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Wayne Greenwald, P.C.

Do Bankruptcy Settlements (Fed.R.Bankr.P. 9019) On Appeal Get The Same
Protections (11 U.S.C. § 363(m)) As Bankruptcy Sales (11 U.S.C. § 363(b)) On Appeal?[1]

Bankruptcy cases frequently have transfers of the bankruptcy estate’s property through court-
approved sales.[2] Sometimes those sales are challenged.[3] Often those challenges are overruled.[4]
Sometimes the order approving the sale is appealed.[5]
The usual practice is the motion seeking the sale includes a request for 11 U.S.C. § 363(m) (“§
363″) protections. Those protections are:

  • The reversal or modification on appeal of an authorization under subsection (b) or
    (c) of this section of a sale or lease of property does not affect the validity of a
    sale or lease under such authorization to an entity that purchased or leased such
    property in good faith, whether or not such entity knew of the pendency of the
    appeal, unless such authorization and such sale or lease were stayed pending

Stated simply, if the challenger wins the appeal after the sale is completed, the sale is

Do transfers of estate property through a court-approved settlement[6] get the same protections,
when neither the motion seeking or the order approving the settlement:

  1. refer to § 363(m);
  2. describe the transaction as a sale;
  3. consider whether the transaction satisfies § 363(b)’s requirements for a sale?

Are those appeals statutorily moot?

Notice/Due Process Issue

Initially, if a Motion and notice of the Motion only discuss a Rule 9019 Settlement, not a §
363 sale, is the due process requirement satisfied? “The very essence of due process is the
requirement of notice and an opportunity to be heard.”[7] If parties in interest are not provided full
notice of all the relief the motion sought, the answer can be no.[8]

The Rule 9019 Process vs.
the § 363 Sale Process

Sales under § 363(b) generally require Trustees seeking “higher and better” offers for the sale,
as contemplated by § 363(b)(1).[9] Fed.R.Bankr.P. 9019 settlements lack that requirement.[10]
Fed.R.Bankr.P. 9019 requires only that the settlement not fall “below the lowest point in the range of reasonableness.”[11]

Motions seeking Rule 9019 approval of a settlement which want § 363(m) protections should
address and satisfy § 363(b)’s requirements. Those that don’t, don’t get § 363(m) protections.[12] As
one court opined:

  • . . .it is clear from the record that in the Trustee’s motion to approve this compromise,
    the motion was not identified as a Section 363 asset sale, it was not briefed as such a
    sale, and the Bankruptcy Court did not indicate that it was deciding the issue under
    Section 363. This court therefore will not hold Objecting Parties to its standards.

Yes, settlements invoking Rule 9019, frequently involve transfers of property or a property
right.[13] However, “every sale of property involves a transfer, but not every transfer is a sale.”[14]


  • while § 363(m) applies to sales, no comparable provision applies to settlements under
    Rule 9019. Further, applying § 363(m) to settlements would not further that subsection’s
    purpose. Section 363(m) is intended to increase the confidence of purchasers in
    bankruptcy sales and then encourage them to buy estate assets for higher prices. See In
    re Ernst Home Ctr., Inc.
    , 209 B.R. 974, 986 (Bankr.W.D.Wash.1997) (“The intent of
    Section 363(m) is to encourage third parties to do business with a debtor in possession,
    by providing certainty and finality to a transaction where consideration is paid in good
    faith to the estate by that third party.”). This purpose is not directly related to

We therefore conclude that this appeal is not statutorily moot under § 363(m).[15]

Nor does § 363(m) mootness “by its terms, apply to orders approving compromises, it applies

to orders granting Section 363(b) or (c) motions to sell assets.[16]

The differentiation is consistent with § 363’s and Rule 9019’s applications. Section 363 and
Rule 9019 apply different standards.[17] A § 363 sale and a Rule 9019 compromise “may be bundled
together as a package.”[18] Then, the movant must adhere to procedures and standards for both forms
of relief.[19] The bankruptcy court must make independent determinations that the sale and the
compromise should be approved.[20] Failure to do can result in vacating the order approving the

Using the Lesson

This analysis does not mean that Rule 9019 motion objectors can relax in their objections.
Courts may disagree with this analysis.[22] It means that parties to settlements who want § 363(m)
protections better comply with § 363(b)’s requirements. Or, there’s a substantial risk of not getting §
363(m) benefits. As my Aunt Syl would say, “if you don’t ask, you don’t get.”

[1]© 2022 Wayne M. Greenwald

[2] See, 11 U.S.C. § 363(b)

[3]See, In re Sears Holdings Corporation, 2021 WL 5986997(2nd Cir. 2021).



[5]See, In re Stadium Management Corp., 895 F.2d 845, 847 (C.A.1 (Mass.)(“The effect
of § 363(m) is that “when an order confirming a sale to a good faith purchaser is entered and a
stay of that sale is not obtained, the sale becomes final and cannot be reversed on appeal.”)
[6]Fed.R.Bankr.P. 9019 (“Rule 9019”).
(a) On motion by the trustee and after notice and a hearing, the court may approve a
compromise or settlement. Notice shall be given to creditors, the United States trustee,
the debtor, and indenture trustees as provided in Rule 2002 and to any other entity as the
court may direct.
Rule 9019(a)
[7]See, International House v. N.L.R.B., 676 F.2d 906, 911 (2nd Cir. 1982)

[8]See, A Catastrophic Collision: Due Process and Section 363 Free and Clear Asset
Sales Meet Head-On in the GM Bankruptcy,
26 No. 3 J. Bankr. L. & Prac. NL Art. 1 (e.g.
“Where a future claimant has no reason to know why or how such bankruptcy or sale will affect
his or her rights, such a claimant “is no more able to become a claimant in the bankruptcy
proceeding than if he had not received notice at all.”206 Accordingly, notice of nothing more
than the proceedings is considered a “mere gesture,” not due process.”)

[9]See, In re Marrose Corp., 1992 WL 33848, at *1 (Bankr S.D.N.Y., 1992)(§ 363(b)(1)
contemplates “higher and better offers.”).
[10] In re PBS Foods LLC, 2015 WL 3465815, at *5 (Bkrtcy.S.D.N.Y., 2015)(“The Court .
. . was required to assess the Settlement solely under the Rule 9019 standards—not to consider whether the Settlement was higher and better than any competing offers.”)
[11]Cosoff v. Rodman (In re W.T. Grant Co.), 699 F.2d 599, 608 (2d Cir. 1983) (citation
omitted), In re Ditech Holding Corporation, 606 B.R. 544, 623 (Bkrtcy.S.D.N.Y., 2019), In re
Royal Alice Properties, LLC,
2021 WL 5711988, at *6 (Bkrtcy.E.D.La., 2021), In re PBS Foods
2015 WL 3465815, at fn. 7
[12]See, In re SK Foods, L.P., 2011 WL 2709648, at *5 (E.D.Cal.,2011)(“SK Foods”)
[13]In re Fridman, 2016 WL 3961303, at *5–6 (9th Cir.BAP 2016) (“Fridman“), SK
2011 WL 2709648, at *4–5. Contra. In re Pursuit Holdings (NY), LLC, 845 Fed.Appx.
60, 62–63 (2nd Cir. 2021) (“. . .the settlement of the claims at issue here was an integral part of
the sale of estate property. Accordingly, we agree with the district court that the order in question
was indeed a sale under § 363(b) to which § 363(m)’s mootness rule applies.)
[14]In re NNN 3500 Maple 26, LLC, 2014 WL 1407320, at *8 (Bkrtcy.N.D.Tex.,2014),
citing, In re Pacific Lumber, 584 F.3d 229, 245 (5th Cir.2009).

[15]Fridman, 2016 WL 3961303, at *5–6

[16]SK Foods, 2011 WL 2709648, at *5.

[17] In re Buffalo Coal Co., 2006 WL 3359585, at *3 (Bkrtcy. N.D.W.Va., 2006).

[18] Id., at *4.

[19] Id.

[20] In re Buffalo Coal Co., 2006 WL 3359585, at *4

[21]See, In re Lahijani, 325 B.R. 282, 290 (9th Cir.BAP 2005).

[22] e.g., In re Pursuit Holdings (NY), LLC, 845 Fed.Appx.62–63.