616 B.R. 615
S.D.N.Y.2020Background
- Sears and affiliated debtors sold assets in bankruptcy to Transform Holdco under an APA that conferred “designation rights” to assign many Sears leases, including the Mall of America (MoA) lease.
- Holdco designated Transform Leaseco as assignee of the MoA lease; MOAC (the landlord) objected under 11 U.S.C. § 365(b)(3) (shopping-center assignee requirements).
- The Bankruptcy Court overruled MOAC’s objections, entered an Assignment Order authorizing the assumption and assignment to Leaseco, and denied MOAC’s stay motion; the assignment closed shortly thereafter.
- MOAC appealed the Assignment Order to the district court; the district court initially vacated the Assignment Order, concluding Leaseco failed § 365(b)(3)(A).
- Transform moved for rehearing, arguing for the first time that the appeal was statutorily moot under 11 U.S.C. § 363(m) because the Assignment Order was not stayed pending appeal.
- On rehearing the district court concluded § 363(m) is jurisdictional, that the assignment qualified as a § 363(m) “sale” (transfer for consideration and authorized under §§ 363 and 365 / tied to the Sale Order), and dismissed MOAC’s appeal as statutorily moot, vacating its prior judgment.
Issues
| Issue | Plaintiff's Argument (MOAC) | Defendant's Argument (Transform) | Held |
|---|---|---|---|
| Does failure to obtain a stay of the Assignment Order under § 363(m) deprive the district court of appellate jurisdiction? | § 363(m) can be waived; Transform’s trial-court statements eliminated mootness risk. | § 363(m) is jurisdictional and nonwaivable; absence of a stay renders appeal statutorily moot except for good-faith challenges. | § 363(m) is jurisdictional; lack of stay rendered the appeal statutorily moot. |
| Can Transform be judicially estopped or deemed to have waived invocation of § 363(m) after representations below that it would not rely on § 363(m)? | Transform’s statements to the bankruptcy court constitute waiver/judicial estoppel; MOAC relied on them and forewent seeking a stay. | Waiver and estoppel cannot create appellate jurisdiction when Congress limits it; Transform’s legal position change does not cure jurisdictional statute. | Waiver and judicial estoppel do not overcome § 363(m)’s jurisdictional bar; estoppel inapplicable because position was legal, not purely factual. |
| Was the assignment of the MoA lease a “sale or lease of property” within § 363(m)? | The assignment was a § 365-only assignment and lacked independent consideration, so § 363(m) should not apply. | The assignment involved consideration (Holdco paid cure costs) and the Assignment Order invoked §§ 363 and 365 and was tied to the Sale Order; thus it is a § 363(m) sale. | Assignment is a § 363(m) sale: (1) Holdco’s payment of cure costs constituted consideration; (2) the Assignment Order invoked § 363 and was inextricably intertwined with the Sale Order. |
| Does Weingarten (6th Cir.) control and make the appeal moot only when the intermediate assignment is part of a unitary sale to an identified ultimate purchaser? | Weingarten differs because no ultimate subtenant had been identified and Leaseco paid no separate purchase price. | Weingarten is persuasive precedent; but even without a unitary two-step, this assignment meets § 363(m) criteria for other reasons. | Weingarten is informative but not controlling; court declines to treat it as outcome-determinative but finds § 363(m) applies here nonetheless. |
Key Cases Cited
- In re WestPoint Stevens, Inc., 600 F.3d 231 (2d Cir. 2010) (§ 363(m) limits appellate review of unstayed sales; only good-faith challenges survive).
- In re Gucci, 105 F.3d 837 (2d Cir. 1997) (statutory mootness under § 363(m) preserves finality of consummated bankruptcy sales).
- Weingarten Nostat, Inc. v. Service Merchandise Co., 396 F.3d 737 (6th Cir. 2005) (applies § 363(m) to designation/assignment transactions when sale is effectively unitary to an identified subtenant).
- Cinicola v. Scharffenberger, 248 F.3d 110 (3d Cir. 2001) (assignments authorized under both §§ 363 and 365 can fall within § 363(m) protections).
- In re Rickel Home Ctrs., Inc., 209 F.3d 291 (3d Cir. 2000) (§ 363(m) applies where bankruptcy court authorized sale under § 363 even if assignment framed under § 365).
- Krebs Chrysler-Plymouth, Inc. v. Valley Motors, Inc., 141 F.3d 490 (3d Cir. 1998) (distinguishes mere § 365 assignments from transactions authorized under § 363 that trigger § 363(m)).
- In re Adamson Co., Inc., 159 F.3d 896 (4th Cir. 1998) (treats lease assignments made for valuable consideration as § 363 sales).
- In re Exennium, Inc., 715 F.2d 1401 (9th Cir. 1983) (lease purchases treated as § 363 transactions for mootness analysis).