916 F.3d 405
5th Cir.2019Background
- Sneed Shipbuilding filed bankruptcy; trustee alleged fraudulent transfers and sought to recover title to the Channelview shipyard from Martin Sneed's probate estate.
- Operations at the Channelview yard declined; trustee negotiated a sale to San Jac Marine contingent on a settlement resolving title disputes with the probate estate.
- The deal combined a nearly $15 million purchase, payoff of encumbrances and taxes, and about $8 million to the probate estate in exchange for release of title claims and avoidance actions; the bankruptcy court approved the settlement and sale as non-severable.
- New Industries, an unsecured creditor asserting a $550,000 claim, objected to the disbursement to the probate estate but did not obtain a stay of the sale order.
- New Industries appealed; the trustee argued the appeal was moot under equitable mootness and 11 U.S.C. § 363(m); the district court dismissed the appeal as moot and the Fifth Circuit affirmed under § 363(m).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether equitable mootness bars the appeal | New Industries: appeal is reviewable; settlement/sale not so interrelated/consummated to preclude review | Trustee: appeal should be barred because reversal would unravel the interdependent transaction and harm third parties | Court: equitable mootness not applicable—case not a substantially consummated plan and not sufficiently complex |
| Whether § 363(m) bars appellate review of the sale components | New Industries: challenges only the cash disbursement to probate estate, not the sale of property, so review should be allowed | Trustee: the payment to probate was essential and inseparable from the sale; without it the sale would not have occurred | Court: § 363(m) applies because the settlement payment was integral to the sale and no stay was obtained, making the appeal moot |
Key Cases Cited
- In re Manges, 29 F.3d 1034 (5th Cir.) (discussing equitable mootness in plan confirmation appeals)
- In re UNR Indus., Inc., 20 F.3d 766 (7th Cir.) (recognizing limits on disturbing implemented plans)
- In re Pacific Lumber Co., 584 F.3d 229 (5th Cir.) (describing equitable mootness standard and caution in applying it)
- In re Continental Airlines, 91 F.3d 553 (3d Cir.) (debating scope and labeling of equitable mootness)
- In re One2One Communications, LLC, 805 F.3d 428 (3d Cir.) (criticizing equitable mootness doctrine)
- In re Tribune Media Co., 799 F.3d 272 (3d Cir.) (applying mootness principles to a complex reorganization)
- In re Hilal, 534 F.3d 498 (5th Cir.) (equitable mootness tied to substantial consummation)
- In re SI Restructuring, Inc., 542 F.3d 131 (5th Cir.) (noting reversal risks to implemented plans)
- In re Ginther Trusts, 238 F.3d 686 (5th Cir.) (applying § 363(m) to bar appeals even as to jurisdictional challenges)
- In re Bleaufontaine, Inc., 634 F.2d 1383 (5th Cir.) (explaining policy promoting finality and prompt sales under § 363)
- In re Trism, Inc., 328 F.3d 1003 (8th Cir.) (holding challenge to sale-related release moot under § 363(m))