“Statutory Mootness”: Applying § 363(m)’s Appeal Impediments To Sales Under A Confirmed Plan (In re Boy Scouts)

How do the § 363(m) limitations on appeals of sale orders apply to sales under a confirmed plan?

That’s an issue discussed at length, illuminated and resolved, under the term “statutory mootness,” in the Boy Scouts opinion from the U.S. Court of Appeals for the Third Circuit (decided May 13, 2025).

§ 363(m) Text

11 U.S.C. § 363(m) provides an impediment to appeals from bankruptcy sales, like this (emphasis added):

“The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.”

The appeal impediments in § 363(m):

apply to “limited circumstances”; and
are “constrained by explicit statutory criteria and the careful scrutiny of the reviewing judge.”

§ 363(m) Mechanics

363(m)’s bar to an appeal is “statutory mootness” because it imposes “a constraint . . . on our capacity to fashion relief.”

When confronted with a challenge to a § 363(b) sale, the reviewing court must determine:

whether the appeal is from an authorization of a sale;
that the purchase was made in good faith; and
that the sale was not stayed.

If those circumstances are met, the court must then determine whether a remedy can be fashioned that will not affect the validity of the sale.

Such a determination requires close scrutiny:

if the remedy does not affect the sale’s validity, the court may entertain the appeal; but
if the appeal would necessarily affect the sale’s validity, the relief is unavailable, so the appeal must be dismissed.

The determination is easy where the requested relief materially increases or decreases the purchase price. But other remedies, too, may fall into that category, depending on the nature of the claim and the type of relief sought.

In restricting appeals for the narrow § 363(m) category of appeals, Congress chose “to promote the policy of . . . finality.” This policy serves an important role in the bankruptcy process:

debtors often enter bankruptcy in dire financial straits with the value of their assets depreciating rapidly—the proverbial “melting ice cube”; and
sometimes, it is advantageous for the debtor to begin selling assets quickly to prevent a lose of value.

Section 363(b) permits quick sales of bankruptcy assets outside the ordinary course of business.

But without assurance that a § 363(b) sale is final, potential purchasers could be chilled from bidding, causing assets to languish idly and lose value, undermining the very purpose § 363(b) aims to serve.

Section 363(m) provides the protection that § 363(b) sales require:

without § 363(m) protections, purchasers could be dragged into endless rounds of litigation over bankruptcy sales, which would substantially reduce the value of estate assets;
Congress’s goal for § 363(m) is to attract investors and help effectuate debtor rehabilitation”; but
§363(m) has limitations—it only prohibits “reversal or modification on appeal” of a § 363(b) “authorization” that (i) was not “stayed pending appeal,” (ii) is not to a “good-faith purchaser,” and (iii) does not affect the “validity of the sale.”

“In short, § 363(m) precludes judicial review of a narrow and well-defined category of cases.”

§ 363(m) Application

–Insurer Appellants

The Plan provides for settling insurers to buyback their policies.

On appeal, the insurer appellants seek a limited, targeted and collateral form of relief that avoids triggering § 363(m). Their requested relief consists of “minimal, but critical” Plan modifications to ensure preservation of the insurer’s rights, which affect none of the considerations on which the purchaser relied in the policy buyback.

–Other Appellants

Other appellants, by contrast, seek a reversal of the Plan confirmation Order in its entirety, and granting such requests would reverse on appeal an authorization made under § 363(b)—the very result § 363(m) prohibits.

The opinion addresses and rejects some specific arguments raised by these other appellants.

Argument: the buyback of some policies has yet to occur, because the buyback is expressly conditioned on the Confirmation Order becoming a final order, which has not yet occurred—this argument is doubly mistaken because, (i) the policies have already been sold, and (ii) while § 363(m) mentions an unstayed authorization, it does not require that the sale be consummated—and all the § 363(m) conditions are met here.
Argument: the insurance policy buybacks are under a confirmed plan, the buybacks are not a § 363(b) sale at all, making § 363(m) inapplicable by its own terms—this contention is erroneous because the buybacks are inextricably intertwined with a prior authorization for the sale of assets under § 363(b), which falls within the ambit of § 363(m).
Argument: the Settling Insurers are not good faith purchasers because they knew of a likely appeal—this argument ignores the text of § 363(m), which protects purchasers “whether or not such entity knew of the pendency of [an] appeal,” and it ignores the Bankruptcy Court filings that the settling insurance companies “are each good faith purchasers for value within the meaning of section 363(m) of the Bankruptcy Code.”
Argument: embracing statutory mootness here would “immunize” plan terms from appellate review anytime a § 363(b) sale is involved—this argument ignores that § 363(m) only prohibits appellate review of § 363(b) sales (not of entire reorganization plans).

Conclusion

Here’s a “Thank you” to the U.S. Third Circuit Court of Appeals for this illumination, in its Boy Scouts opinion, on § 363(m) provisions in the context of sales under a confirmed plan.

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