11-1710-bk, 11-1726-bk
     In re Charter Communications, Inc.


 1                        UNITED STATES COURT OF APPEALS
 2                             FOR THE SECOND CIRCUIT
 3                                August Term 2011
 4          (Argued: March 26, 2012           Decided: August 31, 2012)
 5                    Docket Nos. 11-1710-bk, 11-1726-bk
 6   --------------------------------------------------------x

 7   In re CHARTER COMMUNICATIONS, INC.

 8   --------------------------------------------------------x

 9   R2 INVESTMENTS, LDC,

10         Appellant,

11                           -- v. --

12   CHARTER COMMUNICATIONS, INC., CCH I, LLC, CCH I CAPITAL
13   CORPORATION, CCH II, LLC, CCH II CAPITAL CORPORATION,

14         Debtors-Appellees,

15   PAUL G. ALLEN, OFFICIAL COMMITTEE OF UNSECURED CREDITORS,

16         Appellees.

17   --------------------------------------------------------x

18   LAW DEBENTURE TRUST COMPANY OF NEW YORK,

19         Appellant,

20                           -- v. --

21   CHARTER COMMUNICATIONS, INC., CCH I, LLC, CCH I CAPITAL
22   CORPORATION, CCH II, LLC, CCH II CAPITAL CORPORATION,

23         Debtors-Appellees,

24   PAUL G. ALLEN, OFFICIAL COMMITTEE OF UNSECURED CREDITORS,

25         Appellees.*

26   --------------------------------------------------------x


     *
       The Clerk of the Court is directed to amend the official captions
     as set forth above, which reflects the true status of the parties.

                                          1
 1   B e f o r e :   WALKER, LYNCH and LOHIER, Circuit Judges.

 2        Appellants Law Debenture Trust Company of New York (“LDT”) and

 3   R2 Investments, LDC (“R2”) appeal from an order of the United States

 4   District Court for the Southern District of New York (George B.

 5   Daniels, Judge) dismissing as equitably moot their appeals from the

 6   bankruptcy court order (James M. Peck, Bankruptcy Judge) confirming

 7   the Chapter 11 reorganization plan of Charter Communications, Inc.

 8   and its affiliated debtors.   See R2 Invs., LDC v. Charter Commc’ns,

 9   Inc. (In re Charter Commc’ns, Inc.), 

(S.D.N.Y. 2011);

10   JPMorgan Chase Bank, N.A. v. Charter Commc’ns Operating, LLC (In re

11   Charter Commc’ns), 

(Bankr. S.D.N.Y. 2009).     We agree

12   with the district court that it would be inequitable to grant LDT

13   and R2 the relief they seek now that the reorganization plan has

14   been substantially consummated.    AFFIRMED.

15                                     LAWRENCE S. ROBBINS (Mark T.
16                                     Stancil, Matthew M. Madden, on the
17                                     brief), Robbins, Russell, Englert,
18                                     Orseck, Untereiner & Sauber LLP,
19                                     Washington, D.C., for Appellant R2
20                                     Investments, LDC.
21
22                                     ANDREW W. HAMMOND, White & Case LLP,
23                                     New York, N.Y., for Appellant Law
24                                     Debenture Trust Company of New York.
25
26                                     JOHN C. O’QUINN, Kirkland & Ellis
27                                     LLP, Washington, D.C. (Richard M.
28                                     Cieri, Paul M. Basta, Kirkland &
29                                     Ellis LLP, New York, N.Y., Jeffrey
30                                     S. Powell, Daniel T. Donovan,
31                                     Kirkland & Ellis LLP, Washington,
32                                     D.C., on the brief), for Debtors-
33                                     Appellees Charter Communications,
34                                     Inc., CCH I, LLC, CCH I Capital


                                         2
 1                                    Corporation, CCH II, LLC, CCH II
 2                                    Capital Corporation.
 3
 4                                    JEREMY A. BERMAN (Robert E. Zimet,
 5                                    Jay M. Goffman, Sean J. Young, on
 6                                    the brief), Skadden, Arps, Slate,
 7                                    Meagher & Flom LLP, New York, N.Y.,
 8                                    for Appellee Paul G. Allen.
 9
10                                    DAVID S. ELKIND (Mark R. Somerstein,
11                                    Keith H. Wofford, Darren Azman, on
12                                    the brief), Ropes & Gray LLP, New
13                                    York, N.Y., for Appellee Official
14                                    Committee of Unsecured Creditors.
15

16   JOHN M. WALKER, JR., Circuit Judge:

17        On March 27, 2009, Charter Communications, Inc. (“CCI” and,

18   together with its affiliated debtors, “Charter”) filed what the

19   Bankruptcy Court for the Southern District of New York (James M.

20   Peck, Bankruptcy Judge) described as “perhaps the largest and most

21   complex prearranged bankruptcies ever attempted, and in all

22   likelihood . . . among the most ambitious and contentious as well.”

23   JPMorgan Chase Bank, N.A. v. Charter Commc’ns Operating, LLC (In re

24   Charter Commc’ns), 

, 230 (Bankr. S.D.N.Y. 2009).

25   Following the bankruptcy court’s confirmation of Charter’s proposed

26   plan of reorganization (the “Plan”), the Law Debenture Trust

27   Company of New York (“LDT”), as indenture trustee for certain notes

28   issued by CCI, and R2 Investments, LDC (“R2”), a CCI shareholder,

29   appealed the confirmation order to the District Court for the

30   Southern District of New York.   The district court (George B.

31   Daniels, Judge) dismissed those appeals under the doctrine of

32   equitable mootness.   R2 Invs., LDC v. Charter Commc’ns, Inc. (In re

                                        3
 1   Charter Commc’ns, Inc.), 

(S.D.N.Y. 2011).        LDT and R2

 2   now appeal that dismissal.   We agree with the district court that

 3   the appeals are equitably moot and affirm.

 4                                BACKGROUND

 5        We recite only those facts necessary to this appeal.         A full

 6   recitation of the facts may be found in the district court and

 7   bankruptcy court opinions.   See In re Charter Commc’ns, 

  14; In re Charter Commc’ns, 

.

 9        In 2008, Charter, the nation’s fourth-largest cable television

10   company and a leading provider of cable and a broadband service,

11   was operationally sound but carried almost $22 billion in debt at

12   various levels of its corporate structure.1        In re Charter Commc’ns,

.   After the September 2008 collapse of Lehman

14   Brothers and the financial crisis that ensued, Charter could no

15   longer service its debt due to the tightening credit markets,

16   Charter’s excessive leverage, and lower valuations of companies in

17   the cable sector.   

began negotiating with

18   Paul G. Allen, a major investor whose ownership stake gave him

19   control of the company, and a group of junior bondholders (referred

20   to as the “Crossover Committee”).        

21   in a settlement (the “Allen Settlement”) that contemplated

     1
       Charter’s corporate structure consisted of a publicly traded
     parent holding company, CCI, sitting atop a chain of subsidiaries.
     See Br. of Debtors-Appellees at 10. Charter’s publicly traded debt
     was issued by eight holding companies stacked between CCI and
     Charter Communications Operating, LLC, the primary operating
     company. 

prenegotiated reorganization in bankruptcy.     

filed for Chapter 11 bankruptcy, using the Allen Settlement as

 3   the cornerstone of its prenegotiated Plan.   

.

 4   Left out of the negotiations, however, were LDT, the trustee for

 5   $479 million in aggregate principal of convertible notes issued by

 6   CCI; R2, a CCI shareholder; and J.P. Morgan Chase N.A. (“JPMorgan”),

 7   the holder of Charter’s senior debt.   These entities had no input

 8   into the Allen Settlement or the prepackaged Plan.   

 9   B.R. at 233.

10        To fully appreciate the key role Paul Allen played in

11   Charter’s reorganization requires delving a bit into the weeds of

12   the negotiations underlying the Allen Settlement.    Charter’s

13   reorganization strategy was driven by the goal of reinstating its

14   senior credit facility with JPMorgan--that is, curing any breaches

15   in its contracts with JPMorgan so that JPMorgan would be classified

16   as an unimpaired creditor.   See 11 U.S.C. § 1124(2).     Charter

17   wanted to avoid renegotiating its senior debt during the financial

18   turmoil of late 2008 and early 2009 because it believed such

19   renegotiation would at best lead to a higher interest rate and at

20   worst result in Charter being closed off to new financing

21   altogether.    In re Charter 

.   Charter thus

22   needed to structure its reorganization in a way that would avoid

23   triggering a default under the credit agreement with JPMorgan.      One

24   condition Charter had consented to in the credit agreement was that

25   Allen would retain thirty-five percent of the ordinary voting power

                                        5
 1   of Charter Communications Operating, LLC (“CCO”), the obligor under

 2   the senior credit agreements.    

  For the

 3   reorganization plan to succeed, Charter thus needed to induce Allen

 4   to retain these voting rights, even though most of his investment

 5   in Charter would be wiped out.   

addition, for

 6   Charter to preserve roughly $2.85 billion of net operating losses,

 7   a valuable tax attribute, it needed Allen to forgo exercising

 8   contractual exchange rights and to maintain a one percent ownership

 9   interest in Charter Communications Holding Company, LLC (“Holdco”).

10   

Charter’s main goals in restructuring, namely

11   reinstating its senior debt and obtaining tax savings though

12   preserving net operating losses, required Allen’s cooperation,

13   Allen alone was in a position to provide “uniquely personal”

14   benefits to Charter.   

       Following “a spirited negotiation in which sophisticated

16   adversaries and their expert advisors bargained with each other

17   aggressively and in good faith,” 

the Crossover

18   Committee, and Allen agreed to the Allen Settlement.     As part of

19   the Settlement, Allen agreed to retain a thirty-five percent voting

20   interest in CCO and a one percent ownership interest in Holdco, and

21   to refrain from exercising his contractual exchange rights.      

  In return for these concessions, Allen would receive $375

23   million, of which $180 million was classified as pure settlement

24   consideration.   

Allen Settlement further provided

25   for a “$1.6 billion rights offering, a stepped-up tax basis in a

                                          6
 1   significant portion of [Charter’s] assets, and the purchase of

 2   [Allen’s]” preferred shares in CC VIII, LLC, a Charter subsidiary.

 3   

also successfully negotiated for a liability

 4   release (other third parties, including the management of Charter,

 5   were released as well).   

n.26.   Under the

 6   reorganization Plan that resulted from the Allen Settlement, the

 7   CCI noteholders, represented by LDT, would receive approximately

 8   32.7 percent of their claims, 

R2 and other equity

 9   holders of CCI would receive nothing, see Debtor’s Disclosure

10   Statement at 33.

11        On November 17, 2009, after a nineteen-day hearing, the

12   bankruptcy court overruled all objections and confirmed the Plan as

13   submitted by 

.   The following week, the

14   bankruptcy court denied R2 and LDT’s motions for an emergency stay

15   of the confirmation order.   The district court (Sidney H. Stein,

16   Judge, sitting in Part I) denied a stay pending appeal to that

17   court, and the confirmation order and the Plan took effect on

18   November 30, 2009.   See In re Charter 

.

19   Charter immediately took actions under the Plan, including

20   cancelling the equity issued by the prepetition Charter, issuing

21   shares in the reorganized Charter, converting notes issued by the

22   prepetition Charter entities into new notes, and issuing warrants

23   to Charter’s prepetition noteholders.   

24        R2 and LDT have objected to the Plan at every stage of these

25   proceedings.   Before the district court, they raised several

                                        7
 1   overlapping challenges to the Plan’s confirmation.   Their

 2   objections, viewed broadly, related to the Allen Settlement, the

 3   bankruptcy court’s valuation of Charter, and compliance with the

 4   Bankruptcy Code’s cramdown provisions for approving a plan over the

 5   objections of creditors.   See 

Allen, and the

 6   Committee of Unsecured Creditors argued that, whatever the merit of

 7   R2’s and LDT’s legal claims, the relief they sought could not be

 8   granted without upsetting the already-consummated Plan and that the

 9   doctrine of equitable mootness barred the appeals.   

10   district court agreed and dismissed the appeals as equitably moot.

11   R2 and LDT filed separate appeals from that dismissal, which were

12   argued in tandem.

13                                 DISCUSSION

14   I.     Legal Standard for Equitable Mootness

15          This appeal concerns equitable mootness, a prudential doctrine

16   under which the district court may dismiss a bankruptcy appeal

17   “when, even though effective relief could conceivably be fashioned,

18   implementation of that relief would be inequitable.”   Official

19   Comm. of Unsecured Creditors of LTV Aerospace & Def. Co. v.

20   Official Comm. of Unsecured Creditors of LTV Steel Co. (In re

21   Chateaugay Corp.), 

, 325 (2d Cir. 1993) (“Chateaugay

22   I”).   Unlike constitutional mootness, which turns on the threshold

23   question of whether a justiciable case or controversy exists,

24   equitable mootness in the context presented here is concerned with

25   whether a particular remedy can be granted without unjustly

                                        8
 1   upsetting a debtor’s plan of reorganization.   See Deutsche Bank AG

 2   v. Metromedia Fiber Network, Inc. (In re Metromedia Fiber Network,

 3   Inc.), 

, 143-44 (2d Cir. 2005); see also In re UNR

 4   Indus., 

, 769 (7th Cir. 1994) (“There is a big

 5   difference between inability to alter the outcome (real mootness)

 6   and unwillingness to alter the outcome (‘equitable mootness’).”).

 7   Equitable mootness in the bankruptcy setting thus requires the

 8   district court to carefully balance the importance of finality in

 9   bankruptcy proceedings against the appellant’s right to review and

10   relief.   See Chateaugay 

; Bank of N.Y. Trust

11   Co., NA v. Official Unsecured Creditors’ Comm. (In re Pac. Lumber

12   Co.), 

, 240 (5th Cir. 2009) (noting that equitable

13   mootness is “a judicial anomaly” because it creates an exception to

14   courts’ “virtually unflagging obligation to exercise jurisdiction”

15   (internal quotation marks omitted)).   “[E]quitable mootness applies

16   to specific claims, not entire appeals” and must be applied “with a

17   scalpel rather than an axe.”   In re Pac. 

18   41.

19         In this circuit, an appeal is presumed equitably moot where

20   the debtor’s plan of reorganization has been substantially

21   consummated.   Aetna Cas. & Sur. Co. v. LTV Steel Co. (In re

22   Chateaugay Corp.), 

, 776 (2d Cir. 1996) (“Chateaugay

23   III”); Frito-Lay, Inc. v. LTV Steel Co. (In re Chateaugay Corp.),

24   

, 952-53 (2d Cir. 1993) (“Chateaugay II”).   “Substantial

25   consummation” is defined in the Bankruptcy Code to require that all

                                       9
 1   or substantially all of the proposed transfers in a plan are

 2   consummated; that the successor company has assumed the business or

 3   management of the property dealt with by the plan; and that the

 4   distributions called for by the plan have commenced.     See 11 U.S.C.

 5   § 1101(2).

 6        The presumption of equitable mootness can be overcome,

 7   however, if all five of the “Chateaugay factors” are met:

 8        (1) “the court can still order some effective relief”;

 9        (2) “such relief will not affect the re-emergence of the
10            debtor as a revitalized corporate entity”;

11        (3) “such relief will not unravel intricate transactions so as
12            to knock the props out from under the authorization for
13            every transaction that has taken place and create an
14            unmanageable, uncontrollable situation for the Bankruptcy
15            Court”;

16        (4) “the parties who would be adversely affected by the
17            modification have notice of the appeal and an opportunity
18            to participate in the proceedings”; and

19        (5) “the appellant pursued with diligence all available
20            remedies to obtain a stay of execution of the
21            objectionable order if the failure to do so creates a
22            situation rendering it inequitable to reverse the orders
23            appealed from.”

24   Chateaugay 

(internal citations, quotations,

25   and alterations omitted).   Substantial consummation thus “does not

26   necessarily make it impossible or inequitable for an appellate

27   court to grant effective relief.”     

is a claim

28   automatically equitably moot if the relief requested would require

29   that a confirmed plan be altered.     In this regard, we disagree with

30   the district court’s overly broad statement that invalidating a

31   plan and remanding for renegotiation renders a request “per se

                                      10
 1   equitably moot.”    In re Charter 

n.21.   The

 2   Chateaugay factors ensure that there is no per se equitable

 3   mootness by requiring a court to examine the actual effects of the

 4   requested relief.    Finally, in examining a debtor’s contention that

 5   a claim is equitably moot, we cannot rely solely on the debtor’s

 6   conclusory predictions or opinions that the requested relief would

 7   doom the reorganized company.   Instead, Chateaugay II requires an

 8   analytical inquiry into the likely effects of the relief an

 9   appellant seeks and must be based on facts.    Only if all five

10   Chateaugay factors are met, and if the appellant prevails on the

11   merits of its legal claims, will relief be granted.

12   II.   Standard of Review

13         We turn first to the standard of review in appeals of

14   equitable mootness determinations.2    Generally in bankruptcy

15   appeals, the district court reviews the bankruptcy court’s factual

16   findings for clear error and its conclusions of law de novo.      Fed.

17   R. Bankr. P. 8013.   On appeal to this court, we ordinarily review

     2
       No published Second Circuit decision has addressed this question
     directly. In a non-precedential summary order we determined that
     abuse of discretion review was appropriate. See Ad Hoc Comm. of
     Kenton Cnty. Bondholders v. Delta Air Lines, Inc., 309 F. App’x
     455, 457 (2d Cir. 2009). In prior decisions we have described the
     general standard of review in bankruptcy cases, involving de novo
     review of legal conclusions, and then proceeded to address
     equitable mootness without further discussion or application of a
     particular standard of review. See, e.g., In re 

; South St. Seaport Ltd. P’ship v. Burger Boys, Inc. (In
     re Burger Boys, Inc.), 

, 759 (2d Cir. 1996); Resolution
     Trust Corp. v. Best Prods. Co. (In re Best Prods. Co.), 

,
     29 (2d Cir. 1995). To the extent these cases suggested that de
     novo review may apply to district court determinations regarding
     equitable mootness, they did so in dicta.

                                       11
 1   the district court’s decision de novo.    In re Metromedia, 

  at 139.   Equitable mootness appeals arise in a somewhat different

 3   procedural posture: in an equitable mootness dismissal, the

 4   district court is not reviewing the bankruptcy court at all, but

 5   exercising its own discretion in the first instance.    In so doing,

 6   the district court may rely on the bankruptcy court’s factual

 7   findings, unless clearly erroneous, and if necessary receive

 8   additional evidence.   Perhaps because of the unusual nature of

 9   equitable mootness dismissals, the courts of appeals are split over

10   whether a de novo or abuse of discretion standard of review should

11   be applied by a court of appeals.     Compare Curreys of Neb., Inc. v.

12   United Producers, Inc. (In re United Producers, Inc.), 

  942, 946-47 (6th Cir. 2008) (reviewing determination of equitable

14   mootness de novo), Liquidity Solutions, Inc. v. Winn-Dixie Stores,

15   Inc. (In re Winn-Dixie Store, Inc.), 286 F. App’x 619, 622 & n.2

16   (11th Cir. 2008) (same), and United States v. Gen. Wireless, Inc.

17   (In re GWI PCS 1 Inc.), 

, 799-800 (5th Cir. 2000)

18   (same), with Search Mkt. Direct, Inc. v. Jubber (In re Paige), 584

, 1334-1335 (10th Cir. 2009) (reviewing determination of

20   equitable mootness for abuse of discretion), and Nordhoff Invs.,

21   Inc. v. Zenith Elecs. Corp., 

, 182 (3d Cir. 2001)

22   (same).

23        We join those circuits that apply an abuse-of-discretion

24   standard, finding it significant that we are reviewing the district

25   court’s own exercise of discretion as to whether it is practicable

                                      12
 1   to grant relief.   A somewhat analogous situation arises when

 2   Article III mootness turns on the defendant’s voluntary cessation

 3   of allegedly illegal conduct.   There, the voluntary cessation

 4   “bear[s] on whether the court should, in the exercise of its

 5   discretion, dismiss the case as moot.”    Harrison & Burrowes Bridge

 6   Constructors, Inc. v. Cuomo, 

, 59 (2d Cir. 1992).     In

 7   such a case, because dismissal “lies within the sound discretion of

 8   the district court,” we review for abuse of discretion.   Id.;

 9   Granite State Outdoor Adver., Inc. v. Zoning Bd. of Stamford, 

  App'x 680, 683 (2d Cir. 2002); cf. In re 

11   (reviewing equitable mootness for abuse of discretion in part

12   because of its similarities to prudential mootness, reviewed in the

13   Tenth Circuit for abuse of discretion).   More generally, equitable

14   mootness determinations involve “a discretionary balancing of

15   equitable and prudential factors,” the type of determination we

16   usually review for abuse of discretion.   In re Cont’l Airlines, 91

, 560 (3d Cir. 1996) (en banc).   Accordingly, we will

18   review the district court’s decision for abuse of discretion.

19   III. Objections to the Allen Settlement and Third-Party Releases
20        are Equitably Moot

21        R2 and LDT both challenge the compensation Paul Allen received

22   under the Allen Settlement as contravening the absolute priority

23   rule and Delaware’s entire fairness standard.   They further argue

24   that the third-party releases, which originated in the Allen

25   Settlement and were incorporated into the confirmed Plan, do not



                                      13
 1   comply with SEC v. Drexel Burnham Lambert Group, Inc. (In re Drexel

 2   Burnham Lambert Group, Inc.), 

, 293 (2d Cir. 1992),

 3   limiting third-party releases to unique circumstances.     Appellants

 4   claim that these legal errors can be redressed through a

 5   prospective monetary award, without undoing the Allen Settlement or

 6   reopening the bankruptcy proceedings.   LDT suggests that Allen be

 7   required to disgorge some or all of his $180 million in settlement

 8   consideration, or that Charter pay a similar amount directly to

 9   LDT.   R2 presents a different alternative:   that the bankruptcy

10   court determine the lowest payout Allen would have been willing to

11   accept, and order him to disgorge the excess.     And R2 maintains that

12   the third-party releases can be surgically excised from the Allen

13   Settlement and the Plan.

14          We begin by noting that LDT and R2 have met their burden with

15   respect to several of the Chateaugay factors.    First, it is not

16   impossible to grant LDT and R2 relief, in the sense that the appeals

17   are not constitutionally moot (factor 1).     See Dean v. Blumenthal,

18   

, 66 (2d Cir. 2009) (claims for monetary relief

19   automatically avoid constitutional mootness).    Next, LDT and R2 were

20   diligent in seeking a stay of the confirmation order (factor 5).3

21   That LDT and R2 were not granted a stay does not affect the analysis

     3
       Although no stay was sought from this court, under the
     circumstances we do not fault LDT and R2 for the omission: the
     district court denied a stay on the evening of Wednesday November
     25, 2009, the day before Thanksgiving, and this court was closed
     until the following Monday when the Plan became effective and was
     substantially consummated, leaving no time to move this court for a
     stay.

                                       14
 1   under Chateaugay II, which looks only to diligence in seeking a

 2   stay.    Chateaugay 

; In re 

  144-45.

 4           Next, LDT and R2 are correct that the relief they seek would

 5   not adversely affect parties without an opportunity to participate

 6   in the appeal (factor 4).    See Chateaugay 

.   Even

 7   assuming that the relief requested would send Charter back into

 8   bankruptcy, the parties most affected would be Charter itself,

 9   Allen, and Charter’s creditors, all of whom are either parties to

10   this appeal or participated actively in the bankruptcy proceedings.

11   Cf. Kenton Cnty. Bondholders Comm. v. Delta Air Lines, Inc. (In re

12   Delta Air Lines, Inc.), 

, 524 (S.D.N.Y. 2007) (finding

13   appeal of a settlement equitably moot in part because distributions

14   under the settlement had been made to innocent third parties that

15   were not participating in the appeal).    In any event, if the Allen

16   Settlement were unlawful, it would not be inequitable to require

17   the parties to that agreement to disgorge their ill-gotten gains,

18   participation in the appeal or not.     See Motor Vehicle Cas. Co. v.

19   Thorpe Insulation Co. (In re Thorpe Insulation Co.), 

,

20   882 (9th Cir. 2012) (“[T]he question is not whether . . . no third

21   party interests are affected” but whether any effects on third

22   parties would be inequitable.).    Likewise, striking the third-party

23   releases from the Plan would affect only those third parties that

24   benefited from the releases.    See Hilal v. Williams (In re Hilal),

25   

, 500 (5th Cir. 2008); Gillman v. Cont’l Airlines (In

                                        15
 1   re Cont’l Airlines), 

, 210 (3d Cir. 2000) (finding

 2   appeal of third-party releases not equitably moot where the

 3   defendant presented no arguments that investors or creditors relied

 4   on the presence of releases in supporting the plan).    Less direct

 5   effects may be felt by reorganized Charter’s shareholders, since

 6   either a limited remand or a payout would affect the value of the

 7   company.   However, Charter has regularly and fully disclosed the

 8   existence of this appeal and the possibility of an adverse ruling

 9   as a risk factor in publicly filed annual and quarterly reports.

10   See, e.g., Charter Communications, Inc., Annual Report (Form 10-K),

11   at 29 (Mar. 1, 2011).    A prudent investor would take this

12   information into account before purchasing shares in Charter.       See

13   In re Cont’l 

(Alito, J., dissenting).

14        However, LDT and R2 have failed to establish that the relief

15   they request would not affect Charter’s emergence as a revitalized

16   entity and would not require unraveling complex transactions

17   undertaken after the Plan was consummated (factors 2 and 3).    See

18   Chateaugay 

.    R2 and LDT are correct that any

19   disgorgement by Allen would not impact reorganized Charter’s

20   financial health.    And, as Appellants stress, reorganized Charter

21   has been quite successful, with substantial assets and cash flow,

22   access to an $800 million revolving line of credit, and long-term

23   debt structured on favorable terms.     Charter makes no claim that a

24   payment in the range of $200 million would send it spiraling back

25   into bankruptcy.    LDT and R2 ignore, however, that we must also

                                        16
 1   consider the heavy transactional costs associated with the monetary

 2   relief they seek.    Modifying the terms of the Allen Settlement,

 3   including striking the releases, would be no ministerial task.      The

 4   Allen Settlement was the product of an intense multi-party

 5   negotiation, and removing a critical piece of the Allen Settlement—

 6   such as Allen’s compensation and the third-party releases—would

 7   impact other terms of the agreement and throw into doubt the

 8   viability of the entire Plan.    See In re 

  145.

10          LDT and R2 maintain that in refusing to alter the Allen

11   Settlement, the district court gave too much weight to the

12   nonseverability clause contained in the Settlement and the Plan.

13   See In re Charter 

, 24-25, 25 n.22, 28-29,

14   30.    We agree with LDT and R2 that normally a nonseverability clause

15   standing on its own cannot support a finding of equitable mootness.

16   Allowing a boilerplate nonseverability clause, without more, to

17   determine the equitable mootness question would give the debtor and

18   other negotiating parties too much power to constrain Article III

19   review.    See Nordhoff Invs., 

(Alito, J.,

20   concurring in the judgment) (expressing concern that the “equitable

21   mootness doctrine can easily be used as a weapon to prevent any

22   appellate review of bankruptcy court orders confirming

23   reorganization plans”).    Given the ubiquity of nonseverability

24   clauses in prenegotiated plans, such a rule could moot virtually

25   every appeal where a stay had not been granted.    See R2 Br. at 41-42

                                        17
 1   & 42 n.10 (noting that of the top ten prenegotiated bankruptcies

 2   filed in 2010 by value of the debtor’s assets, each contained a

 3   nonseverability clause in either the confirmation order or in the

 4   reorganization plan).   More importantly, equitable mootness is a

 5   practical doctrine that requires courts to consider the actual

 6   effects of the relief requested on a debtor’s emergence from

 7   bankruptcy.   While a nonseverability clause may be one indication

 8   that a particular term was important to the bargaining parties, a

 9   district court cannot rely on such a clause to the exclusion of

10   other evidence.4   See Trans World Airlines, Inc. v. Texaco, Inc. (In

11   re Texaco, Inc.), 

, 47-49 (S.D.N.Y. 1988) (looking to

12   both nonseverability clause and testimony about the importance of

13   release provisions to determine that severing the provisions “would

14   undermine both the Settlement Agreement and the Reorganization

15   Plan”); see also Behrmann v. Nat’l Heritage Found., 

,

16   713-14 (4th Cir. 2011) (finding an appeal of a release provision

17   not equitably moot where the bankruptcy court concluded that the

18   releases were “important” to the Plan without adequate factual

19   support).




     4
       Reliance on the nonseverability clause alone would be particularly
     inappropriate here with respect to the third-party releases because
     the “term sheet” incorporated into the Allen Settlement expressly
     provided that the debtors’ failure to secure the releases as part
     of the approved Plan would not breach the Allen Settlement. These
     dueling contractual provisions only underscore the need to examine
     the totality of evidence to determine the importance of a
     particular provision.

                                       18
 1        In these appeals, however, the district court did not rest its

 2   decision exclusively on the nonseverability clause.    The bankruptcy

 3   court found that the compensation to Allen and the third-party

 4   releases were critical to the bargain that allowed Charter to

 5   successfully restructure and that undoing them, as the plaintiffs

 6   urge, would cut the heart out of the reorganization.    Crediting

 7   multiple witnesses, it also found that Allen was in a unique

 8   position to create a successful arrangement because only through

 9   his forbearance of exchange rights and agreement to maintain voting

10   power could Charter reinstate its senior debt and preserve valuable

11   net operating losses.   See Findings of Fact, Conclusions of Law,

12   and Order Confirming Debtors’ Joint Plan of Reorganization (“Conf.

13   Order”) ¶¶ 32, 43; see also JA 462, 589, 605, 611.    The releases,

14   like the compensation, were important in inducing Allen to settle.

15   See Conf. Order ¶ 32; see also JA 463, 589, 605, 611.    In the face

16   of witnesses representing that the releases and compensation were

17   important to Allen, LDT and R2 can point to no evidence that the

18   settlement consideration paid to Allen or the third-party releases

19   were simply incidental to the bargain that was struck.   Compare In

20   re 

(request to strike third-party

21   releases equitably moot because “it [was] as likely as not that the

22   bargain struck by the debtor and the released parties might have

23   been different without the releases”) with In re Cont’l Airlines,

(appeal of third-party releases not equitably

25   moot where there was “[n]o evidence or arguments . . . that

                                      19
 1   Plaintiffs’ appeal, if successful, would necessitate the reversal

 2   or unraveling of the entire plan of reorganization”).

 3         Even if LDT and R2 are correct that the settlement

 4   consideration and releases are legally unsupportable, these

 5   provisions could not be excised without seriously threatening

 6   Charter’s ability to re-emerge successfully from bankruptcy.5   Nor

 7   could the monetary relief requested be achieved by a quick,

 8   surgical change to the confirmation order.   Allen may not be

 9   willing to give up the benefit he received from the Allen

10   Settlement without also reneging on at least part of the benefit he

11   bestowed on Charter.   Thus the parties would have to enter renewed

12   negotiations, casting uncertainty over Charter’s operations until

13   the issue’s resolution.   We therefore find no abuse of discretion

14   in the district court’s conclusion that these claims relating to

15   the Allen Settlement are equitably moot.

16   IV.   R2’s Claim for the Revaluation of CCI is Equitably Moot

17         R2’s next claim of error relates to the valuation of Charter.

18   The bankruptcies of Charter’s 131 affiliated entities were

19   consolidated for procedural, not substantive, purposes.    

  at 269-70.   The Plan, however, values all Charter entities as one.

     5
       This risk—supported in the record—that the parties might be unable
     to compromise if the bankruptcy proceedings were reopened, is what
     we understand the district court to have meant when it wrote that
     relief would “nullify the plan.” 

, 25, 26, 27
     n.29, 28. Technically speaking, any vacatur of a confirmation
     order, no matter how limited, would “nullify” the plan, at least
     temporarily and in part, but we understand the district court’s use
     of “nullification” to have referred to a nullification of the
     ability to reorganize at all.

                                      20
 1   

holder in CCI, argues that CCI should have been

 2   valued separately, taking into account the value of the net

 3   operating losses, which R2 argues “belong” to CCI.    Here again, R2

 4   claims that simple relief is available: remand the case to the

 5   bankruptcy court for a limited valuation of CCI as a stand-alone

 6   entity, and distribute any surplus to CCI’s shareholders, R2 among

 7   them.

 8           As with challenges to the Allen Settlement, R2 has met the

 9   Chateaugay factors relating to ability to grant effective relief,

10   diligence in seeking a stay, and effect on third parties.     However,

11   we could not grant the relief R2 seeks without requiring a

12   significant revision of Charter’s reorganization.     R2’s argument is,

13   in effect, an attack on the bankruptcy court’s determination that

14   it was appropriate for the Plan to consider all the Charter

15   entities together, even though the bankruptcies were never

16   substantively consolidated.    In order to grant a separate valuation

17   of CCI, the district court would have had to overturn the

18   bankruptcy court’s determination that a joint Plan was appropriate.

19   That legal conclusion would require not just that CCI be separately

20   valued, but that all the Charter subsidiaries be revalued and the

21   proceeds of the bankruptcy distributed accordingly.     See Compania

22   Internacional Financiera S.A. v. Calpine Corp. (In re Calpine

23   Corp.), 

, 519-20 (S.D.N.Y. 2008) (holding that the

24   debtor’s valuation was a “‘key issue’” in a reorganization, and

25   therefore even if a remand resulted in a higher valuation, the plan

                                        21
 1   would need to be substantially changed), aff’d 354 F. App’x 479 (2d

 2   Cir. 2009).   This is not the type of relief that can be undertaken

 3   without knocking the props out from under completed transactions or

 4   affecting the re-emergence of the debtor from bankruptcy.6    See

 5   Chateaugay 

.     Thus, the district court did not

 6   abuse its discretion in dismissing this claim for revaluation of

 7   CCI as equitably moot.

 8   V.   LDT’s Claim that the Plan Violates 11 U.S.C. § 1129’s Cramdown
 9        Provisions is Equitably Moot

10        LDT appeals the bankruptcy court’s determination that the Plan

11   complies with the cramdown provisions of 11 U.S.C. § 1129.    First,

12   LDT argues that, as a creditor of CCI, it had a more senior claim

13   to the value of the net operating losses than the Crossover

14   Committee members, who held the debt of other Charter entities.

15   See § 1129(b)(2)(B)(ii).   Second, LDT argues that creditors were

16   “gerrymandered” into separate classes to satisfy the provisions of

17   § 1129(a)(10), which requires that at least one class of impaired


     6
       The district court erred, however, when it held that the relief
     requested could not be granted because the confirmation order
     rendered R2’s claims “cancelled, released, and extinguished” with
     the holders “receiving no distribution under the 

(internal quotation marks and alteration omitted). When the
     confirmation order is on appeal, the legal effects of that order—
     such as extinguishing equity—cannot themselves preclude review.
     See Chateaugay 

-54, (rejecting the argument that
     because the confirmation order provided that certain assets were to
     re-vest in the debtor “free and clear of all claims and interests”
     we could not correct a legal error in their distribution (internal
     quotation marks omitted)). Nevertheless, the district court’s
     alternative holding that equitable mootness barred the appeal
     notwithstanding the this provision was independently sufficient to
     support its judgment.

                                      22
 1   creditors accept a plan.   It further argues that the bankruptcy

 2   court erred by holding that § 1129(a)(10) was satisfied if an

 3   impaired class of any of the debtors accepted the Plan.      As relief

 4   for all these alleged errors, LDT seeks the payment in full of the

 5   CCI notes, at a cost to Charter of about $330 

  29 n.38.

 7        As with R2’s claims regarding valuation, LDT may be correct

 8   that the simple payment of $330 million would satisfy the

 9   Chateaugay factors.   However, as with R2’s revaluation claim, the

10   legal conclusions required to find for LDT would require much more

11   than simply paying the CCI Noteholders’ claims in full.      The legal

12   errors that LDT alleges, if proven, would require unwinding the

13   Plan and reclassifying creditors.       This is the opposite of a

14   surgical change to the Plan.    See In re Pac. 

  251 (finding claims of artificial impairment and misclassification

16   of creditors equitably moot because “no remedy . . . is practicable

17   other than unwinding the plan”).    We therefore affirm the district

18   court’s exercise of its discretion in dismissing the claim that the

19   cramdown provisions were violated as equitably moot as well.

20                                  CONCLUSION

21        For the foregoing reasons, the district court’s order

22   dismissing LDT and R2’s appeals as equitably moot is AFFIRMED.




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