In Re: 60 91st Street Corp.

Background

Kim Mortimer, the sole shareholder of debtor 60 91st Street Corp., appealed from a Bankruptcy Court order that confirmed a Chapter 11 liquidation plan and authorized the sale of substantially all of the debtor’s assets, including its nine-unit apartment building. Heidi J. Sorvino was the Chapter 11 trustee and appellee.

The Bankruptcy Court entered the confirmation and sale order on February 25, 2021. The trustee completed the asset sale on March 22, 2021. The plan became effective on May 12, 2021, and the trustee distributed the sale proceeds and remaining cash to creditors. On September 9, 2021, the Bankruptcy Court entered a final decree closing the case and finding that the plan had been fully administered.

Mortimer filed a notice of appeal concerning approval of the property sale, but the filing was premature because the Bankruptcy Court had not yet entered an order approving the sale. The District Court set a deadline for Mortimer’s opening brief, which she missed. The trustee then moved to dismiss the appeal. Mortimer did not initially respond, but after the court extended her response deadline, she filed a response and an amended response.

Legal standard

The District Court had authority to hear appeals from final Bankruptcy Court orders under 28 U.S.C. § 158(a). It explained that a bankruptcy appeal may be dismissed under the doctrine of equitable mootness when effective relief might technically be possible but granting it would be unfair. The doctrine is intended to prevent courts from disturbing a bankruptcy plan after it has been implemented.

A bankruptcy plan is substantially consummated when substantially all property covered by the plan has been transferred, the debtor or its successor has assumed control of the relevant property or business, and distributions under the plan have begun. In the Second Circuit, substantial consummation creates a presumption that an appeal is equitably moot. An appellant may overcome that presumption only by satisfying five factors concerning available relief, the effect on the debtor and completed transactions, notice to affected parties, and diligence in seeking a stay.

Court’s analysis

The court found that the plan had been substantially consummated because the trustee had completed the sale, distributed the available proceeds and cash to creditors, and obtained a final decree closing the bankruptcy case.

The court also found that the relevant factors favored dismissal. Mortimer had not sought a stay of the order or an expedited appeal. The court recognized the challenges of Mortimer’s circumstances and the COVID-19 pandemic, but stated that diligence in requesting a stay was a chief consideration. Because the plan had been implemented and transactions and distributions had occurred, granting relief could require rewriting or unraveling the negotiated transactions and could cause previously satisfied claims to become active again. The court concluded that granting Mortimer relief would therefore be inequitable.

Disposition

The court granted the trustee’s motion to dismiss and dismissed Mortimer’s appeal as moot. It directed the Clerk of Court to terminate the motion, remove the case from the list of open bankruptcy appeals, close the action, and mail Mortimer a copy of the opinion and order. The court also stated that it had considered Mortimer’s remaining arguments and found them meritless.