In A Chapter 11 Case, If A Post-Confirmation Equity Committee Is To Be Appointed, It Must Be Provided For In The Plan And Cannot Be Created By Post-Confirmation Motion
In re Genesis Health Ventures, Inc., 204 Fed. Appx. 144 (3d Cir. Oct. 4, 2006) (per curiam)
This decision from the Third Circuit, which was entered per curium and marked “non-precedential,” involved an appeal from a former shareholder of the debtor, Genesis Health Ventures, Inc., who was proceeding pro se. Shortly after the bankruptcy court confirmed the debtors’ plan of reorganization in 2001, the former shareholder, James Hayes, filed a motion for formation of an equity committee post-confirmation. Because of the other appeals he was pursuing in the bankruptcy case, his motion was left pending for over three years, at which point he returned to the bankruptcy court, where the court then denied the motion as untimely and subject to the doctrine of “equitable mootness.” The district court agreed, and so did the court of appeals. Underlying the discussion of that doctrine lay the implicit proposition that the motion was really a challenge to the terms of the plan, though presented procedurally in a manner distinct from plan objections.
Former shareholder Hayes, in 2001, filed objections to the debtor’s plan of reorganization and requested that an equity committee be appointed. The bankruptcy court, in September 2001, rejected his objections to the plan, denied his request for an equity committee and entered judgment confirming the plan. Hayes filed notices of appeal from the denial of his objections to the plan and his equity committee request. He also filed a motion in the bankruptcy court for an appointment of a post-confirmation equity committee. The course of his appeals from the first two orders took nearly three years before they were exhausted. Hayes then went back to the bankruptcy court to seek a hearing on the motion for a post-confirmation equity committee that he filed in 2001. The court denied that motion in 2004, holding that it was grossly untimely, and applied the doctrine of equitable mootness. The district court affirmed on the grounds of equitable mootness and also because the debtor was insolvent.
On appeal to the court of appeals, the Third Circuit found the doctrine of equitable mootness applied. The court emphasized the public policy favoring the finality of bankruptcy judgments. The court did not comment on the district court’s alternative ruling that the debtor was insolvent.
In applying the doctrine of equitable mootness, the court focused on the judgment of the bankruptcy court confirming the plan, and held that the plan could not be equitably unscrambled, years after it was confirmed. Implied though unstated was the principle that the appointment of a post-confirmation equity committee had to have been a part of the plan. The actual denial of the motion for appointment of the post-confirmation equity committee by the bankruptcy court did not occur until three years after the plan was confirmed, but a stay of the plan’s implementation would have been needed to keep Hayes’ motion from becoming moot.
