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MOAC Mall Holdings LLC v. Transform Holdco LLC

Supreme Court of the United States
598 U. S. ____ (2023) (2023)
ELI5:

Rule of Law:

Section 363(m) of the U.S. Bankruptcy Code is a non-jurisdictional claim-processing rule that limits the remedies available to a successful appellant but does not deprive an appellate court of its power to hear the case.


Facts:

  • In 2018, Sears, Roebuck and Co. (Sears) filed for Chapter 11 bankruptcy.
  • Sears sold most of its assets to Transform Holdco LLC (Transform), including the right to designate assignees for Sears's existing leases.
  • One such lease was for a retail space at the Mall of America, owned by MOAC Mall Holdings LLC (MOAC).
  • Transform designated its own wholly owned subsidiary to assume the Mall of America lease.
  • MOAC objected to the assignment, arguing that Transform had not provided the 'adequate assurance of future performance' required by the Bankruptcy Code for shopping center leases.

Procedural Posture:

  • MOAC objected to a lease assignment in the U.S. Bankruptcy Court.
  • The Bankruptcy Court overruled MOAC's objection and issued an 'Assignment Order' authorizing the lease transfer.
  • MOAC requested a stay of the Assignment Order pending appeal, which the Bankruptcy Court denied, partly based on Transform's representation that it would not invoke § 363(m).
  • The lease was formally assigned to Transform's subsidiary.
  • MOAC appealed the Assignment Order to the U.S. District Court.
  • The District Court initially reversed the Bankruptcy Court, finding in favor of MOAC.
  • On rehearing, Transform argued for the first time that § 363(m) deprived the court of jurisdiction.
  • Bound by precedent, the District Court reversed itself and dismissed MOAC's appeal on jurisdictional grounds.
  • MOAC, as appellant, appealed to the U.S. Court of Appeals for the Second Circuit, with Transform as appellee.
  • The Second Circuit affirmed the District Court's dismissal, agreeing that § 363(m) is jurisdictional.
  • The U.S. Supreme Court granted MOAC's petition for a writ of certiorari.

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Issue:

Is Section 363(m) of the U.S. Bankruptcy Code a jurisdictional provision?


Opinions:

Majority - Justice Jackson

No, Section 363(m) is not a jurisdictional provision. Under the Court's clear-statement precedents, a statutory provision is treated as jurisdictional only if Congress 'clearly states' as much. The text of § 363(m) does not refer to a court's power or authority, nor is it located with the Bankruptcy Code's jurisdictional provisions. Instead, it presumes a court has jurisdiction by contemplating that an appellate court may 'revers[e] or modif[y]' a sale authorization, while merely limiting the effect of that reversal on a good-faith purchaser if the sale was not stayed. This structure makes § 363(m) a restriction on the effects of a valid exercise of judicial power, rather than a limit on the power itself. Arguments that the provision reflects traditional in rem jurisdiction or codifies a purportedly jurisdictional prior bankruptcy rule are unpersuasive because they do not meet the high bar of the clear-statement rule and rely on pre-modern case law that used the term 'jurisdictional' imprecisely.



Analysis:

This unanimous decision resolves a Circuit split and reinforces the Supreme Court's disciplined approach to distinguishing between jurisdictional rules and non-jurisdictional claim-processing rules. By holding § 363(m) is not jurisdictional, the Court makes its protections subject to waiver and forfeiture. This prevents litigants from strategically waiting to invoke the statute until after an unfavorable merits decision, promoting fairness and judicial efficiency in bankruptcy appeals. The ruling solidifies the principle that unless Congress provides a 'clear statement,' statutory limitations will be treated as rules about the rights of parties, not the power of the courts.

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