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Mootness Protection
Code §§ 363(m) and 364(e) protect orders for use of cash collateral and for DIP financing from reversal or modification on appeal, if no stay pending appeal has been obtained. Absent a stay, an appeal from such a financing order is likely to be dismissed as moot. But the mootness protection may extend only to funds that have been distributed. And to be sure to obtain the statutory protection, the lender should ensure that the order contains an explicit finding that its credit was extended in good faith, and the finding of good faith maybe challenged on appeal absent a stay.
Section 364(e) specifically protects the "validity" of the debt and the "priority" of a lien securing it. This leaves some question as to whether other terms of the financing are similarly protected from modification or reversal. Some courts have held the provision extends to other terms of the loan or collateralization. But courts have differed on whether it extends to a waiver of the estate's claims against the lender, if timely appealed.
In larger cases debtors' counsel frequently request that at least a substantial portion of their fees be paid on a monthly basis. Such a procedure has been utilized in the Ninth Circuit for many years under the authority of In re Knudsen Corp., 84 B.R. 668 (9 Cir. BAP 1988). Such procedures have also been used for many years in several other districts, but apparently without reported authority. Recently, the Bankruptcy Courts for the District of Delaware and for the Western District of Pennsylvania have provided such reported authority. In re Mariner Post-Acute Network, Inc., 257 B.R. 723 (Bankr. D. Del. 2000); In re Pittsburgh Corning Corp., 255 B.R. 162 (Bankr. W.D. Pa. 2000). These opinions contain a good compilation many of the various procedures that have been used in many districts, and in some cases local rules or U.S. Trustee Guidelines.
The general procedure is for professionals to submit bills to the debtor and other parties in interest on a monthly basis. Parties have 10 days within which to object to all or any portion of such bills. In the absence of any objection, the debtor is authorized to pay
