23-1126
9th Cir. BAPMay 1, 2024Background
- Miomni Gaming, Ltd. filed for Chapter 7 bankruptcy after a $5.5 million judgment in favor of creditor SBC Nevada, LLC, arising from a failed mobile sportsbook app contract.
- Miomni’s principal owners allegedly transferred assets from the debtor to affiliated entities, including Miomni Sports, Ltd. (formerly Miomni Media, Ltd.), after the judgment.
- The bankruptcy trustee entered an agreement to sell the debtor’s causes of action (potential fraudulent transfer and successor liability claims) to SBC, with sale proceeds split between the estate and SBC.
- Miomni Sports made an informal competing cash offer but failed to lodge a formal opposition or secure U.S. counsel before the hearing.
- The bankruptcy court approved the sale to SBC on an unopposed, expedited basis, finding SBC a good faith purchaser under § 363(m), and later denied reconsideration.
- Miomni Sports appealed, arguing lack of proper notice, unfair treatment, and that its offer was superior.
Issues
| Issue | Plaintiff’s Argument | Defendant’s Argument | Held |
|---|---|---|---|
| Was SBC a “good faith purchaser” under § 363(m)? | Sports argued the sale was tainted by fraud/unfairness, lack of proper notice, and that SBC/Trustee acted in collusion to exclude other bidders. | SBC and Trustee asserted sale was at arm’s length, properly noticed, Sports’ offer lacked formality and evidence of ability to pay, and no evidence of collusion/fraud existed. | The bankruptcy court’s finding of good faith was not clearly erroneous; no evidence of fraud or unfairness; affirmed. |
| Was notice of the sale adequate under bankruptcy rules? | Sports claimed short notice, improper service of the sale motion, and prejudice as it could not engage counsel or bid fully. | Trustee countered Sports had actual notice, communicated an offer, and had an opportunity to object or appear at the hearing; any deficiency in formal notice caused no real prejudice. | Court found actual notice sufficient; Sports was not prejudiced and had adequate opportunity to act. |
| Should reconsideration of the sale order have been granted? | Sports said the court erred in finding no qualified overbidder and failed to analyze its offer and potential prejudice. | Trustee argued the offer lacked credibility, no filing appeared, and there was no error or manifest injustice requiring reconsideration. | Court denied reconsideration; no clear error, mistake, or circumstances justifying relief. |
| Does Sports have appellate standing to challenge the sale as a disappointed bidder? | Sports asserted standing due to its creditor status (after filing proof of claim) and by challenging the sale’s integrity. | SBC argued Sports lacked standing as a non-creditor bidder; challenged timing and basis for standing. | Court held standing based on filed claim and challenge to sale integrity; proceeded to merits review. |
Key Cases Cited
- In re Ewell, 958 F.2d 276 (9th Cir. 1992) (good faith purchaser status under § 363(m) requires absence of fraud, collusion, or unfair advantage)
- Paulman v. Gateway Venture Partners III, L.P. (In re Filtercorp, Inc.), 163 F.3d 570 (9th Cir. 1998) (affirming protections for sales to good faith purchasers under § 363(m))
- Adeli v. Barclay (In re Berkeley Del. Ct., LLC), 834 F.3d 1036 (9th Cir. 2016) (standard of review for good faith purchaser findings is clear error)
- Ferrari N. Am., Inc. v. Sims (In re R.B.B., Inc.), 211 F.3d 475 (9th Cir. 2000) (scope of appellate review after consummated sale without stay under § 363(m))