First Intercontinental Bank v. Edward Ahn, 705 F. App'x 581

First Intercontinental Bank (FIB) was an unsecured creditor of Edward and Helen Ahn and appealed the bankruptcy court's approval of a settlement releasing certain avoidance claims.
The settlement paid $200,000 to Cindy and Christina Ahn in exchange for the estate releasing avoidance claims.
The bankruptcy trustee's statute of limitations to bring those avoidance actions (on behalf of the estate) has expired under 11 U.S.C. § 546(a).
FIB sought vacatur of the settlement, return of the $200,000, and permission to pursue the avoidance claims in state court on its own behalf.
The Bankruptcy Appellate Panel dismissed FIB’s appeal as constitutionally moot; the Ninth Circuit affirms on the alternative ground of equitable mootness because unscrambling the settlement would be impractical and inequitable.
The court noted the settlement was fully consummated, FIB did not diligently obtain a stay from higher courts, and FIB waived an oral-argument offer to overbid by failing to brief it.

Issue	FIB's Argument	Trustee/Ahns' Argument	Held
Whether the appeal can be heard despite post-order changes	Vacate settlement, refund $200,000, allow FIB to pursue avoidance claims in state court	Vacatur would defeat estate distribution and reward end-run around trustee's statutory priority	Appeal is equitably moot; dismissed
Whether effective equitable relief can be fashioned	Relief possible by rescinding settlement and enabling FIB to litigate claims	Statute of limitations bars trustee actions; vacatur would leave estate without payment or recovery	Court: cannot fashion relief that is both effective and equitable
Whether the statute of limitations bars relief for the estate	N/A (FIB seeks relief for itself)	Trustee: trustee’s limitations expired, so claims cannot be revived for estate benefit	Statute expiration is a ‘‘comprehensive change’’ making appeal inequitable
Whether appellant exercised diligence to obtain a stay	FIB withdrew bankruptcy-court stay motions and did not seek stay from this Court or Circuit Justice	Settlement fully consummated; lack of diligent stay-seeking weighs against relief	Court notes insufficient diligence; supports equitable mootness

Rev Op Grp. v. ML Manager LLC (In re Mortgs. Ltd.), 771 F.3d 1211 (9th Cir. 2014) (describing equitable mootness doctrine)
Motor Vehicle Cas. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d 869 (9th Cir. 2012) (articulating four-factor equitable-mootness test)
Castaic Partners II, LLC v. Daca-Castaic, LLC (In re Castaic Partners II, LLC), 823 F.3d 966 (9th Cir. 2016) (equitable mootness and the ‘‘unscrambling the eggs’’ metaphor)
Campbell v. Wash. Dep’t of Soc. & Health Servs., 671 F.3d 837 (9th Cir. 2011) (courts may affirm on any ground supported by the record)
Baker & Drake, Inc. v. Pub. Serv. Comm’n of Nev. (In re Baker & Drake, Inc.), 35 F.3d 1348 (9th Cir. 1994) (practicality and equity govern whether to undo bankruptcy transactions)
Burkart v. Coleman (In re Tippett), 542 F.3d 684 (9th Cir. 2008) (bankruptcy’s goal of equitable distribution among creditors)
Sherwood Partners, Inc. v. Lycos, Inc., 394 F.3d 1198 (9th Cir. 2005) (discussing equitable distribution as a core bankruptcy purpose)
In re Roberts Farms, Inc., 652 F.2d 793 (9th Cir. 1981) (equitable mootness and comprehensive change of circumstances)