Equitable Mootness And Arbitration: First Impressions In The Ninth Circuit

2012 is shaping up as a year of bankruptcy first impressions for the Ninth Circuit. The court of appeals sailed into uncharted bankruptcy waters twice already this year in the same chapter 11 case. On January 24, the court ruled in In re Thorpe Insulation Co., 2012 WL 178998 (9th Cir. Jan. 24, 2012) ("Thorpe I"), that an appeal by certain nonsettling asbestos insurers of an order confirming a chapter 11 plan was not equitably moot because, among other things, the plan had not been "substantially consummated" under the court's novel construction of that statutory term. Less than a week later, the Ninth Circuit ruled in Continental Ins. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co., 2012 WL 255231 (9th Cir. Jan. 30, 2012) ("Thorpe II"), that a bankruptcy court has discretion in a core proceeding to decline to enforce an otherwise valid and applicable arbitration provision if arbitration would conflict with the underlying purposes of the Bankruptcy Code.