922 F.3d 323
5th Cir.2019Background
- VCR I, L.L.C. filed Chapter 11 in 2012; the case was later converted to Chapter 7 and a Chapter 7 Trustee was appointed.
- While the case was in Chapter 11, VCR and Gluckstadt entered an Agreed Order stating VCR "shall file and notice a motion" to sell a fourth tract to Gluckstadt for $612,500.
- No such motion was ever filed; in 2016 the Trustee moved under 11 U.S.C. § 363 to conduct a public auction and sell four tracts (including the fourth tract) free and clear of liens to the highest bidder.
- Gluckstadt objected, arguing the Trustee breached the Agreed Order and was obligated to move to sell the fourth tract to Gluckstadt for $612,500 without an auction.
- The bankruptcy court overruled the objection, approved the auction; the district court affirmed; the fourth tract ultimately sold at auction for $2,325,000.
- The Trustee moved to dismiss the appeal as moot; the Fifth Circuit denied the motion and affirmed the lower courts' rulings that the Trustee complied with the Agreed Order and properly sought an auction to maximize estate value.
Issues
| Issue | Gluckstadt's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether the Agreed Order bound the Trustee to file a motion to sell the fourth tract to Gluckstadt for $612,500 without an auction | Agreed Order was a binding settlement requiring the Trustee to file for sale to Gluckstadt at $612,500 (subject only to creditor objections) | Agreement required court approval under § 363; Trustee owed fiduciary duty to maximize estate and could conduct an auction to obtain highest and best price | The court held the Trustee was not bound to consummate a non‑competitive sale; § 363 procedures and the trustee’s duty to maximize estate value permitted an auction; Trustee complied with the Agreed Order |
| Whether the appeal was moot after the tract sold at auction | Gluckstadt did not seek to undo the sale but sought damages for breach of the Agreed Order; thus appeal presents live controversy | Trustee argued the sale’s validity under § 363(m) made the appeal moot | Court denied mootness: sale need not be invalidated for appeal to proceed because Gluckstadt pursued damages for alleged breach and the breach question was adjudicated |
Key Cases Cited
- The Cadle Co. v. Mims (In re Moore), 608 F.3d 253 (5th Cir. 2010) (§ 363 sale rules; trustee must articulate business justification and seek court approval)
- Goodwin v. Mickey Thompson Entm’t Grp., Inc. (In re Mickey Thompson), 292 B.R. 415 (B.A.P. 9th Cir. 2003) (trustee’s fiduciary duty to maximize estate can require competitive bidding rather than enforcing an unapproved settlement-purchase)
- Myers v. Martin (In re Martin), 91 F.3d 389 (3d Cir. 1996) (trustee’s fiduciary duty limits enforceability of preapproval contractual obligations)
- Viegelahn v. Lopez (In re Lopez), 897 F.3d 663 (5th Cir. 2018) (standards of review for bankruptcy appeals)