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On Oct. 24, 2017, the U.S. Court of Appeals for the Third Circuit in In re Pursuit Capital Management LLC[1] struck down an appeal as moot pursuant to a strict interpretation of Bankruptcy Code § 363(m) in large part due to the appellant’s failure to seek a stay of a sale order in the lower court.
State court receiverships have become a popular alternative to federal bankruptcy proceedings for the sale of distressed businesses.[1] In Wisconsin, Wis. Stats. Chapter 128 sets forth a statutory process allowing for the liquidation of a debtor company’s assets and the distribution of the sale proceeds to creditors in a state court-supervised proceeding. There are several benefits associated with initiating a Chapter 128 receivership (which can be voluntary or involuntary) rather than a bankruptcy proceeding.
It is no secret that restaurants and bars have high mortality rates. When these businesses fail, liquor licenses are frequently the only remaining valuable asset. Liquor licenses are crucial to restaurants and other hospitality venues’ ongoing operations and can be worth a lot of money.
After a bankruptcy case closed, a third party (CVC) sued the purchaser (ADM) of property acquired from the debtors in a bankruptcy sale. CVC claimed that it had a right of first refusal (ROFR) with respect to the property. In response, ADM contended that the ROFR did not survive the “free and clear” bankruptcy sale. At the request of ADM, the bankruptcy court reopened the bankruptcy case to consider the issue.[1]
What happens when property of the estate that a trustee or debtor-in-possession proposes to sell “free and clear” is subject to unexpired lease interests? The resolution of this question requires the reconciliation of two separate provisions of the Bankruptcy Code that most often operate independently and in isolation. The first provision, 11 U.S.C. § 363(f), permits a trustee or debtor in possession[1] in bankruptcy to sell assets of the estate free and clear of third-party interests.
