In Re One2One Communications, LLC
542 B.R. 428
| 3rd Cir. | 2015Background
- One2One Communications (Debtor) confirmed a Chapter 11 plan providing a $200,000 equity purchase by a Plan Sponsor; no new financing or public securities were issued. 17 unsecured creditors existed; Quad/Graphics held the largest claim (~$9.36M) and was the sole objector.
- Bankruptcy Court confirmed the Plan after a five-day hearing; automatic 14-day stay expired and Appellant’s stay requests were denied. Debtor commenced plan transfers and distributions.
- Quad timely appealed the Confirmation Order to the district court and sought emergency relief and stays; the district court dismissed the appeal as equitably moot without reaching the merits.
- The Third Circuit panel reviewed whether the district court abused its discretion in dismissing the appeal as equitably moot under controlling precedent (In re Continental Airlines).
- The Third Circuit panel held Continental controls (panel cannot overrule en banc) but found the district court abused its discretion and reversed, remanding for merits consideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity/applicability of equitable mootness | Doctrine is unconstitutional and inconsistent with Bankruptcy Code; Stern requires Article III appellate review | Continental is binding; doctrine tolerated across circuits to protect finality | Court: Cannot overrule Continental (binding); must apply it, but declined to revisit its validity en banc |
| Whether appeal is equitably moot | Quad argued plan not complex; limited third-party reliance; limited relief (strike releases) could preserve plan | Debtor argued plan substantially consummated, no stay, undoing would scramble plan and harm third parties | Court: Although plan consummated and no stay, dismissal was abuse of discretion — factors do not support equitable mootness here |
| Burden of proof on equitable mootness | Quad contended Debtor bears burden to show equitable mootness elements | Debtor treated as moving party to dismiss as equitably moot | Court: Party seeking dismissal (Debtor) bears the burden; district court erred in shifting burden to Quad |
| Proper remedy sequencing (merits vs. mootness) | Quad urged merits review (or limited relief) before mootness dismissal | Debtor urged dismissal without merits because plan consummation bars effective relief | Court: Remanded for merits; emphasized that modest/ordinary consummation does not justify dismissal and limited remedies may be feasible |
Key Cases Cited
- In re Continental Airlines, 91 F.3d 553 (3d Cir. 1996) (en banc) (adopted equitable mootness doctrine)
- In re Semcrude, L.P., 728 F.3d 314 (3d Cir. 2013) (clarified narrow application and burden on movant)
- Stern v. Marshall, 131 S. Ct. 2594 (U.S. 2011) (limits non-Article III adjudication of certain state-law claims)
- In re Philadelphia Newspapers, 690 F.3d 161 (3d Cir. 2012) (applied narrow, cautious use of equitable mootness)
- Nordhoff Invs. v. Zenith Elecs. Corp., 258 F.3d 180 (3d Cir. 2001) (equitable mootness intended for complex reorganizations)
- In re Metromedia Fiber Network, Inc., 416 F.3d 136 (2d Cir. 2005) (analyze merits before equitable mootness; useful for framing remedies)
- Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (U.S. 2015) (Article III review preserves institutional limits on non-Article III adjudicators)