Under § 363(b)(1), a debtor in possession may use, sell or lease property of the estate after notice and a hearing. Once a bankruptcy court determines that a sound business justification exists for the proposed sale of estate property, the court must ensure that the debtor has provided all interested parties with adequate and reasonable notice, the sale price is fair and reasonable, and the purchaser will sell in good faith. If there are objections to the proposed sale, the debtor must seek approval of the proposed sale from the bankruptcy court.

Two recent district court decisions, each involving appeals of a bankruptcy sale order where the appellant(s) failed to obtain a stay pending appeal, provide insight into statutory mootness under § 363(m) of the Bankruptcy Code. In both In re HDR Holdings Inc. and Barnes v. 309 RTE 100 Dover LLC, the appellant(s) advanced arguments designed to avoid mootness by challenging the respective bankruptcy court’s finding that the buyer was a “good faith purchaser.” The appeals were dismissed as statutorily moot in each instance. The district courts’ analyses illustrate the challenges appellants face when seeking to avoid statutory mootness under § 363(m) and underscore the importance to purchasers of developing a solid factual record during a sale process. And we may soon get even more guidance on this important topic, as the Barnes decision was appealed to the Second Circuit Court of Appeals.