Business Law

MOAC Mall Holdings LLC v. Transform Holdco LLC (In re Sears Holdings Corp.)

The following is an update analyzing a recent case of interest:

The high-profile Chapter 11 of Sears produced another decision involving the high-profile Mall of America (“Mall”). MOAC Mall Holdings LLC v. Transform Holdco LLC (In re Sears Holdings Corp.), 2020 WL 2319194 (S.D.N.Y. May 11, 2020). To view the opinion, click here.


As part of a large asset sale, Sears’ lease with the Mall was to be assumed and assigned to a “Buyer.” The Mall objected to the assumption and assignment but lost at the Bankruptcy Court level.  The Mall appealed and the District Court overturned the Bankruptcy Court in a decision based on section 365(b)(3)(A). MOAC Mall Holdings LLC v. Transform Holdco LLC (In re Sears Holdings Corp.), 613 B.R. 51 (S.D.N.Y. Feb. 27, 2020). (I previously wrote on that aspect of the Sears case earlier. See 2020-12 Comm. Fin. News. NL 23, New York District Court Vacated Bankruptcy Court Order Authorizing Assumption and Assignment of Lease Between Sears and Mall of America. [In re Sears Holdings Corp., 68 Bankr. Ct. Dec. (CRR) 110, 2020 WL 953528 (S.D.N.Y. 2020)].

The Buyer then filed a motion for reconsideration with the District Court, arguing “m is for moot”–statutory mootness under section 363(m). That section provides:

The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.

The Buyer’s new position was directly contradictory to its position taken earlier in the case when the Mall–having lost at the Bankruptcy Court level–had moved for a stay of the order authorizing the assumption and assignment. At that earlier point, the Buyer had argued that Mall did not need a stay, because section 363(m) did not apply to the proposed transaction and thus would not moot the issue. At that stage, everyone–the Mall, Buyer, and the Bankruptcy Judge–had assumed that section 363(m) did not apply, in no small part presumably because the Buyer was saying just that.


Back to the present.  The District Court was now very unhappy with the Buyer for switching its position on potential mootness. The Buyer now sought–in the words of the District Court–“to benefit from a complete reversal of [its prior] representation.”

The District Court tried valiantly to find a way to avoid ruling in favor of the Buyer and rewarding it for this flip-flop in position.  The District Court parsed the statute, which makes no mention of jurisdiction, but ultimately found itself constrained by binding authority. The Second Circuit has twice held that Section 363(m) is “a jurisdiction-depriving statute.” In re WestPoint Stevens Inc., 600 F.3d 231, 248 (2d Cir. 2010); and In re Gucci, 105 F.3d 837, 838–840 (2d Cir. 1997). And thus, the District Court “may neither reverse nor modify the judicially-authorized sale.”

The Mall argued both waiver and estoppel, and the District Court was sympathetic. But waiver, it wrote, “cannot be relied on to create appellate jurisdiction where there is none.” And “[a]s much as I hate to say it,” the District Court decided that judicial estoppel was not applicable because the purchaser had not taken an inconsistent position regarding a fact, and judicial estoppel does not apply to alternative legal theories.

With “great regret,” the court vacated its prior opinion and dismissed the Mall’s appeal, as the appeal “is, and always was, statutorily moot”–giving a huge win to the Buyer by whose tactics the court was “appalled.”


As with the earlier opinion in the Sears case, the District Court wrote an exhaustive opinion–43 pages last time, 30 pages this time. And once again the court struggled mightily–last time with the difficulty of coming to the right decision, this time with a result it thought wholly unjust but to which it felt bound by Circuit authority.

I found it refreshing to see the court’s openness, honesty and (dare say) vulnerability in a situation that clearly troubled her. Confessing that she “does not pretend to [have] expertise in bankruptcy,” the judge said she “was unaware of the possibility that the appeal might be moot.”

The Mall did not argue bad faith on Buyer’s part, a finding of which would have removed the protections of 363(m). Landlords in similar situations going forward should make the bad faith argument if warranted.

Having now written two articles on the Mall of America, I am feeling the need to see the place and am considering it for summer vacation. I will have to see if they are open post-COVID. 

The Commercial Finance Newsletter is written by an ad hoc group of the California Lawyers Association (CLA) Business Law Section.  These materials were written by Christopher V. Hawkins, an attorney with Sullivan Hill Rez & Engel, APLC, a member of the ad hoc group and the CLA’s Commercial Transactions Committee, with editorial contributions by the Hon. Meredith A. Jury, United States Bankruptcy Judge, C.D. Cal. (Ret.), a member of the ad hoc group.  The opinions expressed herein are solely those of the author.  Thomson Reuters holds the copyright to these materials and has permitted the Commercial Transactions Committee of Business Law Section of the California Lawyers Association to reprint them. This material may not be further transmitted without the consent of Thomson Reuters.

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