On April 19, 2023, the Supreme Court, in a unanimous opinion written by Justice Ketanji Brown Jackson in MOAC Mall Holdings LLC, ruled Bankruptcy Code section 363(m) to be non-jurisdictional, i.e. just a “mere restriction on the effects of a valid exercise” of judicial power “when a party successfully appeals a covered authorization.” Before MOAC, the Third, Sixth, Seventh, Ninth, Tenth and Eleventh Circuits held section 363(m) to be non-jurisdictional, but the Fifth and Second Circuits had diverged.
In reversing that Second Circuit decision, the Court rested on the lack of any clear textual and contextual evidence that Congress intended section 363(m) to be jurisdictional. In other words, the Court applied the so-called “clear-statement rule.” In general, this principle insists that a particular result can be achieved only if the statutory text unambiguously says so. In the jurisdictional context, such as here, the clear-statement rule serves as a way to gauge whether Congress’ “likely” intended “noncompliance with … [the relevant statutory] precondition [to] govern a court’s adjudicatory capacity,” i.e. its jurisdiction.
The Court began with section 363(m)’s text:
The reversal or modification on appeal of an authorization under [§ 363(a) or (b)] … of a sale or lease of property does not affect the validity of a sale or lease under such authorization to … [a good faith purchaser or lessee] … unless such authorization and such sale or lease were stayed pending appeal.
In this one paragraph, the Court saw two indicia that Congress did not likely craft section 363(m) to be jurisdictional. First, it imposes “a caveated constraint on the effect of a reversal or modification,” one that does not implicate “a court’s authority” or refer “in any way to the jurisdiction of the district courts.” Second, it does not compel an exclusively jurisdictional reading. Stated differently, it could be construed as a limitation on the discretionary exercise of a separately conferred judicial power. That this was a colorable interpretation of section 363(m) foreclosed its classification as jurisdictional.
Two contextual factors bolstered this conclusion: specifically, section 363(m)’s absence of any “clear tie” and exclusion from Title 28 of the U.S. Code, where “the Code provisions that recognize federal court’s jurisdiction over bankruptcy matters” are codified.
Finally, the Court reasoned that the fact that section 363(m)’s “issues directions” was beside the point because directives can be “important … yet not jurisdictional.”
To Be Decided …. Later?
In a potentially significant prelude to the above, the Court effectively rejected the buyer’s contention that the appeal was moot because no relief could be granted (but not under section 363(m)). More precisely, it declined to determine the correctness of this claim as “a court of first view.” However, Justice Jackson did so using language arguably incompatible with the doctrine of equitable mootness, the subject of a still pending appeal.
The Court remanded to the Second Circuit for “further proceedings consistent with this opinion.”