R² Investments, LDC v. Charter Communications, Inc. (In Re Charter Communications, Inc.)
691 F.3d 476
2d Cir.2012Background
- Charter filed a prepackaged Chapter 11 plan after a contentious Allen Settlement with Paul Allen to support reinstatement of its senior debt and tax attributes.
- LDT (indenture trustee) and R2 Investments (Charter shareholder) contested the Plan’s confirmation and appealed after the bankruptcy court approved it.
- The district court dismissed the appeals as equitably moot because the Plan was substantially consummated and extensive post-confirmation actions had occurred.
- Charter executed actions under the Plan (e.g., equity cancellations, new Charter shares, asset transfers, and warrants) shortly after confirmation.
- LDT and R2 argued the Allen Settlement and third-party releases were legally deficient and should be remediable by monetary relief or limited remand.
- The appellate issue centers on whether equitable mootness bars review and whether any relief short of undoing the Plan is practicable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether equitable mootness bars review of the appeals | LDT/R2 contend relief possible without unraveling the plan. | Charter/creditors argue the plan's substantial consummation makes review inequitable. | Appeals deemed equitably moot; affirmed dismissal. |
| Whether the Allen Settlement can be altered without unwinding the Plan | Allen compensation and third-party releases are legally defective and should be disgorged or severed. | Adjusting them would disrupt the plan and undermine reorganization. | Relief would undermine the plan; equitably moot. |
| Whether the revaluation of CCI can be granted without major Plan changes | Separate valuation of CCI could yield surplus for shareholders without disrupting the plan. | Requires revaluing all Charter entities and distributing proceeds; not a surgical change. | Remand for separate valuation equitably moot. |
| Whether the cramdown provisions were violated under § 1129 | LDT alleges seniority and class issues; seeks full payment of CCI notes. | Violations would require unwinding the plan, not a minor adjustment. | Equitably moot; dismissal affirmed. |
Key Cases Cited
- In re Chateaugay Corp., 988 F.2d 322 (2d Cir. 1993) (equitable mootness framework and five-factor test)
- In re Chateaugay Corp., 94 F.3d 772 (2d Cir. 1996) (reaffirmation of substantial consummation and factors)
- In re Pac. Lumber Co., 584 F.3d 229 (5th Cir. 2009) (equitable mootness and practicality of relief)
- In re Metromedia Fiber Network, Inc., 416 F.3d 136 (2d Cir. 2005) (balance of finality and relief in bankruptcy appeals)
- In re Texaco, Inc., 92 B.R. 38 (S.D.N.Y. 1988) (nonseverability and impact of relief on settlements)