Sutton v. Weinman Ex Rel. Centrix Liquidating Trust ( 2010 )


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  •                                                                        FILED
    United States Court of Appeals
    Tenth Circuit
    September 8, 2010
    UNITED STATES COURT OF APPEALS
    Elisabeth A. Shumaker
    Clerk of Court
    FOR THE TENTH CIRCUIT
    In re: CENTRIX FINANCIAL LLC,
    Debtor.
    ------------------------------                         No. 10-1057
    (D.C. No. 1:08-CV-01130-PAB)
    ROBERT E. SUTTON; 6762 S.                                (D. Colo.)
    POTOMAC LLC; CENTRIX
    CONSOLIDATED, LLC,
    Appellants,
    v.
    JEFFREY A. WEINMAN, as Trustee
    to the Centrix Liquidating Trust,
    Appellee.
    ORDER AND JUDGMENT *
    Before TACHA, HOLLOWAY, and ANDERSON, Circuit Judges.
    *
    After examining the briefs and appellate record, this panel has determined
    unanimously that oral argument would not materially assist the determination of
    this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
    therefore ordered submitted without oral argument. This order and judgment is
    not binding precedent, except under the doctrines of law of the case, res judicata,
    and collateral estoppel. It may be cited, however, for its persuasive value
    consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
    Robert E. Sutton (Sutton), 6762 S. Potomac LLC (Potomac), and Centrix
    Consolidated, LLC (collectively Appellants), appealed interlocutory and final
    orders of the bankruptcy court in this proceeding. The district court dismissed
    their appeal as equitably moot. Exercising our jurisdiction pursuant to 
    28 U.S.C. § 158
    (d)(1), we affirm.
    I.
    In this matter the bankruptcy court jointly administered Chapter 11
    proceedings filed in September 2006, involving Centrix Financial LLC and
    numerous other affiliated companies (collectively the Debtors). Appellants were
    constituents of the Debtors’ businesses, which related to underwriting and
    servicing sub-prime automobile loans. Substantially all of the Debtors’ assets
    were sold to a third party in February 2007. On May 16, 2008, over Sutton’s and
    Potomac’s objections, the bankruptcy court confirmed the liquidating Chapter 11
    plan (Plan) proposed by the Debtors and the Creditors’ Committee.
    The Plan consolidated the remaining liabilities and properties of the various
    Debtors’ estates, extinguishing their separate legal existence and deeming the
    Debtor entities dissolved. All of the Debtors’ assets and property were
    transferred to the Centrix Liquidating Trust (Trust) and Jeffrey A. Weinman was
    appointed as Trustee. The Plan called for payment of administrative, priority, and
    secured claims from the cash assets of the Trust. It provided that claims against
    Sutton and other non-debtor insiders were critical assets of the Debtors’ estates
    -2-
    and were likely the key source of any meaningful recovery by unsecured
    creditors. The Trustee was authorized to commence adversary proceedings to
    enforce the Debtors’ claims.
    Appellants filed a timely appeal of the bankruptcy court’s orders to the
    district court, challenging pre-confirmation orders that (1) denied Sutton and
    Potomac leave to conduct examinations under Fed. R. Bankr. P. 2004,
    (2) approved the disclosure statement over Sutton’s and Potomac’s objections,
    (3) enjoined Sutton and Potomac from filing claims objections, and (4) estimated
    Sutton’s and Potomac’s administrative claims at zero. They also appealed the
    bankruptcy court’s order confirming the Plan over Sutton’s and Potomac’s
    objections. Appellants did not seek to stay consummation of the Plan pending
    their appeal.
    The Trustee moved to dismiss the appeal. He argued that, following
    substantial consummation of the Plan, the relief Appellants sought was
    impractical and inequitable in light of the changed circumstances following
    confirmation. Thus, he asked the district court to dismiss the appeal as “equitably
    moot.” The court granted the Trustee’s motion and dismissed the appeal on
    June 10, 2009. Appellants appealed the dismissal to this court. While their
    appeal was pending, we issued an opinion in another case formally adopting the
    equitable mootness doctrine and setting forth the factors to be considered in
    applying it. See Search Market Direct, Inc. v. Jubber (In re Paige), 584 F.3d
    -3-
    1327, 1337, 1339 (10th Cir. 2009). Therefore, we reversed the district court’s
    decision and remanded to allow that court to apply the relevant factors in the first
    instance. On remand the district court considered the Trustee’s motion in light of
    our decision in Search Market Direct and once again dismissed Appellants’
    appeal as equitably moot.
    II.
    We review a district court’s determination of equitable mootness for an
    abuse of discretion. 
    Id. at 1335
    . “An abuse of discretion occurs when the district
    court’s decision is arbitrary, capricious, or whimsical, or results in a manifestly
    unreasonable judgment.” Moothart v. Bell, 
    21 F.3d 1499
    , 1504-05 (10th Cir.
    1994) (quotations omitted). In applying the abuse-of-discretion standard, the
    question is not whether this court would have reached a different determination
    on the facts presented. See United States v. Burgess, 
    576 F.3d 1078
    , 1100
    (10th Cir.), cert. denied, 
    130 S. Ct. 1028
     (2009); Eisenberg v. Univ. of N.M.,
    
    936 F.2d 1131
    , 1137 (10th Cir. 1991) (reviewing court does not second-guess
    district court’s determination absent abuse of discretion). “Under the abuse of
    discretion standard[] a trial court’s decision will not be disturbed unless the
    appellate court has a definite and firm conviction the lower court made a clear
    error of judgment or exceeded the bounds of permissible choice in the
    circumstances.” Id. at 1504 (quotation omitted). “We will not challenge [the
    district court’s] evaluation unless it finds no support in the record, deviates from
    -4-
    the appropriate legal standard, or follows from a plainly implausible, irrational, or
    erroneous reading of the record.” United States v. Robinson, 
    39 F.3d 1115
    , 1116
    (10th Cir. 1994). Despite our explicit adoption of the abuse-of-discretion
    standard of review for equitable mootness determinations in Search Market
    Direct, Appellants do not acknowledge or apply that standard in their appellate
    briefs.
    III.
    In Search Market Direct we set forth a six-part test for determining whether
    an appeal is equitably moot.
    It seems that under the doctrine of equitable mootness a court
    should decline to hear an appeal of a bankruptcy court’s decision
    where the answers to the following six questions indicate that
    reaching the merits would be unfair or impracticable: (1) Has the
    appellant sought and/or obtained a stay pending appeal? (2) Has the
    appealed plan been substantially consummated? (3) Will the rights
    of innocent third parties be adversely affected by reversal of the
    confirmed plan? (4) Will the public-policy need for reliance on the
    confirmed bankruptcy plan—and the need for creditors generally to
    be able to rely on bankruptcy court decisions—be undermined by
    reversal of the plan? (5) If appellant’s challenge were upheld, what
    would be the likely impact upon a successful reorganization of the
    debtor? And (6) based upon a quick look at the merits of appellant’s
    challenge to the plan, is appellant’s challenge legally meritorious or
    equitably compelling?
    584 F.3d at 1339. We cautioned that “[t]hese six factors are not necessarily
    conclusive, nor will each factor always merit equal weight.” Id. Appellants
    -5-
    argue the district court misapplied each of these factors. We address their
    arguments in turn, mindful of our abuse-of-discretion standard of review. 1
    A.
    The first consideration relevant to equitable mootness “involves two
    questions: (1) Did the party seeking reversal try to obtain a stay? (2) Assuming
    the party seeking reversal sought a stay, was that party successful in obtaining a
    stay pending appeal?” Id. at 1340. In Search Market Direct, we emphasized that
    “both of these questions are significant” because “an appellant’s complete and
    unjustified failure to seek a stay will often make it unfair for the court to grant
    relief–especially if that relief may affect third parties.” Id. at 1340, 1341. “Thus,
    we will not only look to whether a stay has been obtained; we will also inquire
    into whether the appellant has sought a stay pending appeal.” Id. at 1341. Based
    on Appellants’ failure to even seek a stay, the district court concluded this factor
    weighed in favor of equitable mootness.
    Appellants first contend that failure to obtain a stay is immaterial to a
    determination whether an appeal is equitably moot. This argument ignores our
    1
    Appellants once again argue that the district court could entertain their
    appeal by immunizing post-confirmation transactions consummated in reliance on
    the confirmed Plan. They characterize this as a question independent of the
    equitable mootness analysis. But as we indicated in our decision in their previous
    appeal, see Sutton v. Weinman, 355 F. App’x 199, 201 n.1 (10th Cir. 2009)
    (unpublished), this issue is appropriately addressed in the context of whether the
    relief requested in the appeal would affect the rights of innocent third parties not
    before the court.
    -6-
    holding in Search Market Direct that a court should consider both a party’s
    attempts to secure a stay and whether those attempts were successful. See id. at
    1340-41. Appellants argue alternatively that their failure to seek a stay was
    justified because they lacked funds to post a supersedeas bond, such that any
    attempt to obtain a stay would have been futile. But they fail to show that the
    district court’s contrary determination was an abuse of discretion. The district
    court reasoned they could have sought to post a bond in a lesser amount, based on
    their lack of assets and the contingent nature of the claims against third parties
    under the Plan. Therefore, the court determined that Appellants’ failure to seek a
    stay was not justified. Appellants have not shown that the district court’s
    reasoning was arbitrary, capricious, or whimsical, or results in a manifestly
    unreasonable judgment. We conclude the district court did not abuse its
    discretion in weighing this first factor in favor of equitable mootness.
    B.
    The second question asks whether the Plan has been substantially
    consummated. “We have adopted the ‘substantial consummation’ yardstick
    because it informs our judgment as to when finality concerns and the reliance
    interests of third parties upon the plan as effectuated have become paramount to a
    resolution of the dispute between the parties on appeal.” Id. at 1341 (quotation
    omitted). In determining whether a plan has been substantially consummated, we
    apply the Bankruptcy Code’s three-part definition:
    -7-
    “substantial consummation” means–
    (A) transfer of all or substantially all of the property proposed
    by the plan to be transferred;
    (B) assumption by the debtor or by the successor to the debtor
    under the plan of the business or of the management of all or
    substantially all of the property dealt with by the plan; and
    (C) commencement of distribution under the plan.
    
    11 U.S.C. § 1101
    (2); see Search Market Direct, 584 F.3d at 1341-42.
    The district court considered the consummation activities that had occurred
    since confirmation of the Plan on May 16, 2008. The Debtors had transferred all
    assets to the Trust, and the Debtor entities had been dissolved pursuant to the
    terms of the Plan. The Trustee had commenced forty-two adversary proceedings
    against third parties. As the district court observed, these claims constituted the
    principal assets of the bankruptcy estate. Of the cases filed, over half had been
    settled as of the date of the court’s decision on February 12, 2010, resulting in
    recoveries to the Trust of almost $500,000. The Trustee had obtained default
    judgments in several more actions valued at approximately $263,000. In addition,
    the Trustee had entered into a consent judgment with the State of Colorado to
    settle a claim the State originally brought against Centrix Financial LLC. The
    amount of the consent judgment is over $92 million, although the State agreed to
    treat only $5 million as a general unsecured claim. Finally, by February 2010, the
    Trustee had paid administrative claims and made other disbursements totaling
    -8-
    approximately $418,000. Applying the definition in § 1101(2), the district court
    concluded the Plan had been substantially consummated.
    Appellants’ initial contention—that substantial consummation is not
    relevant to determining whether an appeal is equitably moot—is again
    contradicted by our decision in Search Market Direct. See 584 F.3d at 1341-42.
    Alternatively, they claim the district court erred in concluding the Plan was
    substantially consummated. They assert that, in comparison to administrative and
    unsecured claims aggregating in the hundreds of millions of dollars under the
    Plan, there has been very little consummation activity. They argue a plan cannot
    be substantially consummated until a significant majority of the payments under
    the plan have been completed. They appear to base this contention on their
    interpretation of § 1101(2)(A), which requires “transfer of all or substantially all
    of the property proposed by the plan to be transferred.” See In re Heatron, Inc.,
    
    34 B.R. 526
    , 527, 529 (Bankr. W.D. Mo. 1983) (construing § 1101(2)(A) to
    require completion of substantially all payments to creditors before plan
    substantially consummated).
    As the district court noted, however, Appellants’ construction of
    § 1101(2)(A) as requiring completion of substantially all payments to creditors
    would render meaningless § 1101(2)(C), which requires only that distributions
    under the plan be commenced. Appellants’ construction has been rejected by a
    majority of courts to consider the issue, beginning with In re Hayball Trucking,
    -9-
    Inc., 
    67 B.R. 681
     (Bankr. E.D. Mich. 1986). Hayball Trucking reasoned that, in
    order to give effect to subsection (C), “distributions to creditors over a period of
    time are not the types of transfers of property . . . contemplated in subsection
    (A).” 
    Id. at 684
    . Instead, the court concluded:
    [S]ubsections (A) and (C) appear to distinguish between transfers of
    property to or from the debtor at or near the time the plan is
    confirmed[,] undertaken to shape the new financial structure of the
    debtor[,] and distributions of dividends to creditors made over a
    period of time from operating revenues. “Substantial consummation”
    requires completion or near completion of the former, but only
    commencement of the latter.
    Id.; see also, e.g., Antiquities of Nev., Inc. v. Bala Cynwyd Corp. (In re
    Antiquities of Nev., Inc.), 
    173 B.R. 926
    , 929-930 (B.A.P. 9th Cir. 1994)
    (following Hayball Trucking); In re Potts, 
    188 B.R. 575
    , 580-81 (Bankr. N.D.
    Ind. 1995) (same); In re H & L Developers, Inc., 
    178 B.R. 77
    , 80-81 (Bankr. E.D.
    Pa. 1994) (same); In re Burlingame, 
    123 B.R. 409
    , 411-12 (Bankr. N.D. Okla.
    1991) (same). We agree with the well-reasoned majority rationale and therefore
    reject Appellants’ contention that the district court erred in concluding the Plan
    has been substantially consummated, as that standard is defined in
    § 1101(2)(A)-(C).
    We agree with Appellants, however, that substantial consummation is not
    dispositive. See Search Market Direct, 584 F.3d at 1342. Nor did the district
    court treat it as such. Appellants point to our discussion in Search Market Direct
    of “concerns that motivate courts not to decide the merits of an appeal of a
    -10-
    substantially consummated bankruptcy plan.” Id. Because the district court
    discussed similar issues in its analyses of the other factors relevant to a
    determination of equitable mootness, we will likewise address them in the context
    of our review of the district court’s application of the remaining factors.
    C.
    The third factor requires the court to consider the effects that reversal of a
    plan will have on innocent third parties. This “is probably the foremost concern
    in our analysis of equitable mootness.” Id. at 1343. Appellants do not challenge
    the district court’s determination that their appeal seeks a complete reversal of the
    Plan, such that creditors would be required to vote upon a new plan. See In re
    Long Shot Drilling, Inc., 
    224 B.R. 473
    , 481 (B.A.P. 10th Cir. 1998) (concluding
    remand to amend disclosure statement and plan would require creditors to revote).
    In considering how this relief could adversely affect third parties, the district
    court focused on (1) the administrative payments already made, (2) the
    consummated litigation settlements, and (3) the ongoing adversary proceedings.
    The court initially concluded that Appellants would be equitably bound by
    their representation they have no intent to challenge the administrative payments
    or settlements. Cf. F.H. Partners, L.P. v. Inv. Co. of the Sw. (In re Inv. Co. of the
    Sw.), 
    341 B.R. 298
    , 310 (B.A.P. 10th Cir. 2006) (considering, with respect to
    adverse impact of relief sought on appeal, appellant’s representation it would not
    seek return of payments made to third parties). Thus, the district court did not
    -11-
    take into account the possibility of such challenges in weighing the harm to third
    parties from reversal of the Plan. It stated further that any challenge to the
    consummated settlements was unlikely to be successful. But the court
    acknowledged the possibility a new trustee may challenge the administrative
    payments upon reversal of the Plan. Addressing the ongoing litigation, the court
    concluded reversal of the Plan would potentially affect third parties, particularly
    in light of the uncertainty of who would assume control of the cases. The court
    later expounded on this reasoning, finding that as a result of delay in moving
    forward with the liquidation, Plan assets consisting primarily of adversary
    proceedings would likely diminish, to the detriment of the creditors. Appellants
    advance two arguments of error relating to the district court’s analysis of this
    factor, both of which we reject.
    i.
    Appellants contend the Trustee failed to prove that reversal of the Plan will
    result in injury to third parties. They assert the district court’s conclusion that
    third parties will potentially be harmed is insufficient, under our holding in
    Search Market Direct, to find this factor weighs in favor of equitable mootness.
    See 584 F.3d at 1343-44. We disagree. The district court readily acknowledged
    its analysis of what would occur upon reversal of the Plan was somewhat
    speculative, in large part because Appellants claims on appeal did not involve a
    competing plan. But the facts of this case are different from those in Search
    -12-
    Market Direct. In that case two creditors vying for ownership of the debtor’s
    most valuable asset had proposed competing plans, one of which was confirmed.
    The appellant sought reversal of the confirmed plan in favor of its own plan. See
    id. at 1331-33. The third-party-harm analysis focused on whether the appellee
    had shown that the appellant had insufficient funds to finance its proposed plan.
    See id. at 1344-47
    In contrast, Appellants’ appeal issues required a different analysis. Their
    claims related to alleged error in the bankruptcy court’s processes in managing
    and resolving the case. They sought a complete reversal of the Plan, after which
    they would pursue Rule 2004 examinations and file their claims objections. If
    successful on appeal, the zero-estimation of their administrative claims would be
    reversed as well, and a new disclosure statement and a new plan would require a
    new vote by creditors. Appellants did not propose an alternative plan. Faced
    with this uncertainty in the ultimate relief Appellants were seeking, the court
    theorized that, were their claims successful, they may have greater control over
    the nature of a new plan, and the amount of the claims against them could
    ultimately be reduced. The district court also posited it was likely a substantially
    similar plan would be confirmed, providing for a liquidating trust holding
    adversary proceedings as its principal assets. Appellants do not take issue with
    these assumptions. Against this backdrop, the district court considered whether
    reversal of the Plan would unduly harm third parties not before the court, taking
    -13-
    pains to identify and dismiss the effects which it concluded were unlikely to
    occur. On the facts presented in this case, the district court did not abuse its
    discretion in considering and weighing potential effects on third parties as a result
    of reversal of the Plan.
    ii.
    Appellants also maintain the district court erred in not “immunizing” all
    post-confirmation transactions from the effects of reversal of the Plan. They
    assert this is all the court needed to do to protect third parties from undue harm.
    And they contend the court could have made such an order binding not only on
    Appellants, but on all third parties as well. Appellants’ argument is based on a
    theory of standing: they reason that, because Appellants were the only parties
    with unresolved objections prior to confirmation of the Plan, they alone would
    have standing to object to transactions entered into under the Plan and they alone
    could seek to undo them upon reversal.
    Appellants’ near-singular focus on this issue is misplaced. In assessing the
    effects of reversal of the Plan on third parties, the district court took into account
    their disclaimer of any intent to undo payments to and settlements with third
    parties. And it dismissed, as unlikely to succeed, any undoing of the
    consummated transactions, with the exception of possible challenges to
    administrative payments by a new trustee. Appellants do not explain why a new
    trustee under a new plan, who was neither before the bankruptcy court in order to
    -14-
    object to the Plan, nor before the district court on appeal, would lack standing to
    bring such a challenge. None of the cases cited by Appellants supports such a
    proposition. 2
    Moreover, it is apparent the district court’s primary focus, in assessing
    third-party harm, was the effect of reversal of the Plan upon the ongoing
    adversary proceedings, which are the principal assets of the liquidating estate and
    include claims against Sutton. Appellants do not address this portion of the
    district court’s analysis in their opening brief. An opening brief must identify
    “appellant’s contentions and the reasons for them, with citations to the authorities
    and parts of the record on which the appellant relies.” Fed. R. App. P.
    28(a)(9)(A). “Consistent with this requirement, we routinely have declined to
    consider arguments that are not raised, or are inadequately presented, in an
    appellant’s opening brief.” Bronson v. Swensen, 
    500 F.3d 1099
    , 1104 (10th Cir.
    2
    We agree with the Trustee that Appellants’ cited cases applying 
    11 U.S.C. § 363
    (m) and former Bankruptcy Rule 10-801(2) are inapposite. These cases do
    not address a court’s equitable power to immunize transactions with third parties
    from the effects of reversal of a bankruptcy plan on appeal. Instead, the courts
    applied statutory or court-rule provisions preserving the validity of certain types
    of transactions with good faith purchasers absent a stay pending appeal. The
    courts considered whether, in light of such statutory or court rule provisions, they
    could nonetheless provide relief on appeal such that the appeal was not moot. See
    In re King Res. Co., 
    651 F.2d 1326
    , 1331-32 (10th Cir. 1980); Osborn v. Durant
    Bank & Trust Co. (In re Osborn), 
    24 F.3d 1199
    , 1203-04 (10th Cir. 1994);
    Golfland Entm’t Ctrs., Inc. v. Peak Inv., Inc. (In re BCD Corp.), 
    119 F.3d 852
    ,
    856-57 (10th Cir. 1997). Appellants identify no statute or court rule protecting
    the validity of the post-confirmation transactions in this case.
    -15-
    2007). “Stated differently, the omission of an issue in an opening brief generally
    forfeits appellate consideration of that issue.” 
    Id.
     As Appellants advance no
    argument of error with respect to this portion of the district court’s analysis, we
    decline to review it on appeal.
    D.
    The fourth factor for determining equitable mootness “reflects a court’s
    concern for striking the proper balance between the equitable considerations of
    finality and good faith reliance on a judgment and the competing interests that
    underlie the right of a party to seek review of a bankruptcy court order adversely
    affecting him.” Search Market Direct, 584 F.3d at 1347 (quotation omitted). In
    Search Market Direct, we acknowledged that “completed acts in accordance with
    an unstayed order of the bankruptcy court must not thereafter be routinely
    vulnerable to nullification if a plan of reorganization is to succeed.” Id.
    (quotation omitted). And we found it “equally important that a court not reverse
    a bankruptcy plan if an appellate reversal . . . would create a nightmarish situation
    for the bankruptcy court on remand and make reconstructive relief extremely
    improbable.” Id. (quotations and brackets omitted). But we also considered the
    seriousness of the appeal allegations as a “countervailing concern[]” that could
    weigh against a determination of equitable mootness. Id.
    Appellants’ contention that the right to appeal an adverse judgment always
    outweighs the public-policy interest in finality has no merit. Nor have they
    -16-
    shown the district court abused its discretion in weighing this factor in favor of
    equitable mootness. Appellants emphasize the district court’s finding that
    reversal of the Plan would not cause a nightmarish situation for the bankruptcy
    court on remand. The court stated that “[i]n all likelihood, what would happen is
    that a plan substantially similar to the plan that was approved would come about
    and would probably come about without a[n] extraordinarily complicated
    unscrambling of the egg.” Aplt. App., Vol. 5 at 923. Thus, Appellants contend
    the district court was compelled to conclude that their right to appeal outweighed
    the public-policy interest in finality. But as the district court noted, the absence
    of a nightmarish situation for the bankruptcy court on remand is “not the only
    concern.” Id. In Search Market Direct we identified, as a countervailing concern
    outweighing the public-policy interest in finality, the “troubling allegations”
    raised in that case “of bad-faith dealings between the debtor, [another creditor],
    and the trustee, and of a lack of disinterestedness on the part of the trustee.”
    584 F.3d at 1347. Without expressing any opinion of the merits of these
    allegations, we concluded “these are serious allegations that should, if possible,
    receive their due attention.” Id. Appellants maintain their appeal claims must
    likewise receive the court’s due attention. But the district court concluded
    Appellants’ claims do not involve the same kind of troubling issues:
    The quick look certainly does not indicate, as it did in [Search
    Market Direct], that there was some type of claim of error that would
    indicate some serious reason that the court would need to consider
    -17-
    the appeal in order to be able to bring to light some issue that went to
    the integrity of the bankruptcy process.
    Aplt. App., Vol. 5 at 931. 3 Noting the extent to which the unstayed Plan had
    “marched forward,” and acknowledging that its decision was a “closer call”
    because of the absence of a nightmarish situation on remand, id. at 924, the
    district court nonetheless concluded that reversal of the Plan “would affect
    adversely the public policy need for reliance on the confirmed plan,” id. at 925.
    Appellants have not established that the district court made a clear error of
    judgment or exceeded the bounds of permissible choice in weighing the
    public-policy factor.
    E.
    The fifth factor a court should consider in determining whether an appeal is
    equitably moot is the impact of reversal upon the likelihood of a new, successful
    reorganization. The district court first observed that a successful reorganization
    3
    Although the district court made this observation in the context of its
    analysis of the final factor, we believe it is also relevant to the court’s
    consideration of the public-policy factor, in which it referenced the “troubling
    allegations” involved in Search Market Direct. In that case we likewise
    considered the seriousness of the appeal allegations in our analyses of both the
    fourth and sixth factors. See 584 F.3d at 1347, 1348. And we acknowledged that
    the analyses under the various factors could be overlapping. See id. at 1348
    (noting preceding analysis resolved questions posed by fifth factor). Regarding
    the district court’s assessment of the sixth factor—taking a quick look at the
    merits of the issues on appeal—Appellants contend the district court erred in
    concluding their claims were not equitably compelling. We will address that
    argument in reviewing the district court’s application of the final factor.
    -18-
    of the Debtors would likely involve a liquidating trust, the principal assets of
    which would again be the adversary proceedings, including claims against Sutton.
    The court then considered the impact of reversal of the Plan on the success of
    such a reorganization, concluding it would necessarily be postponed and therefore
    plan assets and plan claims would likely diminish, to the detriment of the
    creditors. Appellants address the crux of the district court’s reasoning in a
    footnote, asserting that even if a new reorganization results in reduced claims
    against Appellants and smaller distributions to creditors, “that is not a basis for a
    conclusion that a ‘successful’ reorganization is not possible. It simply means that
    a proper application of the statutory criteria may result in a different allocation of
    reorganization value.” Aplt. Opening Br. at 28 n.4. Appellants cite no authority
    for this proposition.
    We conclude the district court did not abuse its discretion in evaluating this
    factor. A “successful reorganization” is ordinarily “one from which the debtor
    emerges as an economically viable operation.” Sheet Metal Workers’ Int’l Assoc.
    v. Mile Hi Metal Sys., Inc. (In re Mile Hi Metal Sys., Inc.), 
    899 F.2d 887
    , 893
    (10th Cir. 1990). But this case involves liquidation of the Debtors’ assets.
    Appellants do not dispute the district court’s conclusions that a new
    reorganization would again involve a liquidating trust, or that adversary
    proceedings would remain the primary assets of such a trust. Nor do they
    challenge the court’s characterization of their appeal as aimed at reducing the
    -19-
    extent of the claims against them, or its conclusion that Plan assets would likely
    diminish as a result of delay. In the context of this case, it was neither arbitrary,
    capricious, nor whimsical for the district court to consider the impact of a reversal
    of the confirmed Plan on the relative success, in terms of maximizing the
    creditors’ recovery, of a new liquidation plan.
    F.
    The final factor in evaluating whether an appeal is equitably moot involves
    a “quick look at the merits of appellant’s challenge to the plan” to determine if it
    is “legally meritorious or equitably compelling.” Search Market Direct, 584 F.3d
    at 1339. In doing so, a court does not thoroughly evaluate and decide the merits
    of the claims. See id. at 1348. The district court reviewed the parties’ appeal
    briefs in this case and concluded one of Appellants’ five claims appeared to have
    some merit, but a quick look at the merits of the other four claims did not shed
    light on the court’s equitable mootness analysis. The court initially declared this
    sixth factor “a draw in terms of whether or not the challenge is legally
    meritorious.” Aplt. App., Vol. 5 at 931. But the court went on to conclude “that
    the merits of appellants’ challenge to the plan [are] not equitably compelling
    given the fact that the appellants are . . . the parties against whom many of the
    claims that constitute the assets of the trust are [brought].” Id. And, as noted
    infra, the court distinguished Appellants’ claims from those in Search Market
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    Direct, which “went to the integrity of the bankruptcy process.” Id. Thus, the
    court concluded this factor did not weigh in favor of proceeding with the appeal.
    Appellants maintain that one of their claims implicates the abrogation of
    serious and fundamental rights. They argue the bankruptcy court violated their
    due process rights by precluding them from filing claims objections. As a result,
    they assert they are “confronted with an adversary proceeding seeking damages
    exceeding $100 million without ever being permitted to challenge the damage
    component of the claims asserted against them.” Aplt. Opening Br. at 29
    (quotations and emphasis omitted). Appellants also point to the district court’s
    conclusion that one of their other claims appeared to have some merit.
    Appellants do not explain how they are prevented from defending against
    the claims filed against them, including the extent of the damages alleged, in the
    adversary proceedings. Nor have they shown that the district court abused its
    discretion in concluding that, unlike the claims at issue in Search Market Direct,
    Appellants’ appeal issues do not raise “serious conflicts of interest” or other
    issues that “go to the very integrity of the bankruptcy process.” 584 F.3d at 1348.
    IV.
    Having concluded the district court did not abuse its discretion in weighing
    each of the relevant factors, we likewise find no abuse of discretion in its ultimate
    holding that, based on the overall six-factor test, Appellants’ appeal was equitably
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    moot. The judgment of the district court is therefore AFFIRMED. Appellants’
    motion for expedited appeal is DENIED as moot.
    Entered for the Court
    Deanell Reece Tacha
    Circuit Judge
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