484 B.R. 874
Bankr. M.D. Fla.2013Background
- Horizons A Far, LLC, creditor of the bankruptcy estate, appeals two Bankruptcy Court orders (Sale Order and Overruling Order).
- Trustee offered to sell Debtors’ 50% economic interest in Partners LLC; Buono objected, arguing sale should be limited to economic interest and not include management.
- Bankruptcy Court held Partners’ Operating Agreement restricted Trustee’s ability to sell the full management interest; §365(c)(1) barred assumption of the management interest.
- Trustee could sell only Debtors’ 50% economic interest; Appellant argued §363(h) allowed the sale of 100% of Partners, including Buono’s interest.
- Overrugling Order sustained objections and denied 100% sale; procedural issues included timeliness and notice arguments; merits addressed the §363(h) theory.
- The district court held Partners’ Operating Agreement is executory under the functional approach and affirmed the Bankruptcy Court’s ruling; sale of only Debtors’ 50% economic interest stands.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether due process was satisfied regarding notice and opportunity to object. | Horizons asserts lack of notice/object for economic-interest sale. | Buono/Webber argues notice was adequate and any new framing was properly addressed as a reconsideration or timely objection. | No due process violation; notice and opportunity to be heard were adequate. |
| Whether §365(c)(1) or §363(h) governs sale of Partners, and whether trustees can sell 100% of Partners. | Horizons contends §363(h) permits 100% sale of Partners to maximize estate value. | Buono/Webber contends Partners’ LLC is not a tenancy or co-ownership subject to §363(h); §365(c)(1) applies if the operating agreement is executory. | Operating Agreement is executory; §365(c)(1) applies; sale limited to Debtors’ 50% economic interest. |
Key Cases Cited
- In re Globe Mfg. Corp., 567 F.3d 1291 (11th Cir. 2009) (standard of review for factual findings and de novo review of legal conclusions)
- Thompkins v. Lil's Joe Records, Inc., 476 F.3d 1294 (11th Cir. 2007) (functional approach to executory contracts under bankruptcy law)
- In re Livingston, 804 F.2d 1219 (11th Cir. 1986) (§363(h) applies narrowly to enumerated tenancies)