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  • Writer's pictureKirk Hartley

GM – Denial of Stay of Asset Sale and Denial of 2d Circuit Direct Appeal – “Equita

In GM, Judge Gerber denied a stay of the asset sale and denied a direct appeal to the 2d Circuit; the order is here (Docket No. 3046). Basic news articles are here (WSJ) and here (NYT).

What the news articles do not mention is a bankruptcy appeal doctrine known as the “equitable mootness” doctrine. Under that doctrine, appeals are sometimes dismissed as moot after the relevant bankruptcy event has happened. Here, the relevant event would be the consummation of the upcoming asset sale that Judge Gerber has refused to stay.

For a recent, cogent and free law review article explaining the “equitable mootness” doctrine and why some say it is unconstitutional, go here for a Santa Clara Law Review article by a law student, Katelyn Knight.

There is irony to the current events in GM. Why? Because in various asbestos chapter 11 cases, counsel for asbestos claimants and counsel for futures representatives have argued and used the equitable mootness doctrine as a leverage point to try to shield chapter 11 plans they approved when many, many millions were being set aside for asbestos claimants. Now the equitable mootness doctrine may hit them as a sword. So goes life in litigation where much time is spent trying to dance on both sides of a sharp edge.

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