464 B.R. 120
D. Del.2012Background
- Debtors filed for bankruptcy after failing to replace expiring government contracts, leading to revenue decline.
- Debtors agreed to sell nearly all assets to Kaiser under an Asset Purchase Agreement that included a Litigation Trust (Trust).
- The Trust would hold causes of action against Boeing and others; Kaiser would fund the Trust, retain 90% of its beneficial interest, and estates would receive up to $30 million total.
- An expedited sale hearing occurred on September 1, 2011; the lease assumption deadline was September 13, 2011; the court orally granted the Sale Motion and denied a stay request.
- The sale closed without a stay in this Court, and Boeing appealed the Sale Order; Kaiser moved to dismiss the appeal as moot.
- The district court must decide whether the Trust creation was a sale protected by § 363(m) and whether vacating the Trust would affect the sale’s validity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Trust creation is a 363(m) sale term | Kaiser argues Trust is a sale feature protected by 363(m). | Boeing contends the Trust is a use, not a sale, and thus 363(m) does not apply. | Trust creation constitutes a sale under 363(m) protection. |
| Whether vacating the Trust would affect the sale's validity | Vacating the Trust would preserve the deal's finality and not disturb the sale. | Vacating the Trust would not affect the sale's validity. | Vacating the Trust would affect the sale's validity; thus mootness applies. |
Key Cases Cited
- Krebs Chrysler-Plymouth, Inc. v. Valley Motors, Inc., 141 F.3d 490 (1998) (requirement that mootness must show sale not stayed and effect on sale)
- Cinicola v. Scharffenberger, 248 F.3d 110 (3d Cir.2001) (protection of transactions integral to a sale under 363(m))
- In re Charter Behavioral Health Sys., LLC, 45 Fed.Appx. 150 (3d Cir.2002) (protection to assignments integral to sale)
- In re Abbotts Dairies of Penn., Inc., 788 F.2d 143 (3d Cir.1986) (finality policy of 363(m) and protection of sale orders)
- Integrated Solutions, Inc. v. Service Support Specialties, Inc., 124 F.3d 487 (3d Cir.1997) (sale/assignment of tort causes of action can implicate 363(m))