572 B.R. 391
Bankr. S.D. Florida2016Background
- TLO (debtor) developed the proprietary BOLT IP (BOLT language, BParser compiler/runtime) and filed chapter 11 in May 2013; TransUnion subsidiary TRADS (buyer) purchased substantially all assets at a § 363 auction for $154M in November 2013.
- The Sale Motion, Stalking Horse APA, Draft Sale Order, and final Sale Order expressly described Intellectual Property (including BOLT/BParser) as Acquired Assets and provided the sale would be “free and clear” of interests; the Sale Order found TRADS a good-faith purchaser and retained jurisdiction to enforce the Order.
- Ole Poulsen (co‑founder of TLO) claimed ownership of components of the BOLT IP and had moved from Florida to Oregon before the sale; TLO and its agents mailed sale-related notices to addresses on the creditor/equity mailing matrix and used commercial service vendors; proof of mailing and USPS forwarding evidence was introduced.
- TRADS conducted extensive legal and technical due diligence and relied on TLO’s representations that TLO owned the BOLT IP (including reps/warranties in the APA and supporting disclosure schedules). TRADS would not have purchased without the BOLT IP.
- After the sale TRADS learned TBO (later IDI) contracted to buy purported BParser rights from Poulsen; TRADS sued and moved to enforce the Sale Order, seeking declaratory relief and sanctions for violation of the Sale Order.
- The bankruptcy court tried the adversary proceeding and (a) denied defendants’ motion to dismiss, (b) found Poulsen received adequate notice or was on constructive notice, (c) found TRADS acted in good faith under § 363(m), (d) held TLO owned the BOLT IP as a work-made-for-hire because Poulsen was an employee when he created it, and (e) granted TRADS’ motion to enforce the Sale Order and awarded sanctions against TBO.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May defendants collaterally attack the final Sale Order years after closing? | TRADS: sale is final; defendants must use Rule 60(b) or timely appeal; defendants did not appeal or seek timely relief. | Defendants: Sale Order should be set aside because TLO lacked rights to sell BOLT IP and Poulsen lacked notice/due process. | Court: Collateral attack barred; defendants failed to show Rule 60(b) grounds; equitable mootness applies. |
| Was notice and due process adequate to extinguish Poulsen’s asserted interest? | TRADS: certificates of service, commercial vendors, USPS forwarding and mailing practices show mail was properly addressed/mailed and reasonably calculated to give notice. | Poulsen: did not receive critical pleadings at his Florida address and thus lacked due process. | Court: Notices were properly mailed (Florida/Oregon addresses equivalent for USPS purposes); presumption of receipt not rebutted; due process satisfied. |
| Did TRADS purchase in good faith and get § 363(m) protections? | TRADS: extensive due diligence, relied on TLO reps/warranties, no fraud/collusion; would not have bought if BOLT IP uncertain. | Defendants: TRADS knew source code was not in TLO possession and therefore had notice of adverse claim. | Court: TRADS paid value, acted without fraud or collusion, relied reasonably on TLO representations—was a good-faith purchaser entitled to § 363(m) protection. |
| Who owned BOLT IP at sale (work-made-for-hire)? | TRADS: Poulsen was an employee of TLO when he developed BOLT; work-made-for-hire doctrine vests ownership in TLO. | Poulsen/TBO: Poulsen created BOLT before TLO existed or as an owner/independent contractor, so he retained ownership. | Court: Applying common-law agency factors, Poulsen was an employee (title, salary/benefits, regular work, integration into business); BOLT was created within scope of employment; TLO owned the IP at sale. |
Key Cases Cited
- Regions Bank v. J.R. Oil Co., 387 F.3d 721 (8th Cir.) (final bankruptcy sale order binds the world and may only be set aside for fraud, unfairness, mistake, or under Rule 60(b))
- FutureSource LLC v. Reuters Ltd., 312 F.3d 281 (7th Cir.) (failure to object to a bankruptcy sale given adequate notice constitutes consent under § 363(f)(2))
- In re Savage Indus., Inc., 43 F.3d 714 (1st Cir.) (notice is cornerstone of bankruptcy procedure; due process requires notice reasonably calculated to apprise interested parties)
- Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (U.S.) (due process requires notice reasonably calculated under the circumstances)
- Dusenbery v. United States, 534 U.S. 161 (U.S.) (actual receipt not required where notice is reasonably calculated to inform)
- Konst v. Fla. E. Coast Ry. Co., 71 F.3d 850 (11th Cir.) (rebuttable presumption that properly mailed items are received)
- Weigner v. City of New York, 852 F.2d 646 (2d Cir.) (mailed notice generally satisfies due process despite imperfect reliability of mail)
- Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730 (U.S.) (employees v. independent contractors: apply common-law agency factors to determine employment for copyright work-made-for-hire)
- JustMed, Inc. v. Byce, 600 F.3d 1118 (9th Cir.) (in start-up contexts control factor may be less significant; other employment indicia can support employee finding for work-made-for-hire)