Third Circuit Limits Equitable Mootness Doctrine
October 16, 2013
Publication| Bankruptcy & Corporate Restructuring
Recently, the U.S. Court of Appeals for the Third Circuit reaffirmed its narrow construction of the doctrine of equitable mootness in In re SemCrude L.P. (Samson Energy Resources v. SemCrude L.P.), Case No 12-2736 (3d Cir. Aug. 27, 2013) (Ambro, J.).
Prior to commencing their Chapter 11 cases, SemCrude L.P. and certain of its affiliates purchased oil and gas fromproducers in several states. The appellants were four oil and gas producers from Oklahoma. In the bankruptcy cases,these producers, including the appellants, argued that they were entitled to payment for the oil and gas supplied tothe debtors ahead of other creditors, including the secured lenders, pursuant to state statutes granting liens orcreating statutory trusts for such oil and gas sales. Because the legal issues in these disputes affected hundreds orthousands of producers in each affected state, the debtors sought to establish procedures for resolution of thecommon legal issues that would permit all potentially affected parties to participate, streamline the proceedingsbefore the bankruptcy court, and minimize the costs to the estates.