Court Opinion

ID: 3019167
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:20:28.47005+00
Date Added: 2024-06-11T18:11:50.521332
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Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

10-4-2006

In Re: Genesis
Precedential or Non-Precedential: Non-Precedential

Docket No. 05-4005

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Recommended Citation
"In Re: Genesis " (2006). 2006 Decisions. Paper 363.
http://digitalcommons.law.villanova.edu/thirdcircuit_2006/363

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DPS-333                                                         NOT PRECEDENTIAL

                        UNITED STATES COURT OF APPEALS
                             FOR THE THIRD CIRCUIT

                                       NO. 05-4005
                                    ________________

                  IN RE: GENESIS HEALTH VENTURES, INC., et al.;

                                                      Debtors

                                  JAMES J. HAYES,
                                          Appellant
                       ____________________________________

                     On Appeal From the United States District Court
                                For the District of Delaware
                                (D.C. Civ. No. 04-cv-00477)
                      District Judge: Honorable Joseph J. Farnan, Jr.
                     _______________________________________

             Submitted On Appellee’s Cross-Motion To Dismiss The Appeal
                                  September 8, 2006

      Before: FUENTES, VAN ANTWERPEN AND CHAGARES, CIRCUIT JUDGES

                                 (Filed October 4, 2006 )

                               _______________________

                                      OPINION
                               _______________________

PER CURIAM

       James J. Hayes, a former shareholder of Appellee/reorganized debtor Genesis

Health Ventures, Inc. (with its affiliated co-debtors and Appellees, hereafter referred to
collectively as “Genesis”), appeals from the order of the United States District Court for

the District of Delaware issued July 23, 2005, dismissing as equitably moot his appeal of

the Bankruptcy Court’s order denying his motion for appointment of a post-confirmation

equity committee.

       On September 13, 2001, after the Bankruptcy Court rejected Hayes’s objections to

the plan and denied his first request for an equity committee, the Bankruptcy Court

entered judgment confirming the plan of reorganization in the jointly administered cases

of In re: Genesis Health Ventures, Inc. et al., Bankruptcy Case No. 00-2692, and In re:

Multicare AMC, Inc., Bankruptcy Case No. 00-2494. See In re Genesis Health Ventures,

Inc., 266 B.R. 591 (Bankr. D. Del. 2001). Hayes filed two notices of appeal from the

Bankruptcy Court’s 2001 order, which were docketed separately. He also made a request

for the appointment of an equity committee (his first request to the District Court, but the

second such request overall), which the District Court denied. The District Court

dismissed Hayes’s appeal from the Bankruptcy Court’s judgment as equitably moot. It

dismissed the second, duplicative appeal as previously litigated. The District Court

denied Hayes’s motion to reopen the second duplicative appeal and this Court affirmed.

In re: Genesis Health Ventures, Inc., et al., C.A. No. 04-1862 (3d Cir. Dec. 6, 2004). The

Supreme Court denied Hayes’s petition for a writ of certiorari. See Hayes v. Genesis, 125
S. Ct. 2947 (2005).

       Meanwhile, in 2004, Hayes went back to Bankruptcy Court seeking a ruling on a

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motion for appointment of a post-confirmation equity committee that he had filed in

2001, after the Bankruptcy Court entered judgment. The Bankruptcy Court denied the

motion on May 13, 2004, holding that it was “grossly untimely,” that the doctrine of

equitable mootness applied to the Genesis Plan, and that no extraordinary circumstances

existed warranting the appointment of a post-confirmation equity committee. Hayes

appealed and on July 23, 2005, the District Court dismissed the appeal under the doctrine

of equitable mootness. Alternatively, the District Court affirmed the Bankruptcy Court’s

denial of the motion because Genesis was completely insolvent. Hayes filed a timely

notice of appeal.

       We have appellate jurisdiction pursuant to 28 U.S.C. §§ 158(d) and 1291. Our

review of the Bankruptcy Court’s decision is de novo. In re Telegroup, 281 F.3d 133,

136 (3d Cir. 2002). We will treat the Appellee’s motion to dismiss as a motion for

summary affirmance and we will affirm for substantially the same reasons set forth by the

District Court in its opinion.

       Under the doctrine of equitable mootness, “[a]n appeal should ... be dismissed as

moot, even though effective relief could conceivably be fashioned, where implementation

of that relief would be inequitable.” In re Continental Airlines, 91 F.3d 553, 559 (3d Cir.

1996). The equitable mootness doctrine “prevents a court from unscrambling complex

bankruptcy reorganizations when the appealing party should have acted before the plan

became extremely difficult to retract.” Nordhoff Investments, Inc. v. Zenith Elecs. Corp.,

                                             3
258 F.3d 180, 185 (3d Cir. 2001). In determining whether dismissal for equitable

mootness is warranted, a court must consider five factors: (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 the 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. “[T]he foremost consideration is whether

the reorganization plan has been consummated.” In re PWS Holding Corp., 228 F.3d
224, 236 (3d Cir. 2000). Moreover, it is incumbent on the appealing parties to obtain a

stay where there is a “clear possibility” that their claims would become moot. See

Continental, 91 F.3d at 566. And, if the relief requested on appeal would jeopardize the

success of the reorganization plan by causing its “reversal or unraveling,” then dismissal

of the appeal for equitable mootness is favored. See PWS Holding Corp., 228 F.3d at

236. Finally, the public policy favoring the finality of bankruptcy judgments, although

identified as a separate factor, in truth, provides the lens through which the other factors

should be viewed.

       With the foregoing principles in mind, we conclude that the District Court

correctly dismissed the appeal for equitable mootness. The Plan has been substantially

consummated. Hayes did not seek or obtain a stay of the confirmation order. The rights

of third parties who have long relied on the consummated plan would be negatively

affected, and the relief that Hayes seeks would likely cause the reversal or unraveling of

                                              4
the Plan. If, as Hayes asserts, the plan is unfair and inequitable, it would be so for all

Debtors’ unsecured creditors and would require a newly negotiated plan. Finally, the

consummation of the plan in 2001, the reliance upon it by third parties for all these years,

and the negative impact of Hayes’s request for relief on the success of the plan, all

operate to the detriment of the long recognized public policy supporting the finality of

bankruptcy judgments.

       We have throughly reviewed Hayes arguments on appeal and find that they lack

merit. Because no substantial question is presented by this appeal, the District Court’s

judgment will be affirmed, Appellee’s cross-motion to dismiss the appeal, treated as a

motion for summary affirmance, is granted.

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