Equitable vs. Constitutional Mootness: Eleventh Circuit Provides a Primer
We have written in the past about the doctrine of equitable mootness. A March 30, 2017 per curiam affirmance by the Eleventh Circuit Court of Appeals in Beem v. Ferguson (In re Ferguson) explores the concept and limitations of equitable mootness and distinguishes it from the related doctrine of constitutional mootness.
The Beem case can only be described as a litigation feeding frenzy. In Beem, the debtor Gary Ferguson (Debtor) filed an individual Chapter 11 case. After two years of contentious litigation, the Debtor filed a second amended plan of reorganization. David Beem, a creditor asserting a $385,000 claim against the estate, filed an objection to the plan and also submitted a ballot rejecting the plan. Unfortunately for Beem, both the objection and the ballot were submitted after their respective deadlines. In response, the Debtor filed a motion to strike, arguing that Beem did not have an allowed claim and was not entitled to vote. The Debtor also argued that Beem had worked with an attorney who had been suspended by the Florida Bar in order to fraudulently concoct his purported ballot. The Debtor’s motion was granted, the objection and ballot were struck and the plan was confirmed.
Beem then filed a motion to vacate, rehear, reconsider or supplement the plan and also sought to stay implementation of the plan. Next, he filed a motion for reconsideration of the order striking his ballot. Both motions were denied, and Beem appealed both the order striking his ballot and the order approving the plan, as well as the orders denying reconsideration. The Debtor moved to strike Beem’s appellate brief as untimely and argued that Beem was again improperly working with the suspended attorney. The district court granted the Debtor’s motion, stating that it “would not allow [the suspended attorney] to circumvent the Florida Bar and this Court’s orders of suspension by doing the work and having his clients file pleadings pro se.” The district court gave Beem until April 8 to file a new initial brief, but Beem filed his brief one day late, on April 9. Upon the Debtor’s motion, to which Beem never responded, the new initial brief was stricken and the appeal was dismissed. Beem’s motion for reconsideration of the order dismissing his appeal was denied and Beem appealed to the Eleventh Circuit both the district court’s dismissal of his appeal and the denial of his reconsideration motion.
After Beem timely filed his initial brief at the Eleventh Circuit, the Debtor moved to dismiss the appeal for lack of subject matter jurisdiction. The Debtor argued that the appeal was equitably and constitutionally moot because the plan had been substantially consummated, and as a result, the Eleventh Circuit did not have subject matter jurisdiction over the appeal.
In its analysis, the court distinguished between equitable and constitutional mootness. Equitable mootness is a discretionary doctrine under which a court may dismiss a bankruptcy appeal when it would be impossible to grant effective relief. The doctrine, the court wrote, “reflects a court’s concern for striking the proper balance of equitable considerations of finality and good faith reliance on a judgment and the competing interests that would underlie the right of a party to seek review of a bankruptcy court order adversely affecting him.” In determining whether to apply the doctrine, the court must consider (a) whether a stay pending appeal was obtained and if not, why not, (b) whether the plan has been substantially consummated, (c) what type of relief is sought, and (d) what the effect of granting such relief would be.
In contrast, constitutional mootness derives directly from the “case or controversy” requirement of Article III of the U.S. Constitution. A case is constitutionally moot when no case or controversy exists, or “when the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome.”
The Eleventh Circuit held that constitutional mootness divests a reviewing court of jurisdiction. However, equitable mootness is discretionary and “bears upon only the proper remedy, and does not raise a threshold question of our power to rule.” The court declined to analyze whether the appeal was equitably moot. Instead, the court took pains to point that the same factors supporting the Debtor’s equitable mootness argument, for instance that it would be cumbersome to unwind the transactions set forth in the plan, also demonstrate that the case is not constitutionally moot, writing that the “very fact that it could be so imprudent to disturb the Plan is a testament to the fact that there is indeed a live controversy.”
Beem’s jurisdictional victory was short-lived since the court affirmed the district court’s order dismissing the appeal. The court held that the district court was well within its discretion to dismiss the appeal given Beem’s failure to file his brief by the April 8 deadline and his failure to respond to the motion to dismiss the appeal.
The Beem decision is unpublished and, per the Eleventh Circuit’s rules, is therefore not binding precedent. Nonetheless, the decision is instructive in the differences between equitable and constitutional mootness. Moreover, the court’s decision underscores the limitations of equitable mootness claims, since equitable mootness does not deprive the court of jurisdiction to consider an appeal (although it may make it hard, if not impossible, to prevail on the appeal). The Beem decision makes it clear that parties would be well-advised to consider constitutional mootness, as well as equitable mootness, when faced with an appeal from a bankruptcy court decision.