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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

______________ No. 94-7748

______________

IN RE CONTINENTAL AIRLINES: NATIONSBANK OF TENNESSEE, N.A., f/k/a NationsBank of Tennessee, as Collateral Trustee under a Secured Equipment Indenture and Lease Agreement dated March 15, 1987 ("NationsBank"); NEW JERSEY NATIONAL BANK, as successor by merger to Constellation Bank, N.A., f/k/a National State Bank of Elizabeth, N.J.; HARRIS TRUST AND SAVINGS BANK; and BOATMAN'S FIRST NATIONAL BANK OF OKLAHOMA, as First, Second and Third Priority Secured Equipment Certificates Trustees thereunder, respectively (the "Series Trustees" and, collectively with NationsBank, the "Trustees"), Appellants

_______________ On Appeal from the United States District Court

for the District of Delaware C.A. No. 93-195-JJF (Bankruptcy Nos. 90-932 through 90-984)

________________ Argued September 15, 1995 Before: SLOVITER, Chief Judge , ALITO and SEITZ, Circuit Judges (Filed February 7, l996)

________________ Gary S. Jacobson (Argued) Nicholas J. DiCarlo James G. Scotti Kelley Drye & Warren New York, NY 10178 Attorneys for Appellant NationsBank of Tennessee
Hal L. Baume Louis T. DeLucia Norman Peer Wilentz, Goldman & Spitzer2

Woodbridge, NJ 07095 Attorneys for Appellant New Jersey National Bank Richard G. Elliott, Jr. Daniel J. DeFranceschi Richards, Layton & Finger Wilmington, DE 19899 Attorneys for Appellants Harris Trust and Savings Bank and Boatman's First National Bank of Oklahoma

Richard P. Schifter (Argued) Andrew T. Karron Michael L. Bernstein Kari M. Desgalier Arnold & Porter Washington, D.C. 20004

Laura D. Jones Robert S. Brady Young, Conaway, Stargatt & Taylor Wilmington, DE 19899-0391 Attorneys for Appellee3 ____________________ OPINION OF THE COURT

____________________ SLOVITER, Chief Judge

. INTRODUCTION

Before us is an appeal by NationsBank of Tennessee (Collateral Trustee) and New Jersey National Bank, Harris Trust and Savings Bank, and Boatman's First National Bank of Oklahoma (First, Second, and Third Priority Secured Equipment Certificate Trustees), who are collectively referred to in this opinion as the "Trustees," from the order entered by the district court in the Chapter 11 bankruptcy proceeding of Continental Airlines, Inc. dism issing as moot three appeals by the Trustees. Those appeals were from orders of the bankruptcy court which 1) denied the Trustees' Renewed Motion for adequate protection, 2) confirmed Continental's revised second amended joint plan of reorganization, and denied the Trustees' motion for the establishment of a cash deposit of $123,479,287. In essence, the Appellant Trustees seek payment for an asserted administrative claim of approximately $117 million against the reorganized company. The Appellee, Cont inental Airlines, Inc., defends the district court's mootness ruling and argues, in the alternative, that the underlying rulings of the bankruptcy court were correct as a matter
of law and fact.
I.
FACTUAL AND PROCEDURAL HISTORY Continental filed its Chapter 11 bankruptcy petition on December 3, 1990. Appellant Trustees serve as successor Collateral and Series Trustees for certificate holders who had provided Continental with operating capital. The certificates were secured at the time of Continental 's petition by a pool of 29 commercial aircraft with engines, and 81 additional jet engines which, we were advised, serviced about one- third of4 Continental's operating fleet. Under the Bankruptcy Code, the debtor in possession, which has most of the rights, powers, functions and duties of a trustee, see 11 U.S.C. § 1107(a), "may use property of the estate in the ordinary course of business without notice or a hearing." 11 U.S.C. § 363(c)(1). Section 363(e) provides:

Notwithstanding any other provision of this section, at any time, on request of an entity that has an interest in property used . . . by the [debtor in possession], the court, with or without a hearing, shall prohibit or condition such use . . . as is necessary to provide adequate protectio n of such interest.

11 U.S.C. § 363(e). On February 21, 1991, First Fidelity Bank of New Jersey, predecessor to NationsBank as Collateral Trustee, filed a motion along with many other aircraft lessors and financiers alleging, inter alia , a decline in the value of the collateral and seeking adequate protection under section 363(e). First Fidelity later withdrew from this motion, but on June 28, 1991 it, and the predecessors of the other Appellant Trustees, filed a motion seeking similar relief. The ba nkruptcy court held an evidentiary hearing on the motion from September 3 through September 6, 1991 limited to the Trustees' assertion that they were entitled to adequate protection payments as a result of the collateral's post petition decline in market value. Continental argued, inter alia , that because the Trustees had not filed a motion for relief from the automatic stay, they were not entitled to an award of adequate protection under section 363(e). The bankruptcy court ruled on the Trustees' motio August 27, 1992, rejecting that argument but finding as a fact, based on the "Blue Books," a publication issued by a company that appraises aircraft, that the market value of the collateral had not declined during the period at issue in the motion. I n re Continental Airlines, Inc. , 146 B.R. 536 (Bankr. D. Del. 1992) [hereinafter Continental I ].5 On August 14, 1992, approximately two weeks before the opinion in Continental I was issued, the Trustees filed a motion under section 362(d) of the Bankrup tcy Code to lift the automatic stay ("Lift-Stay Motion"). See 11 U.S.C. § 362(d). This section permits a creditor to move for relief from the automatic stay of delineated activities, such as repossession of collateral, effected by section 362(a) of the B ankruptcy Code.

On September 14, 1992, the Trustees also filed a renewed motion for adequate protection for alleged decline in the collateral's value for the period after September 1991, when the original 1991 motion was argued ("Renewed Motion"). The re were various hearings on the Renewed Motion between November 3, 1992 and February 5, 1993. Toward the end of that period, the Trustees filed a motion dated January 29, 1993, asking the bankruptcy court to establish a cash deposit of some $123 million, of which $117 million was attributable to alleged market decline, to preserve what the Trustees claimed was the administrative priority status of the Trustees' adequate protection claim if Continental emerged from bankruptcy as a reorganized debtor ("Deposit Motion").

During this period efforts to reorganize the debtor continued. On November 9, 1992 Continental entered into an Investment Agreement under which the Investors (Air Partners, L.P. and Air Canada) agreed and committed to an investment of $450 million in the reorganized entity under a complex arrangement and subject to certain conditions. App. at 391 et seq. One of those conditions relevant to this proceeding was a limitation on the amount and nature of liabilities and administrative expense claims required to be assumed by or attributable to the reorganized company. App. at 408. On January 13, 1993 Continental filed a second amended joint plan of reorganization ("Plan") which referenced that Investment Agreement. The Plan provided, inter alia , for assumption of "allowed administrative claims" by the reorganized Continental. App. at 656.

The confirmation hearing was held for a number of days during the period March 16, 1993 through April 16, 1993. The parties reached a settlement on Apr il 12 concerning6 adequate protection due to use and/or maintenance of the collateral by Continental, and no issue relating to use decline (the impairment in value attributable to the use of the collateral by the debtor in possession) is before us. The par ties did not settle the Trustees' adequate protection claims based on decline in market value.

At the conclusion of the confirmation hearing on April 16, 1993, the bankruptcy court denied the Deposit Motion and the Renewed Motion. In a published opinio n, the court held that it was necessary for the Trustees to have sought relief from the automatic stay to be entitled to adequate protection for market value decline; that therefore the Trustees were not entitled to adequate protection due to market declin e until after the date of their Lift- Stay Motion, i.e. August 14, 1992; and that no decline in the market value of the collateral had taken place since that date. In re Continental Airlines,
Inc. , 154 B.R. 176 (Bankr. D. Del. 1993) [hereinafter Continental II ]. Also on April 16, 1993, the bankruptcy court signed the Confirmation Order. The court made a series of detailed findings of fact and conclusions of law underlying the Confirmation Order which will be referred to throughout this opinion when pertinent.

On April 20, 1993 the Trustees filed three notices of appeal to the district court from the bankruptcy court's denial of the Renewed Motion for Adequate Protection, its denial of the Deposit Motion, and its order confirming the Plan. Two days later, Trustees filed a motion for a partial stay of the consummation of the Plan ("Conditional Stay Motion"), but filed that motion in the district court, which referred them to the bankruptcy court. On April 26, 1993, the Trustees filed a stay request in the bankruptcy court. Because the bankruptcy judge was not available, the hearing on the motion was held the next day in the district court, which ruled that the Trustees were likely to prevail on appeal but denied the stay because the Trustees were "unable to post a bond satisfactory to the Court." App. at 1755- 56. With no stay impeding implementation of the7 Plan which had now been confirmed, the Investors proceeded to close the transaction by making their promised investment. On May 6, 1993 Continental filed a motion in the district court to dismiss the Trustees' appeals as moot, which the district court granted on December 30, 1993. The Trustees filed a motion for rehearing and reconsideration in light of the decision in Frito-Lay, Inc. v. LTV Steel Co., Inc. (In re Chateaugay Corp.) , 10 F.3d 944 (2d Cir. 1993) [hereinafter Chateaugay II ], which the court denied. The Trustees filed a timely notice of appeal. We have jurisdiction pursuant to 28 U.S.C. § 158(d).
II.
DISCUSSION
A. The merits issues on which the parties divide present interesting and challenging questions of first impression for this court, and some appear not to have been decided by any appellate court. The Trustees argue that neither the Bankruptcy Code nor any reliable precedent sup ports the bankruptcy court's holding that a creditor must file a motion to lift the automatic stay as a prerequisite to seeking adequate protection. They argue that this is a matter of law that this court can decide de novo even though the district court did not reach the issue. They further argue that the bankruptcy court's finding that there was no diminution in the market value of the Trustees' collateral after they filed their Lift- Stay Motion was clearly erroneous. Finally, they argue that the bankrup tcy court erred as a matter of law in denying their motion for the establishment of a cash deposit.

Not surprisingly, Continental, as appellee, defends both the bankruptcy court's legal determination that the Trustees could not assert adequate protection claims for alleged market value decline during the period before they moved for relief from the automatic stay and its factual conclusion that there had been no substantial decline in8 the value of the collateral since the Lift-Stay Motion was filed. Fina lly, it argues that in any event the Trustees could not recover for adequate protection because the value of the collateral did not decline below its value on the petition date, which Continental contends is the relevant measure. We would reach these iss ues only if we were satisfied that the district court erred in holding that the Trustees' appeals to it were moot, a decision as to which the parties vigorously disagree. Mootness vel non of the appeals before the district court is closely related to, if not indistinguishable from, the question whether the appeal to this court is moot, an issue which Continental alludes to in its brief. For convenience, we will refer to mootness in the district court unless we state otherwise. Continental does not conten d that the appeals to the district court or to us were moot in the constitutional sense, implicating the case or controversy requirement of Article III, §1. See, e.g. , Preiser v. Newkirk , 422 U.S. 395, 401- 02 (1975). This is not a situation analogous to t hose where the appeals became moot because the law at issue was repealed, see Diffenderfer v. Central Baptist Church , 404 U.S. 412, 414- 15 (1972); the subject of the election campaign controversy was no longer a candidate, see Golden v. Zwickler , 394 U.S. 103, 109- 10 (1969); or the railroad whose application for tariffs was contested withdrew that application, see A.L. Mechling Barge Lines, Inc. v. United States 368 U.S. 324, 329-30 (1961). Indeed, as the Supreme Court has recently explained, an appeal i s moot in the constitutional sense only if events have taken place during the pendency of the appeal that make it "impossible for the court to grant 'any effectual relief whatever.'" of Scientology v. United States , 506 U.S. 9, ___, 113 S. Ct. 447, 449 (1992) (quoting Mills v. Green , 159 U.S. 651, 653 (1895)). An appeal is not moot "merely because a court cannot restore the parties to the status quo ante . Rather, when a court can fashion ' form of meaningful relief,' even if it only partially redresses the grievances of the9 prevailing party, the appeal is not moot." RTC v. Swedeland Dev. Group, Inc. (In re Swedeland Dev. Group, Inc. ), 16 F.3d 552, 560 (3d Cir. 1994) (in banc) (quoting Church of Scientology , 113 S. Ct. at 450). Thus, in Isidor Paiewonsky Assocs. v. Sharp Properties,
Inc. , 998 F.2d 145, 152 (3d Cir. 1993), we concluded that because we could impose at least one of the remedies enumerated by the appellant, and thereby provide it "some effective relief," the appeal was not moot. That is not the issue in this case.

Instead, Continental invokes the broader interpretation of mootness applied in bankruptcy cases, often referred to as "equitable mootness." See , e.g. , Manges v. Seattle-First Nat'l Bank (In re Manges) , 29 F.3d 1034, 1038-39 (5th Cir. 1994), cert. denied , 115 S. Ct. 1105 (1995); In re Specialty Equip. Cos. , 3 F.3d 1043, 1048 (7th Cir. 1993); Official Comm. of Unsecured Creditors of LTV Aerospace & Defense Co. v. Official Comm. of Unsecured Creditors of LTV Steel Co. (In re Chateaugay Corp. ), 988 F.2d 322, 325 (2d Cir. 1993) [hereinafter Chateaugay I ]; Rochman v. Northeast Utils. Serv. Group (In re Public Serv. Co.) , 963 F.2d 469, 471-72 (1st Cir.), cert. denied , 113 S. Ct. 304 (1992); First Union Real Estate Equity & Mortgage Invs. v. Club Assocs. (In re Club Assocs.) , 956 F.2d 1065, 1069 (11th Cir. 1992); Central States, Southeast and Southwest Areas Pension Fund v. Central Transp.,
Inc. , 841 F.2d 92, 95-96 (4th Cir. 1988); In re AOV Indus. , 792 F.2d 1140, 1147 (D.C. Cir 1986); Trone v. Roberts Farms, Inc. (In re Roberts Farms, Inc.) , 652 F.2d 793, 796

- Cir. 1981). Under this widely recognized and accepted doctrine, the courts have held that "[a]n appeal should . . . be dismissed as moot when, even though effecti ve relief could conceivably be fashioned, implementation of that relief would be inequitable." Chateaugay
I , 988 F.2d at 325.

In a trenchant discussion of the issue in a recent decision of the Seventh Circuit, the court noted that denominating the doctri ne as "equitable mootness" is misleading. In re UNR Indus. , 20 F.3d 766, 769 (7th Cir.), cert. denied , 115 S. Ct. 50910 (1994). Judge Easterbrook, writing for the court, stated: "[t]here is a big difference between inability to alter the outcome (real mootness) and unwillingness to alter the outcome ('equitable mootness'). Using one word for two different concepts breeds confusion." Id. (emphasis in original). Thus, although the discussions and applications of the concept of "mootness" in bankruptcy cases by that court had previously encompassed what is referred to elsewhere as "equitable mootness," see Specialty Equip. , 3 F.3d at 1048; In re Andreuccetti , 975 F.2d 413, 418 (7th Cir. 1992), the court in UNR Industries stated it would now "banish 'equitable mootness' from the (local) lexicon." 20 F.3d at 769. Instead, the court continued, "[w]e ask not whether this case is moot, 'equitably' or otherwise, but whether it is prudent to upset the plan of reorganization at this late
date." Id. These "equitable " or "prudential" considerations focus on "concerns unique to bankruptcy proceedings." Manges , 29 F.3d at 1038. Whether termed "equitable mootness" or a prudence doctrine, we see no reason why this court should part company with our sister circuits in th eir adoption of this doctrine. If limited in scope and cautiously applied, this doctrine provides a vehicle whereby the court can prevent substantial harm to numerous parties.

The Trustees have not challenged the viability of the doctrine of equitable mootness or application of prudential considerations in bankruptcy cases, nor have they cited to a case in any circuit that rejects the concept. Instead, they rely most heavily on a decision of the Second Circuit holding that even though the reorganizatio n plan for the bankrupt LTV Corporation had been confirmed, the appeal of tax lessors challenging the plan's failure to give their claims administrative priority was not moot. See Chateaugay
II , 10 F.3d 944 (2d Cir. 1993). Significantly, the court in Chateaugay II did not quarrel with the doctrine, merely its application in that case. In fact, in RTC v. Best Prods. Co. (In re Best Prod. Co.) , 68 F.3d 26, 29 (2d Cir. 1995), a more recent case from the11 Second Circuit, the court once again emphasized the language in Chateaugay I that even though an appeal may not be moot in the sense of Article III of the Constitution, it may be deemed moot in bankruptcy cases because of "equitable considerations." We have generally stated that we exercise plenary review of a district court's decision on mootness. See Northeast Women's Ctr., Inc. v. McMonagle , 939 F.2d 57, 61 (3d Cir. 1991); International Bhd. of Boilermakers v. Kelly 815 F.2d 912, 914 (3d Cir. 1987). In those cases our focus was on constitutional
mootnes s. It is surprising, but we have not seen any discussion of our standard of review of a district court's determination that a bankruptcy appeal to it was moot for equitable or prudential reasons. Under ordinary review principles, we would review that dec ision for abuse of discretion. A particular case may also raise legal and/or factual issues interspersed with the prudential ones, and then the applicable review standard, plenary or clearly erroneous, would apply.

B. Factors that have been considered b y courts in determining whether it would be equitable or prudential to reach the merits of a bankruptcy appeal include (1) whether the reorganization plan has been substantially consummated, (2) whether a stay has been obtained, (3) whether the relief requ ested would affect the rights of parties not before the court, (4) whether the relief requested would affect the success of the plan, and (5) the public policy of affording finality to bankruptcy judgments. See Manges , 29 F.3d at 1039; Rochman , 963 F.2d at 471-72.

The foremost consideration has been whether the reorganization plan has been substantially consummated, especially where the reorganization involves intricate transactions, see Rochman , 963 F.2d at 473- 74 (performance under plan involved "numero complex arrangements"); Roberts Farms , 652 F.2d at 797 (plan involved "many intricate and12 involved transactions" and reversal of plan's confirmation "would knock the props out from under" such transactions and "create an unmanageable, uncontrollable sit uation for the Bankruptcy Court"), or where outside investors have relied on the confirmation of the plan, see Manges , 29 F.3d at 1039 (equitable mootness "protects the interests of non adverse third parties who are not before the reviewing court but who h ave acted in reliance upon the plan as implemented"); UNR Indus. , 20 F.3d at 770 ("[b]y protecting the interests of persons who acquire assets in reliance on a plan of reorganization, a court increases the price the estate can realize ex ante , and thus pro duces benefits for creditors in the aggregate"); Rochman , 963 F.2d at 474 (reorganization involved $1.5 billion in financing from 100,000 sources); Club Assocs. , 956 F.2d at 1070 ("a number of investors, who were not parties to this case, had committed new funds to the 'reemerged Club' with the expectation of receiving a preferred return on their investments").

"Substantial consummation" is defined in the Bankruptcy Code as: "(A) transfer of all or substantially all of the property proposed by the plan to be transferred; (B) assumption by the debtor or by the successor to the debtor under the plan of the business or of the management of all or substantially all of the property dealt with by the plan; and (C) commencement of distribution under the plan." 1 1 U.S.C. § 1101(2). In such instances, the strong public interest in the finality of bankruptcy reorganizations is particularly compelling.

The district court dismissed the appeals to it as moot based on the conclusions, set forth in its opinion dated December 30, 1993, that substantial consummation of the Plan had occurred, the Investors had already made their $450 million investment into the reorganized entity, all elements of the Plan, except distributions to the unsecured creditors, had been compl eted, and a reversal of the order confirming the Plan likely would put Continental back into bankruptcy. App. at 1873. The court also noted that13 Continental had implemented the Plan following its approval by the court because the Trustees had failed to obtain a stay.

The Trustees do not challenge that there had been substantial consummation by December 1993, when the district court dismissed the appeals as moot. They suggest that as their object is not to disturb the reorganization, but only to get paym ent from the reorganized Continental for their adequate protection claim measured by the market value decline of the collateral during bankruptcy, the line of cases upon which Continental relies is inapplicable. We cannot agree, because the rejection of t he Trustees' claim by the bankruptcy court was inextricably intertwined with the implementation of the reorganization. See AOV Indus. , 792 F.2d at 1148 (to evaluate mootness, court must "scrutinize each individual claim, testing the feasibility of grantin g the relief against its potential impact on the reorganization scheme as a whole"). Thus, the Trustees cannot avoid the effect of the substantial consummation of the reorganization plan so readily. Inasmuch as Continental agrees that the issue is not constitutional mootness but prudential mootness, we may assume that even after substantial or total consummation of its reorganization, some effective relief would have been and still is available for the Trustees' claim. It is quite another matter in light of the substantial, indeed irrevocable, change in the status quo to determine that it would have been equitable for the court to reach the merits of the Trustees' claim. For the district court had before it an unstayed bankruptcy reorganization plan, a nd many courts have based their prudential decisions to decline to consider challenges to bankruptcy court orders on the ground that there has been substantial consummation of a plan of reorganization in reliance upon an unstayed confirmation order. See , e.g. , Rochman , 963 F.2d at 475. In Chateaugay I , the court noted that although the Bankruptcy Code only requires a stay pending appeal in limited circumstances, there is a procedure under Bankruptcy Rule 8005 to seek to preserve the status quo and "[t]he party who appeals without seeking to14 avail himself of that protection does so at his own risk." 988 F.2d at 326. And in Manges , the court observed, under the descriptive title "Halting the Runaway Train: the Motions to Stay," that "in many of the c ases in which bankruptcy appeals were dismissed as moot, the appellants failed to seek a stay." 29 F.3d 1039. Even the seeking of a stay may not be enough. The appellants in In re UNR Industries had sought a stay, albeit unsuccessfully, at every oppor tunity; nonetheless, the court noted, "[a] stay not sought, and a stay sought and denied, lead equally to the implementation of the plan of reorganization." 20 F.3d at 770. Accord AOV Indus. , 792 F.2d at 1144, 1146-47. Shortly after the confirmation of t he Continental Plan, the Trustees filed an Emergency Motion for Conditional Stay of Order Confirming the Plan pending their appeal to the district court. The condition the Trustees sought in lieu of a stay was the establishment of a segregated account for $117 million, the full amount of their adequate protection claim, or alternatively at least $22 million, which they claim was the admitted decline in the value of the collateral. See App. at 1721. In response to the court's inquiry, they conceded that t hey were not willing to post any bond. The district court never required a supersedeas bond in the amount of $450,000,000, as the dissent suggests. In fact, the district court tried to ascertain the amount of bond that would be reasonable, and the Truste es' general position was that they were "merely the fiduciary of the money of their bondholders" and they suggested no lesser amount. App. at 1729.

Thus, as one of the reasons for its order denying the stay, the district court noted their unwillingness to post a bond satisfactory to the court. App. at 1756.
e.g. , Central States , 841 F.2d at 95 (appellant's failure to post bond to stay confirmation order basis for finding appeal moot). Because the failure to post the bond needed to get a stay perm itted the consummation of the plan, this factor weighs heavily in15 favor of the district court's declination to delve into the merits of the Trustees' appeal. The Trustees argue that this court has held that failure to obtain a stay does not necessarily re nder an appeal moot. The cases to which they refer are not apposite. In one, In re Joshua Slocum Ltd. , 922 F.2d 1081 (3d Cir. 1990), the issue was the narrow one of the power of the bankruptcy court to excise a paragraph from a shopping center lease. There is no indication in Slocum that there had been any confirmation of a plan before or during the appeal. In the more recent case to which the Trustees refer, Megafoods Stores, Inc. v. Flagstaff Realty Assocs. (In re Flagstaff Realty Assocs.) , 60 F.3d 1031 (3d Cir. 1995), the appeal also presented a narrow landlord- tenant issue, i.e. the effect of confirmation of the landlord's plan on a tenant's right to pursue its appeal of the bankruptcy court's denial of its recoupment claim. In holding that it was not necessary for the tenant to seek a stay in order to pursue its right to appeal despite the confirmation in the interim, we noted the line of cases placing recoupment and setoff in a special category and stated, "although we recognize the importance of maintaining the integrity of confirmed plans from later attack, these unique circumstances permit the plan to be reopened and readjusted." Id. at 1036. Thus, neither Flagstaff nor Slocum addressed equitable or prudential mootness at issue here.
The Tru stees argue that they had no obligation to take steps to preserve the status quo through a stay because the Plan contained "a built- in mechanism for the [post confirmation] disposition and payment of Disputed Administrative Claims." Appellants' Brief at 10. Assuming arguendo, as Continental does in its brief, that the Plan provisions for post- confirmation payment of administrative claims to the extent they have been allowed by a "Final Order," App. at 656, 691, 1057, was applicable to a claim of the type a nd magnitude of that asserted by the Trustees, the availability of such a mechanism16 does not allay all prudential and equitable concerns. The significant fact is that the Trustees' claim was not "allowed" by the bankruptcy court before confirmation, and t such disallowance was an essential factor in the Investors' decision to proceed to close the transaction.

One of the concerns of the Investors that needed to be satisfied as a condition of their participation was that the total amount that would have to be paid for administrative claims could be distorted by a few large claims. These included, in particular, labor claims by airline pilots, large claims by Eastern Airlines, and the adequate protection claims of the Appellant Trustees. To limit their e xposure, the Investment Agreement provided that the Investors' obligation to proceed with the arrangements was subject, inter alia , to the payments and obligations for administrative claims being no higher than a specified amount. The bankruptcy court f ound in its detailed Findings of Fact, Conclusions of Law and Order Confirming the Debtors' Revised Second Amended Joint Plan of Reorganization that there was substantial, credible and uncontested evidence that the administrative claims payable at confirma tion would be within the specified limit of the cap set forth in the Investment Agreement. It found that neither the pilots' claims nor the Eastern claims was entitled to administrative priority, and that the Trustees' adequate protection claim had
no valu e as an administrative claim. It based its statutorily required determination that the Plan was feasible, see 11 U.S.C. § 1129(a)(11), in part on these findings. App. at 1548-53. High on the list of prudential considerations taken into account by co urts considering whether to allow an appeal following a consummated reorganization is the reliance by third parties, in particular investors, on the finality of the transaction.
See Manges , 29 F.3d at 1039 ("[t]he concept of 'mootness' from a prudential s tandpoint protects the interests of non- adverse third parties who are not before the reviewing court17 but who have acted in reliance upon the plan as implemented"); Rochman , 963 F.3d at 474 (similar). It seems to be uncontested that if the Trustees' cla ims at issue here had been approved as administrative claims, the total such claims would have greatly exceeded the cap specified by the Investors for that purpose. This would have given the Investors the option to withdraw; such withdrawal would have pla ced the entire Plan in jeopardy.

The district court specifically found, in dismissing the Trustees' appeals as moot, that the Investors had relied on the bankruptcy court's order and that there was an integral nexus between the investment and the success of the Plan. The court stated, "[t]he Investors relied on the unstayed Confirmation Order in making the $450 million investment in Continental's Plan. It is clear that [the Trustees'] requested relief [a deposit of $22 million to $117 million for that administrative claim] would undermine the grounds which the Investors relied upon in making their investment and would require a dismantling of the entire Plan." App. at 1874. Although the Trustees argue that this finding is erroneous, there is support for it in the record.

At the hearing in April 1993 before the district court on the Trustees' request for the conditional stay of the Confirmation Order, counsel for the Trustees stated they had testimony that "as a matter of business judgment, it would b e extremely unlikely for the investors to walk away from this deal if . . . a 22-million- dollar deposit was established." App. at 1727. The Trustees' counsel in effect challenged the Investors to assert otherwise, stating that inasmuch as the Investors' counsel were in court they could correct any assertions that he made. Id. Thereafter, the Investors' attorney rose "to make clear the [I]nvestors' position, which is that if the relief is granted to [the Trustees] which they seek from the Court this mor ning [the stay conditioned on a deposit of some $22 million to $117 million], then we are not prepared to close the transaction." App. at 1744.18

The representative of the Investors explained that in the airline business "there is a great sensitivity to cash and the capital structure of a reorganized entity," and that the relief that the Trustees sought "could significantly impair the capital structure that would exist with respect [to] this reorganized airline." Id. at 1744 He reviewed the negotiat ions that had occurred for the cap for administrative expense liability, advised that the Investors had monitored on a monthly basis Continental's performance in that respect, explained that the Investors had insisted that the confirmation order address th e issue of the Trustees' claim "because we want to make sure if we are putting our money in, we are getting the benefit of our bargain, which is a reorganized entity with a capital structure that we contemplated." App. at 1746. He concluded by stating un equivocally that if a stay were entered conditioned upon the bond the Trustees sought, then his client "would not be prepared to close this transaction."
Id. The Trustees' counsel did not thereafter argue that the Investors' counsel's statements were ins ufficiently probative, and therefore that suggestion here is less than persuasive.

In response to this evidence of reliance, the Trustees now argue that when the Investors closed the transaction they were aware that they were taking a risk that the
Truste es would be successful on appeal on the law or facts supporting their claim. The record shows, however, that all parties were well aware of the extensive legal precedent dismissing as moot appeals from unstayed consummated reorganizations. See App. at 41 (references in the Investment Agreement); App. at 1729- 30, 1741 (argument before the district court on the stay). In light of the long line of cases that recognize the prudential considerations that militate against upsetting expectations that formed an integral part of a complex reorganization, we decline to hold that the Investors were unreasonable in proceeding with their investment in reliance on the confirmation order. By the time the district court ruled, it was no longer possible to restore the p arties to19 their earlier positions because the investment had been made, and the option to withdraw because the administrative claims exceeded the cap was no longer available to the
Investors. See Specialty Equip. , 3 F.3d at 1049 (claim held moot when its acceptance "would amount to imposing a different plan of reorganization on the parties"). The Trustees have not presented us with any arguments, other than the availability of the post- confirmation mechanism for administrative claims, which would weigh against all of the prudential considerations that dictate that this consummated reorganization must be left in place. Following confirmation, Continental was operating as a restructured company, and had entered into countless new relationships and
transac tions. To convince a court to take the action sought by the Trustees which would undermine the basis for the Investors' decision to proceed, the Trustees would have to proffer a powerful reason indeed. They have not even attempted to do so. Our dissent ing colleague does not disagree with the concept, unchallenged by the Trustee and universally accepted elsewhere, that equitable considerations may make it imprudent to upset a consummated reorganization plan. Nor do we understand the dissent to take issu e with our identification of the five considerations relevant to application of that doctrine, by whatever name it is denominated. Instead, the dissent merely disagrees with application of that doctrine in this case, based on the dissent's view that the

I nvestors factored the possibility of a reversal into their investment decision, and the dissent's "serious doubt" that the Investors banked on the 100% probability that the Trustees would recover nothing. Record support for the dissent's view has not been and the district court, which was far closer to the parties and the events than we are, made a finding that there was such reliance by these Investors. See App. at 1874. In any event, the district court did not base that finding on any "100% prob ability" factor, an issue the dissent has created.20

Even more important, the district court reached its conclusion based on more than one consideration, principally the facts that the reorganization plan was consummated, no stay was obtained, numerous othe r parties have changed their positions, and numerous irrevocable transactions have since been completed as a result of the consummation of the Plan.

Without listing all of such transactions set forth by Continental in its brief, we note that among those a re the distribution to unsecured creditors, the merger of 53 debtors other than Continental with and into Continental, the investment of $110 million in cash by Air Partners and Air Canada in the reorganized Continental, the transfer by foreign governments of various route authorities, and the assumption by the reorganized Continental of unexpired leases and executory contracts worth over $5.0 billion. Thus, the "key issue" really is whether the district court abused its discretion in weighing the various equitable factors. While a judge on this court might reach a different equitable balance, we are not prepared to hold that the balance reached by the district court was an abuse of its discretion. Under the circumstances presented here, we can see no pr udential considerations that would support an attempt by an appellate court, district or court of appeals, to fashion even a limited remedy for the Trustees. That would necessarily entail imposing a new debt on the reorganized company, which is a differen t entity than it was when this case was before the district court. Thus, we agree with the determination of the district court that the Trustees' claim was moot. We base our holding on our conclusion that it would be neither prudent nor equitable to grant the Trustees the relief they seek.
III.
CONCLUSION For the reasons set forth we will affirm the order of the district court.

_____________________________21 In Re: Continental Airlines No. 94-7748

ALITO, Circuit Judge , dissenting: The majori ty's decision in this case is disturbing. Much is at stake. The appellants (the "Trustees") have raised what the majority itself characterizes as "interesting and challenging questions of first impression for this court," some of which "appear not to have been decided by any appellate court." Maj. Op. at 8. The district court ruled that the Trustees' arguments were likely to prevail on appeal. J.A. 1755 The case is clearly not moot in the sense that the courts lack the ability to provide meaningful relief, and it seems obvious that the Trustees could receive at least some relief without undermining the plan of reorganization. Indeed, the plan itself contains a mechanism for providing such relief, and Continental represented in the bankruptcy court that the Trustees would be paid under this provision if their claim was allowed. Despite all this, both the district court and the majority have refused to consider the Trustees' arguments and have thus left them without a decision on the merits by any Art icle III court. In producing this result, the majority relies on considerations of "prudence" and "equity," but in my view such considerations weigh strongly in favor of entertaining the Trustees' arguments.22 The majority begins its analysis by identifying five factors that have been considered by other courts "in determining whether it would be equitable or prudential to reach the merits of a bankruptcy appeal." Maj. Op. at 14. These are: "(1) whether the reorganization plan has been substantially consum mated, (2) whether a stay has been obtained, (3) whether the relief requested would affect the rights of parties not before the court, (4) whether the relief requested would affect the success of the plan, and (5) the public policy of affording finality to bankruptcy judgments." Id

.

In this case, however, these five factors seem to boil down to basically one, i.e., whether entertaining the Trustees' claim on the merits would upset any reasonable reliance interests. This is the essence of the third fact or listed by the majority "whether the relief requested would affect the rights of parties not before the court."
The fourth factor -- "whether the relief requested would affect the success of the plan" - cannot justify the majority's decision to preclude the Trustees from getting any relief. (Whether or not the plan of reorganization would be imperilled if the Trustees were awarded the full measure of relief that they seek -- a matter of sharp dispute 1 -- no one could plausibly argue that the Trustees cannot be given any relief without endangering the

1 The district court wrote that "if the Court were to reverse the order confirming the Plan, it would likely put Continental back into bankruptcy." J.A. 1873. However, the Trustees argue:

It is difficult to conceive how a reorganization -- such as Continental's that involved the restructuring of over $71 billion in debt, and resulted in shareholder equity of $610 million , could somehow become financially imperilled by the allowance of the Trustees' adequate protection claim. . . . Indeed, not a single shred of evidence exists in the record to indicate -- or even suggest

- that Continental would be compelled to dismantle its Plan or to file another bankruptcy if the Trustees were t o prevail on their adequate protection claim. Appellants' Br. at 24 (emphasis in original; citations omitted).23 plan.) And the remaining factors seem to be largely, if not entirely, subsumed within
factors three and four. 2

For these reasons, it seems to me that the key issue in this case is whether the invest ors in NewCal (the "Investors") or others reasonably relied on the prediction that the Trustees would recover nothing on their claim. 3 If they did, then it might be unfair to upset their reliance interests. If they did not, I see nothing unfair about entertaining that claim on the merits.

In considering the question of reliance, I will start with the Investors because their plight looms large in the analyses of the majority and the district court. When the Investors decided to invest $450 million in N ewCal they knew or should have known that under the reorganization plan NewCal would be required to pay the Trustees' claim if it was ultimately allowed. Section 10.1 of the plan provided that NewCal would pay "Allowed Administrative Claims." Moreover, i n order to persuade the bankruptcy court to reject the Trustees' request that a cash reserve be established prior to confirmation to cover their claim, Continental argued that such a reserve was unnecessary because if the Trustees' claim was allowed it wou ld be "an Allowed Administrative Claim which would be paid in accordance with the terms of Section 10.1 of the Plan." J.A. 1039. In addition, when the

2 2. As the majority seems to recognize (see Maj. Op. at 14), the first factor (substantial consummation) is important in large part because investors and others are likely to have relied on a plan once this stage is reached. In addition, I would suppose that substantial consummation also marks the point at which the policy against disturbing a reorganization plan (factor four) comes prominen tly into play. The same would appear to be true of the second factor (the absence of a stay) since, as the majority notes (Maj. Op. at 15), the lack of a stay "permit[s] substantial consummation." Maj. Op. at 14 And as for the fifth factor ("the pub lic policy of affording finality to bankruptcy judgments"), if entertaining the Trustees' appeal would not upset reasonable reliance interests or undermine the reorganization, it is difficult to see why this public policy would be offended. 3 Continental fr ames the central issue in similar terms, stating: "The relevant question is . . . whether providing the requested relief would inequitably injure the interests of those whose actions in reliance upon the unstayed Confirmation Order resulted in substantial consummation." Appellee's Br. at 11.24 Investors made their investment, the bankruptcy court's denial of the Trustees' claim was already on ap peal to the district court. Under these circumstances, any prudent investor, in deciding whether to invest in NewCal on particular terms, would have taken into account the range and likelihood of possible outcomes in the Trustees' appeal, including the
po ssibility that the appeal would be successful in whole or in part. No reasonable investor would have proceeded on the assumption that there was a 100% probability that the Trustees would recover nothing. Consequently, we would not be upsetting any reason reliance interests by holding that the Trustees' arguments should be considered on the merits. In response to this argument, the majority writes:

The record shows . . . that all parties were well aware of the extensive legal precedent dismissing as moot appeals from unstayed consummated reorganizations. . . . In light of the long line of cases that recognize the prudential considerations that militate against upsetting expectations that formed an integral part of a complex reorganization, we decline to hold that the Investors were unreasonable in proceeding with their investment in reliance on the confirmation order.

Maj. Op. at 23.

If I correctly understand this passage, its reasoning is circular. According to the majority, it was reasonable for the Investors to rely on the Trustees' losing because the Investors had a reasonable basis for concluding that if they reasonably relied on the Trustees' losing the Trustees would lose. And of course the Trustees would lose because the Investors reasonably relied on the Trustees' losing because of the Investors' reasonable reliance on the Trustees' losing as a result of the Investors' reasonable reliance . . . .

The plain fact is that the Investors did not act reasonably or prudently if they relied on a calculation that there was a 100% probability that the Trustees' claim would25 completely fail. 4 (Such reliance would have been no more reasonable than reliance on a calculation that there was a 100% probability that fuel prices would not increase or any other contingency that might harm the company would not come to pass.) Instead, if the Investors acted reasonably and prudently, they factored into their investment decisions the possibility that the Trustees would be successful in whole or in part. 5 And the same is true of the other parties that relied on the plan. These parties, no less than the Investors, should have known that NewCal was obligated under section 10.1 of the plan to pay allowed administrative expenses and that Continental had o btained an important ruling from the bankruptcy court by representing that the Trustees' claim if allowed would be paid by NewCal under this provision.

In sum, entertaining the Trustees' claim on the merits would not upset any reasonable reliance intere sts. Nor would the mere act of entertaining those claims imperil Continental's reorganization. If the Trustees' claim was considered and they won on the merits (by no means a foregone conclusion), any threat to the reorganization could

4 The majority says that the "`100% probability' factor [is] an issue the dissent has created." Maj. Op. 25. However, this "factor" is implicit in the majority's reasoning. If a reasonable investor would have procee ded on the basis of the calculation that there was, let us say, a 50% probability the Trustees would ultimately recover something on their claim, then I fail to see how we would necessarily be upsetting a reasonable reliance interest by holding that the Tr ustees' claim had to be entertained on the merits. 5 Although actual but unreasonable reliance interests are not relevant here, I must say as an aside that I seriously doubt that the Investors banked on a calculation that there was a 100% probability that t he Trustees would recover nothing. The majority suggests that the district court made a "finding" that the Investors did so, but I am not sure that the majority has correctly interpreted what the district court wrote. The district court stated: "The Inv estors relied on the unstayed confirmation order in making the $450 million investment in Continental's Plan." J.A. at 1874. This may mean no more than that the Investors, in deciding to commit the $450 million, took into account the fact that the plan h ad been confirmed and had not been stayed. Taking these facts into account (which would certainly have been reasonable) is quite different from relying on a 100% probability that the Trustees' claim would be entirely unsuccessful. In any event, if the district court meant to say the latter, neither the district court's opinion, Continental's brief, nor the majority's opinion cites any support in the record for this remarkable "finding."26 be taken into acco unt in framing the Trustees' relief. What the district court and the majority have done -- throwing the Trustees out of court before the merits of their claim are even heard -- is unjustified and unjust. I find it ironic that the majority invokes equit y to support this result. As noted, Continental argued in the bankruptcy court that the Trustees' claim, if allowed, would be "an Allowed Administrative Claim which would be paid in accordance with the terms of Section 10.1 of the Plan." J.A. 1039. Now, Continental contends that the Trustees' claim, even if valid on the merits, should not be paid under this provision. Rewarding
such a volte-face is not my idea of equity.

I am also concerned about the implications of this decision for future cases.
Th e majority's decision may make it imperative for appellants in cases like this to obtain stays. If these appellants must post a bond in order to get a stay, then I question whether a stay is a realistic option in reorganizations of companies like Continen tal. And if a stay is not a realistic option in such cases, then bankruptcy judges will exercise a distressing measure of essentially unreviewable authority.

For these reasons, I respectfully disagree with the majority's decision. I
would reverse th e order of the district court and remand for a decision on the merits.

6 In this case, Continental sought a supersedeas bond in the amount of $450,000,000. J.A. at 1973. If a bond of anything approaching this magnitude is required in cases of this type in order to obtain a stay, then a stay may not be realistic.