Adventist Health system/west v. Fire Victim Trust

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 29, 2022
• Docket: 21-15447
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION MAR 29 2022 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS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.