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Supreme Court Rules Section 363(m) of Bankruptcy Code Is Not Jurisdictional

On April 19, 2023, the Supreme Court in MOAC Mall Holdings LLC v. Transform Holdco LLC ruled that Section 363(m) of the Bankruptcy Code is not jurisdictional. MOAC Mall Holdings LLC v. Transform Holdco LLC, No. 21-1270, 2023 U.S. LEXIS 1666 (Apr. 19, 2023).

Section 363(m) of the Bankruptcy Code provides that the reversal or modification on appeal of an authorization of the sale or lease of bankruptcy-estate property does not affect the validity of the authorized sale or lease to an entity that purchased or leased the property in good faith, unless such an authorization, and the sale or lease, were stayed pending appeal. Before MOAC, there was a split among the circuit courts as to whether the language of section 363(m) deprived judges of jurisdiction to consider appeals to invalidate sales or leases during bankruptcy.The Supreme Court’s decision in MOACresolves the circuit split by determining that section 363(m) is not a jurisdictional provision, and instead is only a statutory limitation, making it subject to waiver, estoppel, and other similar doctrines.

The opinion makes clear that Courts should treat a statutory provision as jurisdictional only if Congress clearly states as much. While no “magic words” are necessary, Congress’s statement must be clear and not merely “plausible” or “better” than non-jurisdictional alternatives. Applying this “clear-statement rule” to the language of section 363(m), the Court unanimously held that section 363(m) does not implicate the jurisdiction of appellate courts over sale or lease orders entered under section 363(b).

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