(February 20, 2018, Manchester, NH) – The United States Court of Appeals for the First Circuit affirmed the Bankruptcy Court sale of a Chapter 11 debtor’s assets to Sheehan Phinney client, Schleicher & Stebbins Hotels LLC (“S&S”). [Mission Prod. Holdings, Inc. v. Old Cold LLC and Schleicher & Stebbins Hotels, LLC, 879 F.3d 376 (1st Cir. 2018)] Sheehan Phinney’s team consisted of Christopher M. Candon and Peter S. Cowan.
In December 2015, after a two-day sale hearing, the Bankruptcy Court approved the sale, ruling that S&S was a good faith purchaser entitled to the protections afforded buyers under Section 363(m) of the Bankruptcy Code. Because of the financial condition of the debtor and upon notice to parties in interest, the Bankruptcy Court waived the stay of the effectiveness of the sale order to allow the sale to close without delay. Ten days after the closing of the sale, a competing bidder for the assets and former contract party with the debtor, Mission Product Holdings, Inc. (“Mission”), appealed the sale order without obtaining or even seeking a stay.
The First Circuit found no grounds to overrule the Bankruptcy Court’s findings that S&S was a good faith purchaser within the meaning of 363(m) of the Bankruptcy Code. It also dismissed Mission’s argument that its due process rights were impaired by the Bankruptcy Court’s waiver of the stay period. The First Circuit found that Mission was provided notice and the record made clear the basis for the requested waiver. Finally, the First Circuit summarily rejected Mission’s argument that the Supreme Court’s decision Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973 (2017) – decided over a year after the Bankruptcy Court ‘s order – controlled the outcome of the appeal. To the contrary, the First Circuit concluded that the argument did not even merit consideration. Instead, the First Circuit followed its own precedent on mootness. Because S&S was a good faith purchaser and there was no stay of the sale, Section 363(m) insulates buyers from such later challenges on appeal. See Anheuser-Busch, Inc. v. Miller (In re Stadium Mgmt. Corp.), 895 F.2d 845, 847 (1st Cir. 1990) (“Absent a stay, the court must dismiss a pending appeal as moot because the court has no remedy that it can fashion even if it would have determined the issues differently.”)
Mission’s request for a rehearing was denied.
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Sheehan Phinney is a full service business law firm representing local, national and international clients with innovative approaches and practical solutions. Founded in 1937, Sheehan Phinney has grown to over 60 attorneys with four offices throughout New Hampshire and Massachusetts and is known for professional excellence, practical counsel and commitment to both its clients and the communities it serves. Sheehan Phinney is the exclusive member in New Hampshire of Lex Mundi, the world’s leading association of premier independent law firms.