MOAC Mall Holdings LLC v. Transform Holdco LLC
Headline: Bankruptcy sale protection (§363(m)) is not jurisdictional, the Court rules, allowing ordinary procedural rules and waiver to apply and affecting how landlords and buyers challenge completed asset transfers.
Holding: The Court held that 11 U.S.C. §363(m), which protects good‑faith purchasers of estate property, is not jurisdictional, so courts may apply waiver and ordinary procedural rules when appeals challenge asset sales.
- Courts can apply waiver and other ordinary defenses to late §363(m) claims.
- Makes it easier for landlords to press appeals challenging sale approvals.
- Keeps appeal options alive even when sales have closed, subject to ordinary rules.
Summary
Background
A mall owner in Minnesota (MOAC) objected when Sears, during Chapter 11 bankruptcy, assigned its Mall of America lease to a buyer connected to Transform. The Bankruptcy Court approved the assignment despite MOAC’s claim that the buyer had not shown adequate assurance of future performance. MOAC appealed after the assignment became effective and the District Court initially agreed with MOAC, but Transform argued a different bankruptcy rule, §363(m), stripped courts of power to undo the sale.
Reasoning
The Court considered whether §363(m) is a jurisdictional rule that courts must enforce at any time. It held that §363(m) limits the effect of successful appeals in some cases but does not govern a court’s power to hear appeals. The Justices applied the “clear‑statement” rule: Congress must clearly say when a rule removes a court’s authority. Section 363(m)’s text and context do not do that; it protects good‑faith buyers in some circumstances but also assumes courts will adjudicate and can reverse or modify authorizations. The Second Circuit’s contrary approach was vacated and the case was sent back for further consideration under ordinary procedural doctrines.
Real world impact
The ruling means courts can apply ordinary doctrines like waiver, forfeiture, or estoppel to late invocations of §363(m), rather than treating the rule as an unchallengeable jurisdictional bar. It does not decide whether the lease transfer here was ultimately lawful; the case returns to lower courts for further proceedings, so final outcomes can still change.
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