Richards Layton & Finger

Third Circuit Limits Equitable Mootness Doctrine

October 16, 2013

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 from producers 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 to the debtors ahead of other creditors, including the secured lenders, pursuant to state statutes granting liens or creating statutory trusts for such oil and gas sales. Because the legal issues in these disputes affected hundreds or thousands of producers in each affected state, the debtors sought to establish procedures for resolution of the common legal issues that would permit all potentially affected parties to participate, streamline the proceedings before the bankruptcy court, and minimize the costs to the estates.