Pitman Farms v. ARKK Food Co., LLC (In re Simply Essentials, LLC)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 1 year 4 months ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- No. 22-2011 (8th Circuit, Aug 21,2023) Published
- Tag(s):
-
- Ruling:
- The U.S. Court of Appeals for the Eighth Circuit affirmed a bankruptcy court's order permitting a chapter 7 trustee to sell chapter 5 avoidance actions as property of the debtor's estate.
- Procedural context:
- After the bankruptcy court certified a direct appeal of its own order, the Eighth Circuit granted permission to address "the legal question of whether avoidance actions can be sold as property of the estate." To reach a conclusion, the Eighth Circuit considered the plain language of 11 U.S.C. § 541(a)(1) (stating property of the estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case”) and (7) (stating property of the estate includes “[a]ny interest in property that the estate acquires after the commencement of the case"), as well as pertinent authority interpreting these subsections. The circuit court also considered the appellant's argument based on the canon against surplusage. The appellant did not appeal the bankruptcy court's findings that (1) selling the avoidance actions was in the estate's best interest, and (2) the winning bidder's offer was fair and reasonable.
- Facts:
- Creditors filed an involuntary chapter 7 petition for Debtor Simply Essentials, LLC in the U.S. Bankruptcy Court for the Northern District of Iowa. The chapter 7 trustee concluded Debtor's estate lacked the funds necessary to pursue chapter 5 avoidance actions against Debtor's owner, Appellant/Creditor Pitman Farms. The trustee thus received bids from Pitman Farms and another creditor, ARKK Food Company, for the avoidance actions, The trustee determined ARKK submitted the superior bid, and filed a Motion to Compromise under Federal Rule of Bankruptcy Procedure 9019(b) and a Motion to Sell Property Free and Clear of Liens under 11 U.S.C. § 363(f). The bankruptcy court granted the trustee's motions over Pitman Farms' objection, holding that chapter 5 avoidance actions are property of a debtor's bankruptcy estate that may be sold. Pitman Farms appealed.
- Judge(s):
- Smith, Melloy, and Erickson
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