In the world of bankruptcy, the validity of the doctrine of equitable mootness is an issue that the Supreme Court has been ducking. On March 19, the Court handed down a non-bankruptcy decision on constitutional mootness. Although the unanimous decision by Justice Neil M. Gorsuch includes quotations that could be employed on both sides of the argument, the opinion doesn’t give a solid clue on how the justices would rule on the validity of equitable mootness.

Equitable mootness is not a product of Article III’s requirement that there must be a case or controversy. When equitable mootness is invoked to dismiss an appeal, there typically is an extant case or controversy.

Not based on the Constitution, equitable mootness is a prudential doctrine — that is, something invented by courts. Most often, equitable mootness is invoked to dismiss an appeal from an order confirming a chapter 11 plan.

Although the circuits are not uniform in their application of the doctrine, three factors usually resulting in a finding of equitable mootness are the lack of a stay pending appeal, substantial consummation of the plan and an adverse effect on parties not before the court on appeal.

The ‘No-Fly’ List

The individual in the case before the Supreme Court was born in Eritrea and lived in Sudan before his family moved to the U.S., where he became a citizen. As an adult, he traveled to Sudan on business.

While in Sudan, he was told by U.S. officials that he was on the no-fly list and could not return to the U.S. While still abroad some years later, he sued the U.S. government, claiming a due process violation for having no notice about the basis for his classification and no method to secure redress.

Soon after the suit was filed, the government removed him from the no-fly list and then moved to dismiss the suit as moot. In support of dismissal, the government said that he would not be placed on the no-fly list in the future “based on currently available information.”

The district court twice dismissed the case as moot, but the Ninth Circuit twice reversed, not seeing the case as moot. To resolve a circuit split, the Supreme Court granted the government’s petition for certiorari.

The Merits

When there is a case or controversy as Article III requires, Justice Gorsuch cited Supreme Court precedent for saying that federal courts have a “virtually unflagging obligation” to hear the case. “But,” he said, “events in the world overtake those in the courtroom, [when] a complaining party manages to secure outside of litigation all the relief he might have won in it.”

“When that happens,” Justice Gorsuch said, “a federal court must dismiss the case as moot.” He added, “federal judges are not counselors or academics; they are not free to take up hypothetical questions that pique a party’s curiosity or their own.”

Of possible application to the bankruptcy world, Justice Gorsuch said:

The limited authority vested in federal courts to decide cases and controversies means that they may no more pronounce on past actions that do not have any “continuing effect” in the world than they may shirk decision on those that do.

Justice Gorsuch went on to say:

[O]ur precedents hold [that] a defendant’s “‘voluntary cessation of a challenged practice’” will moot a case only if the defendant can show that the practice cannot “‘reasonably be expected to recur.’” [Citations omitted.]

Also of possible application to equitable mootness, Justice Gorsuch said, “a defendant might suspend its challenged conduct after being sued, win dismissal, and later pick up where it left off,” were it easier to show mootness.

Affirming the circuit court, Justice Gorsuch decided that the case was not moot because the government’s statement only referred to reliance on actions taken in the past. “[N]one of that,” he said, “speaks to whether the government might relist him if he does the same or similar things in the future.”

“In all cases,” Justice Gorsuch said, “it is the defendant’s ‘burden to establish’ that it cannot reasonably be expected to resume its challenged conduct.”

Observations

The opinion by Justice Gorsuch is founded on the notion that a case is not moot if the defendant can take the challenged action again in the future. In the bankruptcy sphere, cases found to be equitably moot usually deal with legal questions that are likely to recur in other cases.

Perhaps fatally so, the Supreme Court’s decision is distinguishable because the same creditor in a bankruptcy case would not be raising the same question in the future against the same debtor.

The question is this: Does the Supreme Court’s focus on the ability of someone to raise the same issue suggest that the high court would frown on equitable mootness regarding a question that’s endemic in bankruptcy cases?