In Re Continental Airlines

91 F.3d 553, 1996 WL 426802

Opinions

OPINION OF THE COURT

SLOVITER, Chief Judge.

INTRODUCTION

Before the in banc court is an appeal by NationsBank of Tennessee (Collateral Trustee) and New Jersey National Bank, Harris Trust and Savings Bank, and Boatman’s First National Bank of Oklahoma (First, Second, and Third Priority Secured Equipment Certificate Trustees), who are collectively referred to in this opinion as the “Trustees,” from the order entered by the district court in the Chapter 11 bankruptcy proceeding of Continental Airlines, Inc. dismissing as “moot” three appeals by the Trustees. Those appeals were from orders of the bankruptcy court which 1) denied the Trustees’ Renewed Motion for adequate protection, 2) confirmed Continental’s revised second amended joint plan of reorganization, and 3) denied the Trustees’ motion for the establishment of a cash deposit of $123,479,287. In essence, the Appellant Trustees seek payment for an asserted administrative claim of approximately $117 million against the reorganized company. The Appellee, Continental Airlines, Inc., defends the district court’s decision to dismiss the Trustees’ appeal and argues, in the alternative, that the underlying rulings of the bankruptcy court were correct as a matter of law and fact.

I.

FACTUAL AND PROCEDURAL HISTORY

Continental filed its Chapter 11 bankruptcy petition on December 3, 1990. Appellant Trustees serve as successor Collateral and Series Trustees for certificate holders who had provided Continental with operating capital. The certificates were secured at the time of Continental’s petition by a pool of 29 commercial aircraft with engines, and 81 additional jet engines which, we were advised, serviced about one-third of Continental’s operating fleet. Under the Bankruptcy Code, the debtor in possession, which has most of the rights, powers, functions and duties of a trustee, see 11 U.S.C. § 1107(a), “may use property of the estate in the ordinary course of business without notice or a hearing.” 11 U.S.C. § 363(e)(1).

Section 363(e) provides:

Notwithstanding any other provision of this section, at any time, on request of an entity that has an interest in property used ... by the [debtor in possession], the court, with or without a hearing, shall prohibit or condition such use ... as is necessary to provide adequate protection of such interest.

11 U.S.C. § 363(e).

On February 21,1991, First Fidelity Bank of New Jersey, predecessor to NationsBank as Collateral Trustee, filed a motion along with many other aircraft lessors and financiers alleging, inter alia, a decline in the value of the collateral and seeking adequate protection under section 363(e). First Fidelity later withdrew from this motion, but on June 28, 1991 it, and the predecessors of the other Appellant Trustees, filed a motion seeking similar relief. The bankruptcy court held an evidentiary hearing on the motion from September 3 through September 6, 1991 limited to the Trustees’ assertion that they were entitled to adequate protection payments as a result of the collateral’s post-petition decline in market value.

Continental argued, inter alia, that because the Trustees had not filed a motion for relief from the automatic stay, they were not entitled to an award of adequate protection under section 363(e). The motion remained pending in the bankruptcy court until August 27, 1992 when the court ruled on the Trustees’ motion, rejecting Continental’s legal argument but finding as a fact, based on the “Blue Books,” a publication issued by a company that appraises aircraft, that the market value of the collateral had not declined during the period at issue in the motion. In re Continental Airlines, Inc., 146 B.R. 536 (Bankr.D.Del.1992) [hereinafter Continental I].

Approximately two weeks before the bankruptcy court issued that opinion, the Trustees filed their first motion under section 362(d) of the Bankruptcy Code to lift the automatic stay (“Lift>-Stay Motion”). See 11 U.S.C. § 362(d). This section permits a creditor to move for relief from the automatic stay of delineated activities, such as repossession of collateral, effected by section 362(a) of the Bankruptcy Code.

On September 14, 1992, the Trustees also filed a renewed motion for adequate protection for alleged decline in the collateral’s value for the period after September 1991, when the original 1991 motion was argued (“Renewed Motion”). There were various hearings on the Renewed Motion between November 3, 1992 and February 5, 1993. Toward the end of that period, the Trustees filed a motion dated January 29,1993, asking the bankruptcy court to establish a cash deposit of some $123 million, of which $117 million was attributable to alleged market decline, to preserve what the Trustees claimed was the administrative priority status of the Trustees’ adequate protection claim if Continental emerged from bankruptcy as a reorganized debtor (“Deposit Motion”).

During this period efforts to reorganize the debtor continued. On November 9, 1992 Continental entered into an Investment Agreement under which the Investors (Air Partners, L.P. and Air Canada) agreed and committed to an investment of $450 million in the reorganized entity under a complex arrangement and subject to certain conditions. App. at 391 et seq. One of those conditions, and the one most relevant to this proceeding, was a limitation on the amount and nature of liabilities and administrative expense claims required to be assumed by or attributable to the reorganized company. App. at 408. On January 13, 1993 Continental filed a second amended joint plan of reorganization (“Plan”) which referenced that Investment Agreement. The Plan provided, inter alia, for assumption of “allowed administrative claims” by the reorganized Continental. App. at 656.

The confirmation hearing was held for a number of days during the period March 16, 1993 through April 16, 1993. The parties reached a settlement on April 12 concerning adequate protection due to use and/or maintenance of the collateral by Continental, and no issue relating to use decline (the impairment in value attributable to the use of the collateral by the debtor in possession) is before us. However, the parties did not settle the Trustees’ adequate protection claims based on decline in market value.

At the conclusion of the confirmation hearing on April 16, 1993, the bankruptcy court denied the Deposit Motion and the Renewed Motion, In a published opinion, the bankruptcy court held that it was necessary for the Trustees to have sought relief from the automatic stay to be entitled to adequate protection for market value decline; that therefore the Trustees were not entitled to adequate protection due to market decline until after the date of their Lift-Stay Motion, i.e. August 14, 1992; and that no decline in the market value of the collateral had taken place since that date. In re Continental Airlines, Inc., 154 B.R. 176 (Bankr.D.Del.1993) [hereinafter Continental II]. Also on April 16, 1993, the bankruptcy court signed the Confirmation Order. The court made a series of detailed findings of fact and conclusions of law underlying the Confirmation Order which will be referred to throughout this opinion when pertinent.

On April 20, 1993 the Trustees filed three notices of appeal to the district court from the bankruptcy court’s denial of the Renewed Motion for Adequate Protection, its denial of the Deposit Motion, and its order confirming the Plan. Two days later, the Trustees filed a motion for a partial stay of the consummation of the Plan (“Conditional Stay Motion”), but filed that motion in the district court, which referred them to the bankruptcy court. On April 26, 1993, the Trustees filed that stay request in the bankruptcy court. Because the bankruptcy judge was not available, the hearing on the motion was held the next day in the district court, which stated, without explanation or analysis, that the Trustees were likely to prevail on their appeal to the district court, but denied the stay because the Trustees were “unable to post a bond satisfactory to the Court.” App. at 1755-56. The Trustees did not then make any effort to seek any emergency relief from this court. With no stay impeding implementation of the Plan which had now been confirmed, the Investors proceeded to close the transaction by making their promised investment.

On May 6, 1993 Continental filed a motion in the district court to dismiss the Trustees’ appeals as moot, which the district court granted on December 30, 1993. The Trustees filed a motion for rehearing and reconsideration in light of the decision in Frito-Lay, Inc. v. LTV Steel Co., Inc. (In re Chateaugay Corp.), 10 F.3d 944 (2d Cir.1993) [hereinafter Chateaugay II], which the court denied. The Trustees then filed a timely notice of appeal. This court has jurisdiction pursuant to 28 U.S.C. § 158(d).

A panel of this court heard argument on September 15, 1995 and issued an opinion that affirmed the district court’s order by a two-to-one vote. The Trustees petitioned for rehearing, and the in banc court voted to rehear the appeal. Under this court’s Internal Operating Procedures, the opinion of the panel issued February 7, 1996 was withdrawn.

II.

DISCUSSION

A.

This court has not addressed the interesting and challenging questions raised by the bankruptcy court’s holding that a creditor must file a motion to lift the automatic stay as a prerequisite to seeking adequate protection. The Trustees argue that the bankruptcy court erred as a matter of law and that this court can decide the issue de novo even though it was not reached by the district court. They further argue that the bankruptcy court’s finding that there was no diminution in the market value of the Trustees’ collateral after they filed their Lift-Stay Motion was clearly erroneous. Finally, they argue that the bankruptcy court erred as a matter of law in denying their motion for the establishment of a cash deposit.

Not surprisingly, Continental, as appellee, defends both the bankruptcy court’s legal determination that the Trustees could not assert adequate protection claims for alleged market value decline during the period before they moved for relief from the automatic stay and its factual conclusion that there had been no substantial decline in the value of the collateral since the Lift-Stay Motion was filed. Finally, it argues that in any event the Trustees could not recover for adequate protection because the value of the collateral did not decline below its value on the petition date, which Continental contends is the relevant measure.

We would reach these issues only if we were satisfied that the district court erred in holding that the Trustees’ appeals to it were “moot,” a decision as to which the parties vigorously disagree. Mootness vel non of the appeals before the district court is closely related to, if not indistinguishable from, the question whether the appeal to this court is moot, an issue which Continental alludes to in its brief. For convenience, we will refer to mootness in the district court unless we state otherwise.

Continental does not contend that the appeals to the district court or to us were moot in the constitutional sense, implicating the case or controversy requirement of Article III, § 1. See, e.g., Preiser v. Newkirk, 422 U.S. 395, 401-02, 95 S.Ct. 2330, 2334-35, 45 L.Ed.2d 272 (1975). This is not a situation analogous to those where the Supreme Court determined that the appeals became moot because the law at issue was repealed, see Diffenderfer v. Central Baptist Church, 404 U.S. 412, 414-15, 92 S.Ct. 574, 575-76, 30 L.Ed.2d 567 (1972); the subject of the election campaign controversy was no longer a candidate, see Golden v. Zwickler, 394 U.S. 103, 109-10, 89 S.Ct. 956, 960-61, 22 L.Ed.2d 113 (1969); or the railroad whose application for tariffs was contested withdrew that application, see A.L. Mechling Barge Lines, Inc. v. United States, 368 U.S. 324, 329-30, 82 S.Ct. 337, 340-41, 7 L.Ed.2d 317 (1961).

Indeed, as the Supreme Court has recently explained, an appeal is moot in the constitutional sense only if events have taken place during the pendency of the appeal that make it “impossible for the court to grant ‘any effectual relief whatever.’ ” Church of Scientology v. United States, 506 U.S. 9, 12, 113 S.Ct. 447, 449, 121 L.Ed.2d 313 (1992) (quoting Mills v. Green, 159 U.S. 651, 653, 16 S.Ct. 132, 133, 40 L.Ed. 293 (1895)). An appeal is not moot “merely because a court cannot restore the parties to the status quo ante. Rather, when a court can fashion ‘some form of meaningful relief,’ even if it only partially redresses the grievances of the prevailing party, the appeal is not moot.” RTC v. Swedeland Dev. Group, Inc. (In re Swedeland Dev. Group, Inc.), 16 F.3d 552, 560 (3d Cir.1994) (in banc) (quoting Church of Scientology, 506 U.S. at 12-14, 113 S.Ct. at 450). Thus, in Isidor Paiewonsky Associates v. Sharp Properties, Inc., 998 F.2d 145, 152 (3d Cir.1993), we concluded that because we could impose at least one of the remedies enumerated by the appellant, and thereby provide it “some effective relief,” the appeal was not moot. See also Swedeland, 16 F.3d at 559-60. That is not the issue in this case.

Instead, Continental invokes the broader interpretation of mootness applied in bankruptcy cases, often referred to as “equitable mootness.” See, e.g., Manges v. Seattle-First Nat’l Bank (In re Manges), 29 F.3d 1034, 1038-39 (5th Cir.1994), cert. denied,U.S.-, 115 S.Ct. 1105, 130 L.Ed.2d 1071 (1995); In re Specialty Equip. Cos., 3 F.3d 1043, 1048 (7th Cir.1993); Official Comm. of Unsecured Creditors of LTV Aerospace & Defense Co. v. Official Comm. of Unsecured Creditors of LTV Steel Co. (In re Chateaugay Corp.), 988 F.2d 322, 325 (2d Cir.1993) [hereinafter Chateaugay I]; Rochman v. Northeast Utils. Serv. Group (In re Public Serv. Co.), 963 F.2d 469, 471-72 (1st Cir.), cert. denied, 506 U.S. 908, 113 S.Ct. 304, 121 L.Ed.2d 226 (1992); First Union Real Estate Equity & Mortgage Invs. v. Club Assocs. (In re Club Assocs.), 956 F.2d 1065, 1069 (11th Cir.1992); Central States, Southeast and Southwest Areas Pension Fund v. Central Transp., Inc., 841 F.2d 92, 95-96 (4th Cir. 1988); In re AOV Indus., 792 F.2d 1140, 1147 (D.C.Cir.1986); Trone v. Roberts Farms, Inc. (In re Roberts Farms, Inc.), 652 F.2d 793, 796-97 (9th Cir.1981).¹ Under this widely recognized and accepted doctrine, the courts have held that “[a]n appeal should ... be dismissed as moot when, even though effective relief could conceivably be fashioned, implementation of that relief would be inequitable.” Chateaugay I, 988 F.2d at 325.

The use of the word “mootness” as a shortcut for a court’s decision that the fait accom-pli of a plan confirmation should preclude further judicial proceedings has led to unfortunate confusion. In a trenchant discussion of the issue in a recent decision of the Seventh Circuit, the court noted that denominating the doctrine as “equitable mootness” is misleading. In re UNR Indus., 20 F.3d 766, 769 (7th Cir.), cert. denied, — U.S. -, 115 S.Ct. 509, 130 L.Ed.2d 416 (1994). Judge Easterbrook, writing for the court, stated: “[tjhere is a big difference between inability to alter the outcome (real mootness) and unwillingness to alter the outcome (‘equitable mootness’). Using one word for two different concepts breeds confusion.” Id. (emphasis in original). Thus, although the discussions and applications of the concept of “mootness” in bankruptcy eases by that court had previously encompassed what is referred to elsewhere as “equitable mootness,” see Specialty Equip., 3 F.3d at 1048; In re Andreuccetti, 975 F.2d 413, 418 (7th Cir.1992), the court in UNR Industries stated it would now “banish ‘equitable mootness’ from the (local) lexicon.” 20 F.3d at 769. Instead, the court continued, “[w]e ask not whether this case is moot, ‘equitably’ or otherwise, but whether it is prudent to upset the plan of reorganization at this late date.” Id.

These “equitable” or “prudential” considerations focus on “concerns unique to bankruptcy proceedings.” Manges, 29 F.3d at 1038. It is evident that “equitable mootness” is an inapt description of the doctrine at issue here. Nonetheless, since past eases have used that term, we use it in discussing them. Therefore, it does not further consideration of this appeal to argue, as the dissent does, that we have “fallen into the trap” of confusing these considerations with Article III mootness. Whether termed “equitable mootness” or a prudence doctrine, we see no reason why the Third Circuit should part company with our sister circuits in their adoption of this doctrine. If limited in scope and cautiously applied, this doctrine provides a vehicle whereby the court can prevent substantial harm to numerous parties.

The Trustees have not challenged the viability of the doctrine of equitable mootness or application of prudential considerations in bankruptcy eases, nor have they cited to a case in any circuit that rejects the concept. Instead, they rely most heavily on a decision of the Second Circuit holding that even though the reorganization plan for the bankrupt LTV Corporation had been confirmed, the appeal of tax lessors challenging the plan’s failure to give their claims administrative priority was not moot. See Chateaugay II, 10 F.3d 944 (2d Cir.1993). Significantly, the court in Chateaugay II did not quarrel with the doctrine, merely its application in that case. In fact, in RTC v. Best Products Co. (In re Best Products Co.), 68 F.3d 26, 29 (2d Cir.1995), a more recent case from the Second Circuit, the court once again emphasized the language in Chateaugay I that even though an appeal may not be moot in the sense of Article III of the Constitution, it may be deemed moot in bankruptcy cases because of “equitable considerations.”

We have generally stated that we exercise plenary review of a district court’s decision on mootness. See Swedeland, 16 F.3d at 559; Northeast Women’s Ctr., Inc. v. McMonagle, 939 F.2d 57, 61 (8d Cir.1991); International Bhd. of Boilermakers v. Kelly, 815 F.2d 912, 914 (3d Cir.1987). However, none of those cases involved a determination, like the one we review here, that an appeal following a consummated bankruptcy reorganization should be dismissed for equitable and prudential reasons even though some effective relief is available. Surprisingly, we have seen little more than a few cursory references to the standard of review in the eases from other circuits applying this doctrine. See AOV Indus., 792 F.2d at 1148 (district court’s power to dismiss appeal as moot “discretionary”); Club Assocs., 956 F.2d at 1069 (legal determinations reviewed de novo, bankruptcy court’s factual findings reviewed for clear error).

Because the mootness determination we review here involves a discretionary balancing of equitable and prudential factors rather than the limits of the federal courts’ authority under Article III, using ordinary review principles we review that decision generally for abuse of discretion. Cf General Glass Indus. Corp. v. Monsour Medical Found., 973 F.2d 197, 200 (3d Cir.1992) (abstention determination reviewed under abuse of discretion standard); Bermuda Express, N.V. v. M/V Litsa, 872 F.2d 554, 557 (3d Cir.) (balancing of equities involved in application of laches doctrine reviewed for abuse of discretion), cert. denied, 493 U.S. 819, 110 S.Ct. 73, 107 L.Ed.2d 40 (1989); Bennett v. White, 865 F.2d 1395, 1402 (3d Cir.) (scope of a remedial order reviewed for abuse of discretion), cert. denied, 492 U.S. 920, 109 S.Ct. 3247, 106 L.Ed.2d 593 (1989); Evans v. Buchanan, 555 F.2d 373, 378-79 (3d Cir.) (in banc) (same), cert. denied, 434 U.S. 880, 98 S.Ct. 235, 236, 54 L.Ed.2d 160 (1977). A particular case may also raise legal and/or factual issues interspersed with the prudential ones, and then the applicable review standard, plenary or clearly erroneous, will apply.

The dissent argues that the cases cited above are inapposite because the district court acted as an appellate court and that we should therefore use plenary review. However, the proposition that when an appellate court reviews a lower court’s balancing of prudential factors, it does so under an abuse of discretion standard as long as the factors considered are not inappropriate as a matter of law is a general one applicable in all fields, not excluding bankruptcy. As the Fifth Circuit noted in a bankruptcy case:

In this particular case, we are reviewing the decision of the district court in its capacity as an appellate court. Several different standards of review govern our decision, depending on the nature of the holdings reviewed. Where the disputed holding involves a matter that is within the district court’s discretion, we will affirm the judgment of a district court acting in its appellate role unless the court has clearly abused its discretion.

Matter of HECI Exploration Co., Inc., 862 F.2d 513, 519 (5th Cir.1988) (citations omitted).

B.

Factors that have been considered by courts in determining whether it would be equitable or prudential to reach the merits of a bankruptcy appeal include (1) whether the reorganization plan has been substantially consummated, (2) whether a stay has been obtained, (3) whether the relief requested would affect the rights of parties not before the court, (4) whether the relief requested would affect the success of the plan, and (5) the public policy of affording finality to bankruptcy judgments. See Manges, 29 F.3d at 1039; Rochman, 963 F.2d at 471-72. The Trustees have not taken issue with our identification of these factors.

Although these five factors have been given varying weight, depending on the particular circumstances, the foremost consideration has been whether the reorganization plan has been substantially consummated. This is especially so where the reorganization involves intricate transactions, see Rochman, 963 F.2d at 473-74 (performance under plan involved “numerous complex arrangements”); Roberts Farms, 652 F.2d at 797 (plan involved “many intricate and involved transactions” and reversal of plan’s confirmation “would knock the props out from under” such transactions and “create an unmanageable, uncontrollable situation for the Bankruptcy Court”), or where outside investors have relied on the confirmation of the plan, see Manges, 29 F.3d at 1039 (equitable mootness “protects the interests of non-adverse third parties who are not before the reviewing court but who have acted in reliance upon the plan as implemented”); UNR Indus., 20 F.3d at 770 (“[b]y protecting the interests of persons who acquire assets in reliance on a plan of reorganization, a court increases the price the estate can realize ex ante, and thus produces benefits for creditors in the aggregate”); Rochman, 963 F.2d at 474 (reorganization involved $1.5 billion in financing irom 100,000 sources); Club Assocs., 956 F.2d at 1070 (“a number of investors, who were not parties to this case, had committed new funds to the ‘reemerged Club’ with the expectation of receiving a preferred return on their investments”).

“Substantial consummation” is defined in the Bankruptcy Code as: “(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 properly dealt with by the plan; and (C) commencement of distribution under the plan.” 11 U.S.C. § 1101(2). In such instances, the strong public interest in the finality of bankruptcy reorganizations is particularly compelling.

The district court dismissed the Trustees’ appeals to it as “moot” based on the conclusions, set forth in its opinion dated December 30, 1993, that substantial consummation of the Plan had occurred, the Investors had already made their $450 million investment into the reorganized entity, all elements of the Plan, except distributions to the unsecured creditors, had been completed, and a reversal of the order confirming the Plan likely would put Continental back into bankruptcy. App. at 1873. The court also noted that Continental had implemented the Plan following its approval by the court because the Trustees had failed to obtain a stay.

The Trustees do not challenge that there had been substantial consummation by December 1993, when the district court dismissed the appeals as moot. They suggest that as their object is not to disturb the reorganization, but only to get payment from the reorganized Continental for their adequate protection claim measured by the market value decline of the collateral during bankruptcy, the line of cases upon which Continental relies is inapplicable. We cannot agree, because the rejection of the Trustees’ claim by the bankruptcy court was inextricably intertwined with the implementation of the reorganization. See AOV Indus., 792 F.2d at 1148 (to evaluate mootness, court must “scrutinize each individual claim, testing the feasibility of granting the relief against its potential impact on the reorganization scheme as a whole”). Thus, the Trustees cannot avoid the effect of the substantial consummation of the reorganization plan so readily.

Inasmuch as Continental agrees that the issue is not constitutional mootness but prudential mootness, we will assume arguendo that even after substantial or total consummation of its reorganization, some effective relief would have been available for the Trustees’ claim at the time they appealed to the district court, and on appeal to this court. Even before the in banc court, Continental has not challenged that assumption. It is quite another matter in light of the substantial, indeed irrevocable, change in the status quo that followed confirmation to determine that it would have been prudent for the court to reach the merits of the Trustees’ claim. For the district court had before it an un-stayed bankruptcy reorganization plan, and many courts have based their prudential decisions to decline to consider challenges to bankruptcy court orders on the ground that there has been substantial consummation of a plan of reorganization in reliance upon an unstayed confirmation order. See, e.g., Rochman, 963 F.2d at 475.

In Chateaugay I, the court noted that although the Bankruptcy Code only requires a stay pending appeal in limited circumstances, there is a procedure under Bankruptcy Rule 8005 to seek to preserve the status quo and “[t]he party who appeals without seeking to avail himself of that protection does so at his own risk.” 988 F.2d at 326. And in In re Manges, the court observed, under the descriptive title “Halting the Runaway Train: the Motions to Stay,” that “in many of the eases in which bankruptcy appeals were dismissed as moot, the appellants failed to seek a stay.” 29 F.3d at 1039.

Even the seeking of a stay may not be enough. The appellants in In re UNR Industries had sought a stay, albeit unsuccessfully, at every opportunity; nonetheless, the court noted, “[a] stay not sought, and a stay sought and denied, lead equally to the implementation of the plan of reorganization.” 20 F.3d at 770; accord AOV Indus., 792 F.2d at 1144, 1146-47.

Shortly after the confirmation of the Continental Plan, the Trustees filed an Emergency Motion for Conditional Stay of Order Confirming the Plan pending their appeal to the district court. The condition the Trustees sought in lieu of a stay was the establishment of a segregated account of $117 million, the full amount of their adequate protection claim, or alternatively at least $22 million, which they claim was the admitted decline in the value of the collateral. See App. at 1721. In response to the district court’s inquiry, they conceded that they were not willing to post any bond. The district court never required a supersedeas bond in the amount of $450,000,000, as the Trustees have suggested. In fact, the district court tried to ascertain the amount of bond that would be reasonable, and the Trustees’ general position was that they were “merely the fiduciary of the money of their bondholders” and they suggested no lesser amount. App. at 1729.

Thus, as one of the reasons for its order denying the stay, the district court noted the ■unwillingness of the Trustees to post a bond satisfactory to the court. App. at 1756. See, e.g., Central States, 841 F.2d at 95 (appellant’s failure to post bond to stay confirmation order basis for finding appeal moot). Because the failure to post the bond needed to get a stay permitted the consummation of the plan, this factor weighs heavily in favor of the district court’s declination to delve into the merits of the Trustees’ appeal.

The Trustees argue that this court has held that failure to obtain a stay does not necessarily render an appeal moot. The cases to which they refer are not apposite. In one, In re Joshua Slocum Ltd., 922 F.2d 1081 (3d Cir.1990), the issue was the narrow one of the power of the bankruptcy court to excise a paragraph from a shopping center lease. There is no indication in Slocum that there had been any confirmation of a plan before or during the appeal.

In the more recent case to which the Trustees refer, Megafoods Stores, Inc. v. Flagstaff Realty Assocs. (In re Flagstaff Realty Assocs.), 60 F.3d 1031 (3d Cir.1995), the appeal also presented a narrow landlord-tenant issue, i.e. the effect of confirmation of the landlord’s plan on a tenant’s right to pursue its appeal of the bankruptcy court’s denial of its recoupment claim. In holding that it was not necessary for the tenant to seek a stay in order to pursue its right to appeal despite the confirmation in the interim, we noted the line of cases placing recoupment and setoff in a special category and stated, “although we recognize the importance of maintaining the integrity of confirmed plans from later attack, these unique circumstances permit the plan to be reopened and readjusted.” Id. at 1036. Thus, neither Flagstaff nor Slocum addressed the equitable or prudential mootness considerations at issue here.

High on the list of prudential considerations taken into account by courts considering whether to allow an appeal following a consummated reorganization is the reliance by third parties, in particular investors, on the finality of the transaction. See Manges, 29 F.3d at 1039 (“[t]he concept of ‘mootness’ from a prudential standpoint protects the interests of non-adverse third parties who are not before the reviewing court but who have acted in reliance upon the plan as implemented”); Rochman, 963 F.2d at 474-75 (similar). Here, the record is replete with evidence that the Investors relied on the bankruptcy court’s unstayed Confirmation Order in making the decision to proceed to close the transaction and that an essential factor in that decision was the bankruptcy court’s disallowance of the Trustees’ adequate protection claim.

The Plan of reorganization provided that the reorganized Continental would pay “Allowed Administrative Claims.” App. at 656, 691 (Plan §§ 5.5, 10.1). Among the administrative claims that were still disputed at the time of the confirmation hearing were several large claims, including, in particular, labor claims by airline pilots, large claims by Eastern Airlines, and the Trustees’ claim for adequate protection based on alleged market decline of the collateral. App. at 1223, 1346. One of the concerns of the Investors that needed to be satisfied as a condition of their participation was that the total amount that would have to be paid for allowed administrative claims could be distorted by a few such large claims. To limit their exposure, the Investment Agreement provided that the Investors’ obligation to proceed with the arrangements was subject, inter alia, to the payments and obligations for administrative claims being no higher than a specified amount, or “cap.” App. at 408.

At the confirmation hearing, Continental’s expert witness testified that if the claims of the Airline Pilots and the Trustees were excluded, the total allowed administrative claims payable under the Plan would be close to the cap, and that if the Trustees’ claim were allowed, the cap would be exceeded, allowing the Investors to walk away from the deal. App. at 1223-24, 1333-38. Based on this testimony, Continental argued to the bankruptcy court that the feasibility determination required for confirmation under 11 U.S.C. § 1129(a)(11) would turn in part on the adjudication of the Trustees’ still outstanding administrative claim. App. at 1400. Continental therefore urged the court to incorporate its adjudication of the Trustees’ claim into the Confirmation Order itself, asserting that the Investors would not go forward with the deal “unless there is an order upon which they can place reliance, which is going to be a plan confirmation order.” App. at 1400. The Trustees argued against incorporation, taking the position that even though the amount of the adequate protection claim allowed by the court would be relevant to the court’s subsequent determination of feasibility, the adjudication of the claim itself was a separate matter from plan confirmation. App. at 1401.

The bankruptcy court ultimately took the approach urged by Continental, incorporating into its Confirmation Order its decision denying the Trustees’ adequate protection claim. As part of its feasibility determination, it explicitly found that neither the pilots’ claims nor the Eastern claims was entitled to administrative priority, and that the Trustees’ adequate protection claim had no value as an administrative claim. App. at 1549-51. On that basis, it found that there was substantial, credible and uncontested evidence that the administrative claims payable at confirmation — excluding the claims of the pilots, Eastern, and the Trustees — would be within the specified limit of the cap set forth in the Investment Agreement, App. at 1548, noting that the adjudications of the Trustees’ claim and the Eastern claims were “crucial to the willingness of the Investors to consummate the Financing Transaction.” App. at 1550.

We are unwilling to accept the Trustees’ suggestion, implicit in their briefs and made explicit at oral argument, that the bankruptcy court’s ruling on the merits of their adequate protection claim was colored by a so-called “ultimatum” from Continental that if the claim were granted the Investors would abandon the reorganization. See In Banc Argument Transcript at 3. The Trustees offer no evidence in support of this suggestion, and we certainly would not lightly impute such a motive to the bankruptcy court. In effect, the Trustees are challenging the Investors’ right to condition their investment on the amount of approved administrative claims. This was never raised below at the time of the Investment Agreement, the ultimate confirmation or the period between. We know of no statute, rule or precedent that would deny investors the right to limit their investments on the existence of conditions which they believe give the newly reorganized company a reasonable opportunity to succeed — such as, in this case, without being weighed down by excessive administrative expenses.

The Trustees also argue that Continental’s position at the confirmation hearing, that the adjudication of the Trustees’ claim should be incorporated into the Confirmation Order, was a “ploy” to “disingenuously” use the fact of such incorporation to “manufactur[e] the appearance of mootness.” Appellants’ Brief at 3; In Banc Argument Transcript at 1. Their characterization of Continental’s position as a “ploy” implies that it had no legitimate reason. In light of the integral nexus between the feasibility of confirmation and the adjudication of the Trustees’ claim, it appears that the suggestion of incorporation urged by Continental and adopted by the bankruptcy court was reasonable and reflected the inescapable fact that the Trustees’ claim and the confirmation of the Plan were inextricably intertwined, rather than an attempt to “manufacture” the appearance of equitable mootness.

In dismissing the Trustees’ appeals as moot, the district court specifically found that the Investors had relied on the bankruptcy court’s unstayed Confirmation Order and that there was an integral nexus between the investment and the success of the Plan. The court stated, “[t]he Investors relied on the unstayed Confirmation Order in making the $450 million investment in Continental’s Plan. It is clear that [the Trustees’] requested relief would undermine the grounds which the Investors relied upon in making their investment and would require a dismantling of the entire Plan.” App. at 1874. Although the Trustees argue that this finding is erroneous, there is support for it in the record.

At the hearing in April 1993 before the district court on the Trustees’ request for the conditional stay of the Confirmation Order, counsel for the Trustees stated they had testimony that “as a matter of business judgment, it would be extremely unlikely for the investors to walk away from this deal if ... a 22-million-dollar deposit was established.” App. at 1727. The Trustees’ counsel in effect challenged the Investors to assert otherwise, stating that inasmuch as the Investors’ counsel were in court they could correct any assertions that he made. Id. Thereafter, the Investors’ attorney rose “to make clear the [I]nvestors’ position, which is that if the relief is granted to [the Trustees] which they seek from the Court this morning [the stay conditioned on a deposit of some $22 million to $117 million], then we are not prepared to close the transaction.” App. at 1744.

The representative of the Investors explained that in the airline business “there is a great sensitivity to cash and the capital structure of a reorganized entity,” and that the relief that the Trustees sought “could significantly impair the capital structure that would exist with respect [to] this reorganized airline.” Id. at 1744-45. He reviewed the negotiations that had occurred for the cap for administrative expense liability, advised that the Investors had monitored on a monthly basis Continental’s performance in that respect, and explained that the Investors had insisted that the Confirmation Order address the issue of the Trustees’ claim “because we want to make sure if we are putting our money in, we are getting the benefit of our bargain, which is a reorganized entity with a capital structure that we contemplated.” App. at 1746. He concluded by stating unequivocally that if a stay were entered conditioned upon the bond the Trustees sought, then his client “would not be prepared to close this transaction.” Id. The Trustees’ counsel did not thereafter argue that the Investors’ counsel’s statements were insufficiently probative, and therefore that suggestion here is less than persuasive.

The Trustees have not contested here that if their claim for market value decline of the collateral (a claim independent of their claim for the use and maintenance of the collateral, which has been satisfied) had been approved as an administrative claim, the total such administrative claim would have greatly exceeded the cap specified by the Investors for that purpose. This would have given the Investors the option to withdraw; such withdrawal would have placed the entire Plan in jeopardy. By the time the district court ruled on the appeal, it was no longer possible to restore the parties to their earlier positions because the investment had been made, and the option to withdraw was no longer available to the Investors. See Specialty Equip., 3 F.3d at 1049 (claim held moot when its acceptance “would amount to imposing a different plan of reorganization on the parties”). Thus, the third factor bearing on the prudential determination whether to reach the merits of a bankruptcy appeal after confirmation and in the absence of a stay — the effect of the requested relief on the rights of parties not before the court — weighs heavily against the Trustees.

This factor cannot fairly be recast as whether the Investors or others reasonably relied on the prediction that the Trustees would recover nothing on their claim. While we agree that reliance of the Investors and others on the unstayed Confirmation Order is of central importance to our analysis, to focus on the “reasonableness” of that reliance, at least as measured by the likelihood of reversal on appeal, is necessarily a circular enterprise and therefore of little utility. Whether the Investors were reasonable in relying on the bankruptcy court’s order depends on whether this was a case that would be considered on the merits on appeal or would be dismissed on the basis of the doctrine often referred to as “equitable mootness.” And whether this case would be dismissed on “equitable mootness” grounds on appeal in turn depends on whether the Investors reasonably relied. Thus, placing the focus on the reasonableness of the Investors’ reliance as measured by the probability that Continental would prevail on appeal sets up a straw man which is easily knocked down.

Our inquiry should not be about the “reasonableness” of the Investors’ reliance or the probability of either party succeeding on appeal. Rather, we should ask whether we want to encourage or discourage reliance by investors and others on the finality of bankruptcy confirmation orders. The strong public policy in favor of maximizing debtors’ estates and facilitating successful reorganization, reflected in the Code itself, clearly weighs in favor of encouraging such reliance. Indeed, the importance of allowing approved reorganizations to go forward in reliance on bankruptcy court confirmation orders may be the central animating force behind the equitable mootness doctrine. See Rochman, 963 F.2d at 471-72; Metro Property Mgmt. Co. v. Information Dialogues, Inc. (In re Information Dialogues, Inc.), 662 F.2d 475, 477 (8th Cir,1981). Where, as here, investors and other third parties consummated a massive reorganization in reliance on an un-stayed confirmation order that, explicitly and as a condition of feasibility, denied the claim for which appellate review is sought, the allowance of such appellate review would likely undermine public confidence in the finality of bankruptcy confirmation orders and make successful completion of large reorganizations like this more difficult. This is true regardless of whether the Investors’ reliance was “reasonable” or based on a 30%, 60%, or 100% probability of success on appeal, an issue raised at the oral argument.

In arguing against dismissal here on the basis of prudential considerations, the Trustees repeatedly rely on their assertion that the Plan contained “a built-in mechanism for the [post-confirmation] disposition and payment of Disputed Administrative Claims.” Appellants’ Brief at 10. On the basis of this provision, they argue that they had no obligation to take steps to preserve the status quo through a stay, that their appeal is not moot because “some effective relief’ is available, and that the Plan is contractually “binding” on Continental. They conclude that the district court therefore erred in “permittfing] Continental to escape its ‘contractual’ obligations under the Plan under the guise of the mootness doctrine.” Appellant’s Brief at 20. While the Trustees’ description of the “mechanism” provided in the Plan is technically correct, they overstate the impact of that mechanism.

Under the definitions in the Plan, the Trustees’ claim was a “Disputed Administrative Claim” because it sought adequate protection payments, see App. at 623-24 (Plan § 1.4(vi)) and was the subject of a timely objection, see App. at 632 (Plan § 1.85(a)). The Plan requires the reorganized Continental to pay allowed administrative claims on the later of: the effective date of confirmation or “the fifth Business Day after such Claim is Allowed.” App. at 691 (Plan § 10.1). Further, the Plan provides that “[a] Disputed Claim shall be an Allowed Claim if, and only to the extent that, such Disputed Claim has been Allowed by a Final Order,” App. at 623 (Plan § 1.5), and defines a “Final Order” as “[a]n order which is no longer subject to appeal, certiorari proceeding or other proceeding for review or rehearing, and as to which no [such proceeding is] pending,” App. at 635 (Plan § 1.100).

Thus, the Plan imposes an obligation on the reorganized Continental to pay disputed administrative claims once they become allowed by a final order of court, even if such final order does not occur until after confirmation. If the bankruptcy court’s dis-allowance of the Trustees’ claim were to be reversed on appeal, the Plan appears to provide a “mechanism” for payment of the claim by the reorganized Continental. The mere availability of such a mechanism, however, which may prevent dismissal on the ground of Article III constitutional mootness, does not warrant reversal of the district court’s order dismissing it on prudential grounds. As we have noted, the district court’s “mootness” determination was based not on a finding that no effective relief was available, but rather on the finding that in light of all the circumstances, it would be inequitable to grant relief. Nor has any “contractual obligation” been violated either by Continental or the district court. Where, as here, there has been no order, final or otherwise, allowing the Trustees’ disputed administrative claim, the Plan imposes no obligation on the reorganized Continental to pay it.

Finally, the Plan provisions allowing for post-confirmation payment of allowed claims in no way obviated the Trustees’ obligation to seek a stay. Here, where the confirmation of the Plan and the willingness of the Investors to go forward turned on the bankruptcy court’s denial of the Trustees’ claims, and where the denial of those claims was in fact incorporated into the Confirmation Order, there was a clear possibility that the Trustees’ claims would become moot after consummation of the Plan, and it was therefore incumbent on the Trustees to obtain a stay. Indeed, the record shows that all parties were well aware of the extensive legal precedent dismissing as moot or on equitable grounds appeals from unstayed consummated reorganizations. See App. at 410 (references in the Investment Agreement); App. at 1729-80, 1741 (argument before the district court on the stay).

For similar reasons, we fail to see the inconsistency charged by the Trustees between Continental’s current position as to “equitable mootness” and its argument to the bankruptcy court in response to the Trustees’ Deposit Motion that the Plan would require payment of the Trustees’ claim by the reorganized Continental if and when allowed. See App. at 1039. As noted above, the Plan imposes no obligation on Continental in the absence of a final order allowing the Trustees’ claim, and the mere availability of a mechanism for granting relief does not mean the court cannot determine that in light of all the circumstances it should not even try to unscramble the eggs.

Moreover, at the time Continental argued against the Deposit Motion the bankruptcy court had not yet ruled disallowing the Trustees’ claim nor cited that as an explicit basis for its feasibility determination in confirming the plan. Accordingly, Continental did not yet have reason to know that the claim would be denied and become subject to “equitable mootness” on appeal. As soon as the basis for this mootness argument became apparent, Continental repeatedly asserted its intention to make such an argument if an appeal was filed and no stay obtained. App. at 1691,1742.

The Trustees have not presented us with any arguments which would weigh against all of the prudential considerations that dictate that this consummated reorganization must be left in place. Following confirmation, Continental was operating as a restructured company, and had entered into countless new relationships and transactions. To convince a court to take the action sought by the Trustees which would undermine the basis for the Investors’ decision to proceed, the Trustees would have to proffer a powerful reason indeed. They have not even attempted to do so.

Arrayed against that silence are the facts that the reorganization plan was consummated, no stay was obtained, numerous other parties have changed their positions, and numerous irrevocable transactions have since been completed as a result of the consummation of the Plan. Without listing all of such transactions set forth by Continental in its brief, we note that among those are the distribution to unsecured creditors, the merger of 53 debtors other than Continental with and into Continental, the investment of $110 million in cash by Air Partners and Air Canada in the reorganized Continental, the transfer by foreign governments of various route authorities, and the assumption by the reorganized Continental of unexpired leases and executory contracts worth over $5.0 billion. Thus, the key issue really is whether the district court abused its discretion in weighing the various equitable factors. We are not prepared to hold that the balance reached by the district court was an abuse of its discretion.

Under the circumstances presented here, we can see no prudential considerations that would support an attempt by an appellate court, district or court of appeals, to fashion even a limited remedy for the Trustees. That would necessarily entail imposing a new debt on the reorganized company, which is a different entity than it was when this case was before the district court. Thus, we agree with the determination of the district court to dismiss the Trustees’ claim. We base our holding on our conclusion that it would be neither prudent nor equitable to grant the Trustees the relief they seek.²

III.

CONCLUSION

For the reasons set forth we will affirm the order of the district court.

1 . Because the doctrine often called "equitable mootness” is well accepted, there is little discussion in the case law of its historical basis. The dissent attempts to trace it from a provision of former Bankruptcy Rule 805, which concerned stays pending appeal, to Roberts Farms, 652 F.2d 793 (9th Cir.1981). But the Roberts Farms court noted that the amendment to Rule 805 that made explicit the requirement to obtain a stay in order to effectively challenge an order approving a sale to a good faith purchaser was simply a codification of existing case law. See id. at 796 (citing A & H Holding Corp. v. O’Donnell (In re Abingdon Realty Corp.), 530 F.2d 588, 590 (4th Cir.1976), which in turn cited the Advisory Committee’s Note to the proposed amendment which so stat-' ed).

Further, Roberts Farms made clear that the consideration of equitable factors was an "entirely separate and independent ground for dismissal.” 652 F.2d at 798. The court stated that "Appellants have failed and neglected diligently to pursue their available remedies to obtain a stay of the objectionable orders of the Bankruptcy Court and have permitted such a comprehensive change of circumstances to occur as to render it inequitable for this court to consider the merits of the appeal.” Id. (emphasis added). Roberts Farms characterized as the “touchstone precedent for this principle” the earlier decision in Valley National Bank of Arizona v. Trustee, 609 F.2d 1274 (9th Cir.1979), where the court "held that the failure to seek stays coupled with a substantial change of circumstances would justify dismissal of the appeal for lack of equity.” Roberts Farms, 652 F.2d at 798. Thus the dissent errs in suggesting that later cases considering equitable factors represented "a quite substantial extension” to the doctrine enunciated and applied in Roberts Farms.

2 . In light of our decision, we do not separately consider whether some of the issues presented might have been avoided had the bankruptcy court ruled more expeditiously on motions presented by the parties. We do not know the circumstances, nor the events that may have contributed to what appear, on the docket sheet, to be long delayed rulings.