PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

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Nos. 14-3332 & 14-3333

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IN RE: TRIBUNE MEDIA COMPANY 

f/k/a Tribune Company,

f/k/a Times Mirror Corporation, et al., 

Debtor

AURELIUS CAPITAL MANAGEMENT, L.P.,

Appellant (14-3332)

DEUTSCHE BANK TRUST COMPANY AMERICAS;

LAW DEBENTURE TRUST COMPANY OF NEW YORK,

Appellant (14-3333)

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Appeal from the United States District Court

for the District of Delaware

(D.C. Civil Action Nos. 1-12-cv-00128/mc-00108/cv01072/3/01100/01106)

District Judge: Honorable Gregory M. Sleet 

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Argued April 15, 2015
2

Before: AMBRO, VANASKIE, 

and SHWARTZ, Circuit Judges

(Opinion filed: August 19, 2015 )

Roy T. Englert, Jr., Esquire (Argued)

Matthew M. Madden, Esquire

Hannah W. Riedel, Esquire

Mark T. Stancil, Esquire

Robbins, Russell, Englert, Orseck, Untereiner & Sauber

1801 K Street, N.W., Suite 411-L

Washington, DC 20006

Counsel for Appellants

Aurelius Capital Management, L.P.

Law Debenture Trust Company of New York

David J. Adler, Esquire

McCarter & English

245 Park Avenue, 27th Floor

New York, NY 10167

Katharine L. Mayer, Esquire

McCarter & English

405 North King Street

Renaissance Centre, 8th Floor

Wilmington, DE 19801

Counsel for Appellant

Deutsche Bank Trust Company Americas

James F. Bendernagel, Jr., Esquire

Sidley Austin
3

1501 K Street, N.W.

Washington, DC 20005

James O. Johnston, Esquire (Argued) 

Jones Day

555 South Flower Street, 50th Floor

Los Angeles, CA 90071

Candice L. Kline, Esquire

Jeffrey C. Steen, Esquire

Sidley Austin

One South Dearborn Street

Chicago, IL 60603

J. Kate Stickles, Esquire

Cole Schotz

500 Delaware Avenue, Suite 1410

Wilmington, DE 19801

Counsel for Appellees

Tribune Media Company

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OPINION OF THE COURT

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AMBRO, Circuit Judge

Aurelius Capital Management, L.P. (“Aurelius”), 

along with the Law Debenture Trust Company of New York 

and Deutsche Bank Trust Company Americas (the 

“Trustees”), appeal the District Court’s dismissal as equitably 

moot of their appeals from the Bankruptcy Court’s order 
4

confirming Tribune’s Chapter 11 plan of reorganization. We 

agree with the District Court that Aurelius’s appeal, which 

seeks to undo the crucial component of the now consummated 

plan, should be deemed moot. However, we reverse and 

remand with respect to the Trustees. They seek disgorgement 

from other creditors of $30 million that the Trustees believe 

they are contractually entitled to receive. As the relief the 

Trustees request would neither jeopardize the $7.5 billion 

plan of reorganization nor harm third parties who have 

justifiably relied on plan confirmation, their appeal is not 

equitably moot. 

I. Facts and Procedural History

In December 2007, the Tribune Company (which 

published the Chicago Tribune and the Los Angeles Times

and held many other properties) was facing a challenging 

business climate. Sensing an opportunity, Sam Zell, a 

wealthy real estate investor, orchestrated a leveraged buy-out 

(“LBO”), a transaction by which a purchaser (in this case, an 

entity controlled by Zell and, for convenience, referred to by 

that name in this opinion) acquires an entity using debt 

secured by assets of the acquired entity. Before the LBO, 

Tribune had a market capitalization of approximately $8 

billion and about $5 billion in debt. 

The LBO was taken in two steps: Zell made a tender 

offer to obtain more than half of Tribune’s shares at Step 

One, followed by a purchase of all remaining shares at Step 

Two. In this LBO, as is typical, Zell obtained financing 

(called here the “LBO debt”) to purchase Tribune secured by 

Tribune’s assets, meaning that Zell had nothing at risk. The 

transaction took Tribune private and saddled the company 

with an additional $8 billion of debt. Moreover, as a part of 

the sale, Tribune’s subsidiaries guaranteed the LBO debt. 

The holders of the debt that Tribune carried before Zell took 
5

it over (the “pre-LBO debt”) had recourse only against 

Tribune, not against the subsidiaries. Thus the LBO debt, 

guaranteed by solvent subsidiaries, had “structural seniority” 

over the pre-LBO debt.

Unsurprisingly, Tribune, in a declining industry with a 

precarious balance sheet, eventually sought bankruptcy 

protection. It filed under Chapter 11 in December 2008, and 

at some later point Aurelius, a hedge fund specializing in 

distressed debt, bought $2 billion of the pre-LBO debt and 

became an active participant in the bankruptcy process. (We 

do not know how much Aurelius paid for this debt.)

Ten days after the filing, the U.S. Trustee appointed 

the Official Committee of Unsecured Creditors (the 

“Committee”), which obtained permission to pursue various 

causes of action (e.g., breach of fiduciary duty and fraudulent 

conveyance) on behalf of the estate against the LBO lenders, 

directors and officers of old Tribune, Zell, and others 

(collectively called the “LBO-Related Causes of Action,” see 

In re Tribune Co., 464 B.R. 126, 136 n.7 (Bankr. D. Del. 

2011)

1

). As the Bankruptcy Court put it, “[f]rom the outset 

. . . the major constituents understood that the investigation 

and resolution of the LBO-Related Causes of Action would 

 

1 This is the most relevant Bankruptcy Court opinion we 

review, though it ultimately denied confirmation of both of 

the competing plans referred to below—the Noteholder Plan 

and the DCL Plan. The latter denial was on narrow curable 

grounds that the DCL Plan proponents quickly addressed, and 

thus much of the reasoning supporting Judge Carey’s decision 

to confirm the plan he did is included in the opinion initially 

denying confirmation.
6

be a central issue in the formulation of a plan of 

reorganization.” Id. at 142.

Various groups of stakeholders proposed plans of 

reorganization; the important ones for the purposes of this 

appeal are Aurelius’s (the “Noteholder Plan”) and one 

sponsored by the Debtor, the Committee, and certain senior 

lenders, called the “DCL Plan” (for 

Debtor/Committee/Lender) or simply the “Plan.” The 

primary difference between the Noteholder and the DCL 

Plans was that the proponents of the former (the 

“Noteholders”) wanted to litigate the LBO-Related Causes of 

Action while the DCL Plan proposed to settle them. 

Kenneth Klee, one of the principal drafters of the 

Bankruptcy Code of 1978, was appointed the examiner in this 

case, and he valued the various causes of action to help the 

parties settle them. Professor Klee concluded that whether 

Step One left Tribune insolvent (and was thus constructively 

fraudulent) was a “very close call” if Step Two debt was 

included for the purposes of this calculation. Id. at 159. He 

further concluded that a court was “somewhat likely” to find 

intentional fraud and “highly likely” to find constructive 

fraud at Step Two. Id. He also valued the recoveries to 

Aurelius’s and the Trustees’ classes of debt under the various 

litigation scenarios and concluded that the DCL Plan 

settlement offered more money ($432 million) than all six 

possible litigation outcomes except full avoidance of the LBO 

transactions, which would have afforded the pre-LBO lenders 

$1.3 billion. Id. at 161. Given these findings for both steps 

of the LBO, full recovery was a possibility.

The DCL Plan restructured Tribune’s debt, settled 

many of the LBO-Related Causes of Action for $369 million, 

and assigned other claims to a litigation trust that would 

continue to pursue them and pay out any proceeds according 
7

to a waterfall structure whereby the pre-LBO lenders stand to 

receive the first $90 million and 65% of the Trust’s recoveries 

over $110 million (this aspect of the Plan we refer to as the 

“Settlement”). Aurelius objected because it believes the 

LBO-Related Causes of Action are worth far more than the 

examiner or Bankruptcy Court thought and that it can get a 

great deal more money in litigation than it got under the 

Settlement. The Bankruptcy Court’s opinion on 

confirmation, thoroughly done by Judge Kevin Carey, 

discussed the parties’ disagreement at length and ultimately 

concluded that it was “uncertain” that litigation would result 

in full avoidance of the LBO. Id. at 174. And full avoidance 

was the only result the Bankruptcy Court’s opinion suggests 

could plausibly result in greater recovery than the Settlement. 

See id. at 161 (citing examiner’s opinion that only full 

avoidance could exceed settlement value); 174 (rejecting 

contrary expert opinions). Thus the Court held that the 

Settlement was reasonable, and, on July 23, 2012, the DCL 

Plan was confirmed over Aurelius’s objection.

Aurelius promptly moved for a stay pending appeal 

under Bankruptcy Rule 8007. The Bankruptcy Court held a 

hearing on the motion at which it considered whether to issue 

a stay and, if so, whether to condition it on a bond. Aurelius 

opposed posting a bond in any amount. The Court stayed its 

confirmation order, but it also considered how much an 

unsuccessful appeal by Aurelius would cost Tribune. As a 

result of this valuation, the Court conditioned its stay on 

Aurelius’s posting a $1.5 billion bond to indemnify Tribune 

against the estimated costs associated with staying the order 

for the likely time to appeal. In re Tribune Co., 477 B.R. 465, 

482 (Bankr. D. Del. 2012).

With the threat of equitable mootness looming, 

Aurelius and the Trustees filed emergency motions to vacate 

the bond requirement and to expedite their appeals. The 
8

District Court, however, denied the motions and ordered that 

the briefing schedule for these appeals would be the same as 

for other appealing parties (who are not before us). Aurelius 

appealed the denial of the motions related to the bond 

requirement, but we dismissed the appeal for want of 

appellate jurisdiction (the denials were not final orders). 

Aurelius objected that the amount of the bond was 

prohibitively high, but it has never argued to any court that a 

lower amount would be reasonable; rather, it has consistently 

tried to eliminate the bond requirement altogether.

The appeals were fully briefed in the District Court on 

October 11, 2012, when Aurelius and the Trustees again 

moved to have their appeals heard separately from the other 

pending appeals; the District Court did not rule on this motion 

(which Tribune opposed). On December 5, 2012, Aurelius 

again moved for expedition (the Court again denied the 

motion), and the Plan was consummated on December 31. 

On January 18, 2013, Tribune moved to dismiss the appeals 

as equitably moot. About 18 months later, the District Court 

granted that motion.

As all agreed, the plan was substantially consummated, 

and Tribune persuaded the District Court that it could not 

effectively afford relief without causing undue harm either to 

reorganized Tribune or to its investors. Aurelius appeals, 

arguing that the case is not equitably moot and that the 

Settlement was unreasonably low. The fund seeks 

modification of the confirmation order to reinstate the LBORelated Causes of Action that the Settlement resolved so that 

the claims can be fully litigated or re-settled. 

The Trustees also appeal. They represent certain preLBO debt treated as “Class 1E creditors” in the Plan. They 

argue that they had subordination agreements with the holders 

of two series of pre-LBO notes Tribune issued, called the 
9

PHONES Notes and the EGI Notes, worth a total of about 

$30 million. According to the subordination agreements, if 

Tribune went bankrupt, any recovery by the PHONES and 

EGI Notes would be payable to the Class 1E holders. 

However, the Plan provides that any recovery from those 

Notes will be distributed pro rata between Class 1E and Class 

1F . The latter has about 700 creditors in it, the majority of 

whom “are individuals and small-business trade creditors.” 

In re Tribune Co., Nos. 12-cv-1072 et al., 2014 WL 2797042, 

at *6 (D. Del. June 18, 2014). Further complicating the 

intercreditor dispute is that under the Plan Class 1F members 

were allowed to choose one of two payment options: either 

they could receive a lump sum at the time of their election or 

they could participate in the Plan’s litigation trust (the latter 

holding out a potentially greater, but more uncertain, 

recovery). The Trustees contend that the Plan gives Class 1F 

$30 million dollars that should go to Class 1E, and they 

propose several ways in which Class 1E could recover that 

money without fatally unravelling the Plan. 

We have jurisdiction under 28 U.S.C. §§ 158(d) and 

1291. We review the Court’s equitable mootness 

determination for abuse of discretion.2

 

2 A panel of our Court was “inclined to agree with” thenJudge Alito’s criticism, see In re Continental Airlines, 91 

F.3d 553, 568 n.4 (3d Cir. 1996) (en banc) (Alito, J., 

dissenting), that “‘this standard of review [] contradict[s] our 

precedent that[,] where the district court sits as an appellate 

court, we exercise plenary review.’” In re SemCrude, L.P., 

728 F.3d 314, 320 n.6 (3d Cir. 2013) (quoting In re Phila. 

Newspapers, LLC, 690 F.3d 161, 167–68 n.10 (3d Cir. 

2012)). However, as was true in SemCrude, the abuse-of-
10

II. Discussion

A. The Doctrine of Equitable Mootness

“Equitable mootness” is a narrow doctrine by which an 

appellate court deems it prudent for practical reasons to 

forbear deciding an appeal when to grant the relief requested 

will undermine the finality and reliability of consummated 

plans of reorganization.3 The party seeking to invoke the 

doctrine bears the burden of overcoming the strong 

presumption that appeals from confirmation orders of 

reorganization plans—even those not only approved by 

confirmation but implemented thereafter (called “substantial 

consummation” or simply “consummation”)—need to be 

decided. In re SemCrude, L.P., 728 F.3d 314, 321 (3d Cir. 

2013). Unless we can readily resolve the merits of an appeal 

against the appealing party, our starting point is the relief an 

appellant specifically asks for. And even “when a court 

applies the doctrine of equitable mootness, it does so with a 

scalpel rather than an axe. To that end, a court may fashion 

 

discretion standard of review remains the law of our Circuit. 

Cont’l Airlines, 91 F.3d at 560.

3

“Equitably moot” bankruptcy appeals are not necessarily 

“moot” in the constitutional sense: they may persist in very 

live dispute between adverse parties. Thus, in the Seventh 

Circuit, Judge Easterbrook “banish[ed] ‘equitable mootness’ 

from the (local) lexicon.” In re UNR Indus., Inc., 20 F.3d 766, 

769 (7th Cir. 1994). In SemCrude, 728 F.3d at 317 n.2, we 

noted that the term “prudential forbearance” more accurately 

reflects the decision to decline hearing the merits of an appeal 

because of its feared consequences should a bankruptcy 

court’s decision approving plan confirmation be reversed.
11

whatever relief is practicable instead of declining review 

simply because full relief is not available.” In re Blast 

Energy Servs., Inc., 593 F.3d 418, 425 (5th Cir. 2010) 

(internal quotation marks omitted) (citations omitted).

We first recognized the doctrine of equitable mootness 

in In re Continental Airlines, 91 F.3d 553 (3d Cir. 1996) (en 

banc). The case closely divided our Court, with seven judges 

voting to recognize the doctrine over the dissent of six. We 

explicitly held that it was the law of our Circuit but did not 

lay down any particularly clear guidance on how to decide 

whether an appeal was moot. Instead, the majority opinion 

noted certain factors theretofore considered in making a 

mootness call:

Factors that have been considered by 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 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. at 560 (citation omitted). This statement reveals that the 

doctrine was then, as far as our Court was concerned, in its 

infancy. Note, for example, that we listed “[f]actors that have 

been considered by courts” without specifying whether those 

factors are entitled to equal weight or whether any is 

necessary or sufficient. Id. Over the years, our precedential 

opinions have refined the doctrine to its current, more 

determinate state. As we recently put it,
12

equitable mootness . . . proceed[s] in two 

analytical steps: (1) whether a confirmed plan 

has been substantially consummated; and (2) if 

so, whether granting the relief requested in the 

appeal will (a) fatally scramble the plan and/or 

(b) significantly harm third parties who have 

justifiably relied on plan confirmation.

SemCrude, 728 F.3d at 321. 

This two-step inquiry reduces uncertainty from the 

factors of Continental, and this appeal reflects the importance 

of SemCrude’s step (2): in cases where relief would neither 

fatally scramble the plan nor significantly harm the interests 

of third parties who have justifiably relied on plan 

confirmation, there is no reason to dismiss as equitably moot 

an appeal of a confirmation order for a plan now substantially 

consummated. For example, reliance on consummation of a 

plan would not be justified if a third party obtained a benefit 

that was inconsistent with a contract, statute, or judgment, as 

any benefit from such an error would result in “ill-gotten 

gains.” See In re Charter Commc’ns, Inc., 691 F.3d 476, 484 

(2d Cir. 2012) (“[I]t would not be inequitable to require the 

parties to [an illegal] agreement to disgorge their ill-gotten 

gains, participation in the appeal or not.”). 

While courts and counsel readily understand when 

granting relief on appeal would unravel a plan both confirmed 

and consummated, who are the “third parties” that equitable 

mootness is meant to protect? Continental singled out 

investors as the “particular” beneficiaries of equitable 

mootness, 91 F.3d at 562, while SemCrude discussed the 

interests of lenders, customers, and suppliers. 728 F.3d at 

325. Likewise, Philadelphia Newspapers considered the 

interests of “other creditors” who were not equity investors. 

690 F.3d 161, 171 (3d Cir. 2012). These cases teach that, 
13

although parties other than equity investors may rely on plan 

consummation and thus claim protection in the form of 

equitable mootness, they may not “merit the same ‘outside 

investor’ status as” those who make equity investments in a 

reorganized entity. In re Zenith Elecs. Corp., 250 B.R. 207, 

217 (D. Del. 2000), aff’d sub nom. Nordhoff Investments, Inc. 

v. Zenith Elecs. Corp., 258 F.3d 180 (3d Cir. 2001). 

One reason some third parties have reliance interests 

more worthy of protection than others is that we want to 

encourage behavior (like investment in a reorganized entity) 

that contributes to a successful reorganization. See

Continental, 91 F.3d at 564 (“[T]here was an integral nexus 

between the investment [by the parties urging mootness] and 

the success of the Plan.”); see also id. at 563 (“[T]he Eastern 

claims were crucial to the willingness of the Investors to 

consummate the Financing Transaction.” (internal quotation 

marks omitted)). 

Also, in appropriate circumstances we further the free 

flow of commerce—a chief concern of commercial 

bankruptcy—when we decline to disturb “complex 

transactions undertaken after the Plan was consummated” that 

would be most difficult to unravel. Charter, 691 F.3d at 485 

(“The Allen Settlement was the product of an intense multiparty negotiation, and removing a critical piece of the Allen 

Settlement—such as Allen’s compensation and the third-party 

releases—would impact other terms of the agreement and 

throw into doubt the viability of the entire Plan.”); see also id.

at 486 (“[T]he third-party releases were critical to the bargain 

that allowed Charter to successfully restructure[,] and . . . 

undoing them, as the plaintiffs urge, would cut the heart out 

of the reorganization.”).

At the same time, if funds can be recovered from third 

parties without a plan coming apart, it weighs heavily against 
14

barring an appeal as equitably moot, both in our Court and 

other circuits. See In re PWS Holding Corp., 228 F.3d 224, 

236–37 (3d Cir. 2000) (appeal not moot where appellant 

“seeks to invalidate releases that affect the rights and 

liabilities of third parties [and t]he plan has been substantially 

consummated, but . . . the plan could go forward even if the 

releases were struck”); In re Paige, 584 F.3d 1327, 1342 

(10th Cir. 2009) (“The substantial consummation of a 

bankruptcy plan may make providing relief difficult, and may 

raise concerns about fairness to third parties, but ‘[c]ourts can 

and do order divestiture or damages in’ situations where 

business deals or bankruptcy plans have been wrongly 

consummated.” (quoting In re Res. Tech. Corp., 430 F.3d 

884, 886–87 (7th Cir. 2005) (alteration in Paige))). We agree 

with the Second Circuit that the disgorgement of “ill-gotten 

gains” is proper assuming that the disgorgement otherwise 

leaves a plan of reorganization not in tatters. Charter, 691 

F.3d at 484.

In addition to the third parties (particularly investors) 

identified in our cases, equitable mootness properly applied 

benefits the estate, In re Zenith Elecs. Corp., 329 F.3d 338, 

346 (3d Cir. 2003), and the reorganized entity, id. at 344. All 

these players have a common interest in the finality of a plan: 

the estate because it can wind up; the reorganized entity 

because it can begin to do business without court supervision 

and can seek funding in the capital markets without the cloud 

of bankruptcy; investors because a reorganized entity will 

command a higher and more stable market value outside of 

bankruptcy; lenders because they can collect interest and 

principal; customers in certain industries who need parts or 

services; and other constituents for different context-specific 

reasons that may boil down to it is easier to do business with 

an entity outside of bankruptcy. Equitable mootness assures 

these stakeholders that a plan confirmation order is reliable 

and that they may make financial decisions based on a 
15

reorganized entity’s exit from Chapter 11 without fear that an 

appellate court will wipe out or interfere with their deal. 

The theme is that the third parties with interests 

protected by equitable mootness generally rely on the 

emergence of a reorganized entity from court supervision. 

When a successful appeal would not fatally scramble a 

confirmed and consummated plan, this specific reliance 

interest most often is not implicated, as the plan stays in place 

(with manageable modifications possible) and the reorganized 

entity remains a going concern. For example, the remedy of 

taking from one class of stakeholders the amount given to 

them in excess of what the law allows is not apt to be 

inequitable, as there is little likelihood it will have damaging 

ripple effects beyond the classes that the redistribution 

immediately affects. Consistent with our conclusion in PWS, 

228 F.3d at 236–37, and as the Second Circuit reasoned in 

Charter, 691 F.3d at 484, when taking a payment to which 

one class is not contractually entitled, and giving it to the 

party contractually entitled to those funds, would not 

undermine the basis for other parties’ reliance on the finality 

of confirmation, it makes little sense to deem an appeal 

equitably moot.

B. Aurelius’s Appeal is Equitably Moot.

Aurelius concedes that the DCL Plan is substantially 

consummated, Aurelius Br. at 24 & 26, but it argues that the 

relief it seeks would neither scramble that Plan nor harm third 

parties who have relied on consummation. Aurelius asks us 

to have the confirmation order modified to reinstate the 

settled LBO-Related Causes of Action. Id. at 58. It argues 

that it should be allowed to pursue these claims or settle them 

on more favorable terms and that it can obtain relief from 

reorganized Tribune, from the LBO lenders themselves, or by 
16

redistributing the LBO lenders’ future recovery from the 

litigation trust. Id. at 27–38.

Aurelius’s argument that the relief it ultimately 

seeks—further recovery on the LBO-Related Causes of 

Action—can be afforded (at least in part) misses the point of 

the equitable mootness inquiry. We must also ask whether 

the immediate relief Aurelius seeks, revocation of the 

Settlement in the DCL Plan, would “fatally scramble the plan 

and/or . . . significantly harm third parties who have 

justifiably relied on plan confirmation.” SemCrude, 728 F.3d 

at 321. We believe it would do both. 

To the first concern (fatal scrambling), the Bankruptcy 

Court noted the obvious: the Settlement was “a central issue 

in the formulation of a plan of reorganization.” Tribune, 464 

B.R. at 142. Though it is within the power of an appellate 

court to order the Settlement severed from the Plan and keep 

the rest of the Plan in place—thereby not attempting to 

“unscramble the eggs,” Continental Airlines, 91 F.3d at 566, 

or turning a court into a “Humpty Dumpty repairman,” In re 

Pub. Serv. Co. of New Hampshire, 963 F.2d 469, 475 (1st Cir. 

1992), or any other ovoid metaphor—allowing the relief the 

appeal seeks would effectively undermine the Settlement 

(along with the transactions entered in reliance on it) and, as a 

result, recall the entire Plan for a redo. 

Third-party reliance is related here to the problem of 

scrambling the Plan, as returning to the drawing board would 

at a minimum drastically diminish the value of new equity’s 

investment. That investment no doubt was in reliance on the 

Settlement, as indeed was the reliance of those who voted for 

the Plan. Aurelius proposed a Noteholder Plan that didn’t 

include a settlement of the LBO-Related Causes of Action, 

and it was overwhelmingly rejected by all but 3 of the 243 

creditor classes (the remaining classes were Aurelius’, the 
17

PHONES Notes’, and a third “class in which a single creditor 

holding a claim of $47 voted in favor of both the DCL Plan 

and the Noteholder Plan,” id. at 207). Revoking the 

Settlement would circumvent the bankruptcy process and give 

Aurelius by judicial fiat what it could not achieve by 

consensus within Chapter 11 proceedings or, we can’t help 

but add, if it had put up a bond.

On appeal, Aurelius proposes no relief that would not 

involve reopening the LBO-Related Causes of Action. 

Allowing those suits would “‘knock the props out from under 

the authorization for every transaction that has taken place,’” 

thus scrambling this substantially consummated plan and 

upsetting third parties’ reliance on it. In re Chateaugay 

Corp., 10 F.3d 944, 953 (2d Cir. 1993) (quoting In re Roberts 

Farms, Inc., 652 F.2d 793, 797 (9th Cir. 1981)). In this 

context, the District Court did not abuse its discretion in 

concluding that Aurelius’s appeal is equitably moot.

When determining whether the case is equitably moot, 

we of course must assume Aurelius will prevail on the merits 

because the idea of equitable mootness is that even if Aurelius 

is correct, it would not be fair to award the relief it seeks. 

One might argue that holding the appeal moot is therefore by 

definition inequitable: if Aurelius prevails, that means the 

Bankruptcy Court committed legal error, and it could not be 

inequitable to correct the Court’s mistakes. The reasons to 

reject this hypothesis are twofold. 

First, bankruptcy is concerned primarily with 

achieving a workable outcome for a diverse array of 

stakeholders, and the reliable finality of a confirmed and 

consummated plan allows all interested parties to organize 

their lives around that fact. See Mark J. Roe, Bankruptcy and 

Debt: A New Model for Corporate Reorganization, 83 

Colum. L. Rev. 527, 529 (1983) (identifying speed as one of 
18

“three principal characteristics desirable for a reorganization 

mechanism”). 

Second, and relatedly, an important reason we should 

forbear from hearing a challenge to the order before us is 

because of Aurelius’s failure to post a bond to obtain a stay 

pending appeal. Courts may condition stays of plan 

confirmation orders pending appeal on the posting of a 

supersedeas bond. The purpose of requiring such a “bond in 

a bankruptcy court is to indemnify the party prevailing in the 

original action against loss caused by an unsuccessful attempt 

to reverse the holding of the bankruptcy court.” In re Theatre 

Holding Corp., 22 B.R. 884, 885 (Bankr. S.D.N.Y. 1982). 

Federal Rule of Civil Procedure 62(d) (made applicable to 

bankruptcy cases by Bankruptcy Rule 7062) provides for 

stays pending appeal as of right when a bond is posted in 

damages actions “or where the judgment is sufficiently 

comparable to a money judgment so that payment on a 

supersedeas bond would provide a satisfactory alternative to 

the appellee.” 10 Collier on Bankruptcy ¶ 7062.06 (16th ed. 

2015).

In this case, the Bankruptcy Court carefully calculated 

the likely damage to the estate of a stay pending an appeal 

from its confirmation order. In particular, it analyzed the 

following costs to Tribune and its creditors that a stay would 

cause: additional professional fees, opportunity costs to 

creditors who would receive delayed distributions from the 

DCL Plan or delayed interest and principal payments from 

reorganized Tribune, and a loss in market value to equity 

investors caused by the delayed emergence. Tribune, 477 

B.R. at 480–83. We need not go through the opinion in 

detail, as Aurelius does not squarely argue that the bond 

requirement was an abuse of discretion, but we note that the 

valuation was well-considered and as convincing as the 

alchemy of valuation in bankruptcy can be.
19

As a result of its calculations, the Court determined 

that Aurelius should post a $1.5 billion bond to guarantee that 

the estate could be indemnified in the case of an unsuccessful 

appeal. Id. at 483. We repeat that Aurelius never challenged 

the bond amount, instead attempting unsuccessfully to modify 

the order to remove the bond in its entirety. But given the 

Bankruptcy Court’s findings on the likely substantial loss to 

Tribune due to an appeal, a supersedeas bond in some amount 

was appropriate. Aurelius’s failure to attempt to reduce the 

bond to a more manageable figure (assuming its 

representations are correct that it would be unable to finance 

such a large bond on short notice) leads us to conclude that it 

effectively chose to risk a finding of equitable mootness and 

implicitly decided that an appeal with a stay conditioned on 

any reasonable bond amount was not worth it. This riskadjusted choice by such a rational actor makes a finding of 

mootness not unfair, as it appears from the record before us 

that Aurelius had the opportunity to obtain a stay that would 

have foreclosed the possibility of a mootness finding.4

 

4 To the extent it could be argued that our approach endangers 

any low-value appeal in a large case (because the cost of a 

stay would overwhelm any potential recovery), we note that 

the lower a potential recovery is, the less likely an appeal is to 

be equitably moot because courts will be more willing to 

make minor changes to a plan of reorganization than big ones. 

See Phila. Newspapers, 690 F.3d at 170 (claim worth 1.7% of 

the price of debtor’s assets not equitably moot); Chateaugay, 

10 F.3d at 953 (claim worth up to 10% of a reorganized 

debtor’s working capital was not equitably moot).
20

C. The Trustees’ Appeal is Not Equitably

Moot.

To reiterate, the Trustees contend that they are 

beneficiaries of a subordination agreement that guarantees 

that they will receive any recovery that goes to the holders of 

the PHONES and EGI Notes ahead of a class of trade and 

other creditors (Class 1F). This $30 million intercreditor 

dispute is not equitably moot. Indeed, there is no prudent 

reason to forbear from deciding the merits of the Trustees’ 

appeal.

Again, it is conceded that the Plan has been 

substantially consummated. Thus we turn to SemCrude’s 

second question: “whether granting the relief requested in the 

appeal will (a) fatally scramble the plan and/or (b) 

significantly harm third parties who have justifiably relied on 

plan confirmation.” 728 F.3d at 321. The answer is no.

The merits question presented by the Trustees’ appeal 

is straightforward: does the Plan unfairly allocate Class 1E’s 

recovery to 1F? If the answer is yes, disgorgement could be 

ordered against those Class 1F holders who have received 

more than their fair share, and the Litigation Trust’s waterfall 

can be restructured to make sure that 1E gets its recovery to 

the exclusion of 1F. There’s no chance that this modification 

would unravel the Plan: the dispute is about whether one of 

two classes of creditors is entitled to $30 million in the 

context of a $7.5 billion reorganization. 

Nor, if the Trustees rightly read the subordination 

agreement, has anyone “justifiably relied,” id., on the finality 

of the confirmation order with respect to the $30 million. It is 

true that some of the money has been paid out, but it has gone 

to a readily identifiable set of creditors against whom 

disgorgement can be ordered, and, assuming the Trustees 
21

prevail on the merits, Class 1F members by definition cannot 

justifiably have relied on the payments. The Class 1F payouts 

are not “ill-gotten,” Charter, 691 F.3d at 484, in the sense that 

the members of that class received them as a result of 

malfeasance, but the Trustees’ argument is that the payments 

were not valid. Although the trade creditors and retirees who 

make up Class 1F are likely not sophisticated players and 

may have understandably relied on any payouts they received, 

any reliance they have placed on the Plan confirmation and 

implementation—again, assuming the Trustees’ argument on 

the merits is correct—is still not legally justifiable because 

Class 1F’s claim of entitlement to the money is unlawful 

under the Trustees’ interpretation of the relevant contract.

Moreover, disgorgement from Class 1F is not the only 

possible remedy here (though conceptually it is the most 

straightforward). On remand, if the Trustees prevail on the 

merits, the District Court could enjoin future revenue streams 

of the litigation trust from going to Class 1F until Class 1E is 

paid in full. To the extent this would result in disparate initial 

distributions to the members of Class 1F who participated in 

the litigation trust and those who elected all cash 

distributions, the Court could allow payment of this 

difference to the Class 1F creditors who elected to participate 

in the trust first before diverting recoveries to Class 1E, thus 

effectively revoking the option to choose between an initial 

all-cash distribution and partial cash distribution plus 

participation in the litigation trust, as the Trustees suggest. 

Trustees Br. at 19. Tribune’s only response to this proposal 

by the Trustees is the unsupported statement that it “would be 

a logistical nightmare and would result in chaos.” Tribune 

Response at 71 (internal quotation marks omitted). We fail to 

see the chaos and thus view this as a possible remedial option 

within the District Court’s discretion.
22

The District Court held in a conclusory fashion that 

“[h]undreds of individuals and small-business trade creditors 

. . . were entitled to rely upon the finality of the Confirmation 

Order,” 2014 WL 2797042 at *6, but that misses the point of 

equitable mootness and elevates finality over all other 

interests. The Plan has arguably deprived one prepetition 

lender class of $30 million. Requiring Class 1F to pay $30 

million to Class 1E if the latter prevails on appeal would not 

affect Tribune’s value and thus not any of its investors (nor 

would it harm the estate or new Tribune). It would be 

unfortunate from the perspective of the members of Class 1F 

to require disgorgement, but, if they were never entitled to 

that money in the first place, it is not unfair, and mootness 

must be fair (equitable in legalese) to be invoked.

Equitable mootness gives limited protection to those 

who have justifiably relied on the finality of a consummated 

plan, particularly new equity. No one is arguing that, if the 

Class 1F creditors lose, the consequences would be any worse 

than requiring them to forgo a windfall they never should 

have gotten in the first place. Because we disagree that this 

class of creditors was entitled to rely on the DCL Plan’s 

finality (once again assuming that the Trustees should prevail 

on appeal), we hold that the District Court made an error of 

law and therefore abused its discretion in holding as it did.

D. Delays Below

Both appellants write with strong language about the 

District Court’s delays in hearing their appeals, and they 

characterize Tribune as having “dragg[ed its] heels” 

throughout the proceeding. Aurelius Br. at 20; see also 

Trustees Br. at 10 (incorporating by reference Aurelius’s 

argument that Tribune caused delays in hearing any appeal). 

Tribune responds that the District Court did nothing more 

than refuse to give appellants special treatment and that 
23

Tribune repeatedly indicated that it would comply with the 

briefing schedule the District Court imposed. Notably, the 

appellants do not squarely make an argument that the District 

Court abused its discretion in setting a briefing schedule; it 

seems they complain of the timeline to add to the atmosphere 

of unfairness they are trying to conjure. 

In any event, it does not seem that Tribune is to blame 

for the delay. True, it opposed expedition of the appeal, but 

there is no suggestion that it missed deadlines or filed abusive 

motions for extensions of time. And the appellants do not 

complain of the delay between consummation (December 31, 

2012) and decision (June 2014); rather, they complain that the 

District Court should have decided the case sometime 

between plan confirmation (July 23, 2012) and consummation 

(again, December 31, 2012). One hundred sixty-one days is 

not short, but it’s also not unusual for large cases to take that 

long to decide. Most importantly, Aurelius and the Trustees 

do not actually seek relief for the delay; they just complain 

about it. For all these reasons, the delays below, though 

arguably unfortunate, do not affect the analysis here.

IV. Conclusion

Aurelius’s appeal is equitably moot: the DCL Plan is 

consummated; Aurelius spurned the offer of a stay 

accompanied by a bond; and it would be unfair to Tribune’s 

investors, among others, to allow Aurelius to undo the most 

important aspect of the overwhelmingly approved Plan. By 

contrast, the Trustees’ appeal is not equitably moot: assuming 

the Trustees prevail on the merits, Class 1F holders must 

forgo gains to which they were never entitled. Other third 

parties will not be harmed, nor is the Plan even remotely 

called into question. We thus affirm in part, reverse in part, 

and remand.
1

In re: Tribune Media Company, et al

Nos. 14-3332 & 14-3333

_________________________________________________

AMBRO, Circuit Judge, with whom VANASKIE, Circuit 

Judge, joins, concurring. 

Counsel for Aurelius and the Trustees asserted at oral 

argument that our en banc case In re Continental Airlines, 91 

F.3d 553 (3d Cir. 1996), wrongly recognized the doctrine of 

equitable mootness. At least one esteemed colleague of our 

Court agrees and has called for its reconsideration. See In re: 

One2One Commc’ns, LLC, No. 13-3410, 2015 WL 4430302, 

at *7 (3d Cir. July 21, 2015) (Krause, J., concurring). The 

One2One concurrence makes three principal challenges to the 

doctrine: constitutional (Article III of the Constitution 

requires supervision of decisions by Article I bankruptcy 

judges); statutory (the Bankruptcy Code does not authorize 

equitable mootness); and prudential (it is unfair to appellants 

to deny them relief when a bankruptcy or district court has 

made an error of law). While we do not need to address 

every argument made in that concurrence, its well-crafted 

challenge to equitable mootness makes it worthwhile to lay 

out briefly why this judge-made doctrine is abided by every 

Court of Appeals.

I. Equitable Mootness Does Not Violate Article 

III.

The One2One concurrence expresses “serious 

constitutional concerns” with the equitable mootness doctrine. 

Id. at *15. Perhaps the reason this argument does not make it 

all the way past the goal line to conclude the doctrine is 

actually unconstitutional is that Supreme Court precedent 

refutes the position.
2

The One2One concurrence is concerned that equitable 

mootness insulates the judgments of Article I bankruptcy 

judges’ from review by an Article III tribunal and thus 

violates (1) a personal right to an Article III adjudicator and 

(2) the integrity of the judicial branch of our Government. To 

the extent that the right to Article III review is “personal,” we 

note that the specific personal right the Supreme Court has 

identified is “to have claims decided before judges who are 

free from potential domination by other branches of 

government.” Commodity Futures Trading Comm’n v. Schor, 

478 U.S. 833, 848 (1986) (internal quotation marks omitted). 

As an equitable doctrine applied by Article III courts, 

equitable mootness does not implicate this right. 

As for the structural concern, the argument rests on an 

expansive reading of lines of cases where the Supreme Court 

considered whether Congress may redirect adjudication from 

state courts and Article III courts to Article I courts. Not one

of the cases relied on discusses whether an Article III court 

may abstain from hearing a case, as the primary evil the cases 

address (congressional aggrandizement) is irrelevant. See

Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932, 1944 

(2015) (“Article III . . . bar[s] congressional attempts ‘to 

transfer jurisdiction [to non-Article III tribunals] for the 

purpose of emasculating’ constitutional courts and thereby 

prevent[ing] ‘the encroachment or aggrandizement of one 

branch at the expense of the other.’” (quoting Schor, 478 U.S. 

at 850) (emphasis added) (last two alterations in original));

Stern v. Marshall, 131 S. Ct. 2594, 2620 (2011) (“Is there 

really a threat to the separation of powers where Congress has 

conferred the judicial power outside Article III only over 

certain counterclaims in bankruptcy? The short but emphatic 

answer is yes. A statute may no more lawfully chip away at 

the authority of the Judicial Branch than it may eliminate it 

entirely.”); Thomas v. Union Carbide Agricultural Prods. 

Co., 473 U.S. 568, 590 (1985) (“Congress . . . select[ed] 
3

arbitration as the appropriate method of dispute resolution. 

Given the nature of the right at issue and the concerns 

motivating the Legislature, we do not think this system 

threatens the independent role of the Judiciary in our 

constitutional scheme.”); N. Pipeline Const. Co. v. Marathon 

Pipe Line Co., 458 U.S. 50, 83 (1982) (“The constitutional 

system of checks and balances is designed to guard against 

encroachment or aggrandizement by Congress at the expense 

of the other branches of government.” (internal quotation 

marks omitted)); United States v. Raddatz, 447 U.S. 667, 681 

(1980) (“Congress was alert to Art. III values concerning the 

vesting of decisionmaking power in magistrates. . . . We need 

not decide whether, as suggested by the Government, 

Congress could constitutionally have delegated the task of 

rendering a final decision on a suppression motion to a nonArt. III officer. Congress has not sought to make any such 

delegation.” (footnote omitted) (citation omitted)); Crowell v. 

Benson, 285 U.S. 22, 49 (1932) (“‘[W]e do not consider 

[C]ongress can . . . withdraw from judicial cognizance any 

matter which, from its nature, is the subject of a suit at the 

common law, or in equity, or admiralty.’” (quoting Murray’s 

Lessee v. Hoboken Land & Improvement Co., 59 U.S. (18 

How.) 272, 284 (1855)).

If it seems formalistic to conclude that a court may 

abstain from deciding a case even though Congress may not 

withdraw the same case from the court’s cognizance, that is 

because the Supreme Court’s separation-of-powers cases—at 

least where they hold that an Article III violation has 

occurred—are often formalistic. See Wellness, 135 S. Ct. at 

1950 (Roberts, C.J. [the author of Stern], dissenting) (“I 

would not yield so fully to functionalism.”). Neither the 

personal rights nor the separation of powers guaranteed by 

Article III are infringed when Article III courts decline to 

hear a quite constricted class of cases seeking relief that 

would upend cases resolved and plans implemented (often 
4

years before) and/or would significantly harm third parties 

who relied on that resolution and implementation. We 

therefore do not share the constitutional concerns expressed 

in the One2One concurrence.

II. The Bankruptcy Code Does Not Bar the 

Equitable Mootness Doctrine.

“[E]very Circuit Court has recognized some form of 

equitable mootness,” save the Federal Circuit (which does not 

hear bankruptcy appeals). Nil Ghosh, Plan Accordingly: The 

Third Circuit Delivers a Knockout Punch with Equitable 

Mootness, 23 Norton J. Bankr. L. & Prac. 224 & n.8 (2014) 

(collecting cases).1 Though of course that does not prove the 

doctrine’s validity, it is a starting point that counsels us to 

tread lightly in our examination.

One prominent and frequently cited explanation for the 

genesis of equitable mootness is that various provisions of the 

Bankruptcy Code, notably §§ 363(m) and 1127(b), bespeak a 

 

1 See In re Healthco Int’l, Inc., 136 F.3d 45, 48 (1st Cir. 

1998); In re Charter Commc’ns, Inc., 691 F.3d 476, 481 (2d 

Cir. 2012); In re U.S. Airways Grp., Inc., 369 F.3d 806, 809 

(4th Cir. 2004); In re Pac. Lumber Co., 584 F.3d 229, 240 

(5th Cir. 2009); In re United Producers, Inc., 526 F.3d 942, 

947 (6th Cir. 2008); In re UNR Indus., Inc., 20 F.3d 766, 769 

(7th Cir. 1994); In re President Casinos, Inc., 409 F. App’x 

31 (8th Cir. 2010) (unpublished); In re Thorpe Insulation Co., 

677 F.3d 869, 880 (9th Cir. 2012); In re Paige, 584 F.3d 

1327, 1337 (10th Cir. 2009); In re Holywell Corp., 911 F.2d 

1539, 1543 (11th Cir. 1990), rev’d on other grounds sub nom.

Holywell Corp. v. Smith, 503 U.S. 47 (1992); In re AOV 

Indus., Inc., 792 F.2d 1140, 1147–48 (D.C. Cir. 1986).
5

congressional intent “that courts should keep their hands off 

consummated transactions.” In re UNR Indus., Inc., 20 F.3d 

766, 769 (7th Cir. 1994) (Easterbrook, J.). The former 

provides that if a sale to a good faith purchaser under 11 

U.S.C. § 363 is reversed on appeal, the reversal will not affect 

the validity of the sale to the purchaser, while § 1127(b) 

limits parties’ ability to modify plans of reorganization 

following substantial consummation. However, § 1127(b) on 

its own terms is not read to limit the authority of appellate 

courts to forbear reviewing for prudential reasons appeals 

from orders confirming plans now consummated. UNR, 20 

F.3d at 769. Although § 1129, the plan confirmation 

provision, is silent on the authority of courts to upend 

consummated plans at late dates, UNR considered that 

omission an “interstice[]” or gap that courts may fill to effect 

the intent of Congress to protect the finality of consummated 

plans, a policy goal that the bench, bar, and academy all 

recognize as undergirding equitable mootness. See, e.g., id.; 

Lenard Parkins et al., Equitable Mootness: Will Surgery Kill 

the Patient?, 29 Am. Bankr. Inst. J. 40 (2010), Troy A. 

McKenzie, Judicial Independence, Autonomy, and the 

Bankruptcy Courts, 62 Stan. L. Rev. 747, 789–90 (2010) 

(describing doctrine and its justifications).

A simpler way to reach the same conclusion starts 

from the premise that “bankruptcy courts . . . are courts of 

equity and appl[y] the principles and rules of equity 

jurisprudence.” Young v. United States, 535 U.S. 43, 50 

(2002) (last alteration in original) (internal quotation marks 

omitted); accord Cybergenics Corp. v. Chinery, 330 F.3d 

548, 567 (3d Cir. 2003) (en banc) (“[B]ankruptcy courts are 

equitable tribunals that apply equitable principles in the 

administration of bankruptcy proceedings.”). As Judge 

Posner has put it, equitable mootness “is perhaps best 

described as merely an application of the age-old principle 

that in formulating equitable relief a court must consider the 
6

effects of the relief on innocent third parties.” In re 

Envirodyne Indus., Inc., 29 F.3d 301, 304 (7th Cir. 1994) 

(Posner, J.); see also In re Paige, 584 F.3d 1327, 1335 (10th 

Cir. 2009) (“[T]he doctrine of equitable mootness is rooted, at 

least in part, in the court’s discretionary power to fashion a 

remedy in cases seeking equitable relief.”); In re AOV Indus., 

Inc., 792 F.2d 1140, 1147–48 (D.C. Cir. 1986) (“[T]here 

exists . . . a melange of doctrines relating to the court’s 

discretion in matters of remedy and judicial administration. 

Even when the moving party is not entitled to dismissal on 

[A]rticle III grounds, common sense or equitable 

considerations may justify a decision not to decide a case on 

the merits.” (internal quotation marks omitted) (citations 

omitted)). Our take is that, in the equitable mootness context, 

courts may consider whether it is fair in stark circumstances 

to grant relief that will scramble a consummated plan or will 

upset third parties’ legitimate reliance on the finality of such a 

plan.

In awarding injunctions, a classic form of equitable 

relief, courts always consider the balance of harms to the 

parties and the public. Equitable mootness, properly applied, 

similarly reflects a court’s decision that when undoing a 

confirmed and consummated plan would do more harm to 

many than good for one (or but a few), this is inappropriate 

for a court in equity. To illustrate this principle, consider 

cases where injunctions are statutorily authorized but courts 

still decline to issue one even in the face of a violation and in 

the absence of an alternative remedy. For example, in 

Weinberger v. Romero-Barcelo, the Navy violated the Federal 

Water Pollution Control Act (FWPCA) by discharging 

ordnance into navigable waters. 456 U.S. 305, 309 (1982). 

Rather than enjoin this practice, the District Court ordered the 

Navy to apply for a permit to continue its discharges, but 

specifically allowed the Navy to continue its unpermitted 

activities while its application was pending. The Court did so 
7

because, on balancing the equities in the case, it found that 

the injunction “would cause grievous, and perhaps irreparable 

harm, not only to Defendant Navy, but to the general welfare 

of this Nation.” Romero-Barcelo v. Brown, 478 F. Supp. 646, 

707 (D.P.R. 1979). The Supreme Court held that the decision 

whether to allow a preliminary injunction was left to the 

sound discretion of the District Court notwithstanding the 

apparent ongoing violation of the FWPCA. Romero-Barcelo, 

456 U.S. at 320.

Similarly, in the preliminary injunction context, the 

Supreme Court has allowed district courts to deny relief even

if the party seeking it meets convincingly the success-on-themerits requirement. In Amoco Prod. Co. v. Gambell, Alaska, 

a federal agency allowed oil companies to drill for oil on 

public lands without giving notice to affected Alaska Natives, 

an alleged violation of the Alaska National Interest Lands 

Conservation Act. 480 U.S. 531 (1987). Alaska Natives 

sought a preliminary injunction barring the drilling. The 

District Court held that, while the Act applied to the 

permitting agency, the public interest weighed in favor of oil 

exploration under the facts presented and, on balance, denied 

the preliminary injunction. The Supreme Court held that 

withholding relief was proper despite the finding of a “strong 

likelihood” of success on the merits. Id. at 541, 544–46.

Although these cases are far from factually on point 

here, they reinforce the appropriateness of courts’ discretion 

in issuing or withholding equitable remedies. The doctrine of 

equitable mootness recognizes those few situations where the 

practical harm caused by granting relief would greatly 

outweigh the benefit. Discretion is no less appropriate in the 

plan confirmation context than in ordering other equitable 

remedies; hence we believe that the One2One concurrence’s 

formal challenge that equitable mootness lacks a basis in law 

misses the point that it is in the equitable toolbox of judges 
8

for that scarce case where the relief sought on appeal from an 

implemented plan, if granted, would leave the plan in tatters 

and/or bankruptcy battlefield strewn with too many injured 

bodies.

III. Equitable Mootness Can Be Beneficial as a 

Practical Matter.

As for the practical challenge, we acknowledge the 

unfairness that might result where an aggrieved party is 

deprived of appellate relief even in the face of an erroneous 

lower court decision. But remember, equitable mootness is 

only in play for consideration when modifying a court order 

approving a since-consummated plan would do significant 

harm. The possibility that a successful appeal will not cause 

such harm is no reason to abandon the doctrine altogether. 

Rather, it counsels us to adhere to our precedent that equitable 

mootness “should be the rare exception and not the rule.” Id.

at 321. Moreover, our Court has certainly not been reluctant 

to reverse ill-advised equitable mootness grants. See, e.g.,

supra, Maj. Op. at II.C; Semcrude, 728 F.3d 314 at 323; 

Phila. Newspapers, 690 F.3d at 170; Zenith Elecs. Corp., 329 

F.3d at 346.

Cases where prudence counsels courts not to hear 

appeals are rare, but they are real. Complex bankruptcies 

reorganize thousands of relationships among countless 

parties. When a plan is substantially consummated, it is 

sometimes not only as difficult to restore an estate to the 

status quo ante consummation as it is to gather all the feathers 

from the proverbial pillow, it is also a crushing expense to the 

reorganized entity and its shareholders. If we jettisoned the 

entire equitable mootness doctrine, it is hard to imagine that 

any complex plan would be consummated until all appeals are 

terminated. For why would an equity investor wish to put 

money into a reorganized entity if the plan could be ordered 
9

unraveled? And would not the cost of credit increase 

prohibitively with such a specter? Without equitable 

mootness, any dissenting creditor with a plausible (or even 

not-so-plausible) sounding argument against plan 

confirmation could effectively hold up emergence from 

bankruptcy for years (or until such time as other constituents 

decide to pay the dissenter sufficient settlement consideration 

to drop the appeal), a most costly proposition.

The costs of remaining in bankruptcy underscore one 

factor that significantly mitigates the injustice to a wronged 

appellant whose cause may otherwise be deemed moot—the 

availability of a stay pending appeal. Indeed, If a party 

obtains a stay, the plan cannot be substantially consummated 

and thus the appeal cannot be equitably moot. 

We acknowledge, however, that stays are costly to 

estates: in order to operate a business without court 

supervision and in order to sell shares on the public markets, 

entities must emerge from bankruptcy with prepetition 

liabilities restructured or discharged. Thus every day that a 

company remains in bankruptcy is a day when it will have a 

hard time attracting the investors, employees, and, in some 

industries, customers that it needs to exist and prosper. 

To protect against this loss, courts may condition stays 

pending appeal on the posting of a supersedeas bond. As 

demonstrated by the careful discussion by Judge Carey in this 

case, valuing the costs for a stay of a plan confirmation order 

should be feasible in a case involving sophisticated business 

entities who can hire experts and litigate complex valuation 

questions. We thus see practical benefit to allowing a stay if 

the appellant is willing to post a bond set within a reasonable 

range. Such an order would balance the conceivable harms to 

various constituencies and would also shift to the appealing 
10

party the burden of determining whether its appeal is really 

worth the candle. 

IV. Conclusion

Were we able to revisit our Circuit’s precedent that 

equitable mootness is available in the right circumstance 

(consequently rejecting the views of every other Circuit that 

hears bankruptcy appeals), we would decline to discard this 

tool of equity.2 In a very few cases, shutting an appellant out 

 

2

In addition to its challenge to the basis in law for equitable 

mootness, the One2One concurrence suggests several 

possible modifications to the doctrine should it remain. We 

express no views with respect to whether some or all of those 

proposed changes would be beneficial. However, we note 

that it would be unwise to crystallize as a requirement what 

Judge Krause’s concurrence views as a trend in favor of 

deciding the merits of an appeal before equitable mootness is 

addressed. Slip Op. at 25–27 (advocating that we “requir[e] a 

ruling on the merits” before deciding whether to forbear 

deciding the appeal) (citing In re Envirodyne Indus., Inc., 29 

F.3d at 303–04; In re Metromedia Fiber Network, Inc., 416 

F.3d 136 (2d Cir. 2005); Behrmann v. Nat’l Heritage 

Foundation, 663 F.3d 704, 713 n.3 (4th Cir. 2011)). While 

we certainly agree that “a court is not inhibited from 

considering the merits before considering equitable 

mootness,” Metromedia, 416 F.3d at 144, and add that such 

an approach often will save substantial time, energy, and 

money, courts have had unpleasant experiences with “rigid 

order[s] of battle” like this before, and we do not see the 

wisdom of an ironclad requirement for all cases. Pearson v. 

Callahan, 555 U.S. 223, 234 (2009) (internal quotation marks 
11

of the courthouse does substantially less harm than locking a 

debtor inside. Federal courts have ample equitable authority 

to decide when no remedy is appropriate, and thus, though we 

should always presume that appeal merits be reached and act 

with the utmost care when we turn aside an appeal, equitable 

mootness remains a last-ditch discretionary device for 

protecting the finality of an unstayed plan that has been 

consummated.

 

omitted); see also Ruhrgas AG v. Marathon Oil Co., 526 U.S. 

574, 584 (1999) (allowing personal jurisdiction to be decided 

before subject-matter jurisdiction notwithstanding recent case 

that had held deciding subject-matter jurisdiction first is a 

practice “inflexible and without exception,” Steel Co. v. 

Citizens for a Better Env’t, 523 U.S. 83, 95 (1998)).