Clearview Energy, LLC v. Mammoth Resources Partners, Inc.
Docket: Civil Action No. 1:13-CV-00009-JHM
Court: United States Bankruptcy Court, W.D. Kentucky; April 8, 2013; Us Bankruptcy; United States Bankruptcy Court
An appeal is currently before the Court from a Bankruptcy Court ruling concerning oil and gas leases. The Appellant contends that the Bankruptcy Court incorrectly determined that 11 U.S.C. § 365(d)(4) does not apply to oil and gas leases and permitted the sale of these leases as part of the bankruptcy estate. The Appellee, acting as Trustee, has filed a motion to dismiss the appeal.
The background involves an oil and gas lease established in 1992 between Larry and Steve Jones and Green Oil Company, later assigned to Mammoth Resource, LLC in 2005. The Debtors filed for Chapter 11 bankruptcy in 2010, and the estates were jointly administered. The Trustee moved to sell certain oil well interests, including the Jones leases, which the Bankruptcy Court approved on December 12, 2012, despite the Appellant's objection. Following a denial of a motion to stay the sale, the Appellant filed an appeal and requested a stay, which was granted conditionally upon posting a $400,000 bond. After the Appellant's emergency petition to relieve the bond requirement was denied, the sale proceeded on January 29, 2013, and was confirmed on February 4, 2013.
The Appellant's argument hinges on whether the Jones Oil and Gas Leases qualify as nonresidential leases of real property under 11 U.S.C. § 365(d)(4). It is acknowledged that the leases were not assumed within the mandated 120-day period. The Appellee seeks to dismiss the appeal based on 11 U.S.C. § 365(m). The Court has jurisdiction to review the Bankruptcy Court's final decisions, applying a de novo standard for legal conclusions, while largely undisputed facts will be reviewed under a clearly erroneous standard.
Appellee filed a motion to dismiss the appeal based on 11 U.S.C. § 363(m), which limits appellate review of property sales under § 363(b) or (c) once they are consummated, unless a stay is obtained. Appellee argues that since Appellant did not secure a stay, the appeal should be dismissed due to "statutory mootness," protecting the purchaser from litigation risks. Appellant contends that § 363(m) is inapplicable because the Jones Oil and Gas Leases were not part of the bankruptcy estate, as the Trustee did not assume them under § 365(d)(4).
Appellee distinguishes Appellant's cited cases, asserting those involved actual estate property sales. The Sixth Circuit's precedent states that § 363(m) applies when an appellant fails to obtain a stay on an order permitting a sale, limiting the review of a completed sale regardless of the underlying legal arguments. In *In re Parker*, the court ruled that the sale of a legal malpractice claim was valid even if it was argued not to be estate property, reflecting a similar rationale from the Seventh Circuit in *In re Sax*, where the appeal was deemed moot despite claims that the sold yacht was not part of the estate. The courts emphasized that authorization under § 363(b) suffices for mootness under § 363(m), regardless of the correctness of that authorization. Recognizing exceptions to this statutory mootness could undermine its purpose, as highlighted in related case law.
Appellant is contesting the Bankruptcy Court’s Sale Order regarding the Jones Oil and Gas Leases, arguing they are not part of the estate. However, Appellant did not secure a stay on the proceedings, and the Court previously determined that the $400,000 bond requirement was reasonable, supported by evidence of an interested bidder willing to pay over $300,000 for the leases and equipment. The Bankruptcy Court confirmed the sale, stating it was conducted in good faith, and found that the leases were indeed part of the estate, thus justifying the Sale Order. According to the Sixth Circuit, Section 363(m) limits appellate review of completed sales, rendering the appeal moot regardless of the appellant's claims about the estate's property. Consequently, the Court has granted Appellee's motion to dismiss the appeal as statutorily moot.
