MOAC Mall Holdings LLC v. Transform Holdco LLC
Overview
Overview
When Transform Holdco purchased Sears and Kmart's assets through a bankruptcy sale, the buyer disputed which leases were included; MOAC Mall Holdings challenged certain lease assignments as improper. The Supreme Court held 9-0 that the provision of the Bankruptcy Code protecting buyers at bankruptcy sales from reversal on appeal is not jurisdictional, meaning parties can waive it, and courts of appeals retain jurisdiction to hear challenges to bankruptcy sale orders.
The Facts
Facts
In the Sears bankruptcy, Transform Holdco purchased substantially all of Sears's assets. Disputes arose over whether certain property leases were included in the sale. MOAC Mall Holdings, a landlord, challenged the assignment of its lease to Transform on appeal. Transform argued that 11 U.S.C. §363(m), which limits the ability to reverse or modify approved bankruptcy sales, stripped the appeals court of jurisdiction to review the transaction.
The Issue
Issue
Whether 11 U.S.C. §363(m), which provides that the reversal or modification of a bankruptcy sale order does not affect the validity of a sale to a good-faith purchaser who did not know of a stay pending appeal, is a jurisdictional provision that courts must apply even when it has not been raised by the parties.
The Rules
Rule
A statutory provision is jurisdictional only if Congress has clearly stated that it is a limitation on a court's power to hear a case, as opposed to a restriction on the merits or an affirmative defense subject to waiver. Section 363(m) does not clearly speak to jurisdiction; it addresses the effect of reversal on a completed sale. Absent clear congressional designation, a statutory provision is treated as a claims-processing rule or merits element, not a jurisdictional bar.
The Application
Analysis
Transform argued that §363(m) stripped the appeals court of jurisdiction to hear MOAC's challenge to the lease assignment, but the Court applied the jurisdictional test and found that §363(m) did not clearly state it was a limitation on courts' power to hear cases. Instead, §363(m) addressed only the legal effect of a reversal on a completed sale to a good-faith purchaser. A merits question rather than a jurisdictional bar. Because §363(m) failed to meet the clear congressional standard for jurisdictional provisions, Transform could not use it to divest the appeals court of power to consider MOAC's claims. This distinction preserved the appeals court's jurisdiction while still protecting good-faith purchasers under the statute's substantive protections.
The Conclusion
Conclusion
The Supreme Court held 9-0 that §363(m) is not jurisdictional and therefore can be forfeited or waived by a party. Courts of appeals retain jurisdiction to consider challenges to bankruptcy sale orders, leaving the bankruptcy court's determination as the last word only when the sale was to a good-faith purchaser who took without notice of a stay.
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