REVISED DECEMBER 13, 2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 12, 2010
No. 09-41259 Lyle W. Cayce
Clerk
In the Matter of: ASARCO L.L.C., ET AL,
Debtor
-----------------------------------
UNITED STEEL, PAPER AND FORESTRY, RUBBER MANUFACTURING,
ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS
INTERNATIONAL UNION AFL-CIO, STERLITE (USA) INC.; STERLITE
INDUSTRIES (INDIA) LTD,
Appellants
v.
ASARCO INCORPORATED; AMERICAS MINING CORPORATION,
Appellees
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 2:09-CV-177
Before GARZA and BENAVIDES, Circuit Judges, and CRONE*, District Judge.
*
District Judge for the Eastern District of Texas, sitting by designation.
No. 09-41259
PER CURIAM:**
Appellants Sterlite (USA) Inc. and Sterlite Industries (India), Ltd.
(“Sterlite”), and the United Steel, Paper and Forestry, Rubber Manufacturing,
Energy, Allied Industrial and Service Workers International Union AFL-CIO
(“Union”), appeal the district court’s order confirming the reorganization plan
proposed by Americas Mining Company (“AMC”) and ASARCO. AMC and
ASARCO (“Appellees”) have moved to dismiss the present appeal, arguing that
it is equitably moot. For reasons explained within, we GRANT the motion to
dismiss.1
I
In 1999, AMC purchased debtor ASARCO, a mining conglomerate with
operations in several states and countries. During the next several years,
ASARCO faced substantial environmental problems due to its operations, which
resulted in billions of dollars of liability to the United States and several states.
ASARCO also faced significant liability related to asbestos litigation.
Concurrently, the price of copper declined, cutting into the company’s
profitability. As ASARCO limited its spending in an effort to save money,
employee relations deteriorated, leading to a strike that further harmed the
company. ASARCO entered bankruptcy in 2005.
While this matter was before the bankruptcy court, Sterlite proposed a
reorganization plan (“Debtor’s Plan”) under which it would gain control of
ASARCO and all creditors would be paid in full. The Appellees also proposed a
reorganization plan (“Parent’s Plan”), which would pay creditors in full, but
would leave equity control with AMC.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
1
In the motion to dismiss, Appellees also argue that Sterlite lacks standing to appeal.
We do not address this argument because of our holding on the question of equitable mootness.
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No. 09-41259
The bankruptcy court issued a report and recommendation indicating that
both plans were confirmable under 11 U.S.C. § 1129(a) and (b). The bankruptcy
court then applied a four-factor analysis under § 1129(c) and concluded that the
Parent’s Plan should be confirmed. The parties objected to the bankruptcy
court’s report and recommendation, but the district court overruled the
objections. The district court considered the competing plans under § 1129(c),
concurred with the bankruptcy court’s recommendation, and confirmed the
Parent’s Plan.
The Appellants did not seek a stay of the district court’s order and the
Parent’s Plan was enacted. Among other things, the plan administrator
distributed approximately $3.359 billion to pay numerous creditors, to fund
environmental remediation efforts, and to create reserve funds for disputed
claims. In addition, a federal settlement and more than one hundred state
settlements became effective, resolving $6.5 billion of asserted environmental
claims. Some of these settlements involved the transfer of real property to
various governmental entities. Dissatisfied with the district court’s order,
Appellants filed the present appeal. The Appellees contend the appeal is
equitably moot and must be dismissed.
II
In bankruptcy, this court uses the “concept of mootness to address
equitable concerns unique to bankruptcy proceedings.” Manges v. Seattle First
Nat’l Bank, 29 F.3d 1034, 1038 (5th Cir. 1994) (internal citations and quotations
omitted). Mootness, in this context, is not an inquiry into whether a live
controversy exists, but rather it recognizes “a point beyond which [appellate
courts] cannot order fundamental changes in reorganization actions.” Id. at
1038-39. “[A] reviewing court may decline to consider the merits of a
confirmation order when there has been substantial consummation of the plan
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No. 09-41259
such that effective judicial relief is no longer available—even though there may
still be a viable dispute between the parties on appeal.” Id. at 1039.
A court considers three factors in determining whether to apply equitable
mootness: “(1) whether a stay has been obtained; (2) whether the plan has been
‘substantially consummated’; and (3) whether the relief requested would affect
either the rights of parties not before the court or the success of the plan of
reorganization.” Id. (citations omitted). There is “no set weight given to the
respective prongs.” In re Blast Energy Servs., Inc., 593 F.3d 418, 424 (5th Cir.
2010). The third prong, however, indicates equitable mootness when “no stay
has been obtained and the plan has been substantially consummated. . . .” Id.
at 424; see also In re GWI PCS 1 Inc., 230 F.3d 788, 802-03 (5th Cir. 2000).
Here, Appellants have not sought a stay and the plan has been
substantially consummated with the distribution of billions of dollars to pay
creditors’ claims. In addition, settlements of environmental claims have been
reached with the federal government and numerous states, and numerous other
transactions, including real property transfers, have already occurred.
Under the final prong of the mootness inquiry, we consider whether the
requested relief would affect the rights of parties not before the court or would
jeopardize the success of the reorganization plan. Appellants argue that this
factor weighs against a finding of equitable mootness because they do not want
to unravel the Parent’s Plan. Rather, Appellants assert that they seek a limited
remedy: an order that would substitute Sterlite as the primary equity holder.
This finite relief, Appellants argue, would not affect third parties. We disagree.
There is ample reason to think that substituting Sterlite as the primary
equity-holder would have a far-reaching impact. It would be difficult to
maintain anything resembling the status quo if the primary equity holder were
replaced by Sterlite. See In re GWI PCI 1 Inc., 230 F.3d at 803. Here, the
inquiry under the third prong favors a finding of equitable mootness because a
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No. 09-41259
change in the equity holder’s identity would affect numerous complex financial
transactions.
Therefore, all three prongs of the equitable mootness inquiry favor
dismissal.
III
Accordingly, the motion to dismiss is GRANTED, and the appeal is
DISMISSED.
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