## Facts

- General Motors Corp. and affiliates filed Chapter 11 in the Southern District of New York in June 2009.
- Debtors sought approval under 11 U.S.C. § 363 to sell substantially all assets to NGMCO, Inc. (a Treasury-sponsored purchaser) for over $90 billion.
- The sale agreement required transfer of assets “free and clear” of liabilities not assumed by the purchaser, including existing product-liability claims.
- Five product-liability claimants with prepetition injury claims objected to provisions (1) selling assets “free and clear” of their claims and (2) barring successor-liability claims against the purchaser.
- The bankruptcy court approved the sale, finding the purchaser acted in good faith and that liquidation was the only realistic alternative.
- The sale order transferred assets “free and clear of all liens, claims, encumbrances, and other interests,” including successor/transferee liability theories, and enjoined related actions against the purchaser.
- Appellants appealed but did not obtain a stay; the transaction closed in July 2009.

## Issues

1. Whether 11 U.S.C. § 363(m) limits appellate review of an unstayed, consummated § 363 sale to the purchaser’s good-faith status, including when objections are framed as jurisdictional.
2. Whether the bankruptcy court lacked subject-matter jurisdiction to enter “free and clear” and anti-successor-liability injunction provisions affecting post-closing disputes between claimants and the purchaser.
3. Whether the appeal should be dismissed as equitably moot because the sale closed and was substantially consummated and effective relief would disrupt the transaction.

## Decision

- The district court dismissed the appeal.
- Because appellants failed to obtain a stay and the sale closed to a purchaser found to be in good faith, § 363(m) restricted review to good-faith purchaser status and foreclosed relief that would affect the sale’s validity.
- The court held the bankruptcy court had at least “colorable” jurisdiction to issue the “free and clear” and injunction provisions as integral to implementing the approved sale.
- Independently, the court found the appeal equitably moot because the sale was substantially consummated and the requested relief would materially disturb the transaction and harm reliance interests.

## Legal Principles

- Under 11 U.S.C. § 363(m), reversal or modification of an unstayed sale authorization generally cannot affect the validity of a consummated sale to a good-faith purchaser; appellate review is effectively confined to good-faith status where requested relief would impair the sale.
- Section 363(m)’s restriction applies even when appellants characterize challenges as jurisdictional if the remedy would alter the “free and clear” nature or other core terms of a closed sale.
- A bankruptcy court has, at minimum, “colorable” jurisdiction to approve sale terms and injunctions that are integral to consummating a § 363 transaction and administering the estate.
- Equitable mootness supports dismissal of appeals from unstayed, substantially consummated bankruptcy sale orders when effective relief would scramble the transaction or injure third-party reliance interests.

## Conclusion

The district court dismissed product-liability claimants’ appeal from the GM § 363 sale order because the sale closed without a stay to a good-faith purchaser, leaving § 363(m) to bar relief that would affect the sale, and because the requested relief was equitably moot given substantial consummation and third-party reliance.


Campbell v. Motors Liquidation Co. (In re Motors Liquidation Co.), 428 B.R. 43 (S.D.N.Y. 2010)