Opinion ID: 214973
Heading Depth: 1
Heading Rank: 2

Heading: motion to dismiss for mootness

Text: We first address the trustee's motion to dismiss this appeal as moot based on 11 U.S.C. § 363(m) or under the equitable mootness doctrine. Although COP's appeal comes perilously close to the edge of the mootness cliff, we do not think it should fall off. The trustee reasons that this appeal is moot in light of § 363(m) because the Agreement was sold to a good faith purchaser, COP did not seek a stay of the Sale Order, and a ruling for COP in this appeal that the Agreement was not property of the estate would affect the validity of the sale of the Agreement to Rhino. [1] Subsection 363(m) provides: The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal. We have previously explained the purpose behind § 363(m): In order to protect the public's interest in finalizing bankruptcy sales to encourage buyers to purchase the debtor's property, to prevent injury to creditors, and to insure that adequate sources of financing remain available, § 363(m) of the Bankruptcy Code protects the validity of certain sales by the trustee from the potential consequences of an appeal, if the order authorizing the sale is not stayed. Osborn v. Durant Bank & Trust Co. (In re Osborn), 24 F.3d 1199, 1203 (10th Cir.1994) abrogated in part on other grounds by Eastman v. Union Pacific R.R. Co., 493 F.3d 1151, 1156 (10th Cir.2007). No one disputes that the Agreement was sold from the debtor's estate to a good faith purchaser and that COP did not seek to stay the sale. The mootness question turns on what relief is available to COP if it were to prevail in this appeal. See, e.g., Church of Scientology v. United States, 506 U.S. 9, 12, 113 S.Ct. 447, 121 L.Ed.2d 313 (1992) (noting that appeal should be dismissed as moot if it is impossible for the court to grant any effectual relief whatever (quotation omitted)); Osborn, 24 F.3d at 1203 (holding that because it is not impossible for the court to grant some measure of effective relief, the Osborns' appeal is not moot). Under our decisions and the facts of this case, § 363(m) forecloses any remedy to COP that would affect the validity of the trustee's sale. But it does not preclude a remedy that would not affect the validity of the sale. In Osborn, we explained that, [b]y removing those remedies that would affect the validity of a sale to a good faith purchaser, § 363(m) moots some appeals, namely, those in cases where the only remedies available are those that affect the validity of the sale. Id. at 1203-04 (footnote omitted). But where state law or the Bankruptcy Code provides remedies that do not affect the validity of the sale, § 363(m) does not moot the appeal. Id. at 1204. Recognizing the bar in § 363(m) against upsetting the sale of their property, the appellants in Osborn argued their appeal was not moot because a ruling in their favor could support the recovery of equitable monetary relief. See id. at 1204. We agreed with the Osborn appellants and denied the motion to dismiss their appeal as moot, noting that Texas law might afford some relief under constructive trust principles. Id. Accordingly, even if § 363(m) would bar a sale-invalidation remedy for COP, this appeal would not be moot if COP could pursue a remedy that does not affect the validity of the sale. At oral argument, COP suggested it may be able to recover monetary relief if it succeeds in this appeal, and our cases have acknowledged that possibility. See Osborn, 24 F.3d at 1204; Golfland Entm't Ctrs., Inc., v. Peak Inv., Inc. (In re BCD Corp.), 119 F.3d 852, 857 (10th Cir.1997) (Utah law, similar to the Texas law in Osborn, provides for equitable remedies under the principles of constructive trusts.). The burden of showing mootness is on the trustee, which here means showing that COP would not have such a remedy. See Search Market Direct, Inc. v. Jubber (In re Paige), 584 F.3d 1327, 1336-37 (10th Cir.2009) (holding that appeal was not moot because appellees had failed to carry their burden of proving that there was no relief the court could order); Suter v. Goedert, 504 F.3d 982, 986 (9th Cir.2007) (noting that burden of establishing mootness is on the party advocating its application, and concluding that appellees had not established mootness because they did not affirmatively demonstrate that there was no relief available to appellants). Because the trustee has not affirmatively foreclosed the possibility that COP might be entitled to alternative relief that would not affect the validity of the sale, the trustee has not established that this appeal is moot. The trustee is left with the equitable mootness doctrine. The equitable mootness doctrine allows a court to decline to hear a bankruptcy appeal, even when relief could be granted, if implementing the relief would be inequitable. See In re Paige, 584 F.3d at 1337-38. We have adopted this doctrine in the context of Chapter 11 reorganization plans, see id., but we have not applied it in the Chapter 7 setting. Even if it does apply, we are not required to do so as it is discretionary with the court. See id. at 1335 n. 7 ([T]he doctrine of equitable mootness is rooted ... in the court's discretionary power to fashion a remedy in cases seeking equitable relief.). Rather than decide whether the doctrine can be applied, and, if so, weigh the doctrine's six factors in this case in the face of an underdeveloped record on this issue, we think the better and more appropriate course is to resolve this appeal on the merits.