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confidence, and (iii) the legal uncertainty of the Debtor's post-confirmation activities. Notes: CONCUR: Kennedy. Believes it is unnecessary to decide the standard of review. Judge Kennedy goes on to discuss that the standard of review for equitable mootness is a complicated question because it is the only time in bankruptcy that the B.A.P. or appellate court will be deciding an issue for the first time. Also, thinks the abuse of discretion standard is appropriate. But, because Judge Kennedy believes that the standard of review should not have been decided, Judge Kennedy concurs.
Facts: Zouhair Hilal (the "Debtor"), filed a chapter 11 bankruptcy in early 2005 and a trustee was appointed. After several years and several iterations, a plan of confirmation was affirmed, which called for the liquidation of the Debtor's assets. The plan has been substantially consummated. The Debtor appealed the confirmation order on two grounds: (i) the release of the Trustee from liability for negligence and breach of fiduciary duty, and (ii) the compensation of the plan agent on a percentage basis rather than an hourly basis. The district court dismissed the appeal as equitably moot.
Issue: Whether these narrow issues on appeal adversely affect third parties and are therefore equitably moot in light of the substantial consummation of the plan.
Holding: Vacate the district court and affirm the bankruptcy court.
Rules: An appeal is equitably moot when a plan of reorganization has been so substantially consummated that a court cannot order effective relief even though a live dispute remains among some parties to the bankruptcy case. The doctrine of equitable mootness does not foreclose appeals of a chapter 11 plan that only concern professional compensation and releases. Three elements have been articulated to determine equitable mootness: (1) whether a stay pending the appeal has been granted; (2) whether the plan has been substantially consummated; and (3) whether third parties would be adversely affected by the outcome.
Reasoning: Here, the first two factors were not in dispute: Hilal did not seek a stay pending the appeal and the plan had been substantially consummated. However, no third parties are affected by the outcome of this appeal and, therefore, the appeal is not moot. Moreover, equity supports appellate review of issues that affect the integrity and transparency of the chapter 11 process, and professional compensation as well as trustee releases are integral to both of those goals. Pursuant to Fifth Circuit law, trustees (and professionals retained by trustees) cannot be subject to personal liability for damages to the bankruptcy estate unless they have acted with gross negligence. As for the fees, Hilal offered no evidence of the fact that the plan agent would have made less money had he worked on an hourly basis.
Facts: Numerous individual claimants of Prudential Lines, Inc. ("Prudential") and Prudential's bankruptcy trustee (the "Trustee") filed a motion (the "Motion") against Prudential's insurer - American Steamship Owners Mutual Protection and Indemnity Association (the "Insurer"). The Motion sought two orders from the bankruptcy court that would allow the Trustee to operate under a structure for the use and payment of Prudential's insurance funds (the "Proposed Payment Structure") to pay the claims of the Claimants: first, the motion asked the bankruptcy court to reject the Insurers objection to the Proposed Payment Structure; and, second, the motion asked the
