John Stokes v. Richard Samson

MEMORANDUM

Chapter 7 Trustee Richard J. Samson and some of the estate’s creditors cross-appeal the denial of their motion to dismiss debtor John Patrick Stokes’s action as equitably moot. We review the district court’s determination that Stokes’s appeal was not equitably moot de novo. See Baker & Drake, Inc. v. Pub. Serv. Comm’n (In re Baker & Drake, Inc.), 35 F.3d 1348, 1351 (9th Cir.1994). On the basis of our recent decision in Motor Vehicle Cas. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d 869 (9th Cir.2012), which the district court did not have the benefit of, we reverse.

Whether to dismiss a case on equitable mootness grounds requires first asking “whether a stay was sought, for absent that a party has not fully pursued its rights.” Id. at 881 . If a stay was sought but not gained, we consider (1) “whether substantial consummation of the plan has occurred,” (2) “the effect a remedy may have on third parties not before the court,” and (3) “whether the bankruptcy court can fashion effective and equitable relief without completely knocking the props out from under the plan.” Id. A party’s failure to seek a stay may, by itself, render that party’s…