Debtors seeking to dismiss a challenge by creditors to a bankruptcy reorganization under the equitable mootness doctrine have the burden of proving that the appeal should be denied, the U.S. Court of Appeals for the Third Circuit has ruled in a precedential opinion. The appellate court issued the opinion when it held that the evidentiary record did not support a federal judge's decision to dismiss creditors' appeal of an oil company's restructuring plan under the equitable mootness doctrine.
The equitable mootness doctrine is a legal theory applied by the U.S. bankruptcy courts to deny hearing an objection to a reorganization plan because the requested relief would cause significant harm such as unraveling the entire reorganization plan or shortchanging other significant creditors. Bankruptcy judges can only apply equitable mootness when it determines the interests of finality outweigh those of the appealing party.
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