### INTHE UNITED S TATESCOU RT OFAPPEALS FORTHEFIFTH CIRCU IT

N o. 08- 40517

I n T h e Ma t t e rOf: S AN P AT RI CI O C OUNTYC OMM UNI T YA CT I ON AGENCY D e b t o r

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - TE CHN OLOGY L ENDI NG PART NERS L LC ; NUECES F I NANCI AL CO RP ORAT I ON A pp el l an t s v. S AN PA TR I CI O COUN TYCOM M UN I TYACT I ON AGENCY; T RUST EE M IC H A E L B SC H M ID T ; T E XA S A T T O R N E YG E N E R A L , as Protec t or f or Pub l i cI nt e r e s t s i n Cha r i t y ; I RVI N G RO N DO N ; M AYRARON DO N ; LUPI TA PAI Z; GU STAVO G ALLARD O PI N O; CESAR R N AVA RRE TTE; P&N AU TO S A L E S ; T E R RYS IM P S O N ; N IN AT R E V IN O ; S A R AC R U Z ; C H R IS VAR GA S; W ALTER H I LL; ET AL A pp el l ees

A p p ea lf

rom the U n i tedS tates D i stri ct C ou rt f or th e Sou t h ern D i st ri ctof T exas
B ef ore JO L LY , P R A D O , an d S O U T H W IC K , C i rcui tJu dg es . L esl i e H
. Sou t h w i ck, C i rcui tJu dg e: Tec hno l o gyLe nding Part ne r s LLC an d N u eces F i n an ci alCorpo r ati o n (“the L en ders” ) app ealt h e di st ri ctcourt ’ s di sm i ssal of t h ei r ap pea l of t h e ban kru ptcy United States Court of App eals

Fifth Circuit 

### F I L E D Jul y 14, 2009 Cha rl es R. F ulb ru g e II I ClerkN o. 08- 40517

2 court’ s app rovalof

a set t l em en torder. Th e L en ders a rgue t h at the di st ri ctcourt i m pr o pe r l y ap pli e d the do c t r i ne o f e quit ab l e m o o t ne s s t o di s m i s s . Bec aus e t he
case w as res olvedon thi s th reshol d m oot n ess i ssue, t h e di st ri ctcourtw as nev er c all e d up o n t o de c i de w he t he rt he Le nde r s ’s t at e - l aw t o r tc l ai m s w e r e pa r to f t he ban kru ptcy es t ate. W e agree t h at equi t able m oot n ess sho u ld not hav e been ap pli e d t o t he a ppe alt o di s t r i c tdo ur t
. Con s e que nt l y, w e RE VE RSE a nd R E M A N D to th e d is tr ic t c o u r t fo rfu r th e rp r o c e e d in g s . I
. B AC KGR OUND S an P atr i ci o C ou n t y C om m u n i t y A ct i on A gen cy (“ t h e D ebtor” ) w as a no npr o f i to r ga ni z at i o n, w hi c h r e c e ive d m o ne y f r o m t he s t at e o f

Te xa s a nd the federalgovernm en tt o faci l i t ate it s c h arit able act ivi t i es. A porti on of t h i s m on ey w as usedt o pu rchase pa ssenger van s. L u p ita P a iz o p e r a te da s a n o ffic e ro rd ir e c to ro f th e D e b to r . P a iz , o n b e h a lf of t h e D ebtor , entered i n t o a t ran sact i on w i t h t h e L en ders. Th e L en ders agreed t o pur c has e t he v ans fr o m t he D e bt o ra nd the n l e as e t he v ans b ac k f o rt he D e bt o r ’ s c o nt i nue d us e . Thi s t r ans ac t i o n pe r m i t t e d al o an o f o pe r at i n g f

unds andt he r e c e i pto f

t i t l e t o t he v e hi c l e s a s s e c ur i t y. Pai z r e pr e s e nt e d t o t he Lend e r s t hatt he D e bt o rha d the l e ga lr i ghtt o e nt e ri nt o t hi s t r ans ac t i o n. She
s ig n e dab ill o f s a le o n b e h a lf o f th e D e b to r . Th i s l i t i gat i on e xi st s bec ause t he l oan o f m on ey by t he s t at e a nd fede r al govern m en t s t o pu rcha se the van s prohibi t ed the D ebtorf rom enteri n g i n t o a contractaf

fect i n g t h e governm en t ’ s i n t eresti n t h e property. Th e L en ders
c o nt e nd thatPai z l at e ra dm i t t e d thats he w as una w ar e t hats he di d no tha vet he
au t h o r i t y t o s e l lt he v ans a nd d e c l ar e d thats he w o ul d no tha ves o l d the v ans h a ds h e k n o w n o f th e re s tr ic tio n s . W he n t he D e bt o rw as una bl e to m ake l e as e pa ym e nt s o n t he v ans , t he L en ders w ere un able t o cl ai m t h e van s as s ecuri t y. G overnm en tres t ri ct i on s on t h e t ran sfer of

t i t l e lef tthe L en ders u n secured. T h eref ore, in 200 5, t h e L en dersN o. 08- 40517

3 each fil ed separate stat e- l aw tortsu i t s i n T exas st ate court aga i n stP ai z i n her i n divi du alcapaci t y. E ach sui ta l l egedn egl i gen tm i srepresentat i on on t h e part
o f Pai z . H o w e ve r , t he Lend e r s l i m i t e d t he r e c o ve r y t he y s o ugh tf r o m Pai z t o t he p r o c e e d s fr o m th e D e b to r ’ s d ir e c to r s a n do ffic e r s in s u r a n c e p o lic y . I ti s und i s put e d thatt he po l i c y, w hi c h w as is sued b y St

. PaulFi r e a nd M ari n e I n suran ce C om pa n y an d p ro v id e d $1 m i l l i on i n ben ef i t s, w ou l d cover
r e le v a n t c la im s a g a in s t P a iz in a d d itio n to c la im s a g a in s t t h e D e b to r . T h e r e is
n o i ssue i n t h i s app ealas t o w h at kinds of cl ai m s th e pol i cy cover ed. Th e pol i cy l an gu age stat ed that itc o v e red a “ w rongfulact” by the D ebtoran d byot h er i nsur eds
. “W r ongf

ulA c t” i s br oadly de f i ned i n t he poli c y, butw e a ss um e that th e p olicyw a s n ot o n e sim p l y to p a y d eb ts. W e m a k e th ese ob serv a ti on s, de sp i te t hatt h e p o l i c yi s n o td i r e c t l yi n i s s u e , b e c a u s e p a r to f t h e b a c k g r o und
e xp l ana t i o n b y t he di s t r i c tc o ur tf o rit s ho l di ng w as t hatt he Le nde r s ha d no gr eat erc l ai m t o i nsur ancepr oc ee ds t han w oul d any o f t he o t herc r edit or s. That
w o ul d b e s o o nly i f

t he poli c y c o ve r e d al ldeb t s of t he i ns ur e d. I f

t hatw e r e t he
n a tu r e o f th e c o v e r a g e , a n dw ith c la im s in b a n k r u p tc yo f a b o u t $ 2 .6 m illio n , it d o e s n o t s e e m q u ite p la u s ib le t h a ta s e tt le m e n t w o u ldb e re a c h e do f o n ly $ 6 5 0 , 0 0 0 on a $ 1 m i l l i on p oli cy . T h a t co n cern , tho u gh , do es n ot affect th e res u l t. Pai z dec l ar ed per so nalban krupt c y. Th e L ender s s oughtan d r ec eived an order lif t i n g t h e st ay i n P ai z’ s ban kru ptcy, w h i ch al l ow ed the L en ders t o proceed
w i t h t h ei r s t ate c ou rtneg l i gen tm i srepresentat i on act i on s. T h e D ebtort h en fi led i t s ow n C h ap t er 7 ban kru ptcy pet i t i on i n M arch 2005. M i c haelS c hm i dtw as appoi nt ed as t he bankr upt c y t r ust ee . An audi tby the U
. S. D e pa r t m e nto f H e alt h a nd H um an Se rvi c e s i n 2 00 4 de t e r m i ne d thatt he D ebtorha d overspen tit s grant f u n di n g by m ore th an $55 0,0 00. I n Jan u ary 20 07 , j us tb e f

o r e t he Le nde r s ’s t at e c o ur tt r i al s w e r e t o b e gi n, Sc hm i dt i n terv en edi n bo thaction s. O ve r the L en d e r s ’o p p ositi on , h e rem ov edthe m to ba nkr upt c y c o ur t
. Sc hm i dtha d p r e vi o u sly br o ugh ta c t i o ns o n b e half o f t heN o. 08- 40517

4 D eb tor ag a i n st t h e D eb tor’ s off i cers an ddirectors f

or a l l eg edm i sm a n a ge m en t. Sc hm i dt and t he Tex as At t o r ne y G e ne r al al s o bo t h br o ugh t ac t i o ns ag ai ns tt he D ebtorit self

. E ven t u al l y, over th e L en ders’obj ect i o n, s ix adve r s ary pr o c eedi n gs, i nc l udi ng Sc hm i dt ’ s s ui t s , t he Te xa s At t o r ne y G e ne r al ’ s s ui t , a nd b o t h o f t he Lenders ’s ui t s, w er e c ons oli dat ed i n bankrupt c y c our ti n June 2007. Schm i dt , as t r ust ee , m ove d i n t he bankrupt c y c our tt o a ppoi nthi m se l f as s pe c i alc o uns e lt o r e pr e s e ntt he b ank r upt c y e s t at e i n pr o c e e di ngs i nvo lvi ng t he D ebtoran d i t s of

f i cers , d i rect ors, a n d em pl oyees. Th e ban kru ptcy c ou rtgran t ed t h e m ot i on , w h i ch i n cl u ded a conti n gen cy f ee sc h edu l e f

or Schm i dt of

a t h i rd of al lm on ey coll ect ed f rom s et t l em en tpri or t o t ri al , 45% of al lm on ey coll ect ed
a fte rtr ia l, a n dh a lf o f a ll m o n e yco lle c te da fte ra p p e a l. Schm i dtnego t i at ed a settl em entagr ee m entw i t h St. Paul , w hi c h w as re a ch ed aft er m edi ati on bu tbef ore t ri al
. I n M ay 20 07, t h e ban kru ptcy c ou rt appro ved t he se t t l em ent agr ee m ent , hol di ng t hatSt

. Paulw oul d pay $6 50, 000 of th e $ 1 m illio n av a i l a b l e u n d er th e p oli cyi n ex ch a n ge f or th e d i sm i ssa lw i th pr ej udi c e o f

a l lc l ai m s a ga i ns tt he po l i cy. T h atdi s m i s s ali nc l ude d b o t h o f t he L en ders’cl ai m s, w h i ch they h adi n i t i al ly f i l ed i n st ate c ou rt
. Th e ban kru ptcy court f ou n d th a t al lof

t h e proceeds of

t h e D ebtor ’ s r el evan ti n suran ce pol i cy w e r e pa r tof the b ank r upt c y e s t at e . The Le nde r s uns uc c e s s f ul l y o ppo s e d the
s e t t l e m e nta gr e e m e nt
. The i rm o t i o n t o s t ayt he o r de ra ppr o vi ng t he s e t t l e m e nt ag r e e m e ntw as de ni e d. W i t h t h e set t l em en tagreem en tapp roved, S chm i dt n ext f i l ed a m ot i on f

or ap pr o va lo f

a n i nt e r i m di s t r ibut i o n a gr e e m e nt f o r t he s e t t l e m e nt pr o c e e ds
. The bankrupt c y c our t gr ant ed t he m ot i on. I t appro ved a di st r ibut i on agr ee m entt hat ga ve $3 2 5 , 0 0 0 , o r h a l f of th e settl em en t, p l u s ou t- of- p ock et ex p en ses to S ch m i d t;
m o re th a n $ 1 5 0 ,00 0 to th e T e x a s A tto rn e yG e n e ra l; a n dev e n tu a llyleft $11 8, 961
. 06 to be di st ribu t ed p ro r ata a m on g ap proxi m ately 50 u n secured
c r e d ito r s , in c lu d in gth e L e n d e r s . T h e L e n d e r s file dam o tio n to s ta yth e in te r imN o. 08- 40517

5 d is tr ib u tio n a g r e e m e n t, b u t t h e yd idn o t p o s t a b o n d
. T h e m o tio n w a s d e n ie din A u g u s t 2 0 0 7 , a n dth e fu n d s w e r e d is tr ib u te d
. The Lend e r s a ppe al e d the f o l l o w i ng o r de r s t o t he di s t r i c tcour t : ( 1) t he O r de rCons o l i da t i ng allt he A dv e r s ary Pr o c e e di ngs , ( 2) t he O r de rAppr o vi ng t he S et t l em en tA greem en t , ( 3) t h e O rder D en yi n g L en ders’M ot i on forS t ay of O rder A ppro vi ng Set t l em entA gr ee m ent , ( 4) t he O r derG r ant i ng M ot i on f orA ppro val of I n t eri m D i st ribu t i on A greem en tf or Sett l em en tP roceed s, an d ( 5) t h e O rder D e nyi ng M o t i o n f

o rSt ayo f

O r de rAppr o vi ng I nt e r i m D i s t r ibut i o n a nd Deny i ng St ayo f D i s m i s s alo f

Cons ol i da t e d Adv e r s ar i e s . The pa r t i e s f ul l y br i e fe d the
m erit s i ssues bef

ore t h e di st ri ct court, an d then one m on t h l aterSch m i dt f i l ed
a s e pa r at e m o t i o n t o di s m i s s t he a ppe ala s e quit ab l y m o o t
. I n M ar c h 2 00 8, t he di st ri ct court gran t ed Schm i dt’ s m ot i on . T h ou gh t h e di st ri ct cour t m e n tioned th e m e r its is s u e s , its a n a ly s i s c o n c e n tr a te ds o le lyo n th e is s u e o f e q u ita b le
m oo t nes s. I n gr ant i ng t he m ot i on t o di sm i ss , t he c our tex pl ai ned, “i tw oul d be in e q u ita b le a n dfu tile to co n s id e rth e m e r its o f A p p e lla n ts ’a p p e a ls .” Thi s a ppe alf

o l l o w e d. I I
. DI S CUS S I ON O n t h i s app eal , w e actas t h e sec on d ap pel l ate court t o revi ew t h e act s of th e b a n k ru p tcy cou rt. C on seq u en tly, w e a p p l y th e sa m e sta n d a rdof rev i ew to t h e ban kru ptcy c ou rt ’ s r u l i n g as di d the di st ri ctcourt
. W e provi de no defer en ce t o l egal concl u si on s a n d a n al yze t h em an ew . O n t h e ot h er han d, cl ear err or m ustbe s how n bef

or e w e w oul d r eve r se a f i ndi ng of

fac t
. M i xed ques t i ons of l aw andfac tt hatm ayb e i n t he c as e rec ei ve d e n ov o re v ie w . I n reSe v e n Se as Pet roleum , I

n c. , 5 2 2 F .3 d5 7 5 , 5 8 3 (5 th C ir . 2 0 0 8 ). Th e c ont r oll i ng hol di ng by the di st r i c tc our tw as t hatt he appea lw as eq u i tab l y m oo t bythe ti m e ita rrived
. T h a t is aleg a lde term i n a ti on su bj ect to de no vo re v ie w . In reG W I P C S1 I

n c. , 2 3 0 F .3 d7 8 8 , 7 9 9 -8 0 0 (5 th C ir . 2 0 0 0 ).N o. 08- 40517

6 T h e d o c tr in e o f e q u ita b le m o o tn e s s is d e s ig n e d“t o a d d r e s s e q u ita b le
con cern s u n i q u e to b a n k ru p tcy p roce ed i n gs . ” In re Manges , 29 F. 3d 1034, 1038 ( 5th C i r. 199 4)

. It i s n ot an A rt i cl e II I i n qu i ry i n t o w h et h er a c ase or controver sy e xi s t s , b utrat he r“ a r e c o gnit i o n b y t he a ppe l l at e c o ur t s t hatt he r e i s apo i nt b e y o n dw h ic hth e yca n n o t o r d e rfu n d a m e n t a lc h a n g e s in r e o r g a n i z a t i o n a c t io n s .” I d. at1039. “A n a p p eali s equi t ably m oo tw hen a pl an of r eo r gani zat i on has been so sub st an t i al l y consu m m ated t h at a c ou rtcann otorde r e ffec t ive rel i ef
e v e n th o u g h aliv e d is p u te r e m a in s a m o n gs o m e p a r tie s to th e b a n k r u p tc yca s e .” I n reHi lal , 53 4 F
. 3 d 4 9 8 , 5 0 0 (5th C i r. 2 0 0 8 ). B oth of th e latter tw o sta tem en ts
o f p r in c ip le re fe r to p la n s o f r e o r g a n iz a tio n s . S u c h p la n s m a in ta in ad e b to rin op era ti on an dm a y re su l t i n su b stan ti a lch a n ge s i n ow n ersh i p , m a n a ge m en t,
an d bu si n ess rel ati on s. N e w c o n tra ct s m ay be en t ered, such a s new a r r a n g e m e n ts w ith s u p p lie r s a n d o t h e r s . A ll o f th a t a n dm o r e re s u lt in
ex p ecta ti on i n teres ts t h a t cou rts are l oa thto u p set. W h et h er th e doct ri n e ha s m u ch i f a n y rel evan ce t o a ban kru ptcy un der a C h ap t er 7 li qu i da t i on , a s th i s one, i s a t h reshol d i ssue. “ E qu i t able m oot n ess n o r m a l l y a ri ses w h ere a C h a p ter 11 reor ga n i za ti on plan i s at i ssu e.” In re G ri m lan d, I

n c. , 2 4 3 F
. 3 d 2 2 8 , 2 3 1 n . 4 (5th C i r. 2 0 0 1 ). T h e doc tri n e resp on d s “t o t h e pa rtic u l ar probl em s presented by t h e consum m ati on of pl an s of
reo rg a n i za ti on u n d er C h a p ter 11
. ” I d. a t 2 3 1
. In d e e d , e q u ita b le m o o tn e s s is
o fte n d e fin e dinre la tio n to re o r g a n iz a tio n p la n s . See, e . g. , I n reHi lal , 534 F. 3d
a t 5 0 0 ; In re B err

ym an Prods. , I

n c. , 1 5 9 F .3 d9 4 1 , 9 4 4 (5 th C ir . 1 9 9 8 ); In re Manges , 2 9 F
. 3 da t1 0 3 9 ; 1 3 B C H ARLES A LAN W R I GHT , A RT HUR R. M I L L ER & E DWAR D H. C OOP ER , F EDERAL P RA C TI C EAN D P ROC EDUR E § 3 5 3 3 .2.3 (3d ed
. 2 0 0 8 ). B u tse e I

n rePe que no , 2 4 6 F
. A p p ’ x 2 7 4 (5 th C ir
. 2 0 0 7 ) (fin d in ge q u ita b le
m oo t ne s s i n aChapt e r7 pr o c e e di ng i n a n unp ubli s he d a nd the r e f o r e no np r e c e d e n tia l o p in io n ).N o. 08- 40517

7 I ti s c er t ai nl y ar guabl e thateq ui t abl e m oo t nes s has no appl i c at i on t o a n ap pe ali n aChapt e r7 l i qui da t i o n. Ye t , there i s no r e as o n t o m ak e s uc h a
c o m p r e h e n s iv e s ta te m e n t h e r e . In stea d , w e fin dtha t un d er tra d ition a l e q u ita b le
m oo tn ess an a l ys i s, this case i s n ot m oo t. W e st artw i t h som e st an da rd qu al i f i ers t o equ i t able m oot n ess.

“ Subs t ant i alc o ns um m at i o n o f a r e o r ga ni z at i o n pl an i s am o m e nt o us e ve nt , b ut i tdoes not n ecess ari l y m ak e iti m possibl e or i n equ i t able f or an ap pel l ate c ou rt to gra n t effective reli ef. ” In reManges , 29 F
. 3dat 104 2- 43 (i n t erna lqu ot ati on m ar ks and cit at i on om i t t ed)

. Furt her , “ equi t abl e m oo t nes s need no tf or ec l os e a n ap pea lf

rom aspect s of

C h ap t er 11 pl an conf irm ati on t h at s ol el y concern p rofession a lcom p en sa ti on an dreleas es.” I n r eHi lal , 5 3 4 F .3 da t 5 0 1 ; seeI n re SI R est ruct u ri ng, I

n c. , 54 2 F
. 3 d13 1 , 1 3 6 -3 7 (5th C i r. 20 0 8 ) (ho l d i n g th a t a ch a ll e n g e to th e d isb u rs e m e n t of a tto rn e y ’ s fe e s w a s n o t eq u ita b ly m o o t). W h atever el se m ay be eq u i t ably m oot , t h e L en ders’cl ai m t o ha ve a porti on of S chm i dt’ s at t orney’ s f ees di sgorged seem s beyon d the reach of t h e doct ri n e. W e e xam i n e th ree fa ctors in th e u su a leq u i tab l e m oo tn ess ass ess m en t: “( 1)
w h e th e ras ta yh a s b e e n o b ta in e d , (2 ) w h e th e rt h e p la n h a s b e e n ‘ s u b s ta n tia lly
c o ns um m at e d, ’a nd ( 3) w he t he rt h e r e l i e f r e que s t e d woul d a f fe c te i t he rt he ri gh ts of p a rti es n ot be fore th e cou rt or the su cces s of th e p l a n . ” In re Manges , 29 F. 3d at1039. “Th e ul t i m at e q ues t i on t o b e de c i ded i s w het her t he C our tc an g r a n t r e lie f w ith o u t u n d e r m in in g th e p la n a n d , th e r e b y , a ffe c tin gth ir dp a r tie s .” In re SI R est ruct u ri ng, I n c. , 5 42 F
. 3da t1 36. In t h i s case, the f i rsttw o fact ors ar e no ta ti s s ue , a tl e as tfac t uall y. The Le nde r s di d n otob t ai n as t ay . The
s e t t l e m e ntha s m o s t l y andperhap s ent i r e l y be e n pai d, butw he t he rt hati s t he
e quiva l e nto f

“ s ubs t ant i all y c o ns um m at e d” c an bede fe r r e d. The r e m ai ni ng fac t o ri s w he t her the r e l i e f r e que s t e d woul d a f fe c tt he
suc c es s of

t he pl an ort he r i ght s of par t i es notbe f

or e the c our t
. Th e r eli ef t hat t h e L en ders w ou l d receive f rom a f i n di n g t h at th ei r s t ate- l aw cl ai m s s h ou l d n otN o. 08- 40517

8 h a v e b e e n re m o v e dto b a n k r u p tc yco u r tw o u ldb e are s ta r tin go f th e ir p r o c e e d in g s a g a in s t P a iz ins ta te co u r t. W e r e th e L e n d e r s to b e s u c c e s s fu l in t ho s e c l ai m s , t he n Pai z c o ul d m ak e ac l ai m o n b e ne f i t s payabl e und e rt he i n suran ce pol i cy. E veryon e af fect ed h as been i n volvedin th e se ban kru ptcy pr o c e e di ngs a s c r e dit o r s , t r us t e e , o ra s ano n- pa r t y i ns ur anc e co m pa ny e nt e r i ng asettl em en t w i ththe sp ecif i c p u rp ose of h a vin g itap p rov edbythe cou rt. Thi s c as e i nvo lve s t he pa ym e nto f m o n ey t o p art i e s w ho w e r e b e f o r e t he ban kru ptcy c ou rt , w ith three- qu art ers of t h e set t l em en tbei n g pa i d to ei t h er Schm i dtort he s t at e o f Texas
. W e r eali zet hat t he m oney pai d t o the s t at e w as t hen t o b e given t o a com par abl e char i t y orcharit i es . S t i l l , w e donotf i nd t hat factt o cr eate a hardsh i p i n t h i s c ase suf f i ci en tt o outw ei gh t h e gen eralri gh tof di ssat i sf

i ed l i t i gan t s t o ha ve a revi ew of t h ei r app el l ate i ssues. In d e e d , w e fin dlitt le d iffe r e n c e in th e e q u itie s inth is ca s e fr o m th o s e in gener alc ivilappeal s i n w hi c h a m oney j udgm entw as ent er ed, butno s t ay w as o b ta in e d
. T h e r e is ap r o v is io n fo rs e e k in gas ta yo f aju d g m e n t in a p p e a ls in
s uc h c as e s . Fe d. R
. A pp. P
. 8( a)

. I f t he r e i s no s t ay , am o ne y j udg m e nti nvo lvi ng
m u l t i pl e parti es m ay be p ai d p ri or t o a rul i n g on t h e ap pea l
. If i n f orm ed of

t h ose paym ents, w e donotc ons i derdi sm i ss i ng t he appea lw i t h a s t at em entt hat
e q u ityn o w p r e v e n ts u s fr o m re v ie w in gth e m e r its
. T h a t is tr u e e v e n th o u g h in
s o m e c as e s , t hem o ne y w o ul d no tb e r e c o ve r ab l e if t he j udg m e nt w e r e r e ve r s e d. T h e pri n ci pa lentit y w h o l oses pro t an t o i s t he appell ant w ho di d notge tt he s t ay and c annotrec ove ral lof the paym ent s al r eady m ade. I thas neverbe en t he l aw th a t fa ilu r e to g e t t h e s ta ym o o ts th e a p p e a l. W e a r e a w a r e t h a t s e tt le m e n t a g r e e m e n ts c a n p la ya n im p o r ta n t r o le in im p r o v in gth e o d d s fo r th e o v e r a ll s u c c e s s o f ab a n k r u p tc yp la n . See, e . g. , In re Hi lal , 2 2 6 F
. A p p ’ x3 8 1 (5t h C ir. 2 0 0 7 ); I n reMorningsi d e M

obi le Hom e R V

Park , 3 2 F . A p p ’ x1 3 0 (5 th C ir . 2 0 0 2 ); I n r e U. S. Br as s Cor

p. , 169 F
. 3d957 ( 5th C i r. 1 9 9 9 ). Int h o s e c a s e s , th e se ttlem e n t a g re e m e n ts a n dre lea se s w e re p a rt o f aN o. 08- 40517

9 l arger pl an of

reor gan i zati on . I n on e case, w e f ou n d th at a di spu t e i n a C h ap t er 7 ba n kru ptcy bet w een t w o parti es overasurcharge order w as not equit ably m oot becau se r eversi n g t h e order w ou l d si m pl y requ i re one pa rt y t o repayt h e ot h er. I n reG r i m land , 243 F
. 3d at 232
. T h ere are m ore part i es i n volvedi n t h i s c ase, bu t n ot a di f

ferent pri n ci pl e. T h ere i s n o reor gan i zati on pl an here t h at has been p u t in to e ffe c t a n dw o u ldn e e dt o b e u n r a v e le d
. If t h e s e tt le m e n t a g r e e m e n t in th is c a s e e v e n tu a llyw e r e s e t a s id e , m o n e yre c e iv e du n d e rth e in te r im di sb urs em entor derw oul d need t o b e r epai d. Som e o f the credit or s m ay be f i n an ci al l y u n able t o repay. Th at dif f i cul t y i s not of

t h e sam e n a tu re or m ag ni t ude a s t he und o i ng o f ac o m pli c at e d p l an o f r e o r ga ni z at i o n. E qu i t able m oot n ess i s, to b e red u n da n t , an equ i t able doctr i n e. O n t h ese fa c t s , e v e n if

t h e d o c t r i n e h a s s o me l e g a lr e l e v a n c e t o C h a p t e r7 l i q u i d a t i o n s , we do n otapp l y i t
. E qu i t y m u ch m o re st rongly li es w i t h t h e parti es w h o rai se a l egi t i m ate argum en ttha ttheircl ai m s w ere not properl y pa rtof t h e ban kru ptcy est ate i n t h e f

i rstp la ce . T h at c l ai m shou l d be revi ew ed ab sent s t ronger equ i t able m oot n ess argu m en t s th an w e ha ve seen h ere. T h e di st ri ctcourtnev e rr e ac he d th e sum m ary j u dg m en ti ssues on w h et h er th e L e n d e r s ’cla im s w e r e p a r t o f th e e s ta te
. In s te a d , th e a p p e a l w a s s im p ly d is m is s e do n m o tio n . T h e o n lyo r d e rb e in gre v ie w e dto d a yco n c e r n s e q u ita b le
m oo t nes s. W e g o no f urt herthan toc onc l ude t hatt he doc t r i ne doe s notapply. W e R E V E R S E an d R E M A N D f or f u rt h er proc eedi n gs.