Unlike most civil litigation that includes a limited number of parties and disputes regarding discrete claims or specific corporate assets, a Chapter 11 reorganization plan by definition involves all of the debtor’s business, assets, capital structure and stakeholders. When a plan is approved over the objection of one or more interested parties and no stay pending appeal is obtained, the capital structure is usually completely altered, financing closed and assets conveyed. The question presented in these situations is whether an appeal should be allowed to proceed if no stay is obtained and implementation of the plan proceeds, or should the appeal be dismissed under the doctrine of “equitable mootness.”

All federal circuit courts of appeal that have reviewed this issue have embraced some form of the equitable mootness doctrine regarding appeals of approval of bankruptcy plans of reorganization. The U.S. Court of Appeals for the Third Circuit, en banc, adopted the equitable mootness doctrine in In re Continental Airlines, 91 F.3d 553 (3d Cir. 1996). A panel of the Third Circuit was recently asked to overrule Continental and have the Third Circuit be the first federal circuit court of appeals to repudiate the equitable mootness doctrine. In In re One2One Communications, No. 13-3410 (July 21, 2015), the court held that only an en banc panel had authority to overrule Continental, but reversed a ruling by the district court applying the doctrine and in doing so narrowly interpreted the doctrine. Judge Cheryl Ann Krause, one of the three judges on the panel, wrote a strongly worded 38-page concurring opinion, in which she argued that it is time to abandon the doctrine altogether or substantially reform it.

The Plan at Issue and Lower Court Rulings

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