Appellate Court Reverses Chapter 11 Confirmation Order Based on Faulty Tax Ruling

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Chapter 11 debtors routinely move to dismiss appeals from confirmation orders on mootness grounds, as was done in Levandowski I. The appellate courts have had to wrestle with the equitable mootness issue in the past decade as a result. See, e.g., In re Charter Communications, Inc., 691 F.3d 476, 482 (2d Cir. 2012) ("In this circuit, an appeal is presumed equitably moot where the debtor's plan of reorganization has been substantially consummated."); contra, In re Transwest Resort Properties, Inc., 801 F.3d 1161, 1169 (9th Cir. 2015); ("Reorganized debtors argue that substantial consummation creates a presumption that the appeal is moot …. Our Circuit's articulation of the equitable mootness test, however has not included such a presumption …. We must still consider whether, despite substantial consummation, we can fashion effective relief."); In re One 2 One Communications, LLC, 805 F.3d 428, 434 (3d Cir. 2015) ("The party seeking dismissal bears the burden to demonstrate that, weighing the relevant factors, dismissal is warranted."); In re VeroBlue Farms USA, Inc., 6 F. 4th 884, 885-884 (8th Cir. 2021)) (application of equitable mootness doctrine "exceptional"; remanded for further "inquiry").

The apparent reluctance by some appellate courts to review plan confirmation orders has caused parties to expedite implementation of a confirmed plan to preclude appellate review. In re One 2 One Communications, 805 F.3d at 446 (Krause, J., concurring) ("[A] motion to dismiss an appeal as equitably moot has become 'part of the Plan.' Proponents of reorganization plans now rush to implement them so they may avail themselves of an equitable mootness defense…."); In re U.N.R. Industries, Inc., 20 F.3d 766, 769 (7th Cir. 1994) (Easterbrook, J.) (banished the term "equitable mootness" in that Circuit; "[t]he nameless doctrine is perhaps best described as merely an application of the age-old principle that in formulating equitable relief a court must consider the effects of relief on the innocent third parties," and "not a jurisdictional doctrine").