In a case seemingly designed to test the limits of statutory mootness, the U.S. Court of Appeals for the Fifth Circuit recently held that an appeal of an amended sale order was statutorily moot notwithstanding arguments that the extremely compressed timeline for approval of the amendment entailed procedural due process violations. Matter of Walker County Hospital, 3 F.4th 229 (5th Cir. 2021). Statutory mootness doctrine is grounded in §363(m) of the Bankruptcy Code, which provides that “reversal or modification on appeal of an authorization … of a sale or lease of property does not affect the validity of a sale or lease under such authorization,” with exceptions only where the buyer did not act in good faith or the sale was stayed pending appeal. This statutory provision renders appeals of approved sales moot—effectively insulating bankruptcy sales from appellate review—by stripping an appellate court’s power to grant relief in respect of the sale of assets.

The Fifth Circuit’s decision highlights the nearly insurmountable barrier that statutory mootness poses to meaningful appellate review of approved bankruptcy sales and emphasizes the strong bankruptcy policy of ensuring finality of sales.

The Sale Order and Amendment