United States Supreme Court Holds That Bankruptcy Code Section 363(m) Does Not Preclude Appellate Jurisdiction On Asset Sale Orders

Published date04 May 2023
Subject MatterLitigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy, Trials & Appeals & Compensation
Law FirmCadwalader, Wickersham & Taft LLP
AuthorMs Ingrid Bagby, Casey Servais, Thomas Curtin, Christopher M. Floyd and Anthony Greene

In a ruling issued just yesterday, MOAC Mall Holdings LLC v. Transform Holdco LLC et al., 598 U.S. ----, 2023 WL 2992693 (2023) ("MOAC"), the United States Supreme Court (the "Supreme Court") held that Bankruptcy Code section 363(m) is not jurisdictional in terms of appellate review of asset sale orders, but rather, that such section only contains limitations on the relief that may be afforded on appeal. Section 363(m) of the Bankruptcy Code is often relied upon by purchasers of assets in a bankruptcy case as providing finality to any sale order. The section states in relevant part that:

"The reversal or modification on appeal of an authorization under ['363(b) or '363(c)] of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal."1

Aggrieved parties seeking to overturn sale orders have argued that the language in section 363(m) precludes effective appellate review of such orders and controls the appellate court's jurisdiction with respect thereto. This ruling resolves a split among circuit courts as to whether the language in section 363(m) controls jurisdiction and appellate review.2


MOAC arises in the context of the Sears chapter 11 bankruptcy proceedings, in which the debtor, Sears, Roebuck and Co. ("Sears") agreed to sell most of its assets to purchaser Transform Holdco LLC ("Transform") pursuant to Bankruptcy Code section 363(b)(1). The U.S. Bankruptcy Court for the Southern District of New York issued an order in 2019 approving the sale (the "Sale Order").3 Among the assets conveyed in the sale was the right for Transform to "designate to whom a lease between Sears . . . and some landlord should be assigned."4

One such lease included in the sale was between Sears and landlord MOAC Mall Holdings LLC ("MOAC"; and the lease at issue, the "MOAC Lease"), which leases spaces to tenants in Minnesota's Mall of America. After Transform designated the MOAC Lease for assignment pursuant to the Sale Order, MOAC objected to such assignment on the grounds that Sears had failed to provide adequate assurance of future performance under the MOAC Lease, as is required by Bankruptcy Code section 365.5 The Bankruptcy Court approved the assignment to Transform over MOAC's objection (such order, the "Assignment Order"), and thereafter denied MOAC's request for a stay pending appeal.6 The Assignment Order thus became effective and the MOAC Lease was assigned to Transform.7

MOAC appealed the Bankruptcy Court's approval of the transfer of the MOAC Lease to the U.S. District Court for the Southern District of New York. The District Court reversed the Bankruptcy Court, holding that...

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