New Indus., Inc. v. Byman (In Re Sneed Shipbuilding, Inc.), 914 F.3d 1000

Sneed Shipbuilding filed bankruptcy; trustee alleged fraudulent transfers of the Channelview shipyard and sued the probate estate of Martin Sneed to recover title.
Operations at the Channelview yard faltered; trustee sought to sell the property to San Jac Marine but needed clear title to close.
To secure the sale, the trustee negotiated a settlement with Martin’s probate estate: payout (≈$8M) and releases in exchange for relinquishing title claims and other claims; sale payment (~$15M) would fund clearing liens and taxes.
Bankruptcy court approved a single, non‑severable order approving both the settlement and the sale; unsecured creditor New Industries objected to the payment to the probate estate but did not obtain a stay.
New Industries appealed the approval; the district court dismissed the appeal as moot. The trustee argued both equitable mootness and statutory mootness under 11 U.S.C. § 363(m).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether equitable mootness bars the appeal	Equitable mootness should apply because undoing the transaction would be disruptive	Trustee: equitable mootness applies; but the court should be cautious	Court: equitable mootness inappropriate here — sale not part of a substantially consummated reorganization and not complex enough
Whether § 363(m) bars review of the sale/settlement without a stay	New Industries: challenge limited to cash disbursement, not the sale itself	Trustee: disbursement was essential to the sale; without a stay, § 363(m) precludes appellate review	Court: § 363(m) applies — settlement and sale were mutually dependent and appeal is barred because no stay was obtained
Whether parts of the transaction can be severed for appellate review	New Industries: court can review disbursement separately	Trustee: the settlement and sale are non‑severable; severance impossible	Court: non‑severable; cannot isolate the disbursement from the sale
Whether appellate intervention is warranted despite purchaser reliance policy	New Industries: appellate review remains necessary to protect creditors	Trustee: policy favoring finality of consummated sales to encourage bidders defeats review	Court: congressional policy in § 363(m) favors finality and buyer reliance; appeal dismissed

In re Manges, 29 F.3d 1034 (5th Cir. 1994) (describing equitable mootness in bankruptcy appeals)
In re UNR Indus., Inc., 20 F.3d 766 (7th Cir. 1994) (noting courts should avoid disturbing consummated bankruptcy transactions)
In re Pacific Lumber Co., 584 F.3d 229 (5th Cir. 2009) (treating equitable mootness cautiously; requiring substantial consummation)
In re Hilal, 534 F.3d 498 (5th Cir. 2008) (equitable mootness typically requires substantial consummation)
In re Ginther Trusts, 238 F.3d 686 (5th Cir. 2001) (applying § 363(m) to bar appeals of sales even when jurisdictional questions were raised)
In re Bleaufontaine, Inc., 634 F.2d 1383 (5th Cir. 1981) (discussing policy rationale for finality of bankruptcy sales to encourage bidders)
In re Trism, Inc., 328 F.3d 1003 (8th Cir. 2003) (holding challenge to a release essential to a sale was moot under § 363(m))