Opinion ID: 770900
Heading Depth: 2
Heading Rank: 2

Heading: Substantial Consummation of the Reorganization Plan

Text: 18 The second consideration in the mootness inquiry is whether the reorganization plan has been substantially consummated. We have adopted the 'substantial consummation' yardstick because it informs our judgment as to when finality concerns and the reliance interests of third parties upon the plan as effectuated have become paramount to a resolution of the dispute between the parties on appeal. In re Manges, 29 F.3d at 1041 (citations omitted). According to 11 U.S.C. § 1101(2): 19 '[S]ubstantial consummation' means- 20 (A) transfer of all or substantially all of the property proposed by the plan to be transferred; 21 (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 22 (C) commencement of distribution under the plan. 23 The FCC and the Debtors dispute whether the reorganization plan has been substantially consummated. The Debtors reiterate on appeal the numerous transactions completed following the confirmation of the reorganization plan, see supra note 20, that persuaded the district court to conclude[] that the reorganization plan ha[d] been substantially consummated because substantially all of the property proposed by the plan to be transferred has been transferred, Debtors are managing substantially all of the property dealt with by the plan, and distribution under the plan has commenced. GWI PCS 1, Inc., 245 B.R. at 63. Although the FCC does not contest that these transactions have occurred, the FCC maintains that they do not satisfy the substantially consummated standard for three reasons: (1) only insiders, i.e., plan participants, have provided funding for the Debtors in the reorganization and have been paid funds in the reorganization and thus lack a good faith expectation that the FCC's appeal would not be successful; (2) the Debtors have not obtained the $250 million in financing set forth in the reorganization plan and thus have been unable to create a wireless communications system; and (3) the Litigation Alternative in the reorganization plan contemplated ongoing litigation between the FCC and the Debtors, thereby not making return of licenses to the FCC and consummation of the plan mutually exclusive. We disagree with the FCC and conclude that the reorganization plan has been substantially consummated. 24 First, the FCC's argument that only insiders have provided financing to the Debtors and have received payments from the Debtors and therefore lack good faith reliance on the reorganization plan, even if true, has never been a consideration in determining whether a reorganization has been substantially consummated. See In re Continental Airlines, 91 F.3d at 565 (While we agree that reliance of the Investors and others on the unstayed Confirmation Order is of central importance to our [equitable mootness] analysis, to focus on the 'reasonableness' of that reliance, at least as measured by the likelihood of reversal on appeal, is necessarily a circular enterprise and therefore of little utility. . . . Our inquiry should not be about the 'reasonableness' of the Investors' reliance or the probability of either party succeeding on appeal.); cf. In re Sullivan Cent. Plaza, 1, Ltd., 914 F.2d 731, 734-35 (5th Cir. 1990) (refusing to consider the alleged lack of good faith by a purchaserof debtor property in determining whether an appeal was moot under 11 U.S.C. § 363(m)). 26 Moreover, it would be natural for many, if not a majority, of the transactions set forth in a reorganization plan to involve the participants of the chapter 11 proceedings. Therefore, this argument fails. 25 Second, the FCC contends that the Debtors have yet to obtain all the financing required under the reorganization plan and have neither constructed nor made operable a personal communications system. The Debtors respond that, although additional financing is required for the completion of the personal communications system, the effectiveness of the reorganization plan does not necessarily depend on obtaining such financing. We agree. Our standard requires only substantial consummation, not absolute or complete consummation. The Debtors' failure to acquire full financing does not take away from the transactions that have been completed, see supra note 20. Accordingly, this argument does not mandate a conclusion that substantial consummation has not been achieved. 26 Third, the FCC maintains that, despite the transactions that have occurred, the contemplation of the return of the licenses to the FCC in the Litigation Alternative precludes a finding of substantial consummation. As the Debtors point out, however, no steps have been taken towards the Litigation Alternative; instead, it has been eschewed in favor of the Business Alternative with a number of transactions having been completed in furtherance of the Business Alternative. More importantly, the reorganization plan's provision of the Litigation Alternative bears more upon the effect of allowing the FCC's appeal to be considered on third parties, not on whether the reorganization plan, as implemented through the Business Alternative, has been substantially consummated. Therefore, we agree with the Debtors and the district court 27 that substantial consummation has been achieved; therefore, this factor weighs in favor of dismissal.