On Aug. 31, 2012, the United States Court of Appeals for the Second Circuit issued its decision in In re Charter Communications Inc., (2d Cir. Aug. 31, 2012), expressly adopting an abuse of discretion standard for reviewing equitable mootness determinations. The Charter Communications decision also reaffirmed the Second Circuit’s rebuttable presumption of equitable mootness upon substantial consummation of a debtor’s reorganization plan, which places the burden on appellants to overcome equitable mootness.
Accordingly, the Charter Communications decision is significant because the adoption of the abuse of discretion standard for review coupled with the rebuttable presumption signifies that appellants likely face a difficult task appealing bankruptcy court decisions in
the Second Circuit after substantial consummation of a reorganization plan.
Equitable Mootness DoctrineDoctrine of “equitable mootness” is not based on statute. Rather, the doctrine is unique to bankruptcy proceedings and was judicially created to address situations where redress is possible, but it would be inequitable to overturn a confirmed reorganization plan. In other words, “[i]n the bankruptcy context, ‘where the ability to achieve finality is essential to the fashioning of effective remedies,’ equitable mootness serves as ‘a prudential doctrine ... that is invoked to avoid disturbing a reorganization plan once implemented.’” R2 Investments LDC v. Charter Communications Inc. (In re Charter Communications Inc.), 449 B.R. 14, 22 (S.D.N.Y. 2011); see Bank of New York Trust Co. v. Pacific Lumber Co. (In re ScoPac), 624 F.3d 274, 281 (5th Cir. 2010) (“Equitable mootness is not an Article III inquiry into whether a live case or controversy exists, but rather a recognition that there is a point beyond which a court cannot order fundamental changes in reorganization actions.”).