In Mission Product Holdings Inc. v. Old Cold LLC (In re Old Cold LLC), 879 F.3d 376 (1st Cir. 2018), the First Circuit held that a sale in possible violation of the Supreme Court’s Jevic decision does not allow an appellate court to examine the merits of the sale when the sale-approval order otherwise is statutorily moot under section 363(m).

The unsuccessful bidder appealed without a stay, contending that section 363(m) did not apply because the insider-purchaser was not a good faith purchaser. While the unsuccessful bidder made many arguments on appeal, the most significant had to do with Jevic.  The unsuccessful bidder argued that the sale violated Jevic inasmuch as the insider-purchaser had agreed to assume some, but not all, claims against the debtor. The unsuccessful bidder contended that the sale therefore offended the priorities of distribution and gave better treatment to some creditors of equal rank.

In response, the debtor argued that Jevic pertains only to structured dismissals, and does not apply to section 363(b) asset sales, which, the debtor argued, involve potentially “offsetting bankruptcy-related justification[s]” not present in structured dismissals. See Czyzewski v. Jevic Holding Corp., 137 S.Ct. 973, 986, 197 L.Ed.2d 389 (2017).

The First Circuit, however, found that it need not “consider this challenge to the propriety of the sale,” noting, “[a]s we have explained, section 363(m) applies even if the bankruptcy court's approval of the sale was not proper, as long as the bankruptcy court was acting under section 363(b).” Mission Product, 879 F.3d at 388. According to the court, “Section 363(m) sets forth only two requirements: that there is a good faith purchaser, and that the sale is unstayed. Nothing in Jevic appears to add an exception to this statutory text.”  Id.