Schepis v. Burtch (In Re Pursuit Capital Management, LLC)

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________

No. 16-3953
_____________

In re: PURSUIT CAPITAL MANAGEMENT, LLC,
Debtor

ANTHONY SCHEPIS; FRANK CANELAS; PURSUIT
INVESTMENT MANAGEMENT, LLC; PURSUIT
OPPORTUNITY FUND, I, LP; PURSUIT CAPITAL
MANAGEMENT FUND, I, LP,
Appellants

v.

JEOFFREY L. BURTCH, Chapter 7 Trustee
_______________

On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 1-15-cv-00801)
District Judge: Hon. Richard G. Andrews
_______________

Argued
June 12, 2017
 Before: JORDAN, KRAUSE, Circuit Judges and
STEARNS*, District Judge.

(Filed: October 24, 2017)
_______________

Daniel N. Brogan
Stuart M. Brown
R. Craig Martin [ARGUED]
DLA Piper
1201 N. Market St. – Ste. 2100
Wilmington, DE 19801
Counsel for Appellants

Mark E. Felger
Barry M. Klayman
Cozen O’Connor
1201 N. Market St. – Ste. 1001
Wilmington, DE 19801

Wendy B. Reilly [ARGUED]
Debevoise & Plimpton
919 Third Ave.
New York, NY 10022
Counsel for Appellee
_______________

OPINION OF THE COURT
_______________

*
Honorable Richard G. Stearns, United States District
Court Judge for the District of Massachusetts, sitting by
designation.

2
JORDAN, Circuit Judge.

This case seems at first blush to be about the validity
of the sale of legal claims listed as assets in a bankruptcy
estate, but, at this point, it is really about whether such merits
issues have been preserved for present review. The appointed
Trustee reached an agreement to sell the claims to certain of
the debtor’s creditors (the “Creditor Group”1). After the
Trustee sought court approval of the sale, the parties against
whom the claims are now being asserted (the “Pursuit
Parties”2) objected to the sale and sought to purchase the

1
The creditors involved in the agreement are as
follows: 1) Harris, O’Brien, St. Laurent & Chaudhry LLP; 2)
Reed Smith LLP; 3) Alpha Beta Capital Partners, L.P.; 4)
Claridge Associates, LLC; 5) Jamiscott LLC; 6) Leslie
Schneider and Lilian Schneider, individually and as
representatives of Leonard Schneider’s estate. The notice of
appeal lists as interested parties the following: Reed Smith,
LLP; Alpha Beta Capital Partners, L.P.; Claridge Associates,
LLC; Jamiscott LLC; Leslie Schneider; Lilian Schneider; and
the Estate of Leonard Schneider. Appellants state that the
creditors are “mostly former limited partners in funds for
which the Debtor acted as general partner and who were
already engaged in litigation with the former princip[al]s of
the Debtor[.]” (Opening Br. at 5.) The Trustee describes
them as “the Debtor’s two non-insider creditor
constituencies.” (Answering Br. at 4.)
2
The Pursuit Parties are the appellants and consist of
Anthony Schepis, Frank Canelas, Pursuit Investment
Management, LLC, Pursuit Opportunity Fund I, L.P., and
Pursuit Capital Management Fund I, L.P.

3
claims themselves. The various players engaged in
negotiations and a bidding process, and the Trustee eventually
decided to sell the claims to the Creditor Group for $180,001.
Over objections raised by the Pursuit Parties, the Bankruptcy
Court approved the sale. The Pursuit Parties did not seek a
stay, and the sale closed. The Creditor Group then
immediately sued on the claims in the Bankruptcy Court.

The Pursuit Parties appealed to the District Court,
challenging, among other things, the Trustee’s ability to sell
the claims. The District Court dismissed the appeal as
statutorily moot under 11 U.S.C. § 363(m), because the
Pursuit Parties had not obtained a stay and their requested
remedy, if entered, would affect the validity of the sale. The
Pursuit Parties now appeal to us. Like the District Court, we
conclude that the appeal is statutorily moot under 11 U.S.C.
§ 363(m) and must therefore be dismissed.

I. Background3

A. The Bankruptcy Filing and Initial
Agreement

Pursuit Capital Management, LLC (“Pursuit” or the
“Debtor”) is a Delaware limited liability company and former

3
We recite the background according to the factual
findings of the Bankruptcy Court, none of which have been
shown to be clearly erroneous. See Cinicola v.
Scharffenberger, 248 F.3d 110, 115 n.1 (3d Cir. 2001) (“We
review the bankruptcy court’s findings of fact under a clearly
erroneous standard[.]”).

4
general partner in investment funds. Anthony Schepis and
Frank Canelas founded Pursuit and acted as its managing
members. Pursuit in turn formed Pursuit Capital
Management Fund I, L.P. and, later, Pursuit Opportunity
Fund I, L.P. Those two funds were created to “acquire
securities for trading and investment appreciation.” (Opening
Br. in Support of Mot. to Dismiss, Docket No. 8 at 5,
Claridge Assocs., LLC v. Schepis (In re Pursuit Capital
Management, LLC), No. 16-50083 (Bankr. D. Del.)
(hereinafter “In re Pursuit”).) They “invest[ed] substantially
all of their assets in offshore entities formed under the laws of
the Cayman Islands.” (Id.) Pursuit was the general partner of
those entities and focused on their day-to-day management.

Pursuit voluntarily petitioned for Chapter 7 bankruptcy
on March 21, 2014, after it became liable on legal judgments
for $5 million. Jeoffrey L. Burtch was appointed as the
Trustee of the Pursuit estate. When Pursuit filed its schedules
of assets and statements of financial affairs, it listed
essentially no assets but indicated that it had a “[p]otential
indemnification claim” against one of the funds it managed
(JA at 84), as well as claims connected to two other cases.
The financial statements revealed that Pursuit’s gross income
for 2011 was $645,571.22 from Pursuit Capital Management
Fund I, L.P., “which was subsequently transferred to
[Pursuit’s] members” in early 2013. (JA at 102.) According
to the Creditor Group, Schepis and Canelas, as the sole
owners and managers of the company, “enrich[ed] themselves
at the expense of the Debtor’s creditors, and engaged in
corporate machinations to avoid paying money owed to the
Debtor[.]” (Complaint, In re Pursuit, Docket Nos. 1 & 2.)
More specifically, the Creditor Group said that Schepis and
Canelas “secretly transferred to themselves ... $645,571 in

5
cash held in the Debtor’s bank account, in exchange for no
consideration.” (Id.) That transfer may trigger an avoidance
claim under the Bankruptcy Code, which allows a trustee to
rescind certain transfers of property from a debtor’s estate.
See, e.g., 11 U.S.C. §§ 544, 547, and 548. According to the
Trustee, selling the potential avoidance claim was advisable
because the bankruptcy estate had no funds available to
“administer the estate, let alone [to] pursue the claim[] and
litigation[.]” (JA at 181.)

The Trustee negotiated with the Creditor Group, and,
on March 2, 2015, he filed a motion for a court order
approving an agreement to “settle, transfer and assign” the
avoidance claim and other potential claims to that group.4
(JA at 182.) The Creditor Group agreed to purchase the
claims for $125,000 in exchange for a concession that it
“shall be permitted to bring the ... [c]laims in the Bankruptcy
Court, and [is] deemed to have standing to bring such claims
in the Bankruptcy Court.” (Id.) The Trustee stated in his
motion for approval of the sale that, “[i]n [his] business
judgment, the [Creditor Group’s offer] represent[ed] a fair

4
All told, the claims at issue against Pursuit and its
affiliates include the following: “claims asserted in ... [a
separate action] (the ‘New York action’);” potential
indemnification claims against Pursuit Capital Management
Fund I, L.P.; the potential avoidance claim; and an asserted
interest in potential proceeds from a then-pending separate
litigation called the “UBS litigation[.]” (JA at 495-98.) The
primary focus here is on the avoidance claim. The Creditor
Group is currently pursuing the claims as “fraudulent
transfers ... [p]ursuant to 11 U.S.C. §§ 544, 548[.]” (In re
Pursuit, Docket No. 1 at 23-24).)

6
and reasonable price for the claims[.]” (JA at 185.) The
Trustee also stated that he was willing to entertain “additional
proposals for the assets on similar terms” as an “additional
test of ... fairness[.]” (JA at 188.)

Ten days later, on March 12, 2015, the Pursuit Parties
filed an objection to the Trustee’s sale motion, arguing
primarily that a lack of good faith undermined the fairness of
the agreement, and that the deal did not maximize the value
of the estate. In light of that objection, the Bankruptcy Court
directed that the Trustee entertain purchase offers from the
Pursuit Parties. After discussions between the Trustee and
the Pursuit Parties, during which the Pursuit Parties offered
$147,500 for the claims, the Trustee decided that an auction
was the best means to maximize value for the estate. He
sought and received the Bankruptcy Court’s permission to
conduct one.

B. The Auction

To establish ground rules, the Trustee filed a motion
for approval of proposed auction procedures, including a
provision that the Trustee be allowed to modify the
procedures “as he deem[ed] appropriate to comply with his
fiduciary obligation[,]”5 to determine in his “sole discretion”
the highest and best bid, to reject any bid that he deemed

5
“The Trustee proposes that the auction of the Estate’s
assets be governed by the following procedures ... subject to
modification by the Trustee as he deems appropriate to
comply with his fiduciary obligation[.]” (JA at 241.)

7
inadequate,6 and to negotiate individually or openly with each
bidder.7 (JA at 241.) The Bankruptcy Court approved that
motion “in [its] entirety.” (JA at 254.)

The auction took place by teleconference on July 7,
2015, with the Pursuit Parties and the Creditor Group as the
only interested bidders. The Trustee initially stated that the
Pursuit Parties’ prior offer of $147,500 was the highest and
best, and the bidding proceeded from there in $10,000
increments. Before it could be concluded, the auction
abruptly adjourned because the lawyer for the Pursuit Parties
asserted that he had a scheduling conflict.8 But, the Trustee

6
“The Trustee reserves the right to (i) determine in his
sole discretion which bid(s) is/are the highest and otherwise
best, and (ii) reject at any time, without liability, any bid that
the Trustee, in his business judgment, deems to be (1)
inadequate or insufficient, (2) not in conformity with the
Bankruptcy Code, the Bankruptcy Rules, the Local Rules or
these procedures, or (3) contrary to the best interests of the
Estate[.]” (JA at 242.)
7
“The auction may include individual negotiations
with each bidder and/or open bidding; provided, however,
that all bids shall be made and received in one room, on an
open basis, and each bidder shall be entitled to be present for
all bidding, and all material terms of each bid shall be fully
disclosed to all bidders[.]” (Id.)
8
An acrimonious tone arose early in the auction
process when the Pursuit Parties’ counsel, Peter Cane, refused
to identify his clients during the introductory appearances at
the teleconference. Then the auction was adjourned when

8
Mr. Cane hung up to attend a scheduling conference in a
related case. The following exchange between Mr. Cane and
Jon Harris, counsel to the Creditor Group, took place before
the auction adjourned:

Mr. Cane: So you know, I have a conference
with the New York court at three o’clock at Jon
Harris’s request, and we agreed to it. I am not
going to skip that. The Court scheduled it.

Mr. Harris: That is a scheduling conference.
Sarah Coleman can handle that, or anyone else,
and I’m sure it will be quite brief as well.

Mr. Cane: Don’t tell me who can handle what.
This is about sanctions against you for
fraudulently misrepresenting facts to the court.
Don’t make it worse for yourself.

(Recess)

Mr. Felger: [Mr. Cane], are you on the line?
How about Sarah? I’m hearing nothing. I
received an e-mail from [Mr. Cane] at 3:27. It
says, “Mark, the New York court has asked us
to try again at four o’clock, which means I need
to call my adversary at 3:55. I am not sure how
long it will take. I know I will be completely
clear, as will my client, between 8:30 and nine
o’clock, so I suggest we resume then if that is
agreeable to everyone else. As you said, these
auctions often go to midnight[.]”

9
stated before adjourning that the Pursuit Parties’ last bid of
$170,000 was preferred to any others that had been made to
that point.

The Trustee subsequently proposed eight alternative
dates as options to reconvene the auction, though none was
acceptable to all of the parties. Instead of postponing the
process further, on July 24, 2015, the Trustee requested final
sealed bids from the parties, to be delivered no later than
July 30, 2015. On that date, the Trustee received one sealed
bid from the Creditor Group for $180,001 and he received
nothing from the Pursuit Parties. In fact, not only did the
Pursuit Parties fail to submit a bid, they also informed the
Trustee that they were withdrawing their prior bids from
consideration. Not surprisingly, then, the Trustee agreed to
sell the claims to the Creditor Group, after some additional
negotiations and modifications to the bid. A day later, the
Trustee announced that he would seek approval of the sale
agreement at a hearing on August 10, 2015.

The sale agreement between the Trustee and the
Creditor Group specified that the Creditor Group would
acquire a set of claims, including the avoidance claim that is
the primary focus of the merits arguments in this case. The
agreement also stated that the Creditor Group would pursue
the claims “at their cost and expense [and] ... [a]ny net
recovery will be paid into the estate for distribution to all
creditors[.]” (JA at 423-24.) Additionally, the agreement
contained no representations or warranties regarding the

(JA at 399-400.)

10
claims, and they were to be sold on an “as is[,] where is”
basis. (JA at 501.)

Before the date of the sale approval hearing, the
Pursuit Parties filed a motion to adjourn it, which prompted a
hearing to address that request. The Trustee stated at that
time that he had been prepared to move forward with the
Creditor Group’s sealed bid, but he was wavering because the
Pursuit Parties had just “made a new offer” by email that had
different terms from their previous offer and was for “a
higher dollar amount than the proposal by the [C]reditor
[G]roup.”9 (JA at 492, 514.) Citing the “difficult spot” that
he was in because “[his] job ... is to maximize value[,]” the
Trustee deferred to the Bankruptcy Court’s judgment, stating
that he was not opposed to a temporary adjournment so long
as a definitive date was set to resolve the matter. (JA at 514-
16.) The Creditor Group strongly opposed the Pursuit
Parties’ motion for an adjournment, arguing that there had
been delay enough, that each delay harmed the value of the
claims they sought to purchase, and that they should prevail
in the auction because they had abided by the rules during the
final sealed bidding process.

The Bankruptcy Court rejected the Pursuit Parties’
request to adjourn the sale hearing. The Court stressed that
the Pursuit Parties did not submit a final bid when requested
and that there was concern with “the way th[e] Court and
other parties’ schedules and th[e] Court’s orders [were] being
ignored, to some extent, by the Pursuit Parties.” (JA at 521.)
The Bankruptcy Court thus ruled that the sale hearing would

9
That new offer amounted to $200,000.

11
go forward and, if the Trustee wanted to change his mind
about selling to the Creditor Group, he could do so. After
that hearing, the Pursuit Parties made a new offer of $220,000
to the Trustee, again via email, conditioned on the Trustee
declaring the Pursuit Parties to be the prevailing bidder. The
Trustee ultimately rejected that offer.

C. The Sale Approval Hearing

The hearing to approve the sale took place on
August 10, 2015. At the outset, the Pursuit Parties asked the
Court to reopen the auction rather than proceed with the
hearing. They then and there presented the Trustee with yet
another offer – apparently one that had not been discussed
previously – in the amount of $205,750 and with modified
terms that would “settle[] ... [the] avoidance claim[.]”10 (JA
at 441-43.) After reviewing the new offer, the Trustee again
acknowledged that he was in a difficult situation, but then
stated that he was “prepared to move forward on the motion
[to approve the sale agreement,]” if the Court agreed,
because, “in the end ... the few dollars won’t make a bit of
difference to the creditors of th[e] estate, and the creditors of
th[e] estate are in the [C]reditor [G]roup[.]”11 (JA at 449.)

10
The bid was lower monetarily than the last one the
Pursuit Parties had made, but it contained new terms that the
Pursuit Parties presumably viewed as more valuable.
11
The Trustee noted that, if the Pursuit Parties’ offer
were accepted, the estate would lose out on the potential
recovery that would return to it under the deal with the
Creditor Group, which involved the bankruptcy estate sharing

12
 The Bankruptcy Court, after reviewing the history of
the case, including the Pursuit Parties’ litigating and bidding
behavior, rejected their request to reopen the auction. The
sale approval hearing continued with the Court allowing the
Trustee to testify and be subject to cross-examination. While
cross-examining the Trustee, counsel for the Pursuit Parties
attempted to present yet another offer, this time for $250,000,
but the Court did not permit counsel to bid “from the
podium.” (JA at 471.) After the Trustee’s testimony, the
Pursuit Parties laid out, among other arguments, three
objections to approval of the sale motion: 1) the bid accepted
by the Trustee was not the highest bid; 2) the auction
procedures had not been complied with; and 3) an avoidance
claim cannot be prosecuted by parties other than the trustee,
in a Chapter 7 context.

The Trustee countered by stating that the Creditor
Group’s bid was the best and highest that was offered “in
accordance with the rules.”12 (JA at 484.) He agreed that the
claim was sold on an “as-is, where-is” basis (JA at 485), but,

in the recovery on claims against the Pursuit Parties. That
potential recovery is approximately $645,000.
12
During their argument, the Pursuit Parties had
emphasized that the estate was insolvent and thus a higher bid
should be favored. Counsel for the Trustee acknowledged
that the estate was administratively insolvent but argued that
it would be so regardless of whether the Trustee had accepted
the Pursuit Parties’ offer of $205,750 offered at the start of
the hearing.

13
at least under the Creditor Group’s bid, there was a possibility
for recoveries from the claims that would be advanced against
the Pursuit Parties and would “flow into the estate and be
shared by creditors[.] Under [the Pursuit Parties’] revised
proposal ... there would be no opportunity for additional
monies flowing into the estate.” (JA at 484-85.) The Trustee
also argued that, when changes to the procedures were made,
they were in accordance with the modification provision in
those court-approved rules. (JA at 484-86.)

When the arguments concluded, the Bankruptcy Court
granted the Trustee’s motion to approve the sale agreement.
The Court applied the “sound business purpose test[,]” In re
ICL Holding Co., 802 F.3d 547, 551 (3d Cir. 2015) (citing In
re Montgomery Ward Holding Corp., 242 B.R. 147, 153-54
(Bankr. D. Del. 1999)), and, in relevant part, found that the
Trustee had exercised sound business judgment and that the
sale price was fair because $180,001 – with a potential
additional recovery – was substantially higher than the
original $125,000 offer. The Court also found that, because
there was no evidence of collusion, the Trustee and the
Creditor Group had acted in good faith.

After reviewing those factors, the Bankruptcy Court
responded to the Pursuit Parties’ arguments and objections. It
reiterated its denial of the request to reopen the auction,
reasoning that the need to uphold the integrity of the auction
process outweighed the potential of a higher bid under the
circumstances. In the same vein, the Court stated that it had
“no reason to quarrel with the trustee’s decision that the
offers made by the Pursuit Parties subsequent to the closing
of the auction are not highest and better[,]” taking into
account the potential additional recovery to the estate from a

14
successful suit on the claims. (JA at 428.) The Court also
rejected the Pursuit Parties’ complaint about the modification
of the auction procedures because the Trustee had been
empowered to make such a change when the auction
procedures were first presented for approval. While it agreed
that the Pursuit Parties should be able to raise “any and all
defenses they have to whatever litigation is brought,” the
Bankruptcy Court did not take a position on whether an
avoidance claim could be prosecuted by parties other than the
Trustee. (JA at 429.) With that, the Court approved the sale
and entered an order (the “Sale Order”) to that effect on
August 27, 2015.

D. The Appeals and the Creditor Group’s
Assertion of the Purchased Claims

The Pursuit Parties promptly appealed the Sale Order
to the District Court. Of utmost importance, however, they
did so without first seeking a stay of the order. In their
appeal, the Pursuit Parties argue “that the Bankruptcy Court
erred in entering the Sale Order because the Trustee alone is
authorized to prosecute the causes of action arising under the
Bankruptcy Code, and the Trustee lacked authority to assign
the causes of action to a non-fiduciary third party.” (JA at
52.) They also argue that the Bankruptcy Court’s findings of
good faith are erroneous. Within those arguments are
challenges to the integrity of the auction process as well as an
allegation that the auction procedures were applied to them
prejudicially.

Meanwhile, the Creditor Group has promptly pursued
the claims it purchased. They filed an adversary proceeding

15
against the Pursuit Parties in the Bankruptcy Court,13 and that
case has progressed concurrently with the appeal of the Sale
Order to the District Court and then the appeal to us. In the
adversary proceeding, the Pursuit Parties moved to dismiss,
arguing that the Creditor Group “do[es] not own the causes of
action asserted in the complaint and [is] not entitled to
prosecute [it,]” (JA at 53), because avoidance powers are
reserved “solely and exclusively” for a bankruptcy trustee.
(JA at 52.) In the alternative, they moved to stay the
adversary proceedings pending their appeals.

The District Court ruled that the appeal of the Sale
Order is statutorily moot under 11 U.S.C. § 363(m) because
no stay had been obtained and any reversal or modification of
the sale would naturally affect the validity of the sale. The
District Court also rejected the Pursuit Parties’ arguments
attacking the good faith and the integrity of the auction
process and its procedures. The Court specifically declined to
rule on whether a trustee can properly transfer avoidance
claims and whether non-trustee parties can prosecute such
claims. It recognized that the Pursuit Parties were attempting
to get a merits ruling:

[I]t would seem that [a request by the Pursuit
Parties that the Court decide the Creditor Group
has no power to prosecute the claims even
though they may own them] is essentially that
[it] decide the motion to dismiss that is
currently pending in [the] separate case before

13
The case is Claridge Associates, LLC v. Schepis (In
re Pursuit Capital Management, LLC), No. 14-10610, Adv.
No. 16-50083 (Bankr. D. Del.).

16
 the Bankruptcy Court. I do not think that this is
procedurally appropriate relief.

(JA at 55.) Instead, the District Court determined that:

finding that the Trustee lacked authority to
transfer the causes of action though not
nullifying the sale would affect its validity and
demonstrate that the sale was flawed. Such a
finding would impact the terms of the bargain
struck by the buyer and seller. If the
Bankruptcy Court had declined to approve the
sale of the causes of action, [the Creditor
Group] would undoubtedly have valued what
they were purchasing at a lower amount.

(JA at 56 (internal quotation marks and citations
omitted).)

In light of the District Court’s refusal to address the
merits, the Pursuit Parties again pressed in the Bankruptcy
Court the issue of a trustee’s ability to transfer his avoidance
powers. The Bankruptcy Court requested supplemental
briefing on that issue and conducted a hearing on it, but the
Court has deferred ruling on the issue pending our decision in
this appeal. (Memorandum, In re Pursuit, Adv. No. 16-
50083, Docket No. 103.)

17
II. Discussion14

The Pursuit Parties present numerous arguments
regarding a trustee’s ability to transfer avoidance powers, but
we cannot consider them if the appeal of the Sale Order is
moot under 11 U.S.C. § 363(m). See Cinicola v.
Scharffenberger, 248 F.3d 110, 127 n.19 (3d Cir. 2001)
(“[W]e must first answer the question of statutory mootness
before proceeding to the merits[.]”). That is the primary issue
before us, and we conclude that the appeal is indeed
statutorily moot.

A. The Test

Section 363(m) provides:

[t]he 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

14
The Bankruptcy Court had jurisdiction under 28
U.S.C. §§ 1334 and 157(b). The District Court heard the
appeal under 28 U.S.C. § 158(a)(1). We exercise jurisdiction
over the District Court’s final decision pursuant to 28 U.S.C.
§ 158(d). “Our review of the District Court’s ruling in its
capacity as an appellate court is plenary[.]” In re Seven Fields
Dev. Corp., 505 F.3d 237, 253 (3d Cir. 2007) (quoting In re
O’Lexa, 476 F.3d 177, 178 (3d Cir. 2007)). “[W]e review the
bankruptcy judge’s legal determinations de novo,” id., “and
‘its factual findings for clear error and its exercise of
discretion for abuse thereof.’” Id. (quoting In re United
Healthcare Sys., Inc., 396 F.3d 247, 249 (3d Cir. 2005)).

18
 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 appeal.

11 U.S.C. § 363(m). The purpose of § 363(m) is to promote
the finality of sales. It provides “not only … finality to the
judgment of the bankruptcy court, but particularly … finality
to those orders and judgments upon which third parties rely.”
Pittsburgh Food & Bev. Inc. v. Ranallo, 112 F.3d 645, 647-48
(3d Cir. 1997) (quoting In re Abbotts Dairies of Pa., Inc., 788
F.2d 143, 147 (3d Cir. 1986)); see also In re Stadium Mgmt.
Corp., 895 F.2d 845, 847 (1st Cir. 1990) (discussing the
“salutary policy of affording finality to judgments” in such
sales (citation omitted)). “[I]ts certainty attracts investors and
helps effectuate debtor rehabilitation.”15 Cinicola, 248 F.3d

15
As well put by the United States Court of Appeals
for the Fourth Circuit:
Section 363(m) codifies Congress’s strong
preference for finality and efficiency in the
bankruptcy context, particularly where third
parties are involved. Without the protection of
§ 363(m), purchasers of bankruptcy estate
assets could be dragged into endless rounds of
litigation to determine who has what rights in
the property. This would not only impose
unfair hardship on good faith purchasers, but
would also substantially reduce the value of the
estate. An asset that provides a near-certain
guarantee of litigation and no guarantee of

19
at 122 (citation omitted). “[A]s we and other courts have
recognized, [§] 363(m) was created to promote the policy of
the finality of bankruptcy court orders, and to prevent harmful
effects on the bidding process resulting from the bidders’
knowledge that the highest bid may not end up being the final
sale price.” Krebs Chrysler-Plymouth, Inc. v. Valley Motors,
Inc., 141 F.3d 490, 500 (3d Cir. 1998) (citing Pittsburgh
Food, 112 F.3d at 647-48).

Section 363(m) applies to sales authorized under
§ 363(b), which in turn provides that a “trustee ... may ... sell
... other than in the ordinary course of business, property of
the estate[.]” 11 U.S.C. § 363(b)(1). As relevant here, estate
property is defined as “all legal or equitable interests of the
debtor in property as of the commencement of the case.” 11
U.S.C. § 541(a)(1). Thus a preliminary question is whether
the property at issue – in this case, the avoidance claim – is
“estate property” as defined by the statute. But there are two
problems with addressing that issue here. First is the problem
identified by the District Court: the transferability of the
avoidance claim is the very merits issue that the Pursuit
Parties should have preserved by seeking a stay but did not.
It would be procedurally odd, and would undermine the
policy rationale behind § 363(m), to allow parties to avoid the
responsibility to get a stay by posing a merits issue in the

ownership is likely to have a low sale price; by
removing these risks, § 363(m) allows bidders
to offer fair value for estate property.

In re Rare Earth Minerals, 445 F.3d 359, 363 (4th Cir. 2006)
(internal quotation marks and citations omitted).

20
form of a question about estate property and the applicability
of § 363(m). At least that is how it strikes us in this instance,
where the merits issue does not have an obvious answer. If
the requirement of a stay is to have teeth, any reasonably
close question about the applicability of § 363(m) should be
answered in favor of applicability. Cf. In re Brown, 851 F.3d
619, 622 (6th Cir. 2017) (“This mootness rule applies
regardless of the merits of legal arguments raised against the
bankruptcy court’s order and functions to encourage
participation in bankruptcy asset sales and increase the value
of the property of the estate by protecting good faith
purchasers from modification by an appeals court of the
bargain struck with the [trustee].” (alteration in original)
(internal quotation marks and citations omitted)), petition for
cert. filed.

The second problem with addressing the “estate
property” question now is that the applicability of § 363(m)
was not directly addressed by the parties in their briefing.16
See United States v. Pelullo, 399 F.3d 197, 222 (3d Cir. 2005)
(“[A]n appellant’s failure to identify or argue an issue in his
opening brief constitutes waiver of that issue on appeal.”).
Thus we will assume for the sake of analysis that § 363(m)
does apply.

16
The Pursuit Parties made a two paragraph pitch for
why the avoidance claim is not estate property in an attempt
to demonstrate that the Trustee lacked authority to transfer the
claim. (See Opening Br. at 27.) The Pursuit Parties did not,
however, argue that the avoidance claim is exempt from
§ 363(m) because it did not fall within the meaning of “estate
property” under that mootness statute.

21
 Under our case law, § 363(m) moots a challenge to a
sale if two conditions are satisfied: “(1) the underlying sale or
lease was not stayed pending the appeal, and (2) the court, if
reversing or modifying the authorization to sell or lease,
would be affecting the validity of such a sale or lease.”17
Krebs, 141 F.3d at 499. Though framed as a two-part test,
there is actually an additional step because we are first
required to ask whether the purchaser at the sale “purchased
... [the] property in good faith.” § 363(m); see also Abbotts
Dairies, 788 F.2d at 147.

B. Good Faith

The Pursuit Parties argue that “the sale was not
conducted in good faith and suffered value-defeating
irregularities[.]” (Opening Br. at 51.) Besides denying that
the Creditor Group is a good-faith purchaser, they also argue
that the Trustee “expressly discriminated against [them]
during the auction, to the detriment of the Debtor’s estate[,]”
and they claim that the Bankruptcy Court sanctioned that
discrimination by approving the sale. (Id.) The Bankruptcy
Court found that the parties acted in good faith because there
was neither evidence of collusion nor anything to suggest that
the bidding took place at less than arm’s length. It also found
that the Creditor Group followed the bidding procedures. The

17
Our test under § 363(m) is a minority position. The
majority of our sister circuits have adopted a “per se” rule that
moots a challenge to a sale under § 363(m) automatically
when a stay is not obtained. In re Brown, 851 F.3d at 622
(quotations omitted).

22
District Court affirmed. An analysis of a purchaser’s good
faith status requires a mixed standard of review: “we exercise
plenary review of the legal standard applied by the district
and bankruptcy courts, but review the latter court’s findings
of fact on a clearly erroneous standard[.]” Abbotts Dairies,
788 F.2d at 147.

As already noted, for a purchaser to claim the
protection of § 363(m), she must have acted in good faith. In
re ICL Holding Co., 802 F.3d at 553 (internal quotations
marks omitted); see also In re Tempo Tech. Corp., 202 B.R.
363, 367 (D. Del. 1996) (“[W]here the good faith of the
purchaser is at issue, the district court is required to review
the bankruptcy court’s finding of good faith before dismissing
any subsequent appeal as moot under [§] 363(m).”).
“Unfortunately, neither the Bankruptcy Code nor the
Bankruptcy Rules attempts to define ‘good faith.’” Abbotts
Dairies, 788 F.2d at 147. Courts have thus “turned to
traditional equitable principles, holding that the phrase
encompasses one who purchases in ‘good faith’ and for
‘value.’” Id. (citations omitted). The good faith requirement:

speaks to the integrity of [the purchaser’s]
conduct in the course of the sale proceedings.
Typically, the misconduct that would destroy a
purchaser’s good faith status at a judicial sale
involves fraud, collusion between the purchaser
and other bidders or the trustee, or an attempt to
take grossly unfair advantage of other bidders.

Id. (internal quotation marks and citations omitted); see also
In re Gucci, 126 F.3d 380, 390 (2d Cir. 1997) (“[T]he good-
faith requirement prohibits fraudulent, collusive actions

23
specifically intended to affect the sale price or control the
outcome of the sale.”).

As to value, we have said that, “[g]enerally speaking,
an auction may be sufficient to establish that one has paid
‘value’ for the assets of a bankrupt.” Abbotts Dairies, 788
F.2d at 149. In fact, we have said that “a public auction, as
opposed to appraisals and other evidence, is the best possible
determinant of the value of ... assets[.]” Id. (internal
quotation marks omitted). But, on the facts of that case, we
rejected a finding of good faith because there was a
possibility that the debtor colluded with one of the bidders
during the bankruptcy process. See id. (reasoning that “no
‘auction’ took place in the bankruptcy court [if it was
predicated on collusion and] … the ‘bidding’ could not, by
definition, serve as the final arbiter of the ‘value’ of [the
debtor’s] assets”).

Applying those principles here, we see no clear error
in the Bankruptcy Court’s good faith finding nor any error in
the legal standard applied. The Pursuit Parties struggle to
point to specific facts that support their contentions to the
contrary. They vaguely argue that the Trustee “discriminated
against [them] during the auction ... [a]nd ... the Bankruptcy
Court sanctioned this discrimination[.]” (Opening Br. at 51.)
They also say that the Bankruptcy Court’s finding that the
“parties acted in good faith” does not answer “whether the
auction was conducted in good faith[,]” and that the Trustee
failed to provide evidence to support either conclusion. (Id.)
Lastly, they argue that the Trustee’s conduct relating to the
modification of the auction procedures, and how those
procedures were applied to the Pursuit Parties, constituted bad

24
faith. All of those arguments are conclusory and
unpersuasive.

1. The Good Faith Conduct of the
Trustee and the Creditor Group

The record makes clear that the Trustee acted in
accordance with his fiduciary obligations, rather than in
collusion with the Creditor Group or through attempts to take
unfair advantage of the Pursuit Parties. The Trustee initiated
the sale proceedings because he believed that “the sale of the
assets [would be] a prudent exercise of his business judgment
under the circumstances,” since there were no estate funds
available to pursue claims in litigation. (JA at 181, 185.) He
then stated in his initial motion for sale approval that he was
willing to entertain “additional proposals for the assets on
similar terms” as an “additional test of ... fairness.” (JA at
188.) He followed through by entertaining a bid from the
Pursuit Parties and then requesting an auction.

The auction also appears to have been competitive.
Indeed, the Trustee stated both at the beginning of the auction
and at its adjournment that he favored the Pursuit Parties’
bids above any others. That ultimately forced the Creditor
Group to increase the value of its bids. After proposing eight
substitute dates to reconvene the auction, all to no avail, the
Trustee requested final sealed bids instead of postponing the
process further. Not only did the Pursuit Parties fail to submit
a bid, they withdrew their previous bids. And, following the
sealed bidding, the Trustee continued to negotiate privately
and publicly with both the Creditor Group and the Pursuit
Parties. He ultimately decided to move forward with the sale
to the Creditor Group, after extensive review and consultation

25
with the Bankruptcy Court about the best way to proceed.
The Pursuit Parties failed to win at the auction not because of
the Trustee’s conduct, but because of their own decisions
during the bidding process. None of that shows a lack of
good faith or collusion on the part of the Trustee and the
Creditor Group.

Although the Pursuit Parties’ brief focuses largely on
the conduct of the Trustee, we also note that the evidence
indicates the Creditor Group acted in good faith. They
complied with the rules of the auction, submitted timely bids,
and increased their bids when competition required it. That is
exactly how an auction is supposed to work.

2. Value

We also conclude that appropriate value was delivered
for the claims. As discussed, a competitive auction strongly
indicates that a purchaser has paid appropriate value for estate
assets. Abbotts Dairies, 788 F.2d at 149. Unlike the
circumstances in Abbotts Dairies, where no real auction took
place because there had been collusion, there was competitive
bidding here and no evidence of collusion. Thus there is a
sound basis for concluding that the auction satisfied the value
element of the test for good faith.

The winning final bid in this case was $180,001. That
was, notably, $10,001 more than the Pursuit Parties’ bid at the
end of the live auction, before the auction was forced to
adjourn by their scheduling conflict. In addition to the cash
aspect of the Creditor Group’s bid, the Bankruptcy Court
observed that the winning bid offers the opportunity for a
recovery to the estate, if litigation of the claims against the

26
Pursuit Parties is successful. There was no such potential
recovery embedded in the Pursuit Parties’ bidding because
they seek to acquire the claims precisely so that the claims
will not be litigated. The Bankruptcy Court acknowledged
that fact when it rejected the Pursuit Parties’ argument that
the Trustee erroneously accepted a bid that was not the
highest. The Bankruptcy Court also decided that “the
integrity of the auction process, by far, trumps any potential
higher bid” because the Pursuit Parties, as experienced
bidders, “chose not to provide a sealed bid[] ... and withdrew
previous offers made at the auction. (JA at 427-28.) We
agree with that reasoning and conclude that the Creditor
Group purchased the claims for fair value.

3. The Modification of the Auction
Procedures

The Pursuit Parties also argue that the “auction was
contrary to the [court-ordered] procedures” and thus was
conducted in bad faith. (Opening Br. at 52.) Specifically,
they say that the Trustee failed to show that adjourning the
auction and then requesting final sealed bids enabled him to
“comply with his fiduciary obligation[,]” as required by the
original bidding procedures. (Opening Br. at 37.) And they
argue, even if the modification were proper, that the
procedures were applied against them discriminatorily
because the Trustee refused to negotiate with them after the
final sealed bidding deadline.

This all sounds a bit like the old story of the boy who
shot his parents and then asked for special treatment because
he was an orphan. The changed auction procedures in this
case were, in significant measure, a function of the Pursuit

27
Parties’ contentious and at times obstreperous behavior. It is
clear that the Trustee had the authority to move to a sealed-
bid procedure and did so precisely so that he could comply
with his fiduciary duties. A trustee has the duty to “close
[the] estate as expeditiously as is compatible with the best
interests of parties in interest[.]” 11 U.S.C. § 704(a)(1). The
Trustee transitioned to the final sealed bidding process
because, despite numerous attempts, he could not coordinate
a date to conclude the auction under the original procedures.
The new procedure did not discriminate against the Pursuit
Parties. They had ample opportunity to participate, and
elected not to. The Trustee also entertained multiple bids
from the Pursuit Parties and engaged in negotiations with
them. Therefore, the record does not substantiate any claim
of discrimination or bad faith regarding the auction
procedures. The Bankruptcy Court’s good-faith finding is
sound.

C. The Stay and Validity Prongs

Because we conclude that the sale was affected in
good faith, we can proceed to the application of the two-
prong § 363(m) mootness test called for by our decision in
Krebs, 141 F.3d at 499. That test, again, calls for a finding of
mootness if: “(1) the underlying sale or lease [that is being
challenged] was not stayed pending the appeal, and (2) the
court, if reversing or modifying the authorization to sell or
lease, would be affecting the validity of such a sale or lease.”
Id. (emphasis added). A challenger can avoid mootness
simply by obtaining a stay of the sale order. When a stay is
not obtained, mootness may still be avoided in the rare case
when a reversal or modification of the sale order will not
affect the validity of the sale.

28
 1. The Stay Requirement

The first step to a holding of § 363(m) mootness under
the Krebs test is that the challenger failed to obtain a stay of
the sale order. Id. It is undisputed that the Pursuit Parties
failed in exactly that way. But, referring to the statement in
the Sale Order that the claims were being sold “as is[,] where
is[,]” they argue that “no stay pending Appeal was necessary
... because [their legal defenses] were expressly preserved in
the Sale Order.” (Reply Br. at 3.) Thus they say that they
“did not need to incur the expense associated with seeking a
stay[.]” (Id. at 21.) They provide no legal authority to
support that extraordinary assertion of an exemption from
§ 363(m).18 The statutory language is clear and calls for a
would-be challenger to seek a stay. 11 U.S.C. § 363(m). Our
decision in Krebs identifies a safety valve in § 363(m) so that,
as discussed more fully later, a challenger can argue that the
sale order in question, though not stayed, nevertheless can be
appealed because the relief the challenger seeks will not
undermine the sale. That very narrow exception is quite
different than the Pursuit Parties’ claim that they preserved
their rights in a different way, without seeking a stay. Our
responsibility is to apply the statute, not to accommodate the

18
Following oral argument, the Pursuit Parties
submitted a 28(j) letter describing a Tenth Circuit opinion that
they say is persuasive and proves that one need not obtain a
stay to avoid mootness if one’s defenses are otherwise
preserved. Appellant’s 28(j) letter, June 19, 2017 (discussing
Paige v. Jubber (In re Paige), 685 F.3d 1160 (10th Cir
2012)). That case is inapposite for the reasons discussed infra
at n.20.

29
Pursuit Parties in their failure to comply with it. See Hartford
Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S.
1, 6 (2000) (“[W]hen the statute’s language is plain, the sole
function of the courts – at least where the disposition required
by the text is not absurd – is to enforce it according to its
terms.” (internal quotation marks omitted)). They did not
obtain a stay of the Sale Order, and therefore cannot defeat
mootness on that basis.

2. Affecting the Validity of the Sale

The only question left is whether the Pursuit Parties
can qualify for the safety valve provided in Krebs by showing
that a reversal or modification of the sale does not affect the
validity of the sale. As just noted, when a sale has not been
stayed, a challenge to that sale will be statutorily moot unless
a reversal or modification of the sale would not affect the
validity of the sale. For obvious reasons, that is a high bar. A
challenge to a “central element” of a sale inevitably
challenges the validity of the sale. See Pittsburgh Food, 112
F.3d at 649 (“One cannot challenge the validity of a central
element of a purchase, the sale price, without challenging the
validity of the sale itself.” (quoting In re The Charter Co.,
829 F.2d 1054, 1056 (11th Cir. 1987))). While challenges to
specific terms do not always result in § 363(m) mootness,
“those challenges that would claw back the sale from a good-
faith purchaser” will end in a finding of mootness. In re ICL
Holding Co., 802 F.3d at 554.

The “validity of the sale” inquiry gives effect to
§ 363(m)’s “clear preference in favor of upholding the
validity of bankruptcy sales without unduly restricting the
appellant’s right to contest errors of law made by the

30
bankruptcy court.” In re Brown, 851 F.3d 619, 623 (6th Cir.
2017). It preserves appellate rights only in those rare
circumstances where collateral issues not implicating a
central or integral element of a sale are challenged. Cf.
George W. Kuney, Slipping Into Mootness, Norton Ann.
Surv. of Bankr. L. Part I, § 3 (West 2007) (recognizing that it
is an unusual challenge to a sale that does not distort the
validity of the sale and that the exception likely has meaning
only when “collateral” issues are challenged). In short, the
validity prong of our test provides “[a] narrow exception
[that] may lie for challenges to the Sale Order that are so
divorced from the overall transaction that the challenged
provision would have affected none of the considerations on
which the purchaser relied.” In re Westpoint Stevens, Inc.,
600 F.3d 231, 249 (2d Cir. 2010) (citing Krebs, 141 F.3d at
499). In our assessment of whether a challenge affects the
validity of a sale, we “must look to the remedies requested by
the appellants.” Krebs, 141 F.3d at 499 (citation omitted).

Some examples are instructive. In Krebs, we held that
an appeal was statutorily moot when the car dealership for
which the case is named tried to purchase a debtor’s Jeep
franchise in a chapter 11 bankruptcy. Id. at 492. That
agreement was eventually rejected by the bankruptcy court
and the franchise was sold through an auction. Id. at 493.
Krebs did not obtain a stay. Id. at 497. Though it was the
ultimate purchaser at the auction, Krebs appealed the decision
to reject the original agreement. The district court affirmed.
Id. at 493. We then concluded that the appeal was moot
under § 363(m). We stated that the remedy sought, a ruling
that rejection of the original agreement was improper, would
“[n]aturally ... have an impact on the validity of the auction
sale ... because reversing the rejection would necessarily

31
require reversing the subsequent assumption and assignment
of the underlying franchises. Clearly, this remedy is not
permitted by section 363(m).” Id. at 499. Krebs had not
obtained a stay, the case was moot, and we dismissed it. Id.

A case from the United States Court of Appeals for the
Eighth Circuit also decided that a challenge to a sale was
moot because it implicated an integral part of the sale. In In
re Trism Inc., the bankruptcy court approved an order that
authorized the sale of Trism’s assets to Bed Rock, Inc. 328
F.3d 1003, 1005 (8th Cir. 2003). The sale order released
“Bed Rock, Bed Rock’s principal owner and president ... and
CIT Group/Business Credit, Inc. ... from all avoidance
liability.” Id. A group of unsecured creditors appealed that
order and release of liability, and the Bankruptcy Appellate
Panel dismissed the appeal as moot under § 363(m). Id. The
Eighth Circuit agreed that the appeal was moot, concluding
that the release of liability was “integral to the sale of Trism’s
assets to Bed Rock.” Id. at 1007. That was because “the ...
Agreement conditioned the closing of the sale upon the
bankruptcy court entering an order providing that [Bed
Rock’s president] would have no liability to Trism’s estate or
the [unsecured creditors] ... [and] CIT’s release ... is directly
linked to absolving [the president] from liability.” Id.
(internal quotation marks omitted). Thus, the court ruled that
reversal would affect the validity of the sale and the appeal
was moot.

We reached a different outcome in In re ICL, 802 F.3d
at 553-54. There, the United States government, asserting a
tax interest in sale proceeds, challenged the sale of a debtor’s
assets. The purchasers agreed to fund winding-down costs of
the company, and the money for that purpose was placed in

32
escrow until winding-down was completed. Id. at 550-52.
The government also challenged an agreement between
lenders to place in trust certain monies for the benefit of
unsecured lenders. Id. The government received nothing
under those proposals. Id. The bankruptcy court rejected the
government’s arguments, approved both agreements, and
denied a request for a stay of the sale. Id. at 552. On appeal,
we addressed “whether we c[ould] give the [g]overnment the
relief it s[ought] – ‘a redistribution’ of the escrowed funds”
and trust monies – “without disturbing the sale.” Id. at 554.
The lenders argued that the relief could not be granted
without affecting the validity of the sale because such
reallocation “w[ould] change a fundamental term of the
transaction” and deprive them of key, bargained-for terms.
Id. (internal quotations and citations omitted). We rejected
those arguments, stating that § 363(m) “stamps out only those
challenges that would claw back the sale from a good-faith
purchaser.” Id. On those facts, the specific remedy the
government wanted would not undermine the validity of the
sale, so we decided that the appeal was not moot under
§ 363(m). Id.

With that background, we assess whether the remedy
sought in this case can be granted without impacting the
sale’s validity. If it cannot, then the appeal is moot. The
Pursuit Parties describe the remedy they want as “a finding
that the Trustee lacked authority to sell avoidance powers[.]”
(Opening Br. at 53.) Alternatively – though it amounts to the
same thing here – they argue for a ruling that avoidance
powers “d[o] not belong to the estate and may not as a matter
of law or policy [be] transfer[red] to the Creditors.” (Opening
Br. at 55 (citation omitted).) The Pursuit Parties assert that

33
we can make those legal rulings without affecting the validity
of the sale.

Both of those arguments share a common
denominator: they differentiate between the ability to pursue
a claim and the ownership of the claim. The Pursuit Parties
say that the Creditor Group will continue to own the claim
they bought, regardless of whether we rule that the Creditor
Group lacks the power to prosecute it or that the claim is not
an avoidance claim at all. And, as the Pursuit Parties see it,
ownership of the claim, even without the ability to pursue it
as an avoidance claim, does not affect the sale’s validity
because, again, there was an agreed-to “as is, where is”
disclaimer included in the final sale agreement. In colloquial
terms, the Creditor Group purchased a “pig in a poke” and
assumed the risk that the “poke” would not contain what had
been hoped.

But, at least as to this appeal of the Sale Order, that
reasoning cannot withstand scrutiny. If we agreed with the
Pursuit Parties and ruled now that the avoidance powers did
not transfer with the claims themselves,19 our ruling would
surely affect the validity of the sale in the sense that the

19
In assessing this aspect of statutory mootness, we
emphasize that we are not deciding whether the sale
transferred a valid avoidance claim. Whether avoidance
powers can be transferred is a question before the Bankruptcy
Court now and one we may confront on another day. At this
juncture, we are assuming without deciding that those powers
can be and were transferred in this case, and we do so solely
for the disposition of this particular appeal.

34
ability to pursue a claim is essential to any meaningful
transfer of such an asset. As the Trustee explained:

[t]he Creditor Group’s ability to pursue the
Claims was a central element of the sale of
these Claims. It would have made no sense for
the Trustee or the Creditor Group to enter into
the Sale Agreement if any of them believed that
the Creditor Group was legally barred from …
bringing the Claims.

(Answering Br. at 21.)

We agree. To hold otherwise would allow a “claw
back” of the sale itself because the value of the claims,
without the ability to prosecute them, would be completely
eliminated and a central feature of the transaction would thus
be frustrated, through no apparent fault of the Creditor Group.
See, e.g., Pieper, Inc. v. Land O’Lakes Farmland Feed, LLC,
390 F.3d 1062, 1066 (8th Cir. 2004) (concluding that
defendant’s expressed principal purpose for entering an
agreement was substantially frustrated by the failure of basic
assumption of the agreement, defeating the commercial
reason for contract); Unihealth v. U.S. Healthcare, Inc., 14 F.
Supp. 2d 623, 635 (D.N.J. 1998) (recognizing frustration of
purpose where an unexpected regulatory change
“substantially frustrate[d] the principal purpose of the
Agreement to the unfair advantage of one party”); 30
Williston on Contracts § 77:95 (4th ed. 2017) (explaining that
the “purpose of the commercial frustration doctrine is to do
equity,” and that it excuses performance “when the parties’
overall contractual intent and objectives have been
completely thwarted”). We agree with the District Court that

35
“a finding that the Trustee lacked authority to transfer the
causes of action ... ‘would affect its validity’ and demonstrate
that the sale was flawed.” (JA at 55 (citation omitted).) We
therefore reject the Pursuit Parties’ arguments and hold that
we cannot give them the remedy they seek without affecting
the validity of the sale. Because we cannot do that, this
appeal is statutorily moot.20

20
The Pursuit Parties submitted a 28(j) letter relying
on In re Paige, 685 F.3d 1160 (10th Cir. 2012). In that case,
a defendant in an adversary proceeding appealed from a
bankruptcy court’s judgment. The bankruptcy court had ruled
that a domain name registered to the defendant belonged to a
bankruptcy debtor’s estate and was thus subject to a sale
agreement between a bankruptcy trustee and a purchaser of
the domain name. Id. at 1164-66, 1169-70. Notably, the
defendant did not appeal the sale approval order itself. Id. at
1170. The sale agreement contained a provision that delayed
a final closing on the domain name until a final and
nonappealable order was issued. Id. at 1174. But the
purchaser waived that provision following the bankruptcy
court’s judgment and took ownership of the domain name.
Id.
The defendant sought to stay that judgment order, and
the bankruptcy court denied the request. Id. The district
court affirmed, but in the alternative ruled that the appeal was
moot under § 363(m). Id. at 1175. On appeal, the Tenth
Circuit agreed with the defendant that the appeal was not
moot because the purchaser “took the Domain Name Assets
subject to [the defendant’s] defenses, ‘pending a ruling on
such defenses in the Pending Adversary [proceeding].’” Id. at
1190 (citation omitted). In essence, because the purchaser
took title before a final and nonappealable order had issued, it

36
III. Conclusion

For the foregoing conclusions, we will dismiss the
Pursuit Parties’ appeal of the Sale Order as statutorily moot
under 11 U.S.C. § 363(m).

“accepted the risk that [the defendant] could still prevail on
the defenses it retained under the Sale Order.” Id. at 1191.
So, § 363(m) did not strip the defendant of those defenses.
Id.
The Pursuit Parties argue that, despite not being
binding, In re Paige is persuasive because the facts are
parallel to this case. At this point, however, the case is
simply inapposite. Unlike this case, the defendant in In re
Paige had already defended the adversary proceeding on the
merits, a judgment was issued against it, and then it
challenged the bankruptcy court’s rulings. Nothing we say
here is meant to limit the Bankruptcy Court from addressing
issues that are rightly before it in the first instance.

37