MOAC Mall Holdings LLC v. Transform Holdco LLC
Headline: Bankruptcy rule §363(m) is not a jurisdictional limit on courts, the Justices hold, allowing judges to apply normal waiver and procedural defenses in appeals over bankruptcy sales and leases.
Holding: The Court held that the Bankruptcy Code’s §363(m) is not a jurisdictional rule, so courts may apply ordinary waiver, forfeiture, and other procedural defenses rather than treat the provision as automatically nonwaivable.
- Allows waiver and forfeiture defenses against §363(m) if parties fail to raise them.
- Makes it riskier to delay invoking §363(m) protections in bankruptcy appeals.
- Returns disputes over bankruptcy sales and lease assignments to lower courts for further review.
Summary
Background
Sears entered Chapter 11 and sold most assets to Transform, which had the right to designate who would receive certain leases. Transform designated the Mall of America lease to a subsidiary. MOAC, the Mall landlord, objected that the proposed assignee lacked the legally required "adequate assurance" of future performance. The Bankruptcy Court approved the assignment (the Assignment Order), denied MOAC’s request for a stay, and the lease was assigned; MOAC appealed and the District Court initially sided with MOAC on the adequacy question but then dismissed the appeal after Transform argued that §363(m) deprived the court of power. The Second Circuit affirmed that dismissal.
Reasoning
The Court considered whether §363(m) is a jurisdictional rule that bars courts from deciding certain appeals. Relying on the requirement that Congress must clearly say when a rule is jurisdictional, the Court found §363(m) does not limit a court’s authority. The text treats judicial review as possible and instead limits the effect of a successful appeal in certain circumstances (for example, protecting good-faith purchasers, or where a sale was stayed). The Court rejected Transform’s arguments about in rem power and the history of an old bankruptcy rule as insufficient to show a clear congressional command that §363(m) is jurisdictional.
Real world impact
The ruling means lower courts can apply ordinary defenses like waiver, forfeiture, or judicial estoppel when §363(m) is invoked, rather than treating the rule as an absolute, nonwaivable bar. The case was vacated and remanded for further proceedings consistent with this holding. The Court did not decide other open questions about §363(m)'s scope, so some disputes will return to lower courts for resolution.
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