Equitable Mootness Doctrine Persists in Bankruptcy Appeals

By Shana A. Elberg, Amy Van Gelder, and Jason M. Liberi (Skadden, Arps, Slate, Meagher & Flom LLP)

In recent years, some courts have become critical of the doctrine of equitable mootness, a judicially created abstention doctrine — unique to the corporate bankruptcy world — that allows appellate courts to dismiss appeals from a bankruptcy court’s confirmation order if the relief sought on appeal threatens to unwind a complex debtor reorganization previously approved by the bankruptcy court. The doctrine promotes finality of confirmation orders, encourages the global consensual resolutions often crucial to complex reorganizations, and protects third parties that have justifiably relied upon the bankruptcy court’s confirmation order or transactions effectuated pursuant to that order.

Despite significant concerns expressed by courts regarding the impact of the doctrine on parties’ fundamental appellate rights, equitable mootness persists in some form within every circuit that has jurisdiction over bankruptcy appeals. Thus, plan proponents and objectors alike must be aware of its implications on contested plan confirmation proceedings and prepared to act quickly to advance their interests following plan confirmation.

This article provides a brief overview of the doctrine of equitable mootness, its application by appellate courts, and key considerations for bankruptcy and non-bankruptcy practitioners faced with contested plan confirmations and subsequent appeals.

The article is available here.

Recent Trends In Enforcement of Intercreditor Agreements and Agreements Among Lenders in Bankruptcy

By Seth Jacobson, Ron Meisler, Carl Tullson and Alison Wirtz (Skadden, Arps, Slate, Meagher & Flom LLP)*

Over the last several decades, the enforcement of intercreditor agreements (“ICAs”) and agreements among lenders (“AALs”) that purport to affect voting rights and the rights to receive payments of cash or other property in respect of secured claims have played an increasingly prominent role in bankruptcy cases. On certain of the more complex issues that have arisen in the context of a bankruptcy, there have been varying interpretations and rulings by the bankruptcy courts. Some courts have enforced these agreements in accordance with their terms, while others have invalidated provisions in these agreements on policy and other grounds. Still others seem to have enforced agreements with a results-oriented approach.

In this article, we examine three recent leading cases: Energy Future Holdings (“EFH“), Momentive, and RadioShack. These cases addressed whether the bankruptcy court was the proper forum for intercreditor disputes, the ability of junior creditors to object to a sale supported by senior creditors, and whether an agreement providing only for lien subordination restricts a junior creditor’s ability to receive distributions under a plan of reorganization.

These leading cases illustrate three trends. First, bankruptcy courts are increasingly willing to insert themselves with respect to disputes among lenders that affect a debtor’s estate, thereby establishing that the bankruptcy court is the proper forum for interpreting ICAs and AALs. Second, the courts are applying the plain language of ICAs and AALs to the facts of the case to reach their conclusions. And, finally, senior creditors appear to continue to bear the risk of agreements that do not limit junior creditors’ rights in bankruptcy using clear and unambiguous language.

The full article is available here.

*Seth Jacobson is a partner and global co-head of the banking group at Skadden, Arps, Slate, Meagher & Flom LLP. Ron Meisler is a corporate restructuring partner, Carl Tullson is a corporate restructuring associate and Alison Wirtz is a banking associate at Skadden. They are all based in the firm’s Chicago office. The opinions expressed in this article are solely the opinions of the authors and not of Skadden, Arps, Slate, Meagher & Flom LLP.