctrine. (App. 9a). It also noted — and on this

point the dissent agreed — that Petitioners “have not challenged

the viability of the doctrine of equitable mootness . . . in

bankruptcy cases, nor have they cited to a case in any circuit

that rejects the concept.” (App. 11a, 28a).

The majority identified five factors that courts have

addressed in determining whether a bankruptcy appeal should

be dismissed as equitably moot. These included:

(1) whether the reorganization plan has been

substantially consummated, (2) whether a

stay has been obtained, (3) whether the

relief requested would affect the rights of

parties not before the court, (4) whether the

relief requested would affect the success of

the plan, and (5) the public policy of

affording finality to bankruptcy judgments.

(App. 13a). The majority again noted — and the dissent did

not dispute — that Petitioners “[had] not taken issue with our

identification of these factors.” (App. 13a, 30a).

13

Applying these factors, the majority concluded that, on the

facts of this case, the balance of equitable factors weighed

heavily in favor of dismissal. The substantial consummation of

the plan of reorganization; Petitioners’ failure diligently to seek

and obtain a stay — particularly in light of their knowledge of

the risk of equitable mootness; and the strong public interest in

the finality of bankruptcy judgments all favored dismissal. (App.

14a-16a, 24a). The majority also concluded that relief could

not be equitably granted to Petitioners without unfairly harming

rights of third parties. Reversing the Bankruptcy Court Orders

to allow Petitioners’ proposed administrative claim would

radically alter the fundamental economic basis of the Plan. That

would be unfair to the Investors, who had made the $450 million

investment that was the linchpin of the Plan in reliance on the

unstayed Confirmation Order and “extensive legal precedent”

recognizing the equitable mooiness doctrine, and to other absent

third-parties who similarly had relied on the confirmed Plan in

entering into numerous complex transactions involving the

reorganized Continental. (App. 20a-22a, 24a).

In this regard, the majority rejected as misplaced Petitioners’

reliance on the Plan provision authorizing Continental to pay

disputed administrative claims allowed after confirmation. The

mere existence of a mechanism that could be used for payment

of claims which, unlike Petitioners’ claims, had not been decided

prior to confirmation, did not eliminate the fundamental problem

that “in light of all the circumstances, it would be inequitable

to grant relief.” (App. 24a). Because Petitioners well knew the

risk of equitable mootness, “the Plan provisions allowing for

post-confirmation payment of allowed claims in no way

obviated [Petitioners’] obligation to seek a stay.” (/d.).

The majority also rejected, as supported by “no evidence,”

Petitioners’ suggestion that the Bankruptcy Court was

improperly influenced in its determination denying Petitioners’

14

suggestion that the Bankruptcy Court was improperly influenced

in its determination denying Petitioners’ claim. (App. 19a).

Petitioners’ argument in this regard essentially amounted to a

challenge to the Investment Agreement provision conditioning

the investment on compliance with a “cap” on administrative

expenses. But, the majority noted, Petitioners never had raised

such a challenge in the Bankruptcy Court, nor had they

identified any legal basis for such a challenge. (App. 19a). The

majority similarly concluded that the incorporation in the

Confirmation Order of the Bankruptcy Court’s denials of

Petitioners’ claims “was reasonable and reflected the inescapable

fact that [Petitioners’] claim and the confirmation of Plan were

inextricably intertwined.”* (App. 20a)

For all these reasons, the majority concluded that “[u)nder

the circumstances presented here, we can see no prudential

considerations” that would justify an attempt to fashion even a

limited remedy for Petitioners. (App. 7a, 26a).

2. The In Banc Dissent

Judge Alito, the author of the panel dissent, also wrote the

dissent in banc. (App. 27a). He recognized that

[Petitioners] have not contested the existence

of the doctrine of “equitable mootness,” and

in light of [Petitioners’] position, I think that

8. The majority’s conclusion is consistent with precedent recognizing

the appropriateness of incorporating into a confirmation order prior findings

or orders that are relevant to the determinations required for confirmation.

See, e.g., In re Farm Bureau Services, Inc., 835 F.2d 877 (6th Cir. 1987); In

re Meyer, 173 B.R. 419, 421 (Bankr. D. Kan. 1994) (stipulation and order

for adequate protection incorporated into confirmation order); /n re Clark,

172 B.R. 701, 704 (Bankr. S.D. Ga. 1994) (“confirmation order necessarily

incorporates any orders that may be entered by the court in connection with

the allowance of claims.”).

15

it is appropriate to assume the existence of

this doctrine for purposes of this appeal.

(App. 28a).

The dissent did not demonstrate any inconsistency between

the majority’s “equitable mootness” analysis and those of other

circuits. (App. 29a-30a). Instead, the dissent contended that the

majority erred in failing to “ma[k]Je an independent examination

of the basis and scope of the doctrine of ‘equitable mootness’

before engraving it in our circuit’s law.” (App. 30a). That is,

the dissent contended that the majority had erred by not

departing from the law in its sister circuits. (See App. 32a-33a).

The dissent then reviewed the development of the law of

equitable mootness and developed its own proposed approach.

Under that approach — for which the dissent cited no authority

— the Appeals should be considered on the merits, and equitable

concerns relating to Petitioners’ failure to obtain a stay, the

finality of plans of reorganization, and protection of third parties,

rights should be addressed only “at the remedial stage, if that

stage is ever reached.” (App. 37a).

REASONS FOR DENYING THE WRIT

None of the “compelling reasons” that this Court has

required for certiorari is present in this case. S. Ct. Rule 10.

To the contrary, this is simply another instance in which a litigant

who lost when well-established law was applied to complex

facts seeks to overturn that decision by belatedly conjuring up

legal theories and policy arguments in the hopes of obtaining

certiorari

In applying the “equitable mootness” doctrine long

recognized in eight other federal circuits, the Third Circuit

16

maintained the uniformity of federal law in this area. The strained

argument at the end of the Petition that ninor syntactic

differences in the courts’ references to one of the several equitable

factors that courts balance constitute a narrow circuit split is

meritless. See infra, pp. 19-21.

Petitioners’ unquestioning acceptance of the equitable

mootness doctrine in the courts below bars — and belies —

their broad challenges in this Court to its legitimacy. See infra,

§ II. Nothing in the flexible, pragmatic equitable mootness

doctrine — or the Third Circuit’s decision applying it in this

case — prevents effective appellate review of bankruptcy court

decisions or undermines established law requiring compliance

with confirmed plans of reorganization. Cf. Pet. at 13. The

dismissal of Petitioners’ appeals in this case was attributable to

their choice not to post a bond and obtain a stay of the

Confirmation Order that would have protected the interests of

all parties. That Petitioners may now regret the entirely

foreseeable consequences of that tactical decision in no way

undermines the soundness of the decision below.

L

THE “EQUITABLE MOOTNESS” DOCTRINE

APPLIED BY THE THIRD CIRCUIT IS CONSISTENT

WITH THE LAW IN EVERY CIRCUIT THAT HAS

ADDRESSED THE ISSUE.

A. Nine Circuit Courts Of Appeals Have Adopted The

“Equitable Mootness” Doctrine In Bankruptcy Appeals

As An Essential Means Of Furthering Important

Bankruptcy Policies.

Petitioners cannot — and do not — dispute that, as the in

banc majority recognized and the dissent did not dispute, every

17

circuit that has considered the issue has held that federal courts

may appropriately rely on equitable and prudential

considerations to dismiss bankruptcy appeals that are not

constitutionally moot but which are pending after substantial

consummation of a confirmed plan of reorganization.’ As these

courts have recognized, the “equitable mootness” doctrine

derives from “concerns unique to bankruptcy proceedings.”

Manges, 29 F.3d at 1038. See also UNR, 20 F.3d at 769-71.

Under the doctrine, “a reviewing court may decline to consider

the merits of a confirmation order when there has been

substantial consummation of the plan such that effective judicial

relief is no longer available” without imposing inequitable

adverse consequences upon “third parties who are not before

the reviewing court but who have acted in reliance upon the

plan as implemented.” Manges, 29 F.3d at 1039. Courts have

declined requests for relief which would be “effective” for the

appellant but inequitable to other parties. See, e.g., UNR, 20

F.3d at 769-71; Chateaugay I, 988 F.2d at 325; Central States,

841 F.2d at 96. The equitable component of the mootness

doctrine in bankruptcy proceedings thus reflects “a recognition

by the appellate courts that there is a point beyond which they

9. See App. 9a; Manges v. Seattle-First Nat'l Bank (In re Manges), 29

F.3d 1034, 1038-39 (Sth Cir. 1994), cert. denied, 115 S. Ct. 1105 (1995); In

re UNR Indus., Inc., 20 F.3d 766, 769-71 (7th Cir.) (accepting substantive

doctrine but rejecting phrase “equitable mootness”), cert. denied, 115 S. Ct.

509 (1994); Chateaugay Il, 10 F.3d 944, 952-53 (2d Cir. 1993); In re

Specialty Equip. Cos., 3 F.3d 1043, 1048 (7th Cir. 1993); Chateaugay I,

988 F.2d 322, 325 (2d Cir. 1993); Rochman v. Northeast Utils. Serv. Group

(In re Public Serv. Co. of N.H.), 963 F.2d 469, 471-72 (ist Cir.), cert. denied,

506 U.S. 908 (1992); First Union Real Estate Equity & Mortgage Invs. v.

Club Assocs. (in re Club Assocs.), 956 F.2d 1065, 1069-70 (11th Cir. 1992);

In re Andreuccetti, 975 F.2d 413, 418 (7th Cir. 1992); Central States

Southeast and Southwest Areas Pension Fund v. Central Transp., Inc., 841

F.2d 92, 95-96 (4th Cir. 1988); In re AOV Indus., Inc., 792 F.2d 1140, 1147

(D.C. Cir. 1986), vacated on other grounds, 797 F.2d 1004 (D.C. Cir. 1986);

Trone v. Roberts Farms, Inc. (In re Roberts Farms, Inc.), 652 F.2d 793,

796-97 (9th Cir. 1981).

18

cannot order fundamental changes in reorganization actions.”

Manges, 29 F.3d at 1039. See also UNR, 20 F.3d at 769-71.

The courts’ reliance on the mootness doctrine to avoid

disturbing successfully completed reorganizations is rooted in

“the important policy favoring finality in bankruptcy

proceedings.” Jn re Public Serv. Co., 963 F.2d at 474. See also

In re Onouli-Kona Land Co., 846 F.2d 1170, 1172 (9th Cir.

1988); In re Information Dialogues, Inc., 662 F.2d 475, 477

(8th Cir. 1981). The finality achieved by rigorous application

of the equitable mootness doctrine protects not only the interests

of the debtor and third parties in particular bankruptcy

proceedings, but, even more importantly, the strong public

interest in successful bankruptcy reorganizations. See NLRB v.

Bildisco & Bildisco, 465 U.S. 513, 527 (1984). The importance

of finality to successful reorganizations is demonstrated by

sections 363(m) and 364(m) of the Bankruptcy Code. Those

sections provide comfort to third party lenders and asset

purchasers which is essential to maximize the value of estate

assets. See United States v. Salerno, 932 F.2d 117, 123 (2d

Cir. 1991); In re Stadium Management Corp., 895 F.2d 845,

847 (Ist Cir. 1990).

As the Seventh Circuit recognized in UNR, the principle

embodied in Bankruptcy Code § 363 similarly requires that

transactions which are integral to confirmed and substantially

consummated plans of reorganization should not be upset on

appeal. See UNR, 20 F.3d at 769. Judge Easterbrook explained

that this rule is essential to attracting the new capital needed for

successful reorganizations.

{I]t is the reliance interests engendered by

the plan, coupled with the difficulty of

reversing the critical transactions, that

counsels against attempts to unwind things

19

on appeal. Every incremental risk of revision

on appeal puts a cloud over the plan of

reorganization, and derivatively over the

assets of the reorganized firm. People pay

less for assets that may be snatched back or

otherwise affected by subsequent events.

Self-protection through the adjustment of

prices may affect the viability of the

reorganization .... By protecting the interests

of persons who acquire assets in reliance on

a plan of reorganization, a court increases

the price the estate can realize ex ante, and

thus produces benefits for creditors in the

aggregate.

UNR, 20 F.3d at 770.

B. There Is No Conflict Among The Circuits As To The

Legal Standard To Be Applied In Determining Whether

A Bankruptcy Appeal Is Equitably Moot.

Petitioners rely on semantic differences in snippets of

language cropped from some appellate decisions to argue at the

end of their Petition that there is a narrow conflict in the circuits

as to the standard for evaluating mootness. See Pet. at 20. They

assert that some circuits permit equitable mootness dismissals

of bankruptcy appeals only where “effective relief” is not

available, which Petitioners argue is a narrower standard than

that articulated in other cases upholding dismissal where it is

not “‘equitable’ to grant relief.” Jd.

Petitioners’ distinction — and the purported conflict — is

illusory. The decisions cited by Petitioners make clear that in

those cases — as in this one — the court’s determination whether

it would be possible to grant “effective relief” included an

20

assessment of whether such relief would be equitable to third

parties who, like the Investors, relied on an unstayed

confirmation order. For example, in Jn re Club Assocs., supra,

the Eleventh Circuit affirmed an equitable mootness dismissal,

expressly recognizing that the mootness analysis required

inquiry into the question “[w]hat effect would granting relief

have on the interests of third parties not before the court?” —

in that case, third-party investors who had committed new funds

to the reorganized entity in substantial reliance on an unstayed

confirmation order. 956 F.2d at 1069 n.11, 1070. Similarly, in

In re AOV Indus., Inc., the D.C. Circuit emphasized “the limits

of our determination” that certain appealed claims were not

equitably moot — which included the fact that, unlike in this

case, “[all] of the parties that could be affected by these claims

were before this court.” 792 F.2d at 1149. And in Central States,

the Fourth Circuit dismissed an appeal as equitably moot where

even the narrower relief proposed would have “impose{d]

substantial adverse consequences upon . . . absent persons”

whose support of the confirmed plan was “at least partially based

upon” economic terms that would have been changed by the

proposed relief. 841 F.2d at 95, 96.

Nor do the Chateaugay cases upon which Petitioners rely

so heavily support their proposed distinction. In the most recent

such decision, Aetna Casualty & Surety Co. v. LTV Steel Co.

(In re Chateaugay Corp.) (“Chateaugay Ili”), 94 F.3d 772

(2d Cir. 1996), the Second Circuit affirmed that portion of a

district court decision “applying the factors we enumerated in

[Chateaugay IT}” to determine that appeals of bankruptcy court

orders approving a settlement were not equitably moot. /d. at

776. The affirmed district court decision expressly stated the

rule previously established in the Second Circuit’s prior

Chateaugay decisions as providing that

An appeal should also be dismissed as moot

21

when, even though effective relief could

conceivably be fashioned, implementation of

that relief would be inequitable.

Aetna Casualty & Surety Co. v. LTV Steel Co. (In re Chateaugay

Corp.), 1995 WL 386483 at *3 (S.D.N.Y. June 28, 1995),

rev'd and remanded on other grounds, 94 F.3d 772 (2d Cir.

1996). See also Chateaugay I, 988 F.2d at 325 (same);

Chateaugay II, 10 F.3d at 952-53 (to avoid mootness, appellant

must show satisfaction of all elements of a multi-factor test,

including that “appellant pursued with diligence all available

remedies to obtain a stay . . . if the failure to do so creates a

situation rendering it inequitable to reverse the orders appealed

from.”).

Indeed, the Petition itself refutes the suggestion that this

Court needs to resolve a purported narrow circuit conflict. The

language of the Petition discloses Petitioners’ recognition that

the term “effective relief” incorporates an analysis of whether

relief would be equitable — that is, effective for all concerned.

See Pet. at i, Question Presented No. 2 (suggesting that test for

equitable mootness should be whether “effective relief can be

fashioned in favor of the creditor that would not imperil the

debtor’s reorganization or upset any reasonable reliance

interest”). (Emphasis added). See also id. at 21 (characterizing

holding in Chateaugay II as having rejected LTV’s [mootness]

argument because effective relief could be fashioned without

imperiling the reorganization or upsetting any reasonable

reliance interest): (Emphasis added).

22

Il.

PETITIONERS HAVE WAIVED ANY CHALLENGE

TO THE LEGITIMACY OF THE WELL-ESTABLISHED

“EQUITABLE MOOTNESS” DOCTRINE.

Petitioners raise an argument never previously presented

in this case: that a federal court’s dismissal of a bankruptcy

appeal as equitably moot is improper because the court lacks

authority to decline to exercise statutorily authorized jurisdiction.

(Pet. at 13-15; compare App. 28a). In the courts below,

Petitioners never challenged the legitimacy of the equitable

mootness doctrine per se; to the contrary, they expressly relied

on equitable mootness cases to argue that their Appeals were

not moot. See supra, p. 11. Because the issue Petitioners now

seek to raise was not briefed in or passed on by the Third Circuit

in affirming the dismissal of Petitioners’ Appeals, this Court

should apply its traditional rule and decline to grant certiorari

to address this issue. See Holly Farms Corp. v. NLRB, 116 S.

Ct. 1396, 1402 n. 7 (1996); United States v. Williams, 112 S.

Ct. 1735, 1738 (1992).

Even if Petitioners’ waiver did not bar their challenge to

the validity per se of the “equitable mootness” doctrine, the

argument does not merit review. The rigid rule Petitioners now

belatedly propose would require the Court to overrule uniform

precedent established during the past 15 years in nine federal

circuits. Moreover, the cases cited by Petitioners in support of

their belatedly asserted theory arose, as Petitioners themselves

acknowledge, “in another context” of abstention and related

doctrines of federalism. (Pet. at 15, citing Colorado River Water

Conservation District v. United States, 424 U.S. 800 (1976);

Quackenbush v. Allstate Insurance Co., 116 S. Ct. 1712 (1996)).

Those ductrines are not implicated in bankruptcy appeals, which

are exclusively federal proceedings in which the rules and

23

principles of equity play a central role. Pepper v. Litton, 308

U.S. 295, 304 (1939).

Il.

THIS CASE DOES NOT PRESENT ANY BROAD

ISSUES OF FEDERAL BANKRUPTCY LAW OR POLICY

THAT REQUIRE RESOLUTION BY THIS COURT.

Petitioners’ remaining arguments for review involve

precisely the sorts of disputes about a lower court’s application

of established law to complex facts that this Court routinely

refuses to review. See Supreme Court Rule 10. Equitable

mootness determinations such as the one at issue here are

necessarily based “upon close consideration of the relief sought

in light of the facts of the particular case.” Central States, 841

F.2d at 96. (See also App. 20a, 25a-26a).

For that reason, there is no merit to Petitioners’

melodramatic suggestions that the decision below will introduce

uncertainty into the Chapter 11 reorganization process by giving

investors’ interests “unreviewable weight” in determining

creditors, rights, undermining existing law requiring compliance

with confirmed plans of reorganization, or permitting

bankruptcy courts to insulate their decisions from judicial

review. See Pet. at 16-17. Bankruptcy courts and parties to future

reorganization proceedings will understand that the Bankruptcy

Court decision denying Petitioners’ claims turned on the specific

requests for relief set forth in Petitioners’ motions and the

Bankruptcy Court’s factual findings concerning those claims

based on evidentiary hearings and expert testimony." They will

10. As Continental explained in its briefs in the courts below, the

Bankruptcy Court’s decision was correct not only as a matter of fact but also

as a matter of law and policy. To hold that Petitioners could recover for

alleged market value decline that occurred prior to their request to take back

the Collateral would effectively make other unsecured creditors insurers of

market risk to creditors who refused themselves to assume any of that risk.

24

further understand that the equitable mootness determination

dismissing Petitioners’ Appeals of the Bankruptcy Court orders

turned upon the specific terms of a complex plan of

reorganization and the Investment Agreement upon which the

Plan was based, Petitioners’ refusal to post any bond in support

of a stay pending appeal, and third parties’ substantial

irrevocable changes of position in reliance upon the unstayed

Confirmation Order. To the extent the rulings below have any

broader meaning, it is only to reaffirm the already well-

established proposition that appellants from bankruptcy

confirmation orders who fail diligently to seek a stay of such

orders risk dismissal of their appeals as equitably moot if the

plan of reorganization is substantially consummated, depending

upon all the facts and circumstances.

CONCLUSION

The petition for writ of certiorari should be denied.

Respectfully submitted,

RICHARD P. SCHIFTER

Counsel of Record

ANDREW T. KARRON

MICHAEL L. BERNSTEIN

KARI M. DESGALIER

ARNOLD & PORTER

Attorneys for Respondent

555 Twelfth Street, N.W.

Washington, D.C. 20004-2253

(202) 942-5000

November 27, 1996