When equitable mootness is a close question on appeal, the Fifth Circuit has ruled that an appellate court can bypass a motion to dismiss for equitable mootness and address the appeal on the merits.
Why is that so? Because an appellate court does not lack constitutional or Article III jurisdiction, even if the appeal is equitably moot.
The debtor operated a gasoline station and claimed to have an unperformed contract to buy the property from the owner. Finding there was no enforceable contract, the bankruptcy court denied the debtor’s motion to compel the owner to sell the property to the debtor. The debtor appealed.
While the appeal was pending in district court, the bankruptcy court dismissed the underlying case. After losing in district court, the debtor appealed to the Fifth Circuit.
For the first time in the court of appeals, the property owner claimed that the appeal was equitably moot because the underlying case had been dismissed. Even if denial of the motion to sell were to be reversed on appeal, the owner reasoned that the appeal was equitably moot because the bankruptcy court could not compel the owner to sell the property.
The debtor contended that there was still a live controversy, since the debtor and the owner disagreed about the enforceability of the contract regardless of the status of the bankruptcy case.
In his opinion on May 3, Circuit Judge Stephen A. Higginson first addressed equitable mootness. Citing In re Pac. Lumber Co., 584 F.3d 229, 240 (5th Cir. 2009), he described equitable mootness as a judicially created version of appellate abstention that favors finality in reorganizations and protects multi-party expectations.
The property owner submitted that dismissal of the bankruptcy case was similar to consummation of a chapter 11 plan, thus foreclosing appellate relief. The debtor countered by saying that equitable mootness did not apply because the enforceability of the contract was ancillary to the bankruptcy and was still a live controversy.
In the Fifth Circuit, the owner conceded that enforceability of the contract remained a live controversy and that the debtor retained an interest in the outcome of the dispute.
Judge Higginson therefore characterized the owner as contending that the case was equitably moot because there could be no effective relief, even though there was a live controversy.
“Resolution of this dispute raises unsettled questions in bankruptcy law,” Judge Higginson said. However, he cited the Third, Fifth and Seventh Circuits for having bypassed equitable mootness to rule on the merits. In particular, he cited then-Circuit Judge Samuel A. Alito, Jr. for having said in dissent that equitable mootness does not present a question of jurisdiction to resolve before reaching the merits. In re Continental Airlines, 91 F.3d 553, 568–72 (3d Cir. 1996) (en banc).
Judge Higginson decided to “leave those issues for another day” because he could affirm on the merits.
On the merits, Judge Higginson upheld denial of the motion to compel sale, because the “brief email exchange did not demonstrate an offer or acceptance, as required for a contract to be binding under Texas law.”
Questions for Our Readers
Here are some questions for our readers to answer:
1. Begin with the assumption that the appellate court has constitutional or Article III jurisdiction because there was a live dispute between the parties regarding enforceability of the contract. Further assume that the appellate court reverses by finding there was an enforceable contract. On remand, would the bankruptcy court have jurisdiction?
2. Given that the underlying case had been dismissed and the bankruptcy court could not compel the owner to sell, would the parties be asking the bankruptcy judge to give an advisory opinion?
3. If a trial court is being asked to give an advisory opinion, does the trial court nevertheless possess Article III or constitutional jurisdiction? Would there be no constitutional jurisdiction because there was no “live” controversy at the time?
4. Had the Fifth Circuit drilled down deeper, would there have been no Article III jurisdiction given the constraints on what the trial could do on remand?
When equitable mootness is a close question on appeal, the Fifth Circuit has ruled that an appellate court can bypass a motion to dismiss for equitable mootness and address the appeal on the merits.
Why is that so? Because an appellate court does not lack constitutional or Article III jurisdiction, even if the appeal is equitably moot.
The debtor operated a gasoline station and claimed to have an unperformed contract to buy the property from the owner. Finding there was no enforceable contract, the bankruptcy court denied the debtor’s motion to compel the owner to sell the property to the debtor. The debtor appealed.
While the appeal was pending in district court, the bankruptcy court dismissed the underlying case. After losing in district court, the debtor appealed to the Fifth Circuit.