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Showing 3 posts in Equitable Mootness.

Equitable Subordination Relief Granted; Recharacterization Relief Denied

U.S. v. State Street Bank and Trust Co., as Trustee for Junior Subordinated Secured PIK Notes, et al. (In re Scott Cable Communications, Inc.), Adv. Proc. No. 01-4605 (KJC), 2014 WL 5298031 (Bankr. D. Del. Oct. 15, 2014).

This recent and lengthy 90-page Opinion by the Honorable Kevin J. Carey arises from the chapter 11 proceedings of Scott Cable Communications, Inc. (“Scott Cable” or the “Company”) and concerns an adversary complaint in which the United States of America, on behalf of the Internal Revenue Service (the “Government” or the “IRS”), sought to recharacterize or equitably subordinate certain secured notes issued in 1996 as part of a chapter 11 reorganization plan.  The secured notes were issued to two classes of creditors and known as “Series A Junior PIK Notes” and “Series B Junior PIK Notes.”  Pursuant to the Order, the Government’s request to recharacterize the Series A Junior PIK Notes as preferred equity instruments of Scott Cable was denied, but the Government’s request to equitably subordinate the Series A Junior PIK Notes to the administrative claims of federal and state taxing authorities was granted.  The Government’s request to recharacterize or equitably subordinate the Series B Junior PIK Notes was denied. Read More ›

Third Circuit in SCH Corporation and Delaware District Court in Tribune Emphasize the Importance of Examining the Relief Sought by Appellants When Deciding An Appeal Equitably Moot

In re SCH Corp., 2014 WL 2724606 (3d Cir. June 17, 2014); Wilmington Trust Co. v. Tribune Co. (In re Tribune Co.), 2014 WL 2797042 (D. Del. June 18, 2014) (consolidated appeals)

In In re Semcrude, L.P., 728 F.3d 314 (3d Cir. 2013), the Third Circuit discussed the analytical framework for evaluating the well-known equitable mootness 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 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.”  In re Continental Airlines, 91 F.3d 553, 560 (3d Cir. 1996).  More specifically, the Third Circuit stated that the equitable mootness analysis should proceed in two steps:  first, a determination as to whether the plan has been substantially consummated, and second, an examination as to whether granting the relief requested in the appeal will (i) fatally scramble the plan or (ii) significantly harm third parties who have justifiably relied on plan confirmation.  Semcrude, 728 F.3d at 321.  As emphasized by the Court, “[d]ismissing an appeal as equitably moot should be rare, occurring only where there is sufficient justification to override the statutory appellate rights of the party seeking review.”  Id. at 326-27.  The recent opinions entered in the cases of SCH Corporation and Tribune emphasize these principles, applying them to vacate a Delaware District Court equitable mootness ruling after determining that the lower court did not properly consider the relief sought by the appellants or its effect on the confirmed plan and third-parties (SCH Corporation) and to dismiss certain appeals after finding that the appellants’ proposed remedies would unravel the confirmed plan and inequitably affect third-parties who reasonably relied on the confirmation order (In re Tribune). Read More ›

District Court Affirms Bankruptcy Court’s Approval of a Settlement and Structured Dismissal in the Face of an Absolute Priority Challenge

Czyzewski v. Jevic Holding Corp. (In re Jevic Holding Corp.), No. 13-104 (SLR), 2014 WL 268613 (D. Del. Jan. 24, 2014)

On January 24, 2014, Judge Sue L. Robinson affirmed a Bankruptcy Court order approving a settlement and structured dismissal of the chapter 11 cases of Jevic Holding Corp. and its affiliated debtors in the face of a challenge that such settlement, among other things, violated the absolute priority rule of section 1129 of the Bankruptcy Code.  Among other things, the Court determined that the absolute priority rule did not apply to the settlement given that it was presented outside a plan of reorganization.  Moreover, even if it did apply, the appeal was equitably moot. Read More ›