## Facts

- U.S. Brass Corporation, a manufacturer linked to polybutylene (PB) plumbing systems, faced hundreds of lawsuits alleging PB-related defects and filed for Chapter 11 relief in the Eastern District of Texas.
- During the bankruptcy, a national class settlement of PB claims was developed and approved in a Tennessee state-court action; it authorized settling plaintiffs to pursue contribution against U.S. Brass.
- The settlement terms were incorporated into U.S. Brass’s Chapter 11 plan; insurance subrogation claimants (insurers that paid PB-loss claims and asserted subrogation rights) were not members of the settlement class.
- The confirmed plan placed both the settling PB claimants and the insurance subrogation claimants in the same creditor class (Class 5) but allocated most expected insurance proceeds and significant trust funding to the PB claimants, with a smaller share reserved for other Class 5 claimants, including the insurers.
- The plan established a trust and transferred substantial assets and insurance rights to it for administering distributions.
- The bankruptcy court confirmed the plan in February 1998 over the insurers’ objections.
- The insurers appealed and sought a stay but did not obtain one; they also did not secure expedited consideration.
- While the appeal was pending, the plan was substantially carried out, including major payments into the trust, execution of settlement agreements, distributions to priority creditors, and assignment of insurance rights.
- Appellees moved to dismiss the appeal as equitably moot.

## Issues

1. Whether the appeal of the confirmation order should be dismissed as equitably moot because the plan had been substantially consummated and effective appellate relief was impracticable.
2. Whether the plan violated 11 U.S.C. § 1123(a)(4) by providing unequal treatment to claimholders within the same class without consent.
3. Whether the plan failed the good-faith requirement of 11 U.S.C. § 1129(a).

## Decision

- The Fifth Circuit dismissed the appeal as equitably moot.
- The court emphasized that the insurers never obtained a stay, allowing implementation of a complex plan and related settlements.
- The court found the plan had been substantially consummated through executed transfers, distributions, and settlement performance.
- The court concluded the relief sought would disrupt distributions and settlements and impair rights and expectations of parties not before the court, risking the plan’s success.
- Because the appeal was dismissed on equitable mootness grounds, the court did not decide the § 1123(a)(4) equal-treatment or § 1129(a) good-faith arguments.

## Legal Principles

- Equitable mootness is a prudential doctrine permitting dismissal of a Chapter 11 confirmation appeal when granting relief would be unfair or impracticable after substantial plan implementation.
- In assessing equitable mootness, courts consider: (1) whether the appellant obtained a stay; (2) whether the plan has been substantially consummated; and (3) whether requested relief would affect third-party rights or the plan’s success.
- Failure to obtain a stay weighs heavily toward equitable mootness because it permits reliance on plan finality and completion of irreversible transactions.
- Even potentially substantial confirmation objections may go unreviewed if the appellant cannot propose relief that can be granted without undoing consummated transactions and harming nonparties.

## Conclusion

The Fifth Circuit left the confirmed reorganization intact and dismissed the insurers’ appeal as equitably moot because no stay was obtained, the plan had been substantially consummated, and the requested redistribution would disrupt executed settlements and third-party reliance interests, making effective relief impracticable.


Insurance Subrogation Claimants v. U.S. Brass Corp. (In re U.S. Brass Corp.), 169 F.3d 957 (5th Cir. 1999)