On January 24, 2025, the United States Bankruptcy Court for the Eastern District of Virginia entered an opinion denying a motion for a stay pending an appeal of a settlement motion in In re Hopeman Bros., Inc., No. 24-32428-KLP, 2025 WL 297652, at *6 (Bankr. E.D. Va. Jan. 24, 2025). The settlement motion contained a provision allowing for a sale of assets pursuant to section 363 of the Bankruptcy Code. Id. at *1; 11 U.S.C. § 363.
In addressing the first element of the test for a stay – whether movant is likely to prevail on the merits – the appealing creditor argued that it was likely to prevail on appeal as a result of the Supreme Court’s decision in Harrington v. Purdue Pharma, L.P., 603 U.S. 204 (2024),[1] “arguing that the limitations on third-party injunctions imposed in that case also apply to § 363 sales.” Hopeman Bros., 2025 WL 297652, at *2–3. The bankruptcy court characterized this argument as “novel” noting that “injunctions and releases have long accompanied ‘free and clear’ sales in bankruptcy.” Id. at *3.
In rejecting this argument, the bankruptcy court relied on two other decisions rendered after Purdue. Id. at *4-5.
In In re Bird Global, Inc., Case No. 23-20514-CLC (Bankr. S.D. Fla.), the bankruptcy court denied a motion for stay pending appeal, finding that “[n]othing in the stay motion makes the court question its interpretation of Purdue and its lack of an effect on this case ....” This decision was affirmed by the district court. Wright v. Bird Global, Case No. 24-CV-23086-RAR (S.D. Fla. Aug. 21, 2024).
In another decision, rendered in Roman Cath. Diocese of Rockville Centre, 665 B.R. 71, 89 (Bankr. S.D.N.Y. 2024), the bankruptcy court approved, over objections, a settlement agreement containing releases and injunctions. The court was not persuaded by the argument urged by the United States Trustee that Purdue is applicable in the context of a section 363 sale in addition to the context of plan confirmation. Id. at 81-82.
Relying on these decisions, the bankruptcy court in Hopeman Bros. held:
A decision that would permit a creditor to independently pursue its claim against property of the debtor after it been sold in bankruptcy would have a chilling effect on the sale of assets in bankruptcy. Purdue was not intended to thwart that process. Perhaps, this is why the Court has not found, and has not been pointed to, any decision extending Purdue's decision to § 363 sales.
As the Supreme Court stated, its decision in Purdue is limited to the issue before it, i.e., whether non-consensual non-debtor releases may be included in chapter 11 plans. Nothing in its opinion suggests that the protections afforded a buyer pursuant to § 363, including the ability of the purchaser to obtain the asset free of the claims of the debtor's creditors, were intended to be abrogated.
Hopeman Bros., 2025 WL 297652, at *4 (footnote omitted).
As a result, the bankruptcy court denied the motion to stay pending appeal. Id. at *5-6.
[1] For prior coverage on Purdue, see Purdue Pharma Plan Blocked, Supreme Court Bars Third-Party Releases in Bankruptcy.
