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. e du/thir dc ir c uit_2001/136Filed June 21, 2001

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 00-2249 and 00-2250

NORDHOFF INVESTMENTS, INC.

v.

ZENITH ELECTRONICS CORPORATION

JOHN D. MCLAUGHLIN, JR., Esq.,

Trustee (D.C. No. 99-cv-00921)

OFFICIAL COMMITTEE/EQUITY SECURITY HOLDERS

v.

ZENITH ELECTRONICS CORPORATION

PATRICIA A. STAIANO,

Trustee (D.C. No. 00-cv-00031)

NORDHOFF INVESTMENTS, INC.

v.

ZENITH ELECTRONICS CORPORATION

PATRICIA A. STAINO,

Trustee (D.C. No. 00-cv-00032) Official Committee/Equity Security Holders, Appellant at No. 00-2249

Nordhoff Investments, Inc., Appellant at No. 00-2250APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE (D.C. Nos. 99-cv-00921, 00-cv-00031 and 00-cv-00032 ) District Judge: The Honorable Gregory M. Sleet

Argued January 23, 2001

BEFORE: NYGAARD, ALITO, and FUENTES, Circuit Judges.

(Filed: June 21, 2001)

Arnold S. Albert, Esq. (Argued)

Albert & Schulwolf 1201 Connecticut Avenue, N.W.

Suite 850 Washington, DC 20036

Thomas G. Macauley, Esq. Zuckerman, Spaeder, Goldstein, Taylor & Kolker 1201 Orange Street Suite 650, P.O. Box 1028 Wilmington, DE 19899 Counsel for Nordhoff Investments, Inc., Appellant at No. 00-2250

Thomas D. Schneider, Esq.

Suite 616

1515 Market Street Philadelphia, PA 19102

Counsel for Official Committee of Equity Security Holders, Appellant

at No. 00-2249

2James H.M. Sprayregen, Esq.

Ilana S. Rubel, Esq. David J. Zott, Esq. (Argued)

Kirkland & Ellis 200 East Randolph Drive

Suite 6500 Chicago, IL 60601

Laura D. Jones, Esq. Pachulski, Stang, Ziehl,
Young & Jones
919 North Market Street P.O. Box 8705, 16th Floor Wilmington, DE 19899

Eric S. Kurtzman, Esq. Pachulski, Stang, Ziehl,
Young & Jones
10100 Santa Monica Boulevard Suite 1100 Los Angeles, CA 90067 Counsel for Appellee Zenith Electronics Corporation

OPINION OF THE COURT

NYGAARD, Circuit Judge:

This case presents the consolidated challenges by

Nordhoff Investments and the Official Committee of Equity Holders to the District Court's order appr oving th e Bankruptcy Court's order confirming Zenith's bankru ptcy and restructuring plan. Zenith argues, as it did be low, that the challenges posed to its restructuring plan are "equitably moot" because the plan has already been substantial ly consummated, has been relied upon by various partie s, and would be very difficult to retract. The District Co urt thoroughly reviewed all of the relevant considerati ons and found the challenges equitably moot. We accept the lower court's findings of fact "unless they ar e complete ly devoid of a credible evidentiary basis or bear no rational re lationship to the supporting data," Moody v. Security Pacific Bus. Credit, Inc., 971 F.2d 1056, 1063 (3d Cir. 1992).

3Furthermore, "[b]ecause the mootness determination we

review here involves a discretionary balancing of e quitable and prudential factors rather than the limits of th e federal court's authority under Article III, using or dinar y review principles we review that decision generally for ab use of discretion." In re Continental Airlines, 91 F.3d 55 3, 560 (3d Cir. 1996) (en banc); see also In r e PWS Holding, 228 F.3d 224, 235-36 (3d Cir 2000). We find no such abuse of

discretion and therefore will affir m.

I. Background

Zenith has suffered critical losses over the past t welve years. LG Electronics invested $360 million in Zeni th during that difficult period, increasing its holdin gs from five percent to fifty-eight percent and occupying six of the eleven seats on Zenith's Board of Directors by 1997 . Zenith attempted to find an outside investor willing to pu rchase its business, but no buyers came forward after Zenith's CEO personally met with executives from Micr osoft, Int el, General Instruments, and other leaders in the elect r onics industry.

Zenith continued to suffer losses and LGE pr oposed a major restructuring of Zenith's debt and equity in April of 1998. A special committee of Zenith's Board of Dire ctors negotiated with LGE and agreed to a plan. After for ming their own advisory committee and obtaining counsel from legal and financial advisors, the bondholders also agreed to the plan. The plan included: 1) exchanging appr oxi mately $103 million in bonds bearing interest at 6.25 perc ent for $50 million in new bonds bearing interest at 8.19 p ercent; 2) canceling Zenith's stock for no consideration; 3 ) issuing new Zenith stock to LGE in exchange for $200 millio n of debt relief forgiving debt owed to LGE; 4) LGE exte nding a new $60 million credit facility to Zenith; 5) cance ling approximately $175 million in additional debt owed to LGE in exchange for $135 million of new debt and owners hip of the Zenith television plant in Reynosa, Mexico; 6) refinancing of debt owed to a consortium of banks l ed by Citicorp; 7) no alteration of debt owed to trade cr editors; and 8) releasing LGE, Zenith directors and officers , and the

4Bondholder's Committee from potential liability to Zenith or

certain creditors.

Zenith submitted the plan to the Securities and Exchange Commission. The SEC reviewed the plan for twelve months and eventually declared it ef fective . Despite the reduced face value of their claim, the bondhold ers overwhelmingly voted in favor of the plan. LGE and secured lenders, including Citibank, also approved the plan . Zenith met often with the Equity Committee during this tim e and provided the Committee with all of the infor mation that it requested. Zenith then filed a Chapter 11 bankruptc y petition and sought final court approval.

The plan was submitted to a Bankruptcy Court in the District of Delaware. Nordhoff, a significant minor ity shareholder in Zenith, and the Equity Committee, wh ich represented the interests of the other minority shareholders, both opposed the plan and wer e repre sented by counsel at the two-day proceedings. Over Nor dho ff and the Equity Committee's objections, the Bankruptcy C ourt approved Zenith's request for an expedited hearing. The primary point of contention concerned competing valuations of Zenith. Peter J. Solomon, Co. valued Zenith at $300 million. That valuation was corroborated by th e fact that Zenith had been unable to sell at a related pr ice, the bondholders' agreement to reduce their claims, and other relevant valuations. Ernst and Young, appearing on behalf of the Equity Committee, valued Zenith at $1.05 bil lion,

which was based on a discount rate the "same as Microsoft's" and a higher royalty rate than calcula ted by Solomon. Nordhoff and the Equity Committee attempte d to discredit Solomon by presenting evidence that Solom on had a conflict of interest based upon its pr evious rel ations with Zenith and would receive a $1 million awar d if Zen ith's plan was successful.

The Bankruptcy Court ultimately accepted Solomon's valuation over Ernst and Young's and decided that: 1) "Zenith's Plan [was] proposed in good faith under t he general requirements of the bankruptcy code"; 2) th e plan was entirely fair; 3) LGE had acted appr opriately; 4)
Zenith's disclosure statement contained a wealth of information, the plan was approved by SEC, and it

5complied with nonbankruptcy law and the Bankruptcy

Code; 5) the "shareholders are r eceiving the value of their interests under the plan--nothing"; 6) Solomon's va luation was not tainted; and 7) this "reorganization is exa ctly what chapter 11 of the Bankruptcy Code was designed to accomplish."

The Bankruptcy Court conditionally confirmed the pl an and rejected Nordhoff and the Equity Committee's objections on November 2, 1999. The Bankruptcy Cour t permitted the release of all claims by Zenith, but refused to allow the release of claims by creditors who did no t vote in favor of the plan. The Court therefore r equired Ze nith to delete any release by claimants who had not affirma tively accepted the plan. The Court granted Zenith ten day s to
make these modifications.

Nordhoff and the Equity Committee r eceived the Bankruptcy Court's opinion on November 3. Zenith immediately made the required changes and submitted the amended plan to the Court on November 4. Zenith ser ved the Equity Committee with the amended plan on Novem ber 4, but, because of what they testified was an"overs ight,"

Zenith officials did not serve Nordhof f with the a mended plan at this time. The Court signed the amended confirmation order on November 5, but did not immed iately notify the parties. Nonetheless, Zenith lear ned th at the order had been signed via the Court's public web ci te on November 5. On November 9, Zenith officials faxed a letter to Nordhoff and the Equity Committee stating that t hey "understand that the court signed the confir mation order on November 5." Zenith received a signed copy of th e confirmation on November 10 and faxed copies of the amended plan and the Court's confirmation or der to Nordhoff and the Equity Committee the same day. Nor dhoff and the Equity Committee filed notices of appeal to the Bankruptcy Court on November 12. At no point, howev er, did either Nordhoff or the Equity Committee seek to stay the plan.

Both the proposed and final plan called for"Immedia te Effectiveness," and it was clear thr oughout the pr oceeding that Zenith intended to implement the plan immediat ely upon approval. As a result, much of the plan was ex ecuted

6between November 5, when the Court confirmed, and

November 10, when Nordhoff was first officially not ified. The following transactions were completed by Novemb er 9: 1) Zenith replaced its debtor-in-possession credit facility with a new $150 million facility syndicated by Citi corp; 2) Zenith entered into a new $60 million cr edit facil ity with LGE; 3) Zenith canceled old stock and issued new st ock to LGE; and 4) Zenith canceled certain debt owed to LG E, issued new debt to LGE, and canceled some of the ne w debt in exchange for the transfer of the Reynosa pl ant at a later date. Zenith's bondholders, however, did not begin to tender their $103.5 million in old bonds for $50 mi llion in new publicly traded instruments until November 19, 1999. Nearly all of the bonds were exchanged by January 3 , 2000, and they have been subject to public trading ever s ince. If

bondholders did not own a sufficient amount of debt to receive a new bond, their holdings were aggregated and sold on the open market. The cash proceeds wer e th en allocated to the fractional holders. Zenith managem ent has since been replaced by LGE management, and the Zeni th executives who devised the plan have departed.

Nordhoff and the Equity Committee appealed to the District Court, challenging the valuation of their shares, the reliance on Solomon's valuation, the expedition of the proceedings, the lack of evidentiary recor d, and t he plan provisions releasing LGE and Zenith's dir ectors fr om potential liability. The District Court dismissed t he appeal as equitably moot.

II. Discussion

At least one Bankruptcy Court has characterized "equitable mootness" as a misnomer: "Ther e is noth ing equitable about the equitable mootness doctrine. . .. The matter is moot out of necessity, not application of equitable principles. In a very real sense the doctrine is mo re accurately denominated as `prudential mootness.' " In re Box Brother Holding Corp., 194 B.R. 32, 45 (Bankr. D. Del. 1996); see also PWS Holding, 228 F.3d at 235-36 (st ating
that "the use of the word `mootness' as a shortcut for a court's decision that the fait accompli of a plan confirmation should preclude further judicial proce edings

7has led to the unfortunate confusion between equita ble

mootness and constitutional mootness"). W e do not entirely agree. One inequity, in particular, that is often a t issue is the effect upon innocent third parties. When transa ctions following court orders are unraveled, thir d partie s not before us who purchased securities in r eliance on those orders will likely suffer adverse ef fects.

We developed the equitable mootness doctrine in In re Continental Airlines, 91 F.3d 553 (3d Cir . 1996) ( en banc). Continental Airlines involved a complex Chapter 11 reorganization premised upon a $450 million investm ent by two outside parties. Trustees of creditors challeng ed the plan due to the decline in value of the aircraft an d jet engines securing their investment. This challenge jeopardized the plan because the investors had cond itioned their involvement upon the absence of such liabilit y. The Bankruptcy Court rejected the trustees' claim. The trustees sought a stay, were denied, and appealed to the Dis trict Court. Meanwhile, relying on the Bankruptcy Court's confirmation, the investors committed their capital and consummated the plan. Continental then moved to dis miss the trustees' appeal on grounds of equitable mootne ss. The District Court granted the motion and dismissed the appeal. We affirmed, stating that such "an appeal s hould . . . be dismissed as moot when, even though ef fec tive relief could conceivably be fashioned, implementation of t hat relief would be inequitable." Continental Airlines, 91 F.3d at 559 (citing In re Chateaugay Corp., 988 F.2d 322, 3 25 (2d Cir. 1993)).

We held that five factors had to be considered when conducting an equitable mootness analysis:

(1) whether the reorganization plan has been substantially consummated,

(2) whether a stay has been obtained,

(3) whether the relief requested would af fe ct the rights of the parties not before the court,

(4) whether the relief requested would af fe ct the success of the plan, and

8(5) the public policy of affording finality to bankruptcy

judgments.

Id. at 560. As we stated in PWS Holding , these "fa ctors are given varying weight, depending on the particular circumstances, but the foremost consideration is wh ether the reorganization plan has been substantially consummated." 228 F.3d at 236. In ef fect, the equi table mootness doctrine prevents a court from unscramblin g complex bankruptcy reorganizations when the appeali ng party should have acted before the plan became extr emely difficult to retract. We have noted, however, that the "doctrine is limited in scope and should be cautiou sly applied . . . ." PWS Holding, 228 F .3d at 236.

We now consider the elements of the equitable mootn ess doctrine against these facts.

A. Substantial Consummation of the Plan

As we stated in Continental Airlines, the substanti al
consummation factor is the "foremost consideration" in an equitable mootness analysis, especially when the pl an "involves intricate transactions . . . or wher e in vestors have relied on the confirmations of the plan." 91 F.3d a t 560. The Bankruptcy Code defines "substantial consummati on"

to mean:

(A) transfer of all or substantially all of the pr operty proposed by the plan to be transferred;

(B) assumption by the debtor or by the succe ssor to the debtor under the plan of the business or of the management of all or substantially all of th e pr operty dealt with by the plan; and

(C) commencement of distribution under the p lan.

11 U.S.C. S 1101(2).

Appellants concede that the plan has been substanti ally
consummated. The Confirmation Order stated that the plan would be immediately effective, and many of the key transactions were completed by November 9, 1999. On November 19, Zenith began exchanging bonds in accordance with the plan, and by January 2000, the only

9portion of the plan remaining to be consummated was the

exchange of one percent of the bonds. By that time, all property had been transferred, all managerial chang es had occurred, and virtually all of the distributions ha d been made. As the District Court concluded, there can be little question that the plan has been substantially

consummated.

Appellants claim, however, that the plan was "remarkable" for how little it actually accomplishe d and that it could be easily retracted. Since it did not contain intricate transactions, Appellants claim, the plan could be reversed in a manner equitable to all parties. Appe llants argue that although the plan involved debt and asse t evaluation of large sums, mere quantities do not ri se to the level of complexity found in Continental Airlines. Further, Appellants claim that Zenith could have conducted t he plan under state law and without the approval of the Bankruptcy Court. The only reason Zenith utilized bankruptcy law, Appellants argue, was to eliminate minority shareholders' rights and expedite the proc ess. Because the plan was simple and could be so easily reversed, Appellants argue that it is appropriate f or us to reconsider the valuation question befor e the Bankr uptcy Court. If the Bankruptcy Court's valuation findings were reversed, then a new trial could be conducted to de termine if LGE paid a fair price.

The District Court found Appellant's arguments"not completely without merit." Compared to the plan in Continental Airlines, which entailed numer ous irre vocable transactions, the merging of fifty-thr ee debtors, the investment of $110 million in cash by two outside investors, and the transfer of trade routes by fore ign governments, the plan here is relatively simple. Th e District Court recognized that the assembly plant could be transferred back to Zenith, the exchange of debt fo r stock could be reversed, and that since Citicorp had been the major debtor to Zenith before, during, and after th e transaction its refinancing could be r eversed with out great difficulty. The District Court found the exchange o f bonds, however, to present "a more difficult problem." Sin ce the bonds are publicly traded, the District Court specu lated

10that "they may have been sold, perhaps mor e than o nce,"

and it would therefore be difficult, if not impossi ble, to reverse the exchange. Further, "any such reversal w ould almost certainly impact the rights of investors tha t were not involved in the bankruptcy court proceedings." Whil e potentially difficult, the District Court nonethele ss reasoned
that "the reversal of these transactions would not likely be quite as daunting a task as the unmerging of 54 deb tors
and the return of the outside investors' investment s" as would have been required in Continental Airlines. T he
District Court concluded that

although some of the Plan transactions could conceivably be "reversed," this would not be easy to accomplish, and other transactions may not b e reversible at all. This factor, ther efore, weighs heavily in favor of dismissal, at least to the exten t that the
court could not fashion relief that would no t r esult in the dismantling of the plan.

We have no reason to find that the District Court a bused its discretion in making this determination. The Co urt considered each of Appellants' arguments and pruden tially balanced the concerns. Although the plan her e is n ot as complex as the plan in Continental Airlines, it is hardly simple. The plan required eighteen months of negoti ation between several parties regarding hundr eds of mill ions of dollars, restructured the debt, assets, and managem ent of a major corporation, and successfully rejuvenated Z enith. Appellants have not offered any evidence that the p lan could be reversed without great difficulty and ineq uity, and

we have reason to believe that the bond r edistribu tion is unretractable. See In re UNR, 20 F.3d 766 (7th Cir. 1994); In re Public Serv. Co. of New Hampshir e, 963 F.2d 469 (1st Cir. 1992). The District Court, therefor e, did not abuse its discretion in its analysis of this factor of the eq uitable

mootness test.

B. The Failure to Obtain a Stay

Because of the nature of bankruptcy confir mations, we have held that it "is obligatory upon appellant .. . to pursue with diligence all available remedies to obt ain a stay

11of execution of the objectionable order (even to th e extent of

applying to the Circuit Justice for relief. . . ), if the failure to do so creates a situation rendering it inequitab le to reverse the orders appealed from." In re Highway Tr uck Drivers & Helpers Local Union #107, 888 F .2d 293, 297 (3d Cir. 1989); see also Continental Airlines , 91 F.3d at 566 ("There was a clear possibility the [Appellants'] c laims would become moot after consummation of the plan, a nd it was therefore incumbent on the [Appellants] to obta in a stay."); In re Chateaugay Corp., 988 F.2d at 326 (" [T]he party who appeals without seeking to avail himself of that [stay] protection does so at his own risk."); In re Crystal Oil Co., 854 F.2d 79, 82 (5th Cir. 1988) (finding a cla im inequitable because the Appellant made no ef fort t o obtain a stay); In re Roberts Farms, Inc. , 652 F.2d 793, 798 (9th Cir. 1981) (dismissing an appeal for lack of equity because the Appellant never applied to the bankruptcy court for a stay); In re Grand Union Co. v. Saul, Ewing, Remick & Saul, 200 B.R. 101, 105 (Bankr. D. Del 1996). Appellants did not, at any time, seek a stay. As the District Court det ermined, this weighs heavily in favor of dismissing Appellan ts'
claims.

Appellants argue that because Zenith did not provid e a copy of the revised plan on November 4, and since m uch of the plan was consummated by the time they received notice on November 9, it was futile for them to seek a sta y in an attempt to prevent the plan from being substantiall y consummated. The record does reflect that Zenith le arned on November 5 that the revised plan had been confir med but did not directly relay this infor mation until November 9, at which time much of the plan had been consumma ted. Zenith surely realized that the minority shareholde rs, whose shares were nullified without consideration, would oppose the confirmation order. The District Court, therefore, correctly characterized this "oversight" as "suspicious."

As the District Court correctly reasoned, however, this oversight did not foreclose Appellants fr om seekin g a stay. First, although Zenith did not immediately pr ovide notice to Nordhoff, it did provide immediate notice to the Eq uity Committee. Nordhoff was, at all times, a member of the

12Equity Committee, and therefore Appellants had an

opportunity to bring a timely request for a stay be fore the plan was consummated. Second, Appellants wer e well aware that the plan was about to be confir med. All relevant versions of the plan called for "Immediate Ef fecti veness," and the Bankruptcy Court conditioned its confir mat ion upon only minor modifications. Confirmation was pen ding, the Equity Committee was immediately notified when the modified plan was approved, and the confir mation w as publically posted on November 5 on the Bankruptcy C ourt's web site. If Appellants intended to seek a stay, th ese circumstances afforded them the opportunity to do s o immediately upon the approval of the plan. Thir d, and most importantly, both sets of Appellants were, by all a ccounts, notified by November 9. The bond exchanging, the mo st complex and irreversible element of the plan, did n ot begin until November 19. Appellants have not offer ed any justification for not seeking a stay between Novemb er 9 and November 19. "Therefore," the District Court conclu ded, "while the circumstances surrounding the appellant' s failure to obtain or even seek a stay suggests that this factor should receive somewhat less weight than it ordinarily would, it does still weigh in favor of a finding of equitable mootness."

The District Court properly weighed the competing

considerations and therefore its deter mination tha t the failure to obtain a stay weighed in favor of dismis sing Appellants' claims was within its discretion.

C. Reliance on Confirmation by Parties not

Before the Court

In addition to the first two elements of the doctri ne of equitable mootness, we stated in Continental Airlin es that "[h]igh on the list of prudential considerations ta ken into account by courts considering whether to allow an a ppeal following a consummated reorganization is the relia nce by third parties, in particular investors, on thefinal ity of the transaction." 91 F.3d at 562. As we further explain ed, the "concept of mootness from a prudential standpoint p rotects the interests of non-adverse third parties who are not before the reviewing court but who have acted in re liance

13on the plan as implemented." Id. (citing Manges v. SeattleFirst Nat'l Bank, 29 F.3d 1034, 1039 (5th Cir. 1994 )).

The District Court considered the status of six par ties who Zenith alleged would have their interests under mined by reversal of the confirmation or der: 1) the cons ortium of lenders headed by Citicorp; 2) Zenith's bondholders ; 3) Zenith's retailers and distributors; 4) Zenith's ve ndors, suppliers, and service providers; 5) LGE; and 6) Ze nith's former minority shareholders. The District Court fo und that "none [of these parties] appear to merit the same ` outside investor' status as the investors in Continental ," who committed $450 million. To varying degr ees, howeve r, the District Court found that some of these parties mer it protection.

First, because Citicorp was a secured lender before
, during, and after the confirmation, it would not su ffer an adverse impact as a result of appellate r eview. Al so, the lenders voted in favor of the plan and were r epres ented by counsel at the proceedings below. Thus, the Distric t Court found that Citicorp's $40 million advance on a $150 million credit facility at least raised questions as to whe ther they should be viewed as "third parties not befor e the court." Second, the District Court found that the inter est s of the bondholders were "perhaps mor e strongly implicated ." Although the bondholders were not true outside part ies "in the sense that they could walk away from the deal," the "bonds are publicly traded and the bondholders toda y may not be the same investors as the bondholders at the time of the bankruptcy filing or confirmation." Therefore, the
District Court reasoned:

Many sales of those bonds may have occurred in the

reliance on the creditworthiness of the r eo rganized

debtor. Whether these reliance inter ests wi ll be impaired depends upon the impact of appellat e r eview

on that creditworthiness. It would seem that the bondholders would likely be harmed only if r eversal of
the confirmation order leads to the withdraw al of LGE's support . . .

We agree that the bondholders maintain a third part y interest. Third, the District Court found Zenith's claims

14regarding the retailers, distributors, and supplier s

"somewhat thin." Apparently, these parties entered into commitments with Zenith in reliance on thefinality of the reorganization and allocated shelf space, productio n capacity, and credit according to the confirmation, and the District Court found that "[a]t least some of these unnamed entities are likely to be `third parties' entitled to consideration under the equitable mootness analysis ." The Court found the "potential harm to these parties, h owever," to be "somewhat speculative." Fourth, the District Court found Zenith's attempt to characterize LGE as an ou tside party "unpersuasive" since it was the majority shar eholder prior to bankruptcy and is now the sole shar eholde r. Unlike the outside investors in Continental Airlines , LGE would have incurred massive losses had it walked away fro m the deal. Fifth, the Court found Zenith's claims that t he minority shareholders may have taken tax deductions

based on their losses without merit since Zenith di d not produce any evidence that these former shareholders would prefer to take the tax deduction instead of r ecove ring their previous stock holding.

The District Court concluded that there "ar e third parties who have likely relied on confirmation of the plan and who could be harmed by reversal of the confirmation ord er." "Although these parties may not be properly charact erized as `outside investors,' " the Court stated,"such in vestors are not the only types of third parties given consi derations in an equitable mootness analysis." "Ther efore," t he Court concluded, "while this factor may not warrant quite as much weight as it did in Continental, it does still weigh in favor of a finding of equitable mootness."

Nordhoff also challenges the District Court on this issue by claiming that all of the third parties, with the exception of the retailers and suppliers, were befor e the Ba nkruptcy Court and therefore are not, as Continental Airline s required, "non-adverse third parties who are not be fore the reviewing court." As Zenith points out, however, th e requirement calls for parties to be befor e the rev iewing court, and while some of these parties may have bee n for the Bankruptcy Court, they are not befor e us now. See In Re Box Brothers, 194 B.R. at 42. Since these partie s are not

15currently before us and relied on the plan confirma tion,

they merit protection under the equitable mootness

doctrine.

Although these facts do not present the same extent of reliance as found in Continental Airlines , this co ncern still weighs against Appellants' challenges. The District Court
did not abuse its discretion in its deter mination that "nonadverse third parties who are not befor e the revie wing

court" relied on the confirmation and therefore mer it some protection.

D. Whether the Relief Requested Would Af fect

the Success of the Plan

We also consider whether Appellants' concer ns coul d be remedied without unraveling the entirety of the pla n or whether they seek to "knock the props out fr om und er the authorization for every transaction that has taken place and create an unmanageable, uncontrollable situatio n for the Bankruptcy Court." In re Chateaugay Corp., 10 F .3d at 952; see also In Re Robert Farms, 652 F.2d 793, 798 (9th Cir. 1981).

Appellants challenge the valuation of Zenith, and t his price is the very centerpiece of the plan. As the D istrict Court noted, the agreed-upon valuation per mitted: 1) LGE's emergence as the sole shareholder with no considera tion paid to the minority shareholders, and 2) the bondh olders' acceptance of new bonds worth roughly one half the value of the old bonds. The plan would no longer be viabl e without these agreements, and the futur e relations hip

between LGE and Zenith would be cast in doubt. W it hout LGE, Zenith would likely be forced to liquidate und er Chapter 7 since their recent recovery is contingent upon the plan. Thus, Appellants do not challenge an "intermediate" element of the plan that could be al tered while maintaining the overall integrity of the plan , as in PWS Holding Corp., 228 F.3d 224.

Appellants explicitly indicated during oral ar gume nt that it was their intention to dissolve the plan: "This is one of [those plans] where the plan can and should be unra vel'ed. Okay? I do want to make that clear. Again, if it wa s vague

16from my papers, let me make it absolutely clear ."

Appellants seek "nothing less than a wholesale anni hilation of the Plan," In re Manges, 29 F .3d at 1043, and t his proposed relief would affect the r e-emergence of t he debtor as a revitalized entity." See In r e Club Assocs., 956 F.2d 1065, 1069 (11th Cir. 1992). The District Court thu s properly found that this element of the equitable m ootness doctrine weighs against Appellants.

E. General Public Policy Affording Finality to Bankruptcy Judgments

As the District Court stated, "the public policy of affording finality to bankruptcy judgments is bette r described as the lens through which the other equit able
mootness factors should be viewed." We described th is

rationale in Continental Airlines:

Our inquiry should not be about the "reasona bleness" of the Investors' reliance or the probabilit y of either party succeeding on appeal. Rather, we shoul d ask whether we want to encourage or discourage r eliance of investors and others on the finality of bank ruptcy confirmation orders. The strong public polic y in favor of maximizing debtor's estates and facilitat ing successful reorganization, reflected in the code itself, clearly weighs in favor of encouraging such r eliance. Indeed, the importance of allowing approved reorganizations to go forward in r eliance o n bankruptcy court confirmation orders may be the central animating force behind the equitable mootnes s doctrine. Where, as here, investors and othe r third parties consummate a massive reorganization in reliance on an unstayed confirmation or der that, explicitly and as a condition of feasibility , denied the claim for which appellate review is sought, the allowance of such appellate review would lik ely undermine public confidence in the finality of bankruptcy confirmation orders and make succ essful completion of large reorganization like this more difficult.

91 F.3d 565 (citations omitted).

17Here, unlike Continental Airlines, LGE is not an ou tsider

but rather had independent financial incentive to f acilitate Zenith's recovery. It is therefore less necessary t o encourage LGE's reliance on the bankruptcy judgment in this c ase. However, this plan did enable Zenith to negotiate w ith several parties and recover from its decline. Likew ise, a number of parties relied on the confir mation of th e plan, and, as the District Court stated, reversal would b e contrary to the public policy of encouraging action s, by outsiders and investors alike, that facilitates suc cessful reorganizations.

The District Court, therefore, did not abuse its di scretion by determining that the public policy of pr omoting the finality of bankruptcy judgements also weighed in f avor of dismissing Appellants' appeals.

F. Other Considerations

1. Expedition of the Confirmation

Appellants further argue that expediting the plan's confirmation was unfair since the Appellants had on ly one month to prepare objections, and this was an insuff icient amount of time. In addition, Appellants complain th at the plan was consummated between November 4 and Novembe r 9, which was before Nordhoff knew of the confirmati on. Despite this final push toward consummation, howeve r, all parties were aware of the plan during its eighteen- month
creation and were allowed to review r elevant docum ents and meet with the plan operatives. "Thus," as the D istrict Court stated, "despite expedited proceedings in the Bankruptcy Court, Appellants cannot claim to have b een denied a meaningful opportunity to engage their own experts or otherwise oppose the plan." We agree.

2. Solomon's Valuation

Appellants also complain that the Bankruptcy Court adopted Solomon's valuation despite conflicts of in terest. First, courts have broad discretion not only to adm it expert witnesses, but also to weigh their testimony. Kumho Tire

18Co., Ltd. v. Carmichael, 526 U.S. 137, 153 (1999). Second,

Solomon's valuation was corroborated by the fact th at no investors had accepted Zenith's offer to sell at a related price, the bondholders' agreement to reduce the val ue of their claims, and other relevant valuations. Third, the margin of error between Solomon's valuation and Zen ith's solvency was $400 million. Fourth, the Bankruptcy C ourt determined that Solomon's compensation was not a me re "success fee," but rather was for a "substantial ar ray of services: investment banking advice, financial anal ysis, operational restructuring, marketing, as well as va luation analysis. The `success fee' was not offer ed for it s testimony at the confirmation hearing." We will not disturb t hese findings.

III. Conclusion

The District Court gave serious consideration to th e issues of fundamental fairness that Zenith may have abused. "Because the issues implicate the fair ness of the process by which the plan was proposed and confirme d," the District Court stated, "the court is somewhat r eluctant to preclude appellate review of those issues." "Alt hough the court will dismiss the appeals," it decided,"it doe s not do
so without some hesitation." The District Court con cluded: "Having considered and weighed the factors discusse d above, the court is convinced that dismissal of the se appeals on equitable mootness grounds is appr opria te. In particular, Appellants' failure to even seek a stay as the plan was being substantially - if not entir ely - consummated outweighs the courts concerns identifie d

above."

The District Court accurately analyzed each of the factors of the equitable mootness test, appropriately balan ced these elements, and concluded that the doctrine sho uld apply to Appellants' claims. The District Court the r efore did

not abuse its discretion and we will affir m.

19ALITO, Circuit Judge, concurring in the judgment:

I reluctantly concur in the judgment of the court. Under In re Continental Airlines, 91 F .3d 553 (3d Cir. 1 996) (en banc), cert. denied sub nom. Bank of N.Y . v. Conti nental Airlines, 519 U.S. 1057 (1997), I am afraid that we must affirm the decision of the District Court holding t hat the appeal is equitably moot. The District Court applie d the standard adopted in Continental Airlines , and alth ough the District Court's decision is debatable, it did not commit an

abuse of discretion.

In reaching this conclusion, I am primarily influen ced by the appellants' failure to seek a stay. It is distu rbing that Zenith, in a seeming attempt to moot any appeal pri or to filing, succeeded in implementing most of the plan before the appellants even received notice that the plan h ad been confirmed. However, the plan was not entirely consummated when the appellants finally lear ned of the bankruptcy court's order. Most notably, the exchang e of the
old for the new bonds had still not been carried ou t. If the appellants had promptly applied for a stay, with or without posting a bond, when they finally got word of what the bankruptcy court had done, I would view this appeal differently. But the appellants never applied for a stay and have not provided an adequate explanation for their failure to do so. Under these circumstances, I cannot say t hat the
decision of the district court was an abuse of disc r etion.

For the reasons explained in my dissent in Continen tal Airlines, see 91 F.3d at 567-73, however, I continu e to disagree with the expansive version of the equitabl e mootness doctrine that our court adopted in that ca se, as well as with the abuse-of-discretion standar d of r eview. See id. at 568 n.4 (Alito, J., dissenting). As this cas e shows, our court's equitable mootness doctrine can easily be u sed as a weapon to prevent any appellate review of bankruptc y court orders confirming reorganization plans. It thus pla ces far too much power in the hands of bankruptcy judges.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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