In Re. Genesis v., (3rd Cir. 2006)

Status: Not Precedential

Docket Number: 05-4005

Linked as:

Text

DPS-333 N O T PRECEDENTIAL

U N IT E D STATES COURT OF APPEALS

F O R THE THIRD CIRCUIT

N O . 05-4005

IN RE: GENESIS HEALTH VENTURES, INC., et al.;

Debtors

JAMES J. HAYES,

Appellant

O n Appeal From the United States District Court

F o r the District of Delaware

(D .C . Civ. No. 04-cv-00477)

D istrict Judge: Honorable Joseph J. Farnan, Jr.

S u b m itte d On Appellee's Cross-Motion To Dismiss The Appeal

September 8, 2006

Before: FUENTES, VAN ANTWERPEN AND CHAGARES, CIRCUIT JUDGES

(F ile d October 4, 2006

O P IN IO N

P E R CURIAM

Ja m e s J. Hayes, a former shareholder of Appellee/reorganized debtor Genesis

H e a lth Ventures, Inc. (with its affiliated co-debtors and Appellees, hereafter referred to

c o lle c tiv e ly as "Genesis"), appeals from the order of the United States District Court for th e District of Delaware issued July 23, 2005, dismissing as equitably moot his appeal of th e Bankruptcy Court's order denying his motion for appointment of a post-confirmation e q u ity committee.

O n September 13, 2001, after the Bankruptcy Court rejected Hayes's objections to the plan and denied his first request for an equity committee, the Bankruptcy Court e n te re d judgment confirming the plan of reorganization in the jointly administered cases o f In re: Genesis Health Ventures, Inc. et al., Bankruptcy Case No. 00-2692, and In re: M u l tic a r e AMC, Inc., Bankruptcy Case No. 00-2494. See In re Genesis Health Ventures, In c ., 266 B.R. 591 (Bankr. D. Del. 2001). Hayes filed two notices of appeal from the B a n k r u p tc y Court's 2001 order, which were docketed separately. He also made a request f o r the appointment of an equity committee (his first request to the District Court, but the sec o n d such request overall), which the District Court denied. The District Court d ism issed Hayes's appeal from the Bankruptcy Court's judgment as equitably moot. It d ism issed the second, duplicative appeal as previously litigated. The District Court d e n ie d Hayes's motion to reopen the second duplicative appeal and this Court affirmed.

In re: Genesis Health Ventures, Inc., et al., C.A. No. 04-1862 (3d Cir. Dec. 6, 2004). The S u p r e m e Court denied Hayes's petition for a writ of certiorari. See Hayes v. Genesis, 125 S .C t. 2947 (2005).

M e a n w h ile , in 2004, Hayes went back to Bankruptcy Court seeking a ruling on a m o tio n for appointment of a post-confirmation equity committee that he had filed in 2 0 0 1 , after the Bankruptcy Court entered judgment. The Bankruptcy Court denied the m o tio n on May 13, 2004, holding that it was "grossly untimely," that the doctrine of e q u ita b le mootness applied to the Genesis Plan, and that no extraordinary circumstances e x is te d warranting the appointment of a post-confirmation equity committee. Hayes a p p e ale d and on July 23, 2005, the District Court dismissed the appeal under the doctrine o f equitable mootness. Alternatively, the District Court affirmed the Bankruptcy Court's d e n ial of the motion because Genesis was completely insolvent. Hayes filed a timely n o tice of appeal.

W e have appellate jurisdiction pursuant to 28U.S.C. §§ 158(d) and 1291. Our re v ie w of the Bankruptcy Court's decision is de novo. In re Telegroup, 281 F.3d 133, 1 3 6 (3d Cir. 2002). We will treat the Appellee's motion to dismiss as a motion for s u m m a ry affirmance and we will affirm for substantially the same reasons set forth by the D is tric t Court in its opinion.

U n d e r the doctrine of equitable mootness, "[a]n appeal should ... be dismissed as m o o t, even though effective relief could conceivably be fashioned, where implementation o f that relief would be inequitable." In re Continental Airlines, 91 F.3d 553, 559 (3d Cir. 1 9 9 6 ). The equitable mootness doctrine "prevents a court from unscrambling complex b a n k ru p tc y reorganizations when the appealing party should have acted before the plan b e c a m e extremely difficult to retract." Nordhoff Investments, Inc. v. Zenith Elecs. Corp., 2 5 8 F.3d 180, 185 (3d Cir. 2001). In determining whether dismissal for equitable m o o tn e ss is warranted, a court must consider five factors: (1) whether the reorganization p la n has been substantially consummated; (2) whether a stay has been obtained; (3) w h e th e r the relief requested would affect the rights of the parties not before the court; (4) w h e th e r the relief requested would affect the success of the plan; and (5) the public policy o f affording finality to bankruptcy judgments. "[T]he foremost consideration is whether th e reorganization plan has been consummated." In re PWS Holding Corp., 228 F.3d 2 2 4 , 236 (3d Cir. 2000). Moreover, it is incumbent on the appealing parties to obtain a s ta y where there is a "clear possibility" that their claims would become moot. See C o n tin e n ta l, 91 F.3d at 566. And, if the relief requested on appeal would jeopardize the s u c c es s of the reorganization plan by causing its "reversal or unraveling," then dismissal o f the appeal for equitable mootness is favored. See PWS Holding Corp., 228 F.3d at 2 3 6 . Finally, the public policy favoring the finality of bankruptcy judgments, although iden tified as a separate factor, in truth, provides the lens through which the other factors s h o u ld be viewed.

W ith the foregoing principles in mind, we conclude that the District Court c o rre c tly dismissed the appeal for equitable mootness. The Plan has been substantially c o n su m m a ted . Hayes did not seek or obtain a stay of the confirmation order. The rights o f third parties who have long relied on the consummated plan would be negatively a f f e c te d , and the relief that Hayes seeks would likely cause the reversal or unraveling of th e Plan. If, as Hayes asserts, the plan is unfair and inequitable, it would be so for all D e b to rs ' unsecured creditors and would require a newly negotiated plan. Finally, the c o n s u m m a tio n of the plan in 2001, the reliance upon it by third parties for all these years, a n d the negative impact of Hayes's request for relief on the success of the plan, all o p e ra te to the detriment of the long recognized public policy supporting the finality of b a n k r u p t c y judgments.

W e have throughly reviewed Hayes arguments on appeal and find that they lack m erit. Because no substantial question is presented by this appeal, the District Court's ju d g m e n t will be affirmed, Appellee's cross-motion to dismiss the appeal, treated as a m o tio n for summary affirmance, is granted.