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Summarizing by Bradley Pearce

Rushton v. ANR Company, Inc, et al. (In re C.W. Mining Co.)

No. 12-4091 (10th Cir. January 22, 2014).
With one exception (discussed below), the Tenth Circuit affirmed the district court’s dismissal of various consolidated bankruptcy appeals as statutorily moot by operation of § 363(m).
Procedural context:
The appeal arises from several adversary proceedings filed by a chapter 7 trustee to avoid and recover property of the estate transferred in violation of § 549. The trustee prevailed, and the defendants appealed to the district court. While the appeals were pending, the trustee sold the recovered assets to a new purchaser in a court-approved § 363 and sought dismissal of the pending appeals as statutorily moot pursuant to § 363(m). The district court dismissed each of the appeals, and a consolidated appeal to the Tenth Circuit followed.
The chapter 7 case originated as an involuntary case filed against C.W. Mining, which owned exclusive coal mining rights on land owned by COP and ANR. After the involuntary petition was filed but before an order for relief was entered, C.W. Mining transferred all its operations, including its mining rights, to Hiawatha. The bankruptcy court subsequently avoided the transfers and ordered the return of the estate assets pursuant to § 549, which Hiawatha, COP, and ANR appealed. The trustee also sought and obtained a declaratory judgment as to the estate’s ownership of a house on the leased property that was occupied by Charles Reynolds, who ran C.W. Mining’s operation. Reynolds appealed that judgment, too. While the various appeals were pending, the bankruptcy court approved the sale by the chapter 7 trustee of the estate’s assets to a buyer (Rhino) pursuant to § 363 and held that the buyer was a good faith purchaser entitled to the protections of § 363(m). After the sale closed, the trustee and Rhino moved to dismiss the various pending appeals as both equitably moot and statutorily moot by operation of § 363(m). In affirming the district court’s dismissal of the various appeals, the Tenth Circuit looked to certain fundamental principles of § 363(m) mootness. First, §363(m)’s effect is not limited to appeals of the sale order itself. Where, as here, reversal or modification of another order (i.e., the § 549 order) could effectively “modify” the sale order, § 363(m) compels dismissal. Next, while the trustee bears the burden of proving mootness under § 363(m), that burden does not extend to require the trustee “to disprove every possible legal remedy imaginable. Instead, the appellants must at least identify an available remedy that will not affect the sale’s validity.” Finally, merely alluding to the possibility of monetary relief is not sufficient to overcome § 363(m) mootness. Thus, where the appellant failed to present a theory of recovery based on the availability of monetary relief that would not require the modification or unwinding of the sale transaction, it could not survive dismissal for mootness under § 363(m) by raising such arguments for the first time on appeal. Thus, the Tenth Circuit reversed the district court’s ruling dismissing Reynold’s appeal, finding that Reynolds had properly asserted—and preserved—a counterclaim for monetary relief (for the value of improvements made by him to the property) that would not affect the validity of the Rhino sale.
Tymkovich, Brorby, and Murphy.

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