The U.S. Supreme Court recently heard arguments in MOAC Mall Holdings LLC v. Transform Holdco LLC. The case involves the authority of a court of appeals to review a bankruptcy order authorizing a bankrupt tenant to sell its interest in a lease. The dispute involves a Sears store located in the Mall of America. As a result of Sears’ prior Chapter 11 bankruptcy, it agreed to transfer most of its assets to Transform. Eventually, Transform decided that it wanted to retain that store. The landlord (MOAC is the entity that owns the Mall of America) objected, arguing that Section 365 barred an assignment of the Mall of America lease to Transform because Transform could not provide (in the language of Section 365 of the Bankruptcy Code) “adequate assurance” of its performance under the lease, in part because Transform was not “similar to the financial condition and operating performance” of Sears as Sears existed when the lease originally was signed. The bankruptcy court rejected the landlord’s argument.

When MOAC appealed, the U.S. Court of Appeals for the 2nd Circuit declined to address the landlord’s complaint, holding that Section 363(m) of the Bankruptcy Code deprived the appellate court of jurisdiction over the appeal based on earlier 2nd Circuit precedent. This case gets into the finer points of the Bankruptcy Code. MOAC sought Supreme Court review by arguing that Section 363(m) does not deprive appellate courts of jurisdiction and that in this case Transform waived any argument that Section 363(m) provides a defense to Transform. Deciding whether Section 363(m) is a jurisdictional statute would resolve a split among the circuits, with the 2nd Circuit in the minority of appellate courts that have held that the statute deprives jurisdiction on appeal.