464 BR 120
D. Del.2012Background
- Debtors filed for bankruptcy and pursued a sale of all major assets to Kaiser Aircraft Industries.
- The Asset Purchase Agreement included the creation of a Litigation Trust in which Kaiser would hold 90% of the Trust’s beneficial interests and fund litigation; Debtors retained 10%.
- The Trust would vest estate causes of action against Boeing and others and is treated as a purchased asset under the APA.
- Closing depended on the Trust’s creation; the bankruptcy court orally granted the Sale Motion, and the 14-day stay under Rule 6004(h) was not applied.
- Boeing appealed the Sale Order; Kaiser moved to dismiss the appeal as moot, and the district court granted the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Trust creation constitute a sale protected by §363(m)? | Boeing argues the Trust is a use, not a sale, thus §363(m) protection does not apply. | Kaiser contends the Trust constitutes a sale/part of the asset sale and is entitled to §363(m) protection. | Yes; the Trust is protected as part of the sale. |
| Would vacating the Trust affect the validity of the sale? | Boeing claims vacating the Trust would not affect sale validity and thus should not moot the appeal. | Kaiser argues vacating the Trust would nullify the sale and undermine finality. | Yes; vacating the Trust would affect sale validity, supporting mootness and dismissal. |
Key Cases Cited
- Cinicola v. Scharffenberger, 248 F.3d 110 (3d Cir. 2001) (intertwined transactions receive §363(m) protection)
- In re Charter Behavioral Health Sys., LLC, 45 Fed. Appx. 150 (3d Cir. 2002) (protection for assignments tied to sale)
- In re Abbotts Dairies of Penn., Inc., 788 F.2d 143 (3d Cir. 1986) (finality policy of §363(m))
- Krebs Chrysler-Plymouth, Inc. v. Valley Motors, Inc., 141 F.3d 490 (3d Cir. 1998) (test for mootness requires showing sale not stayed and effect on sale)