Tribune Media Company v.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________

Nos. 14-3332 & 14-3333
________________

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)

________________

Appeal from the United States District Court
for the District of Delaware
(D.C. Civil Action Nos. 1-12-cv-00128/mc-00108/cv-
01072/3/01100/01106)
District Judge: Honorable Gregory M. Sleet
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Argued April 15, 2015
 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

2
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
________________

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

3
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

4
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.

5
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

6
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

7
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 LBO-
Related 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 pre-
LBO 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

8
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” then-
Judge 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-

9
 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.

10
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,

11
 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,

12
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 multi-
party 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

13
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

14
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

15
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

16
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

17
“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.

18
 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 risk-
adjusted 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).

19
 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

20
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.

21
 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

22
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.

23
 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.

1
 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]

2
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 non-
Art. 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

3
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).

4
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

5
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

6
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-the-
merits 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

7
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

8
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

9
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

10
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)).

11