U.S. Supreme Court Update: Petitions Seek Review Of Notable Bankruptcy Law Rulings

• Published date: 23 September 2021
• Subject Matter: Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy, Trials & Appeals & Compensation
• Law Firm: Jones Day
• Author: Mr Mark Douglas

At a conference to be held at the end of the summer recess on September 27, 2021, the U.S. Supreme Court will consider whether to grant petitions seeking review during the new Term that begins on October 4 of three notable appeals involving issues of bankruptcy law. Two of those appeals address the doctrine of "equitable mootness." The third concerns federal preemption of a non-debtor third party's tortious interference claims against other non-debtor third parties.

The court-fashioned remedy of equitable mootness bars adjudication of an appeal when a comprehensive change of circumstances has occurred such that it would be inequitable for a reviewing court to address the merits of the appeal. In bankruptcy cases, appellees often invoke equitable mootness as a basis for precluding appellate review of an order confirming a chapter 11 plan.

The equitable mootness doctrine has been criticized as an abrogation of federal courts' "virtually unflagging obligation" to hear appeals within their jurisdiction. In re One2One Commc'ns, LLC, 805 F.3d 428, 433 (3d Cir. 2015); In re Charter Commc'ns, Inc., 691 F.3d 476, 481 (2d Cir. 2012). According to this view, dismissing an appeal on equitable mootness grounds "should be the rare exception." In re Tribune Media Co., 799 F.3d 272, 288 (3d Cir. 2015); accord In re VeroBlue Farms USA, Inc., 2021 WL 3411834, *1 (8th Cir. Aug. 5, 2021) (as in decisions by the Third, Tenth, and numerous other Circuits, "we conclude that the district court did not apply a sufficiently rigorous test to determine when bankruptcy equities and pragmatics justify foregoing Article III judicial review of a bankruptcy court order confirming a Chapter 11 plan"); In re Pac. Lumber Co., 584 F.3d 229, 240 (5th Cir. 2009) (equitable mootness should be applied "with a scalpel rather than an axe"). In VeroBlue, the Eighth Circuit even went so far as "banish 'equitable mootness' from the (local) lexicon" because it is "misleading," holding that, in accordance with the Supreme Court's decision in Mission Prod. Holdings Inc. v. Tempnology LLC, 139 S. Ct. 1652 (2019), an appeal is "moot, that is, beyond a federal court's Article III jurisdiction, only if 'it is impossible for a court to grant any effectual relief whatsoever.'" VeroBlue, 2021 WL 3411834, at *5 (quoting Mission Prod., 139 S. Ct. at 1660).

Substantially similar tests (briefly discussed here) have been applied by most circuit courts of appeals in assessing whether an appeal of a chapter 11...