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Moac Mall Holdings LLC v. Transform Holdco LLC

Oral argument transcript · No. 21-1270 · October Term 2022 · argued December 5, 2022 · the petitioner won

Decision: votes, opinion and citations · Official transcript (PDF) · Argument audio at the Supreme Court

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From the Court's official transcript; speaker labels as in the transcript, with advocates' full names from its list of appearances.

Chief Justice Roberts: We'll hear argument next in 21-1270, MOAC Mall Holdings versus Transform Holdco LLC. Mr. Hallward-Driemeier. ORAL ARGUMENT OF DOUGLAS H. HALLWARD-DRIEMEIER ON BEHALF OF THE PETITIONER MR. HALLWARD-DRIEMEIER: Mr. Chief Justice, and may it please the Court: Because of the harsh consequences of designating a procedural prerequisite jurisdictional, this Court requires a clear indication from Congress before it will treat a limit as such. Nothing in the text, structure, or context of Section 363(m) suggests, much less clearly reflects, that Congress ex -- intended the absence of a stay to deprive the appellate courts of jurisdiction. To the contrary, the text explicitly presupposes the exercise of appellate jurisdiction, including to reverse or modify a sale order. The provision merely limits the remedial consequences of such a ruling and then only if there was no stay. Official 1 Transform's few appellate decisions concerning an earlier rule of bankruptcy procedure do not provide a clear indication of con -- jurisdictional character. None of the cases Transform cites are from this Court, and none actually designated the rule jurisdictional. Because the requirement of a stay is not jurisdictional, it was subject to waiver, forfeiture, and estoppel, each of which applies here. Transform assured the bankruptcy court that it would not invoke Section 363(b) to defeat MOAC's appeal because Transform did not believe Section 363(m) applied. And Transform was right. The order under review did not authorize a sale under 363(b). The asset sale had already closed. Rather, the order authorized assumption and assignment of a lease under Section 365, with no additional payment to the debtor. It does not defeat any congressional limit on the Court's power to hold Transform to the position it took in the bankruptcy court. Finally, Transform's alternative argument that the lease's transfer deprived the Official 1 appellate courts of jurisdiction to review the assignment order is confused on multiple levels. It wrongly assumes that bankruptcy courts' jurisdiction is solely in rem, which this Court has rejected, but even if it were, this Court has made clear that the transfer of the res does not deprive the appellate courts of jurisdiction where, as here, the transferee is a party to the proceedings. I welcome the Court's questions.

Justice Thomas: In your -- I -- I understand you'd like to get to the jurisdiction/non-jurisdiction question, but I think I've almost had my fill of that. The -- could you just take a second to explain what provision you rely on to -- as the -- to challenge the lease assignment? MR. HALLWARD-DRIEMEIER: We argue that the -- the less -- the -- that the assignee did not satisfy adequate assurance of future performance. And that's in --

Justice Thomas: Yeah, I understand that. MR. HALLWARD-DRIEMEIER: -- 365(b)(1)(C) and also 365(b)(3)(A). So the Official 1 Bankruptcy Code requires -- it's -- it's very protective of mall owners. Congress was very solicitous of them. And it provided that both in order to assume and to assign a shopping center lease, the -- the debtor and the assignee would have to show that there would be adequate assurance of future performance, and that required specifically showing that the assignee had the same financial wherewithal and operation experience as the -- the original lessee, here, Sears in 1991. And the district court held that that was not met here.

Justice Thomas: As a practical matter, what -- what would the difference be? MR. HALLWARD-DRIEMEIER: Well, on -- on remand, we believe that MOAC would be entitled to recover the property because the -- the time to -- to designate and assume and assign the lease has now expired. But, even if we were not right on that, at the very least, MOAC would be entitled to an assignee that satisfied that statutory requirement, which would also protect the mall's interest. Of course, whether we're entitled to either of those reliefs is a merits question. Official 1 It does not go to this Court's jurisdiction.

Chief Justice Roberts: Does your argument depend upon there being issues that could be raised that do not go to the authorization of the sale or lease? In other words, I understand the argument that this doesn't bar jurisdiction across the waterfront, but it does seem to bar any further inquiry into the validity of the sale or lease. No? MR. HALLWARD-DRIEMEIER: Where -- where the statute is properly invoked, that would be true. But, here, its protections were both waived and forfeited. It was not raised in the district court until -- after the district court had ruled on the merits, and it was affirmatively waived in the bankruptcy court as part of Transform's objection to a stay --

Chief Justice Roberts: So -- MR. HALLWARD-DRIEMEIER: -- pending appeal.

Chief Justice Roberts: -- so what would you have left apart from the issues of waiver? MR. HALLWARD-DRIEMEIER: Well, we would also argue that this was not a -- a -- a Official 1 sale of property of the estate under 363(b) because that had already happened. The sale had closed. The money had been paid to Sears, and there was no -- it was not subject to adjustment if the designated leases were later held not to be eligible for assignment. In fact, the A -- the -- the APA, the purchase agreement, explicitly contemplated that the bankruptcy court would have to consider and decide whether there had been adequate assurance of future performance and that if it was not found, then the debtor would have no obligation to assume or assign the lease. So the sale closes while that possibility of an individual designated lease not being assignable was still outstanding. So there is -- there's no way in which the sale is invalidated by a ruling in our favor. That's why I say Transform was right initially to say that this is not an order that -- to which 363(m) applies even on its terms because it specifically contemplates the purchase or sale. The words "sale" and "purchaser" appear several times in the provision, and it is a -- an authorization under 363(b). Official 1 The authorization that is relevant here appears at Petition Appendix 114a. It's paragraph 11 of the APA, and it says: "Debtors are hereby authorized, in accordance with Sections 105(a) and 365 [...] to assume and assign the Designated Lease." Assumption and assignment occurs under 365. There's no reference there to 363. We're challenging the assumption and assignment, not the earlier sale. What was sold was designation rights. The sale of the designation rights is done and gone. It's been completed and not going to be undone with this. But the sale of the designation rights contemplated that a designated lease might never be successfully assigned because the assignee could not satisfy their statutory requirement of adequate protection, and that's what happened here. So Transform is simply being held to the terms of its bargain.

Justice Alito: Suppose we agree with you on the jurisdictional question. What would happen on remand? Can the district court simply vacate the assignment order? MR. HALLWARD-DRIEMEIER: Yes, Your Official 1 Honor. And --

Justice Alito: Okay. What -- what if that happens? To whom would the lease revert? MR. HALLWARD-DRIEMEIER: So we believe that the lease would revert to the -- to Mall of America, and that's because, under 365(d)(4), the -- the statutory time to assume a lease expires after 210 days, unless extended by consent. Here, there was extension by consent until the end of August --

Justice Alito: But why wouldn't it revert -- MR. HALLWARD-DRIEMEIER: -- but no further.

Justice Alito: -- either to the Sears bankruptcy estate, if there is still such a thing, or to the reconstituted Sears? MR. HALLWARD-DRIEMEIER: Well, it -- it -- in a sense, it would revert to the estate, but because, under the language of 365(d)(4), once the 210-day period to assume has passed, the lease is deemed rejected, and since we're past that time, it would, under the terms of the statute, immediately revert to the lessor. But there's another reason why the Official 1 same thing holds, and that's because Transform only had designation rights during the designation period, and that expired on May 3, 2019. So we think it's too late two times over for them to -- to try to -- to redesignate a new assignee and go through that process. But that's my merits argument. If I'm wrong on that, then, at the very least, assuming that Sears or its -- its successor has an ability to designate a new assignee, at the very least, we would be entitled to only being assigned to someone who can satisfy the protections afforded by the statute.

Justice Alito: But there are news reports that Sears exited bankruptcy in November, is -- is that correct? So is there still an estate? MR. HALLWARD-DRIEMEIER: Your -- Your -- Your Honor, we would take the position again that it's too late. There is a -- a -- a litigation trust, and I assume an argument could be made that it would become property of the litigation trust. We would dispute that. But, again, those are merits issues for the courts to determine on remand. They Official 1 don't go to this Court's jurisdiction because there's an Article III case or controversy.

Justice Alito: No, I -- I understand that. I'm just trying to figure out what the practical implications of a ruling in your favor are. MR. HALLWARD-DRIEMEIER: But, again, our -- our position is -- is that twice over the time to designate and to assume and assign this lease have passed, but that's because both under the terms of the APA and under the terms of the statute Congress created, basically, Sears had one shot to -- to identify an assignee that would satisfy the requirement. And had they designated an assignee, it could have been any -- it could have been Target, it could have been Bloomingdale's that had the similar financial situation and -- and operating experience as Sears in 1991. That would have been fine and good. Instead, they designated a holding company that had never had any such experience.

Justice Gorsuch: Counsel, I -- I -- I think --

Justice Alito: But you -- no, go Official 1 ahead.

Justice Gorsuch: You sure?

Justice Alito: Yeah.

Justice Gorsuch: All right. I -- I -- I think what I'm struggling with and I'm -- I -- I sense my colleagues are too is that it's a little unusual to say a good faith purchaser of a bankruptcy asset might have to disgorge it, you know, some years later after perhaps the bankruptcy estate has been eliminated and -- and -- and the bankruptcy's discharged. So, what do we do about that? Does every good faith purchaser now take an asset subject to the possibility that it will be reverted to and a bankruptcy estate might have to re-emerge? I mean, I -- I'm just -- I'm just unfamiliar with -- I'm not a bankruptcy expert. MR. HALLWARD-DRIEMEIER: Yeah.

Justice Gorsuch: You are. MR. HALLWARD-DRIEMEIER: So -- so 360 --

Justice Gorsuch: Tell -- tell me -- is there any other analogue to this that you're aware of in the -- MR. HALLWARD-DRIEMEIER: 363(m) Official 1 protects the good faith purchaser's interests.

Justice Gorsuch: Yes, as -- as if there's a stay, but, you know, then you waive and then here we are. MR. HALLWARD-DRIEMEIER: But -- exactly. Here --

Justice Gorsuch: So, and I guess I'm asking is there any other instance in the bankruptcy laws -- maybe that's the way to get at it -- MR. HALLWARD-DRIEMEIER: Well --

Justice Gorsuch: -- where there's this kind of reversion of -- of -- of an asset that -- that -- that a good faith purchaser has taken on? MR. HALLWARD-DRIEMEIER: So, in -- in -- in the first instance, I want to reiterate that we don't think that Transform is a purchaser with respect to the asset assignment.

Justice Gorsuch: I understand, yes, yes, yes, yes, yes. MR. HALLWARD-DRIEMEIER: Right? Because this was a separate --

Justice Gorsuch: Yes, but your argument doesn't turn on that fact. Your Official 1 argument turns on the meaning of the statute. So that doesn't help me. MR. HALLWARD-DRIEMEIER: So, again, I think that the statute -- this Court has recognized that even important principles, even emphatic, you know --

Justice Gorsuch: Yes, yes. I -- I -- I -- I spot you -- MR. HALLWARD-DRIEMEIER: -- rules written emphatically --

Justice Gorsuch: -- counsel, I spot you all of that, but you are dancing, my friend. MR. HALLWARD-DRIEMEIER: So --

Justice Gorsuch: So let's get to the -- let's get to the center stage, you know, is there another example that you can think of where a good faith purchaser in the bankruptcy laws -- just a straightforward question -- would have to disgorge an asset? MR. HALLWARD-DRIEMEIER: I -- I -- I think, absent it's in a sense agreement to do so, as it has here be -- by waiving the protections of the statute, I don't think that's --

Justice Gorsuch: Well, the good faith Official 1 purchaser is not the one who waives it or not. It's -- MR. HALLWARD-DRIEMEIER: Oh. Well, here --

Justice Gorsuch: -- it's the debtor. MR. HALLWARD-DRIEMEIER: -- here, it is, Your Honor.

Justice Gorsuch: I understand here it is, but that's not always going to be true. MR. HALLWARD-DRIEMEIER: No, and -- and, in fact, that's -- the cases that we cite -- and the reply brief on page 18 make that distinction -- they hold that where the transferee is outside of the -- the -- the proceedings and -- and not subject to the court's jurisdiction order, that the -- that it can't be ordered back. But, they say, where the transferee is a party to the proceeding, where the order can in effect be undone through an order to the parties to the proceeding, then there is jurisdiction to give that relief, as here.

Justice Gorsuch: So you would be okay with a rule that says it's not jurisdictional, but in no circumstances may a court order a good Official 1 faith purchaser outside of the bankruptcy proceedings to revert an asset? MR. HALLWARD-DRIEMEIER: Well, that -- that issue is not presented in this case, and I would urge the Court not to reach out to decide it because I don't think it's been briefed in this case. Their -- the -- the principles of what are called equitable mootness have, you know, been legion, and I know that there have been a number of petitions about that to the Court. This is about statutory mootness. It was a statutory protection that was waived by Transform specifically twice in the bankruptcy court. And the bankruptcy court ended its comment about that -- and this is at page 7(a) of the brief in opposition appendix -- saying they're not going to rely on 363(m). Mr. Chesley just reiterated that for a second time. If that were an inaccurate characterization of Transform's position, and, indeed, they had twice disavowed 363(m) already at that time, it was -- it was incumbent upon Transform to clarify. The district court recognized that if Official 1 ever there was a case for judicial estoppel, this is it. But we don't need to rely on either of these doctrines because we also have forfeiture. Transform went through the entire merits litigation in the district court without asserting that 363(m) had any application to the court's jurisdiction to hear this decision, jurisdiction in the statutory sense, jurisdiction in the Article III sense, said nothing about that until after it had lost. And that's precisely the -- the unfair harsh consequences of misdesignating a rule jurisdictional. Here, there is no indication that Congress intended that effect. And I would ask -- give the example, Your -- Your Honor, Justice Gorsuch, you asked about the good faith purchaser, but Transform's argument is so broad that it would mean that there is no authority to recover the property even from a bad faith purchaser, one who did not purchase in good faith. They say the only remedy is Section 549. But Section 549 here is a two-year period of repose. It's also the debtor's cause of Official 1 action subject to waiver. They assert that Sears has already waived any claim under 549, and, of course, the two-year period is gone.

Justice Gorsuch: Counsel, I hear all of that, okay? I guess my concern -- and -- and I'm just -- put aside this case, I know it's really hard, okay, and -- and -- and I -- I -- I'm -- I'll put my cards on the table. I have a hard time seeing this as jurisdictional, okay? But I just -- I just can't think that there are many circumstances in the bankruptcy laws, if there are any, where good faith purchasers might have to relinquish an asset. Okay. Forget about bad faith purchasers. Forget about those. And -- and -- and so we're going to be scrambling to come up with some sort of rule to deal with that fact, okay, and -- and I just want to know where on earth that would come from, and you haven't seemed to have given me much help so far. MR. HALLWARD-DRIEMEIER: Well, again, the -- it's a merits question, and --

Justice Gorsuch: I got that. I really do. Official 1 MR. HALLWARD-DRIEMEIER: -- and the -- the -- the -- so the -- I would point the Court to both this Court's decision Republic Bank of Miami, which is not a bankruptcy case, granted, but where the Court seemed to understand that because the United States was a party before it and had, indeed, brought the action, then a court order to undo the -- the transfer would be honored by the United States. I mean, there were complications because the United States needs an appropriations, but the court found it. Chafin v. Chafin, which is referred to in the law professors' amicus brief, is another one to the same effect. There, the Court characterized it as simply asking for the routine relief on appeal that the decision of the district court be reversed and its order undone. There, the question involved a child's custody. The child had during litigation because there was no stay pending appeal been removed to Scotland.

Justice Gorsuch: Thank you, counsel.

Chief Justice Roberts: Thank you. Following up on Chafin, if I'm remembering correctly, the Court went on a little bit about Official 1 how narrow the issues that would be available in the proceeding would be. MR. HALLWARD-DRIEMEIER: Well, the Court actually does not resolve the question. They said that on remand there was a question whether the -- the -- that the agreement, the -- the international convention would itself provide for an order of re-return or if principles of equity would allow. And I think what the cases that we're citing on page 18 of the reply reflect is that the bankruptcy court is a court of equity. A party like Transform comes to the court, asks for an order. It's subject to the court's personal jurisdiction because that was a term of the APA, consent to the personal jurisdiction of the bankruptcy court, that if the court undoes it, then Transform will have to honor that order. At the moment, there are two pieces of paper. There's a -- a lease that was given to Sears, and there's a second piece of paper that says, pursuant to authority under Section 365 of the bankruptcy court -- code, the -- the -- Sears' lease has been assigned to Transform, but Official 1 when on remand that order is taken away, then Transform has nothing to -- to assert in terms of its right to the -- to the leasehold in -- at Mall of America.

Chief Justice Roberts: Thank you.

Justice Jackson: Isn't part of --

Chief Justice Roberts: Justice -- I'm sorry. Justice Thomas?

Justice Thomas: Nothing.

Chief Justice Roberts: Oh, I'm sorry, we're not there yet.

Justice Kagan: No, we are.

Chief Justice Roberts: No, we are. Yeah. Justice Thomas? Justice Alito? I thought we were. Justice Sotomayor? Justice Kagan?

Justice Kagan: Can -- can I ask you to make an assumption you don't want to make? But would you assume, sort of along the lines that Justice Gorsuch was -- was saying, that, in fact, at this late date, the Court is not going Official 1 to be able to undo the assignment? Does that make this constitutionally moot, or is there some other form of relief that the Court could provide to resolve this dispute? MR. HALLWARD-DRIEMEIER: Well, Your -- Your Honor, I think there might be additional relief that could be provided to -- to Mall of America in terms of out of the compensation from the sale. That's not been explored yet. I do want to make one point in terms of whether this assignment can be undone.

Justice Kagan: But, I -- I -- I -- I want to -- MR. HALLWARD-DRIEMEIER: The parties have stipulated --

Justice Kagan: Just -- just stick with my question. MR. HALLWARD-DRIEMEIER: Okay.

Justice Kagan: You gave one -- flesh out, like, what -- what do you think a court might do, even assuming -- and I know you dispute this, and I'm not suggesting that you're wrong -- but -- but, if there is no unwinding to be done, what is left? MR. HALLWARD-DRIEMEIER: Well, Your -- Official 1 Your Honor, the -- the rule -- the statute only precludes an -- an invalidation of the -- of the sale. Of course, we think this is an assignment, not a sale, so it doesn't apply. But, if that is unavailable, then the court has to consider whether there can be any other relief. Here, we think other relief might be, for example, further protection to ensure us that -- that Transform actually does comply with all of its requirements or perhaps money out of the estate to compensate Mall of America for what it has lost. But, again, that's not necessary to reach here because, here, the parties entered into a stipulation that Transform would not do anything further that would moot the appeal. As a consequence, this property remains dark. It has never been developed. There's no -- nobody operating it right now. So, if ever there's a situation in which an assignment of a lease could be undone, it's this one because the parties agreed to a -- a stipulated --

Chief Justice Roberts: Justice Gorsuch? Justice Kavanaugh? Official 1 Justice Barrett? Justice Jackson?

Justice Jackson: I just wanted to ask whether in part -- partly in response to Justice Gorsuch's question, is it your view that the statute itself, (m), assuming that it applies, does contemplate circumstances in which you might have to unravel it because it's -- it -- it only talks about the validity of a sale that has been made in good faith? MR. HALLWARD-DRIEMEIER: Yes, Your Honor, it -- it -- it explicitly contemplates that if the transfer was not made in good faith, then there would be an unwinding. So the -- Congress specifically contemplated an exercise of this jurisdiction, even that the -- the sale would have to be unwound in certain circumstances. And Transform has waived whatever protection the statute might otherwise have afforded it.

Justice Jackson: Thank you.

Chief Justice Roberts: Thank you, counsel. Ms. Sinzdak. Official 1 ORAL ARGUMENT OF COLLEEN R. SINZDAK FOR THE UNITED STATES, AS AMICUS CURIAE, SUPPORTING THE PETITIONER

Colleen R. Sinzdak: Mr. Chief Justice, and may it please the Court: Section 363(m) is not jurisdictional because nothing in its text suggests that it is, and there is no other evidence that satisfies the clear statement rule described in Arbaugh. Respondent is incorrect in asserting that Section 363(m) is nonetheless jurisdictional because it reflects a longstanding limit on in rem jurisdiction. Among other things, this Court's decision in Republic National Bank rejected the existence of the very limit on in rem jurisdiction that Respondent now asserts. Nor should Respondent prevail based on its new argument that Section 549 and 550 provide the exclusive means to unwind the disputed lease assignment. This new argument about whether Petitioner is entitled to relief under the bankruptcy statutes is not jurisdictional, and even if it were, there is no reason that this Court would have to address it Official 1 before the question of subject matter jurisdiction on which this Court granted cert. I welcome the Court's questions.

Justice Thomas: I know there's a resistance to projecting what would happen when this case -- if this case goes back, but what do you think will happen?

Colleen R. Sinzdak: We are not taking a position on that. The United States does not have --

Justice Thomas: Nobody is.

Colleen R. Sinzdak: Nobody is. (Laughter.)

Colleen R. Sinzdak: Nobody is. It does not affect this Court's subject matter jurisdiction to decide this question, so we do not need to. We would say that we are not aware of cases in which courts have insisted that there be additional process in order to unwind a -- a lease assignment once the court has reversed the lease assignment on appeal. There aren't cases as far as we can tell either way. It is our -- it is our -- our sense that in general this -- this idea that there would need to be further process it -- it -- it Official 1 doesn't have a lot of precedent. We have looked, for example, at what happens when there's a good faith purchaser, and in the cases that we found, there hasn't been additional process that the good faith -- purchaser has had to go through. At least looking at the bankruptcy court dockets, we haven't been able to see that. But -- but we aren't taking a -- a position on that because that wasn't a question on which this Court granted cert.

Justice Gorsuch: Counsel, I -- I hear everything you say, okay? So take it as read, okay? But, normally -- I mean, my bankruptcy experience is limited, so -- and yours is much, much more -- you -- you have access to people with great more expertise, and so I'm -- I'm -- I'm really pleading for that, okay? Normally, I think of good faith purchasers -- put aside bad faith purchasers, okay -- as once they purchase an asset in bankruptcy, we're done and it's all about finality and resolution and moving on and quickly resolving these cases. And that's really pretty essential to the greater purposes of the bankruptcy laws, certainty and allowing Official 1 people an opportunity for a new start, okay? What happens to good faith purchasers in these circumstances who, through no fault of their own but because of the monkey business of the parties, have major assets, you know, potentially with -- withdrawn from them years later? I mean, we're going to -- we're talking years later. That just seems to me contrary to what I know instinctively about the bankruptcy laws. Now perhaps there's some other limitation that we can make up, we can find. Yes, yes, you're -- you're -- you're shaking your head to the right question and nodding it to the right question. Help me. What -- what is it?

Colleen R. Sinzdak: Sure. So, if the purchaser, the good faith purchaser, was not a party to the appeal, which -- which we think is not the situation we have here --

Justice Gorsuch: Got you.

Colleen R. Sinzdak: -- if, instead, they -- they're sort of -- it's three years later --

Justice Gorsuch: Yes.

Colleen R. Sinzdak: -- and suddenly someone Official 1 is showing up at their door and saying you need to give us the property, then we think they could assert Section 363(m). They wouldn't have had an opportunity to assert it before, so they would not have waived. They would not have forfeited.

Justice Gorsuch: Interesting.

Colleen R. Sinzdak: There would be no concerns with respect to judicial estoppel.

Justice Gorsuch: That's helpful. Thank you.

Colleen R. Sinzdak: If I could just address the three -- a -- a -- a few quick points about jurisdiction because we do think this is a straightforward question, and we do -- no, we know that with respect to the Court's precedents, but we think there are three issues where things can get a little bit confused in terms of what governs subject matter jurisdiction. And so the first one is a statutory restriction on relief does not normally govern subject matter jurisdiction. And I think that there can be some concern because of the redressability prong under Article III, the Official 1 Article III analysis, that relief should play into that. We think that Steel Co. squarely addresses this at page 96, where the Court explained that a statutory restriction on relief, the question doesn't usually affect jurisdiction because the question under the redressability analysis is not whether a party is entitled to the relief that it's seeking but, rather, whether, if they are able to obtain that relief, it will truly redress their -- their injury. Now --

Justice Jackson: Counsel, I'm sorry to interrupt you, but can you just make sure to address an issue that I think you didn't have a chance to address, which is the mootness question sort of directly? What -- what is -- what is the most straightforward reason this case remains live given what has been argued on the other side?

Colleen R. Sinzdak: Okay. Again, I just want to say at the threshold that I -- we don't think the Court has to -- to deal with the new question because this is itself a question of subject matter jurisdiction. So we're not in a world where you have to worry about your -- Official 1 your -- your -- your weighing in on the merits when there is a --

Justice Jackson: So we can pick either one for jurisdiction?

Colleen R. Sinzdak: That's right. But I -- I also want to say we do not think that the new question presented -- the -- sorry, pardon me, the new argument is actually jurisdictional, and that's because it's essentially an assertion about whether the -- the Petitioner is going to be able to get the relief it seeks on remand. And we do think that Chafin versus Chafin, the 2013 opinion that I believe Petitioner's counsel were -- was referring to, that directly said that questions about whether a statutory scheme -- or, in that instance, it was actually a statute and a convention. Questions about whether that statutory scheme permit the relief that a part -- the appellant is seeking on remand, those questions go to the merits, not mootness. And it's -- it's -- it's very clear. So I think Chafin versus Chafin at page 174 is the direct answer to the mootness question, and that actually anticipated one of the three jurisdictional Official 1 points I wanted to make. The last one is just about in rem jurisdiction, and I think there are points in Respondents' brief where it treats in rem jurisdiction as synonymous with subject matter jurisdiction. And we think that's not right because subject -- in rem jurisdiction is really an alternative to in personam jurisdiction, so I think every law student learns pretty early on that in order for a court to hear a case, it needs to assure itself that it has both subject matter jurisdiction, that is, the power to hear the class of cases into which the controversy falls. And either person -- in -- in -- in personam jurisdiction, personal jurisdiction, or in rem jurisdiction. And the reason that's important is that we know that limits on personal jurisdiction can be waived. And we think the same is -- is true of limits on in rem jurisdiction such that even if Respondent was correct that there is some principle of in rem jurisdiction that's floating around here, it just doesn't matter because it could be waived. Official 1 And if the Court has no further questions?

Chief Justice Roberts: No one? Okay. Thank you.

Colleen R. Sinzdak: Thank you.

Chief Justice Roberts: Rebuttal, Mr. Brunstad.

G. Eric Brunstad Jr.: Not quite yet for rebuttal, Your Honor.

Chief Justice Roberts: Ah, ah, yes. (Laughter.)

Chief Justice Roberts: It's a tough day. Sorry. Your opening points. ORAL ARGUMENT OF G. ERIC BRUNSTAD, JR., ON BEHALF OF THE RESPONDENTS

G. Eric Brunstad Jr.: Mr. Chief Justice, and may it please the court: Justice Thomas, I am going to take a position on your question. Justice Gorsuch, I have a better answer to the question that's actually correct. Justice Kagan, there is no additional relief that can be granted. Justice Jackson, this case is moot. There is no case or controversy. Official 1 But, first, it's important to set forth the actual facts because my -- my friend got a few things wrong. In 1991, Sears and MOAC entered into a 100-year freely assignable essentially rent-free ground lease. Sears built the building, not MOAC. Decades later, in 2018, when Sears filed for bankruptcy, the building that Sears built with this ground lease became property of the bankruptcy estate of Sears' bankruptcy estate. Sears moved for authority to sell by private contract this property to Transform. After the necessary approvals from the bankruptcy court were obtained, that sale transaction closed on October 4, 2019, three years ago, and it was a sale, as the district court determined. It was a transfer of ownership of property for a price. There was additional consideration that was paid for this specific asset, this building and this lease, millions of dollars in additional consideration that's elaborated on pages 13 to 14 of the red brief. Okay. There is no remedy that can be granted to them at this point. What is the Official 1 relief, the sole relief that they identify? It's on page 10 of their reply brief.

Justice Jackson: Before you get into that, though, can -- I'm interested in the fact that your recitation of the facts did not include the waiver that they continue to point to.

G. Eric Brunstad Jr.: Yes.

Justice Jackson: Isn't there a point in the procedural history of this in which your client, Transform, said we're not going to rely on 363(m) and what do we do about that?

G. Eric Brunstad Jr.: Justice Jackson, there is that point that goes to Section 363(m). My argument initially is wholly apart from Section 363(m). Put that statute aside, put the question of waiver aside because it only pertains to Section 363(m). There is no case or controversy. There is no way to undo the sale in this instance. And here is why, three reasons: The remedy they seek, which is specified on page 10 of their brief, the courts can simply enter an order voiding transfer of MOAC's lease. You can just simply take the property from them. Official 1 That remedy does not exist as a matter of law. The statutory remedy, the exclusive remedy is the avoidance powers. That's not available here. The bankruptcy court on remand has no subject matter jurisdiction over this property. Its property is -- its jurisdiction is limited to property of the estate. This is not property of the estate. If this were remanded back to the bankruptcy judge, the judge would say, I don't have jurisdiction here. I have jurisdiction over property of the estate, not Transform's property. If you want me to have jurisdiction, you have to invoke the avoidance powers to bring it back into the estate. That's not available. But, Justice Gorsuch, your question about what is the -- what is the answer, it is in this Court's seminal decisions, so for commercial law geeks like me, these decisions, although not widely known, they are seminal in my field, and they are this -- this -- this Court's triumvirate of decisions in Gray versus Brignardello, in Voorhees versus Bank of the United States, and in Grignon's Lessee versus Astor, and there the Court unequivocally Official 1 explained, if you reverse a sale order on appeal, it does nothing to affect the sale. The sale cannot be overturned. This Court's language explanation in Gray is -- is -- is -- is -- is straightforward. Although the judgment or decree may be reversed, yet all rights acquired at a judicial sale while the decree or judgment were in full force and which they authorized will be protected. With the errors of the Court, the purchaser has no concern and the Court said this is so well established, you know, we don't -- we shouldn't even have to reiterate it. The Court was even more unequivocal in Voorhees versus Bank of the United States.

Justice Sotomayor: If I go to the sale order itself, I thought the sale order which was selling Sears' right to assign the lease to Transform, the sales order said that that right reserved the landlord's right to object to any lease assignment that failed to conform to the requirements of 365. So the sale order itself reserved the right of objection. That's what you bought. At the assignment or at the step of the assignment, Official 1 the landlord objected. And the Court said no, I'm going to overrule it. But then you came in and said -- you, Transform, came in and said, I'm not going to rely on 365(m). I'm here before the Court. I'm going to subject myself to this procedure, which you did. And it got -- you got overruled. And then you wanted to appeal that. I don't understand.

G. Eric Brunstad Jr.: First off --

Justice Sotomayor: You took -- you're before the Court.

G. Eric Brunstad Jr.: Yes.

Justice Sotomayor: So you're in personam.

G. Eric Brunstad Jr.: Ah.

Justice Sotomayor: You're defending your own rights and -- to the assignment, and now you've lost, or you -- you're invoking 365(m). So I don't understand how the Court has lost jurisdiction.

G. Eric Brunstad Jr.: A proceeding --

Justice Sotomayor: And I'm not even sure how you're a good faith purchaser because you purchase subject to the landlord's objection. Official

G. Eric Brunstad Jr.: The -- the bankruptcy court found we were a good faith purchaser, and as the court of appeals explained, that designation was not challenged. We are a quintessential good faith --

Justice Sotomayor: Yes, but --

G. Eric Brunstad Jr.: -- purchaser.

Justice Sotomayor: -- subject to a condition.

G. Eric Brunstad Jr.: Well, well -- two -- several things, Justice Sotomayor. First of all, it was a two step-process for the sale. The sale was under Section 363 of the assets, which required further approval of the Court for the transfer of the lease, which is also part of the sale, for which additional consideration was paid in addition to the 1.4 billion that was paid for the bulk sale. So this was all a package together. What happened, though, was, at that point, right, and -- and this is -- this is -- this is important, the bankruptcy court does not exercise in personam jurisdiction over property of the estate. There's no summons and complaint against the purchaser. There's no ordinary in Official 1 personam process. It's all in rem. This Court said so in Stratton versus New -- and as the Seventh Circuit explained, a proceeding under Section 363, that's the sale statute, is an in rem proceeding. One does not convert an in rem proceeding into in personam as a buyer by -- by showing up. If that were true, this Court's decision in Hood would be wrong. If -- if -- Your Honor may recall in Hood --

Justice Sotomayor: I'm sorry, I'm -- I'm totally confused now by you.

G. Eric Brunstad Jr.: Certainly, Your Honor.

Justice Sotomayor: Only for the certain --

G. Eric Brunstad Jr.: Let me explain.

Justice Sotomayor: You are the party who bought. You're a good faith --

G. Eric Brunstad Jr.: We are the --

Justice Sotomayor: -- buyer.

G. Eric Brunstad Jr.: -- buyer, Your Honor, yes.

Justice Sotomayor: You bought subject to the objection.

G. Eric Brunstad Jr.: No, Your Honor. Official

Justice Sotomayor: You're before the Court --

G. Eric Brunstad Jr.: That's the -- that's this Court's point in Gray versus Brignardello. Whatever may have been the merits of the objection is not the buyer's concern. This Court was emphatic about that -- emphatic about that.

Justice Sotomayor: I see what you're saying.

G. Eric Brunstad Jr.: When you show up at a sale, all -- the Court said -- and this is just repeating its language from prior decisions. This has been the settled commercial law rule for 200 years. The purchaser is not concerned with any errors the trial court might make in authorizing the sale. As long as the sale was authorized, the purchaser takes free. If it's reversed on appeal, it does not matter --

Justice Sotomayor: I now have --

G. Eric Brunstad Jr.: -- which is why there's no common law rule that you can undo it.

Justice Gorsuch: Okay. So they say there might be some other relief.

G. Eric Brunstad Jr.: Not so, Justice Official 1 Gorsuch.

Justice Gorsuch: All right. Help me --

G. Eric Brunstad Jr.: Here's why. Here's why. This is bankruptcy.

Justice Gorsuch: Yeah.

G. Eric Brunstad Jr.: And, in bankruptcy, if you have a claim, you must file a proof of claim. They did. They filed a proof of claim for the unpaid rent. Transform paid that as additional consideration, which was then paid to them. The opportunity to file a claim for additional damages has long since gone. There is no possibility. That is foreclosed.

Justice Gorsuch: Counsel --

G. Eric Brunstad Jr.: They're out of bankruptcy.

Justice Gorsuch: -- the one --

G. Eric Brunstad Jr.: There is another reason, Justice Gorsuch.

Justice Gorsuch: The one thing you're -- well, give me your other reason. Then I -- then I've got a -- another question.

G. Eric Brunstad Jr.: The other reason is there's no such thing as a cause of action for Official 1 breach --

Justice Gorsuch: Right.

G. Eric Brunstad Jr.: -- of Section 365 of the Bankruptcy Code. There is no such thing. It would be an implied cause of action that does not exist. So they are foreclosed procedurally and substantively from making any claim for damages which they've never heretofore even suggested. It is not possible. Especially since now Sears's bank -- Sears's bankruptcy is over. The case is gone. The funds have been distributed. There is nothing left. So they do not -- Justice Kagan, there is no opportunity for any additional relief whatsoever. The sole statutory mechanism --

Justice Gorsuch: All right. So, counsel, I'm sorry to interrupt you there, but --

G. Eric Brunstad Jr.: Certainly, Justice Gorsuch.

Justice Gorsuch: -- boy, you've been so persuasive, you -- you -- you -- you got me into thinking I should dig this case --

G. Eric Brunstad Jr.: I --

Justice Gorsuch: -- which you -- Official

G. Eric Brunstad Jr.: Yes, Your Honor. Yes.

Justice Gorsuch: But you don't want that, do you?

G. Eric Brunstad Jr.: I do want you to dismiss the petition as improvidently granted. (Laughter.)

G. Eric Brunstad Jr.: I absolutely do, but I do think the statute's also jurisdictional, and I would like to explain why, and this -- this ties into the fact that, right, this is in rem subject matter jurisdiction.

Justice Gorsuch: Yeah.

G. Eric Brunstad Jr.: Subject matter jurisdiction in the bankruptcy court is property of the estate. What is the proceeding here? It is the sale of estate property. That is fundamentally in rem. It cannot be in personam, right? If that were -- if it were in personam, this Court's decision in Hood would be wrong. There, the state showed up. You can't do in personam action against the state. You can only do in rem, the Court said. By the state showing up, which it did, it doesn't convert in rem into in personam. It stays in rem. This is in rem from Official 1 the beginning. Just like in admiralty, the ship has sailed.

Justice Jackson: But, counsel --

Justice Sotomayor: Mr. --

Justice Jackson: -- you suggest that in rem is like a very, very narrow set of powers. And I had understood the bankruptcy court could exercise certain additional powers in its review of the rem. Is that not so?

G. Eric Brunstad Jr.: As this Court explained in Ahlers, whatever equitable powers remain in the bankruptcy court must and can only be exercised within the confines of the Bankruptcy Code. The Bankruptcy Code has a very specific remedy for upsetting these sales. It's called the avoidance powers. They essentially concede those are not available here. They apply not only to good faith purchasers -- that's Section 549 and Section 550 -- but also bad faith purchasers. There is a specific provision of Section 363 that allows for overturning a sale to bad faith purchasers, 363(n). That remedial scheme would make no sense if there was also some vague general equitable power of the bankruptcy court to simply do an end run around Official 1 the avoidance powers and simply bring property back into the estate.

Justice Barrett: Mr. -- Mr. Brunstad, I feel like you're taking us far afield of the question that we granted cert on. I mean, why does any of this matter? Why can't we just answer the jurisdictional question that we granted cert on and then send it away and you can make your arguments below?

G. Eric Brunstad Jr.: Justice Barrett, because there is no case or controversy. As this Court explained --

Justice Barrett: But we don't have to -- we don't have to get into that, right?

G. Eric Brunstad Jr.: Yes, yes, under --

Justice Barrett: If we decided a jurisdictional question, you know, as counsel said, we can decide on either ground.

G. Eric Brunstad Jr.: No, Justice Barrett. Here's why. In this Court's decision in Official English for Arizonans, the Court said we consider not only our ability to decide the question but the lower court's ability to proceed. Here, if you -- if you were to reverse and send it back, what could the lower court do? Official 1 Absolutely nothing.

Justice Kagan: No, they can decide their own jurisdiction to decide jurisdiction. So we have a bunch of different jurisdictional questions. As Justice Barrett said, one we took cert on, and they're split on it, and there's usefulness to our deciding that. And then, as to anything else, send it back and they can decide on their own jurisdiction with respect to the rest --

G. Eric Brunstad Jr.: No, Justice Kagan.

Justice Kagan: -- and you'll make your arguments there.

G. Eric Brunstad Jr.: Jurisdiction is not relief. There must be some tangible remedy that they must be able to get. They cannot. Wholly apart from Section 363 --

Justice Kagan: Well, that's just assuming the conclusion. I mean, that's exactly what we would be asking -- you know, we would be saying there are a bunch of other issues in this case, and one of them is whether there's any possibility of relief remaining, and, you guys, the lower courts, go decide that.

G. Eric Brunstad Jr.: But, Justice Kagan, in Official 1 the Tempnology decision that Your Honor authored, you -- at the very beginning of that decision, Your Honor said, well, is there a contractual breach remedy here? And you thought there was enough evidence that there was to then reach the question of whether Section 365 breach equals rescission. And Your Honor said it doesn't. Very similar here, similar to the one that Your Honor rejected in that decision. But the threshold question under case or controversy jurisprudence is, is there some sort of tangible relief, something they can get out of actually prevailing? And, here, the answer is no. The sole relief they want is to take away the property. And they also want a forfeiture. They've said so themselves. It just simply goes back to them. That's not permissible under bankruptcy law for a whole host of complicated reasons. But the fundamental threshold thing they want they cannot get.

Chief Justice Roberts: Well, counsel, the --

G. Eric Brunstad Jr.: This Court's precedents establishes that. Official

Chief Justice Roberts: -- the Chafin case makes very clear that in terms of looking at what relief is available, they go -- they stretch it pretty far, I think, in -- in -- in analyzing it. You know, maybe this will happen, and it's not inconceivable that this will happen. Not their words, but the type of relief they were talking about under the convention seemed to me to be sort of any possible argument you've got is enough to get it to the district court to at least consider its jurisdiction.

G. Eric Brunstad Jr.: Well, Your Honor, on page 10, there's a reason why there is --

Chief Justice Roberts: Page 10 of what?

G. Eric Brunstad Jr.: -- their -- their statement of a remedy is citation-free. They cite not --

Chief Justice Roberts: I'm sorry, page 10 of what?

G. Eric Brunstad Jr.: Page 10 of the yellow brief, Your Honor.

Chief Justice Roberts: Oh, okay.

G. Eric Brunstad Jr.: Where they actually articulate their remedy. They cite not a single Official 1 case in support of the remedy they claim that they have, and the reason why is because all of this Court's precedents is to the contrary. The cases that I articulated at the beginning are very clear. You cannot -- when -- when the order of a sale is reversed, you cannot disturb the sale. That is blackletter, bench -- benchmark commercial law and practice in this country for two centuries. If you want to get around it, you have to, in bankruptcy, use the statutory mechanism, which is the avoidance powers. As we explain in our brief, that is just not available.

Justice Barrett: Well, if it's that clear, you'll win below, right?

G. Eric Brunstad Jr.: It's clear we'll win below because there is no --

Justice Barrett: Well, I'm saying, so why can't -- you know, as Justice Kagan and I were talking about, we answer the question in which we get it -- granted cert, and you should feel good then if you're right about your chances below.

G. Eric Brunstad Jr.: Because there's no case or controversy if there is no effective relief Official 1 that can be granted.

Justice Barrett: We're not saying there's a case or controversy, right? Let's imagine you lose and we say it's not jurisdictional. All we're saying is that this isn't a jurisdictional bar.

G. Eric Brunstad Jr.: Yes.

Justice Barrett: Any other arguments you have, you can take them up below.

G. Eric Brunstad Jr.: Because the case or controversy requirement of Article III constrains this Court's jurisdiction as well, not simply the lower courts' jurisdiction. That -- that's -- that's -- that's the fundamental point. But there's a second point, and that is the bankruptcy court has no subject matter jurisdiction over this property. Its subject matter jurisdiction is limited in rem to property of the estate. This is also why Section 364 is jurisdictional. It is a blunt abrogation of subject matter jurisdiction. It says, regardless of whether you reverse or you modify a decision on appeal, it does not affect the Official 1 validity of the sale. If you can't affect the validity of the sale, the property cannot be brought back into the estate. If the property can't be brought back into the estate, there's no subject matter jurisdiction in federal court. The ship has sailed, and the statute says you cannot possibly get it back into port. It is just like in admiralty jurisdiction. It's also jurisdictional because Section 363(m) codifies an historic practice. It codifies Rule 805, which was declaratory of existing case law which was uniform.

Justice Jackson: Of course, if that's true, why did you waive it so many times in this case? I mean, that's the -- the only reason why we're here looking at this and trying to decide, per the question presented, whether it's jurisdictional is because you brought it up late. And the court had already ruled against you, and you apparently waived, you know, the 363(m) question. And so, when you brought it back again, you said, but wait, wait, wait, that question is jurisdictional, so you still have to decide it. Official

G. Eric Brunstad Jr.: Counsel made a mistake in articulating what Section 3-6 --

Justice Jackson: Your counsel? Counsel for Transform?

G. Eric Brunstad Jr.: Counsel for Transform. It's the same mistake the bankruptcy judge made about Section 363. But Transform knew this was a jurisdictional question. They cited in their papers in the bankruptcy court the very jurisdictional precedents from the Second Circuit that say it's jurisdictional. One also cannot by consent or waiver or misstatement of the law create subject matter jurisdiction that does not exist. Here, there is no subject matter jurisdiction because the statute bluntly says, no matter what you do on appeal, you cannot bring the asset back into the estate. If you cannot bring the asset back into the estate, it's not property of the estate. There cannot be federal subject matter jurisdiction in bankruptcy, which is limited in rem to assets of the estate. Okay. So it is a blunt jurisdictional abrogation. That is by design. That was Official 1 specifically what Congress intended by codifying verbatim in this oddly worded statute a former rule of procedure, Rule 805, which was declaratory of existing law. The two seminal cases were Fink and Taylor. Taylor involved a situation where there were assets in bankruptcy that were sold, and then the Committee of Creditors appealed and the court of appeals said we don't have jurisdiction to decide this controversy. We have no authority to hear. The same thing in Fink, which used jurisdiction three times in its decision, the Fourth Circuit's decision. Jurisdiction, jurisdiction, jurisdiction. We cannot bring the property back. We cannot order it to come back. Again, one does not --

Chief Justice Roberts: Well, they -- they may have used -- they may have used it three times, but the statute doesn't use it at all.

G. Eric Brunstad Jr.: Correct, but -- but -- and the question is why. And in Boechler, this Court said we look at the traditional tools of statutory interpretation. We look at the text, Official 1 the context, and the history. Well, here, there is an established historical practice that Congress intended to codify. It wasn't just that the courts limited remedial relief. They said we have no authority to even hear the appeal where you're challenging the validity of the sale. And authority to hear is subject matter jurisdictional. We can't even hear it. We're not going to even hear the merits. In case after case after case, the appellate courts dismissed these bankruptcy appeals over and over again without hearing the merits. That's the practice that Rule 805 captured. The courts construing Rule 805 interpreted it in exactly that way. All the -- and some of them involved parties that were before the court. The purchaser was there or not. It did not matter. What mattered was that the courts of appeals would not hear those appeals where the litigant was challenging the validity of the sale. Congress chose to codify that practice, but they did so in a specific context, and that is bankruptcy jurisdiction is Official 1 fundamentally in rem. This Court has said so since the early 1800s. It reiterated that in Katz. It reiterated that in Hood. It established that asset sales in bankruptcy are in rem, not in personam in Stratton versus New. All the lower courts have said the same thing. And they have also concluded as follows: Once property leaves the estate, the jurisdiction of the bankruptcy court lapses. It ends. Why? Because it's in rem and it is limited to property of the estate. Once the property leaves the estate, as happened here when the sale was consummated on October 4, 2019, it was not property of the estate.

Justice Jackson: But what do we do with the good faith language in the statute? I mean, that suggests that some court is going to litigate at least -- at least that issue.

G. Eric Brunstad Jr.: Correct. That limits the subject matter of the litigation to whether the purchaser was in good faith or not. If the purchaser was in bad faith --

Justice Jackson: Well, you said he had no jurisdiction. You said, once it's gone, so the sale happens, the property is gone, and Official 1 then we have 3 -- 363(m), which at least seems to preserve as a litigatable topic --

G. Eric Brunstad Jr.: Yes.

Justice Jackson: -- the question of whether the sale happened in good faith. Your argument suggests that, too bad, so sad, there's nothing we can do. The -- the -- the property is gone.

G. Eric Brunstad Jr.: No, Justice Jackson, because -- because all that it does is it abrogates subject matter jurisdiction in a narrow category of cases. It's as though, in -- in -- in the exercise of its authority to enact basically federal subject matter jurisdiction, the court said you have federal subject matter jurisdiction in the district courts but not with respect to this particular federal question. That would be an abrogation of subject matter jurisdiction. This statute works in exactly the same way. If what you're challenging is the validity of a sale to a good faith purchaser, we do not have subject matter jurisdiction to hear it. As a subject matter constraint, we have no authority to hear it. Official

Chief Justice Roberts: Well, how can that be? I mean, it says that the provision on which you're relying saying you don't have authority to hear it depends upon the fact that the property was purchased in good faith. You can't be circular. It seems to me that you've got to have jurisdiction to decide the good faith question.

G. Eric Brunstad Jr.: That's correct, Your Honor. They have jurisdiction to decide whether it's good faith or not.

Chief Justice Roberts: Yeah.

G. Eric Brunstad Jr.: But, if it is to a good faith purchaser, as in this case, there is no subject matter authority to take the property away, to hear an appeal challenging --

Justice Barrett: But the property left. But the property left. I mean, in these hypotheticals, I mean, I think what Justice Jackson is saying and what the Chief is following up on is you told us before that once the property was gone, poof --

G. Eric Brunstad Jr.: Yes.

Justice Barrett: -- jurisdiction -- jurisdiction went away. Official

G. Eric Brunstad Jr.: Correct.

Justice Barrett: The property is gone, but somehow the Court by virtue of the statute still has to decide this good faith question --

G. Eric Brunstad Jr.: And -- and --

Justice Barrett: -- and have subject matter jurisdiction to do it.

G. Eric Brunstad Jr.: Yes, Justice Barrett, and there is a remedy. As this Court explained in Katz, the avoidance powers are ancillary to the court's in rem jurisdiction. If, in fact, the sale were overturned because it was a bad faith purchaser, then there are ways, statutory means of undoing the sale and bringing the property back into the estate so the court can exercise in rem jurisdiction over it. But the statutory scheme is holistic. Section 363(m) suspends all of that if it's to a good faith purchaser by bluntly stating nothing that you can do can bring the asset back. Overturning it, reversing it, modifying it does not affect the validity of the sale. The transfer of ownership must remain in the purchaser. All of those ancillary processes to Official 1 bring the race back into the estate, into the custody of the bankruptcy court so it can order an alternative disposition, are suspended. That's the -- that was the intended effect of Section 363(m).

Chief Justice Roberts: Well, I don't know. Maybe they are and maybe they're not in particular instances. But you do -- have acknowledged that under 363(m) there is jurisdiction in the court. Now you want to say it's simply to adjudicate good faith, but then all sorts of consequences flow from that decision.

G. Eric Brunstad Jr.: But that's the subject matter, Your Honor. That's the point. The subject matter of good faith is preserved. The subject matter of the validity of the sale is not. Now this is -- this is an unusual statute. This is not like any other statute we were able to find that the court had to construe whether it was jurisdictional or not. It's unique. But that's because bankruptcy jurisdiction is unique. The remedial scheme is unique. Its impact on -- it's very surgical. Official 1 It is a key into the system as a whole, but it is supposed to be a subject matter block. It says as so bluntly and directly: Reversal or modification on appeal does not affect the validity of the sale.

Chief Justice Roberts: If the --

G. Eric Brunstad Jr.: That means what it says.

Chief Justice Roberts: -- purchase was in good faith.

G. Eric Brunstad Jr.: Correct. So the only subject matter you can hear is good faith or not. If the purchaser was in bad faith, all of the remedial provisions under the code are preserved.

Justice Jackson: Does the rem need to be back in order to adjudicate the good faith question?

G. Eric Brunstad Jr.: It does, Your Honor. This is the opposite of --

Justice Jackson: It does? So -- so, before the court could --

G. Eric Brunstad Jr.: No, no, no, no, Your Honor, no, no.

Justice Jackson: -- evaluate good Official 1 faith, we've got to get the rem back?

G. Eric Brunstad Jr.: I -- I misspoke, Your Honor.

Justice Jackson: It does not?

G. Eric Brunstad Jr.: No. The good --

Justice Jackson: All right. So how does it have subject matter jurisdiction to address the question with the rem being gone if you're right about the impact of the rem being gone?

G. Eric Brunstad Jr.: Because that is a precursor to being able to invoke the ancillary processes of avoidance, and those processes turn on whether you have a good faith purchaser or not. If it's a bad faith purchaser, 363(n) applies, and 363(n) says, if you have a collusive bidder, the trustee can avoid the sale or collect damages. It gives an option, which is why it can't be automatically void. So the determination of good faith or bad faith is a precursor to be invoking one of the ancillary processes, as this Court explained to them in Katz, to bring the asset back into the estate so the court can order a different disposition. Official 1 363(m), when it's a good faith purchaser, blocks all of that. The subject matter is -- cannot be touched because you cannot affect the validity of the sale. The statute says so bluntly. If you cannot affect the validity of the sale, the asset cannot conceivably possibly come back into the estate. There is no avoidance mechanism. So there cannot be any additional exercise of jurisdiction over the race, and -- and an appellate court cannot order a lower court to exercise jurisdiction it does not possess.

Justice Kagan: But, Mr. --

G. Eric Brunstad Jr.: And once again, just because the purchaser showed up does not convert an in rem proceeding into an in personam action.

Justice Kagan: Mr. Brunstad, do you have anything to say about the question presented? (Laughter.)

G. Eric Brunstad Jr.: I do, Your Honor. I do, Your Honor. Section 363(m) is jurisdictional, Your Honor, for three reasons: text, context, and history, the traditional methods of statutory interpretation that we look Official 1 to to determine whether a statute was intended by Congress to be jurisdictional. The text has -- it -- the text has this blunt subject matter restriction, as I've articulated it. But the context is really critical.

Justice Kagan: Well, to context, boy -- jumping to context in a place where we've always said you need a clear statement in the text, where is your clear statement in 363(m)?

G. Eric Brunstad Jr.: The clear statement is does not affect the validity of a sale. It's a subject matter constraint, not a procedural rule. The other statutes involve things like file your notice of appeal in 14 days or a time limit. This is not a procedural limitation.

Justice Kagan: I think -- I think what we've always meant when we say a clear statement about jurisdiction is something that says something like the court has no jurisdiction. (Laughter.)

G. Eric Brunstad Jr.: That -- and, in fact, that would be wonderful if it were here. It's not. But the intent was exactly that. You Official 1 cannot bring the ship back into port. The ship has sailed.

Chief Justice Roberts: And we've -- and we've also looked at any kind of wiggle room into -- you know, through the door. You know, if you've got jurisdiction for something, we don't think that that statute is jurisdictional. I mean, you may pick and choose and, when you get into the court, you may be denied relief. You may be denied a big chunk of relief. But, if there's going to be jurisdiction for a little bit, we sort of let them sort out how -- what relief is available once they're in court.

G. Eric Brunstad Jr.: There is no relief available here. Put that -- putting that aside, it's a unique --

Chief Justice Roberts: Well, of course, there is if it's in bad faith.

G. Eric Brunstad Jr.: But -- but that -- that was -- they did not appeal that determination. It was a factual determination below. The court of appeals remarked they didn't raise that, they didn't timely raise that. That is a settled question of fact, not subject to being reopened. Official 1 Okay. But --

Chief Justice Roberts: Settled questions of fact can also be appealed, right?

G. Eric Brunstad Jr.: They did not. That's the problem. They did not challenge that on appeal, so that isn't established. Plus, there's no basis for it. But, to Your Honor's point, this is a uniquely worded statute for a reason. It codifies an historic practice, and the historic practice informs what this statute is. Congress codified the rule, and the rule reflected a uniform body of case law that refused to even hear these appeals if there wasn't a stay where you're challenging the validity of the sale. That was what Congress intended to do. So I think it's important to sort of take a look at that. I understand the clear statement rule, but, again, I would qualify that. That makes sense and is easily applied when you have a procedural requirement, is that jurisdictional or not. Again, here, we have a uniquely worded statute with intended jurisdictional consequences. If you have a sale to a good faith -- Official

Justice Gorsuch: Counsel, let me see if I could put it in my own words.

G. Eric Brunstad Jr.: Yes, Justice Gorsuch.

Justice Gorsuch: Just so I -- just so I understand it because there's --

G. Eric Brunstad Jr.: Perhaps you can do a better job than I could.

Justice Gorsuch: No, no. I'm -- (Laughter.)

Justice Gorsuch: One thing I'm confident about is -- is -- is that I -- I am -- I am deeply confused by this case. But I just want to make sure my confusion is at least what I think it is. How about that? That you would say that, right, we normally require magic words like "no jurisdiction"? That those are typically in personam actions in an in rem world?

G. Eric Brunstad Jr.: Yes.

Justice Gorsuch: What, say, no jurisdiction might look like would be you can't touch the property.

G. Eric Brunstad Jr.: Correct, Your Honor.

Justice Gorsuch: And -- and this statute says you can't touch the sale. Official

G. Eric Brunstad Jr.: Correct, Your Honor, and that is --

Justice Gorsuch: All right. At least I understand the argument. Okay. Thank you.

G. Eric Brunstad Jr.: So --

Justice Jackson: Can't touch the sale if it was made in good faith?

G. Eric Brunstad Jr.: Correct. Correct. And that's what we have here. There was a finding by the --

Justice Jackson: Right, but the question of whether it was made in good faith, who -- who handles that, is Congress intending for this Court to address that or no?

G. Eric Brunstad Jr.: No, and I don't think the Court needs to reach that in this case because that's not an issue in this case.

Justice Jackson: No, I understand, but, as you read the statute --

G. Eric Brunstad Jr.: Yes.

Justice Jackson: -- clearly, the good faith part is still in there. It's --

G. Eric Brunstad Jr.: Correct.

Justice Jackson: -- a part of the analysis, and so, if the rem is gone, who Official 1 addresses that?

G. Eric Brunstad Jr.: Had they appealed it, the district court would have addressed it in the first instance. They did not. They did not object to good faith in the bankruptcy court. They did not raise it on appeal. They did not argue it in their appellate briefs. They did not raise it in the court of appeals. They did not raise it anywhere. Okay. But had they addressed that determination, then that could have been addressed by the court of appeals. That's fine. But what --

Justice Jackson: Because somehow there's jurisdiction for that?

G. Eric Brunstad Jr.: Well, there's jurisdiction for that because the statute only abrogates subject matter jurisdiction if you've got a good faith purchaser. It goes to defining -- it's -- it's like saying suppose the federal question statute said you have federal subject matter jurisdiction over federal questions except for X. Well, you would have to determine as a factual matter, is this about X? If it's about X, we don't have jurisdiction. If it's not about X, we do. Official 1 That's exactly the same thing that's going on here under Section 363(m). Is it a good faith purchaser? That's a factual question. If it's a good faith purchaser, the abrogation of jurisdiction applies. If it's not a good faith purchaser, it doesn't. And if it's not a good faith purchaser, we have a whole remedial scheme under the Bankruptcy Code that can get invoked. But, if it is a good faith purchaser, you cannot touch the sale. It cannot be undone. That was by design. That was Congress's intent to do that in codifying this historic practice. And when codify -- when Congress codifies an historic rule, especially in bankruptcy, this Court has said over and over again --

Justice Sotomayor: I -- I'm sorry, did we have a common law rule on good -- it being the good faith buyer could still challenge the sale?

G. Eric Brunstad Jr.: The -- there was a -- a -- a -- a -- a common law rule on that that wasn't particularly developed. It has become --

Justice Sotomayor: So what we know -- Official

G. Eric Brunstad Jr.: -- more developed over the Bankruptcy Code.

Justice Sotomayor: -- so what we know now is whatever Congress wrote, it was doing away with the common law rule?

G. Eric Brunstad Jr.: No, Your Honor. No.

Justice Sotomayor: It was because it was adding an exception, the good faith buyer exception, that didn't exist. And it seems to me that I don't see anything in the words of the statute that suggests it wasn't imputing other equitable doctrines as well, like, yeah, if you know of the appeal and there's no sale order, you take -- you're still a good faith purchaser --

G. Eric Brunstad Jr.: Justice Sotomayor --

Justice Sotomayor: -- but if you -- if you --

G. Eric Brunstad Jr.: -- I was not clear.

Justice Sotomayor: -- if you've waived this --

G. Eric Brunstad Jr.: Yeah. On page 10a of the red brief, we reproduce Bankruptcy Rule 805, and it does, in fact, also have a good faith element to it. Official

Justice Sotomayor: But --

G. Eric Brunstad Jr.: So it was part of the common law. It wasn't as developed as it is under the Bankruptcy Code. It was part of the rule that Congress codified. And as this Court has said over and over again, when Congress codifies an historic practice in bankruptcy, we will not construe the code to intend a change unless Congress clearly intended a change. Here, it's clear that they --

Justice Sotomayor: By the way --

G. Eric Brunstad Jr.: -- intended to codify the practice, which, again, was uniform. The courts of appeals refused to hear --

Justice Sotomayor: -- do -- do --

G. Eric Brunstad Jr.: -- these cases on the merits.

Justice Sotomayor: I just have a practical question.

G. Eric Brunstad Jr.: Yes, Your Honor.

Justice Sotomayor: At the end of the case -- or assume a stay had been granted --

G. Eric Brunstad Jr.: Yes, Your Honor.

Justice Sotomayor: -- does that mean the bankruptcy estate couldn't have been wound Official 1 up subject to that pending case?

G. Eric Brunstad Jr.: So perhaps, Your Honor, but if a stay had been granted, the property would not have left. It would be -- have remained within the estate. The bankruptcy could have -- court would have remained -- would have had in rem jurisdiction over the asset.

Justice Sotomayor: I see.

G. Eric Brunstad Jr.: It's because a stay was not granted that the transaction closed under private contract on October 4, 2019, and Transform has been -- has owned and maintained the building and occupied it for the last three years, has paid the taxes, has paid the utilities, has paid the rent, is fixing the roof. Here's another reason why we can't do an end run around the statutory mechanisms. Under the statutory mechanisms, all of those reliance interests of the purchaser are preserved if the -- if the transfer is avoided under Section 550. Under their theory, their nonexistent, in my opinion, common law theory, there's no protection. So the millions of dollars in Official 1 additional money that Transform paid to acquire this specific asset, in addition to the $1.4 billion it paid for the bulk -- bulk -- the bulk sale, the additional money it's expended to maintain the property, pay the taxes, is simply forfeited. Under the statutory scheme, it's not. You're given a lien for that on the property under the statutory avoidance scheme. That's another reason why we can't do an end run around Congress's carefully crafted protections for avoiding sales. There's protections for purchasers there. There's none in the common law theory. But, again, going back to -- and if I could just briefly cite these cases -- it's Gray versus Brignardello, 68 U.S. at 634; Voorhees versus Bank of U.S., 35 U.S. at 475 to 476; Grignon's Lessee versus Astor, 43 U.S. at 343. The Court is unequivocal in explaining -- this applies -- it applies in rem, it applies to sales, you cannot take the property away from the purchaser just because the trial court made an error that was reversed on appeal.

Chief Justice Roberts: Thank you. Justice Thomas? Official

Justice Thomas: Nothing.

Chief Justice Roberts: Justice Alito? Justice Sotomayor? Justice Jackson? Okay. Thank you, counsel.

G. Eric Brunstad Jr.: Thank you, Your Honor.

Chief Justice Roberts: Mr. Hallward-Driemeier, rebuttal? REBUTTAL ARGUMENT OF DOUGLAS H. HALLWARD-DRIEMEIER ON BEHALF OF THE PETITIONER MR. HALLWARD-DRIEMEIER: Thank you, Your Honor. With respect to the general proposition that the ship has sailed, this Court explicitly rejected that proposition in Republic National Bank. It said we hold, in an in rem forfeiture action, the court of appeals is not divested of jurisdiction by the prevailing party's transfer of the res out of the court. This Court rejected precisely the rule they have cited. So perhaps they are suggesting there is a bankruptcy-specific rule to the same effect. We cite at page 18 of the reply brief several cases in the courts of appeals that concern this issue, and they say that if the Official 1 transferee is not a party to the proceeding, then the court cannot order it back. But, if the transferee is a party to the proceeding, then the court of appeals can undo the transaction. That is the rule we are relying on. It is the rule applied by Fink and other cases cited. Now, mind you, Gray, Voorhees, et cetera, were never cited in the briefs, and I don't know what they say. I'm sorry. But, to the extent that they purport to establish a rule similar to their characterization of The Ann or The Little Charles, again, this Court specifically rejected that in Republic National Bank. Now 363(m), as Your Honors' questions suggested -- as Your Honors' questions suggest, presupposes that there is authority in the courts to get that property back if, for example, it's a bad page -- bad faith purchaser. But it does not say that it has to be done via Section 549. And, in fact, Transform's argument explains why that can't be the case, because 549 is a cause of action owned by the debtor. It says, hey, too late, sorry, Sears waived any 549 Official 1 cause of action, and also, guess what, two years have passed, so you can't do that either. Congress would not have subjected a party who prevails on appeal in establishing that the transfer is to a party in bad faith would have no viable cause of action or opportunity to recover it. It's inherent in the authority of the Court. That's what the cases we cite on page 18 provide. At the end of the day, all of these are merits issues that do not preclude this Court from deciding the issue on which it granted certiorari. I want to point out that with -- on that issue, first of all, that the good faith finding of fact was in the sale order. Of course, it could not have made a good faith finding of fact with respect to the assignment because the assignment didn't happen until six months later. And MOAC is challenging their good faith. We challenged it in the form of making an argument of judicial estoppel because they were the ones that were responsible for there being no stay because they told the bankruptcy Official 1 court multiple times that they would not invoke 363(m). This -- this bankruptcy court referred to that in its analysis of every one of the factors. And then, finally, with respect to Rule 805, it predated Section 363(m) by two years. There was no established practice of the type they suggest, and, of course, the cases we cite are to the contrary. Thank you, Your Honor.

Chief Justice Roberts: Thank you, counsel. The case is submitted. (Whereupon, at 1:40 p.m., the case was submitted.)