© 2023 Greenberg Traurig, LLP Alert | Troubled Bank Task Force April 2023 The 2023 Banking Crisis: Updated Questions & Answers for Insured and Uninsured Depositors, Other Affected Parties Silicon Valley Bank Failure, Receivership and Sale On March 10, 2023, the California Department of Financial Protection and Innovation closed Silicon Valley Bank, Santa Clara, CA (SVB) and appointed the Federal Deposit Insurance Corporation (FDIC) receiver of SVB.

Purchasers often relish the prospect of buying distressed assets in a bankruptcy proceeding. Under section 363 of the Bankruptcy Code, a buyer may obtain ownership of bankruptcy estate assets “free and clear of any interest” (assuming certain conditions are met), and also be reasonably confident that the sale will not be reversed on appeal. But the U.S. Supreme Court may have now tempered that confidence. In its recent, unanimous opinion, MOAC Mall Holdings LLC v. Transform Holdco LLC, No. 21-1270 (Apr.

The U.S. Supreme Court recently issued its latest bankruptcy opinion in MOAC Mall Holdings LLC v. Transform Holdco LLC, holding that the Bankruptcy Code’s rule against invalidating 363 sales after appeal is not an iron-clad jurisdictional bar, but rather a mere statutory limitation.[1]

In Short

The Situation: The U.S. Supreme Court considered whether § 363(m) of the Bankruptcy Code, which limits a party's ability to undo an asset transfer made to a good-faith purchaser in a bankruptcy case, is jurisdictional.

In a recent decision, the Second Circuit held that only parties with the right to pursue a breach of contract claim under an executory contract or unexpired lease have the right to demand a cure payment in the event the executory contract or lease is assumed by a debtor in bankruptcy, affirming previous decisions by the bankruptcy and district courts, and limiting the scope of Bankruptcy Code § 365(b)(1)(A).

On April 24, 2023, the First Circuit’s opinion in Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin came up for oral argument before the Supreme Court. At issue in this appeal is whether this provision’s “abrogat[ion]” of sovereign immunity “as to a governmental unit,” defined to include any “other … domestic government” in section 101(27), embodies a congressional intention to revoke the sovereign immunity of a Native American tribe with sufficient and obvious clarity to be construed as such a revocation.

On April 19, 2023, the U.S. Supreme Court unanimously held in MOAC Mall Holdings LLC v. Transform Holdco LLC that Section 363(m) of the Bankruptcy Code is not jurisdictional. The decision requires parties timely to invoke that provision, or else risk forfeiting its protections. The decision also continues the Supreme Court’s trend of interpreting statutes to be non-jurisdictional (and thus waivable or forfeitable) in the absence of a clear congressional statement to the contrary.

Background

On April 19, 2023 the Supreme Court issued its unanimous ruling in MOAC Mall Holdings LLC v. Transform Holdco LLC, 528 U.S ____ (2023), holding that the limitations contained in section 363(m) of the United States Bankruptcy Code are not jurisdictional. The Supreme Court’s ruling not only resolved a split amongst the circuits, but it also cleared up a foggy corner of arguably one of the most consequential sections of the Bankruptcy Code.

In MOAC Mall Holdings v. Transform Holdco, the Supreme Court of the United States addressed whether Section 363(m) of the Bankruptcy Code―which limits the effect of certain appeals on orders authorizing the sale or lease of bankruptcy estate property―is a jurisdictional provision.

As the economy continues to face challenges and the threat of bankruptcy becomes more prevalent among businesses, landlords must be more vigilant in protecting their interests in commercial leases. One area of particular concern is leases that fall under Section 467 of the Internal Revenue Code (“Section 467 Leases”).