Adventist Health system/west v. Fire Victim Trust ( 2022 )

FILED
NOT FOR PUBLICATION
MAR 29 2022
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: PACIFIC GAS AND ELECTRIC No. 21-15447
COMPANY,
D.C. No. 4:20-cv-05414-HSG
Debtor,
______________________________
MEMORANDUM*
ADVENTIST HEALTH SYSTEM/WEST;
et al.,
Appellants,
v.
FIRE VICTIM TRUST; et al.,
Appellees.
Appeal from the United States District Court
for the Northern District of California
Haywood S. Gilliam, Jr., District Judge, Presiding
Argued and Submitted March 8, 2022
San Francisco, California
Before: WALLACE, S.R. THOMAS, and McKEOWN, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Adventist Health System/West, Adventist Health Feather River, Paradise
Unified School District, Northern Recycling and Waste Services, LCC, and Napa
County Recycling & Waste Services, LCC (“Appellants”) appeal from the district
court’s dismissal of their bankruptcy appeal as equitably moot. “In evaluating a
dismissal on equitable mootness grounds, we review factual findings for clear error
and legal conclusions de novo.” JPMCC 2007–C1 Grasslawn Lodging, LLC v.
Transwest Resort Props., Inc. (In re Transwest Resort Props., Inc.), 801 F.3d 1161,
1168 (9th Cir. 2015). We have jurisdiction under 28 U.S.C. § 158(d)(1), and we
affirm.
We consider four factors in determining whether a bankruptcy appeal is
equitably moot: (1) whether appellants sought and obtained a stay; (2) whether the
plan has been substantially consummated; (3) what effect any remedy might have
on innocent third parties; and (4) whether the bankruptcy court can fashion
equitable relief without completely undermining the plan. In re Transwest, 801
F.3d at 1167–68. “If a stay was sought and not gained,” we then will look to the
other factors, Motor Vehicle Cas. Co. v. Thorpe Insulation Co. (In re
Thorpe Insulation Co.), 677 F.3d 869, 881 (9th Cir. 2012), but at the very least “we
require the creditor seek a stay of proceedings before the bankruptcy court” to
2
avoid a determination of mootness. Cobb v. City of Stockton (In re City of
Stockton), 909 F.3d 1256, 1263 (9th Cir. 2018).
As we observed in Cobb, “[f]inality is essential to the success of bankruptcy
reorganization plans.” Id. at 1263. Seeking a stay in the bankruptcy court is
especially important because “[w]hen a stay is requested, all affected parties are on
notice that the plan may be subject to appellate review and have an opportunity to
present evidence before the bankruptcy court of the consequences of a stay.” Id.The failure to seek a stay deprives the reviewing court on appeal the ability to
review the bankruptcy court’s findings and reasoning. If a confirmed
reorganization plan is upended years after plan confirmation, the other parties to
the bankruptcy may be significantly damaged.
Appellants did not seek a stay—not before the bankruptcy court, not before
the district court, and not before our court. Appellants do not dispute this fact.
However, they first argue that seeking a stay in the bankruptcy court would have
been futile and that seeking a stay would have risked the Plan not being confirmed.
But we have made clear that appellants have an “obligation to seek a stay pending
appeal, even if the chances of success seem dim.” Rev Op Grp. v. ML Manager
LLC (In re Mortgs. Ltd.), 771 F.3d 1211, 1216 (9th Cir. 2014) (emphasis added).
3
Appellants next argue that they declined to pursue a stay because it “would
have irrevocably destroyed the Plan.” But it is up to the courts—not
Appellants—to make such determinations. And their claim of Plan destruction
argues in favor of applying equitable mootness.
Finally Appellants contend our decision in Blixseth v. Credit Suisse, 961
F.3d 1074 (9th Cir. 2020), cert. denied, 141 S. Ct. 1394 (2021), which endorsed
the reasoning of our unpublished decision in Blixseth v. Yellowstone Mountain
Club, LLC, 609 F. App’x 390 (9th Cir. 2015), held that a failure to seek a stay will
be excused so long as the bankruptcy court can fashion equitable relief. However,
Blixseth is inapplicable because it only dealt with failure to seek a stay in the Court
of Appeals. See id. at 392. We have not required appellants to request a stay in
our court specifically, so long as they otherwise show diligence in pursuing relief.
See In re Transwest, 801 F.3d at 1168. Blixseth filed two stay motions in the
bankruptcy court and one stay motion in the district court, so that case is plainly
distinguishable.
Aside from failing to seek a stay, the other equitable mootness factors also
cut against Appellants. The reorganization plan has been substantially
consummated. See 11 U.S.C. § 1101(2) (defining “substantial consummation”).
As the district court found, the debtors have disbursed more than $42 billion to
4
more than 2,800 creditors and other parties in interest, and the fully funded Fire
Victim and Subrogation Trusts have assumed all liability for the fire claims. And
as of March 2021, the Fire Victim Trust had started making payments to individual
fire victims. Additionally, any effective relief would either be inequitable or would
undermine the Plan. Exempting only Appellants from the challenged provision
could reduce distributions to all other fire victims, and exempting all creditors from
the provision would “knock[] the props out from under” the Plan’s two-trust
structure. In re Thorpe, 677 F.3d at 881.
In sum, Appellants failed to seek a stay as required by our caselaw and
cannot point to any applicable exception that might excuse such a failure. The
other relevant factors also cut in favor of equitable mootness. Accordingly, the
district court correctly dismissed this appeal as equitably moot. We express no
views as to any other issues urged by the parties.
AFFIRMED.
5