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Precedential or Non-Precedential: Non-Precedential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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"In Re: Genesis " (2006). 2006 Decisions. Paper 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DPS-333 NOT PRECEDENTIAL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.,
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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
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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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