Summary
The Fifth Circuit held that an appeal of a bankruptcy court's order approving a non-severable settlement and sale of estate assets was statutorily moot under 11 U.S.C. § 363(m) because the objecting creditor failed to obtain a stay pending appeal. The court declined to apply equitable mootness, as no reorganization plan had been proposed and the transaction lacked the complexity typically required for that doctrine. Section 363(m) bars appellate review of authorized sales or leases of estate property when the order was not stayed, even if the challenge targets only a cash disbursement integral to the sale.
Topics
Practice areas
Questions Presented
- Whether the appeal is moot under the doctrine of equitable mootness or under 11 U.S.C. § 363(m).
Holdings
- Equitable mootness does not apply because no Chapter 11 plan has been proposed and the transaction was not sufficiently complex.
- Yes, the appeal is statutorily moot under § 363(m) because New Industries did not obtain a stay of the bankruptcy court's order approving the sale and settlement, and the settlement was an essential feature of the sale, making the entire transaction unreviewable on appeal.
Key quotations
“In bankruptcy, the right to appeal must sometimes give way to a heightened interest in finality.” (1000)
“Equitable mootness is a scalpel rather than an axe.” (1001)
“but we conclude that section 363(m) made the bankruptcy court's approval the final word on the subject when the objector did not obtain a stay of that ruling.” (1000)
“Congress has ordered us not to review such decisions by the bankruptcy court when they are not stayed.” (1006)
Factual background
Sneed Shipbuilding owned two shipyards, including one in Channelview, and filed for bankruptcy in 2016. After reorganization efforts failed, the court appointed a trustee. The trustee sued the probate estate of Martin Sneed, alleging fraudulent transfer of the Channelview shipyard. To avoid prolonged litigation, the trustee negotiated a settlement with the probate estate and a sale to San Jac Marine, both conditional on each other. The bankruptcy court approved the settlement and sale in a single order, finding them non-severable. New Industries, an unsecured creditor, objected but did not seek a stay of the order.
Procedural history
The bankruptcy court approved a settlement and sale of estate assets. New Industries, an unsecured creditor, objected and appealed. The district court dismissed the appeal as moot. New Industries appealed to the Fifth Circuit.