## Facts

- PW, LLC filed Chapter 11; a Chapter 11 trustee was appointed.
- The estate’s primary asset was real property and related development rights in Burbank, California.
- DB Burbank, LLC held a senior secured claim exceeding $40 million against the property.
- Clear Channel Outdoor, Inc. held a junior consensual lien securing an approximately $2.5 million claim.
- The trustee sought authority under 11 U.S.C. § 363 to sell the property free and clear of liens and encumbrances.
- The bankruptcy court approved sale procedures making DB the stalking-horse bidder and permitting DB to credit bid its secured debt.
- No competing bid exceeded DB’s bid; DB acquired the property through a credit bid rather than a cash purchase.
- Because the purchase price was paid by credit bid, there were no sale proceeds for Clear Channel’s lien to attach to, and Clear Channel received no distribution.
- Clear Channel sought a stay pending appeal of the sale order and confirmation order; no stay was obtained and the sale closed.
- Clear Channel appealed, challenging (i) mootness after closing and (ii) the statutory basis for extinguishing its junior lien.

## Issues

1. Whether 11 U.S.C. § 363(m) rendered the appeal moot after a closed sale to a good-faith purchaser when the appellant challenged the lien-stripping component of the sale order.
2. Whether 11 U.S.C. § 363(f)(5) authorized a sale free and clear of a valid, nonconsenting junior lien when the senior secured creditor purchased by credit bid and provided no money satisfaction to the junior lienholder.

## Decision

- The Bankruptcy Appellate Panel held the appeal was not moot under § 363(m) because effective relief could be granted without invalidating the sale.
- The panel affirmed the continued validity of the sale to DB but allowed review of the portion of the order purporting to strip Clear Channel’s lien.
- The panel reversed the bankruptcy court’s use of § 363(f)(5) to extinguish Clear Channel’s junior lien.
- The panel concluded Clear Channel’s lien could not be eliminated solely through a credit-bid sale that produced no cash proceeds and no monetary payoff mechanism for the junior lienholder.

## Legal Principles

- Section 363(m) protects the validity of an unstayed sale to a good-faith purchaser, but it does not categorically bar appellate review of sale-order provisions when relief can be fashioned without undoing the transfer.
- A court may grant post-closing relief that preserves the sale while correcting an improper “free and clear” determination (for example, by preserving a junior lien against the property in the purchaser’s hands).
- Section 363(f)(5) requires a showing that the interest holder could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of its interest.
- A senior creditor’s credit bid, without cash proceeds or another monetary satisfaction mechanism for the junior lien, is not a “money satisfaction” of the junior lien for purposes of § 363(f)(5).
- A § 363 sale outside a plan cannot use § 363(f)(5) to extinguish a valid, nonconsenting junior lien for zero recovery.

## Conclusion

The Bankruptcy Appellate Panel held that consummation of a § 363 sale did not moot an appeal challenging the lien-stripping portion of the sale order and ruled that § 363(f)(5) did not authorize extinguishing a nonconsenting junior lien when a senior lender acquired the property by credit bid without providing any money satisfaction to the junior lienholder.


In re PW, LLC (Clear Channel Outdoor, Inc. v. Knupfer), 391 B.R. 25 (B.A.P. 9th Cir. 2008)