In In re Simply Essentials, No. 22-2011, 2023 WL 5341506 (8th Cir. Aug. 21, 2023), the U.S. Court of Appeals for the Eighth Circuit (the Eighth Circuit) affirmed a bankruptcy court’s ruling that avoidance actions constitute salable property of the debtor’s bankruptcy estate.

Background

The debtor in this case, Simply Essentials, LLC (the debtor), operated a chicken production and processing facility in Iowa. When the debtor fell on hard times, a group of “disgruntled farmers” filed an involuntary petition under Chapter 7 of the Bankruptcy Code against it. A Chapter 7 trustee was appointed and, during the course of his duties, the trustee determined that the estate did not have sufficient assets to pursue certain “avoidance actions” against the debtor’s creditor and owner, an entity called Pitman Farms. Recognizing the estate’s fiscal constraints, the trustee solicited bids to compromise and sell the avoidance actions and, eventually, received a couple of competing bids from Pitman Farms and another creditor called ARKK Food Co. (ARKK). The trustee determined that ARKK’s offer was superior, and filed a motion to sell the avoidance actions to ARKK pursuant to Section 363(f) of the Bankruptcy Code. The bankruptcy court granted the trustee’s motion, and Pitman Farms challenged the sale in a direct appeal to the Eighth Circuit.

Discussion

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