The U.S. Court of Appeals for the Eleventh Circuit Court upheld a bankruptcy court’s order retaining supervisory authority over Jefferson County, Alabama’s sewer rates for the next forty years. Extending a line of cases holding that once a bankruptcy reorganization plan has been consummated, “the eggs are scrambled,” the Eleventh Circuit held that the doctrine of equitable mootness warranted dismissal of the appeal. The Court suggested that the objecting parties should have expedited their appeal so that it could be heard before the plan became effective. The Eleventh Circuit’s decision underscores the importance of obtaining a stay of the bankruptcy confirmation order and expediting the appeal before the plan is substantially consummated.

BACKGROUND AND BANKRUPTCY COURT DECISION -

The case, styled Andrew Bennett et al. v. Jefferson County, Alabama, grew out of the financial meltdown of Alabama’s most populous county during the Great Recession. Jefferson County had issued $3.2 billion in sewer-related debt instruments. Unable to afford payments on the debt, the County filed a Chapter 9 municipal bankruptcy case in 2011. After 18 months of negotiations with creditors, the County proposed a largely consensual reorganization plan that exchanged the $3.2 billion debt for a reduced amount of $1.8 billion in new sewer debt. In return for the write-down, Jefferson County agreed to phase in agreed-upon sewer rate increases over the next 40 years to pay off the new debt. The plan gave the bankruptcy court jurisdiction to adjudicate lawsuits relating to the county’s implementation of the plan-including the provision requiring phased-in sewer rate increases– during that 40-year period.