On April 19, 2023, the US Supreme Court unanimously held that Section 363(m) of the Bankruptcy Code is not “jurisdictional,” and therefore does not limit a court’s authority to hear an appeal of a bankruptcy sale order (even if it does limit a court’s ability to void the sale itself). This ruling resolves a circuit split and continues the courtroom saga of Sears Roebuck & Company, despite the company having emerged from bankruptcy in November 2022.

Sears, a one-time stalwart of malls across the United States and leading retailer of merchandise, appliances, tools, electronics, and other goods, filed for chapter 11 bankruptcy on October 15, 2018. During that bankruptcy case, Sears sold substantially all of its assets to Transform Holdco LLC under 11 U.S.C. § 363. The terms of the sale gave Transform the right to designate certain leases owned by Sears to be assumed by Transform. After the sale, Transform designated for acquisition a favorable lease with the Mall of America—the United States’ largest shopping and entertainment center—that allowed Sears to serve as an anchor tenant and occupy a three-floor space within Mall of America. When the bankruptcy court approved Transform’s assumption of the lease, Mall of America appealed. The district court reversed Transform’s assumption of the lease. Transform then petitioned the district court for rehearing, arguing for the first time that 11 U.S.C. § 363(m) deprived the district court of jurisdiction over the appeal.

Issue presented under 11 U.S.C. § 363(m)

11 U.S.C. § 363(m) provides that “reversal or modification on appeal of an authorization” under Section 363 (governing sale of the Sears’ estate) “does not affect the validity of a sale” to a good faith purchaser. Essentially, while parties may object to a sale approved under Section 363, a successful appeal may not unwind the sale unless bad faith is involved.

Advocating a broader reading of Section 363(m), Transform argued that Section 363(m) was a jurisdictional limit—immune from waiver, forfeiture, or estoppel—precluding appellate review of sale orders under Section 363. Transform’s position relied on “binding precedent” from the Second Circuit, which held that Section 363(m) prevented appellate review of any unstayed sale orders authorized by Section 363 to a good faith purchaser.

At rehearing, the district court held that the precedent was binding, which the Second Circuit affirmed. Mall of America then petitioned the Supreme Court for a writ of certiorari (i.e. a review the lower courts’ decision) resulting in last week’s opinion.

Court ruling

Resolving a circuit split, the Supreme Court sided with the Mall of America and held that 11 U.S.C. § 363(m) is not a jurisdictional provision and remanded the case to the bankruptcy court. Reviewing precedent holding that appellate jurisdiction is only revoked where Congress clearly states its intention to do so, the Supreme Court determined the plain language of section 363(m) merely limits certain remedies on appeal and does not revoke appellate jurisdiction altogether. Because jurisdiction is a precondition to a court’s power to hear the case, jurisdictional arguments can be raised at any time during litigation and are not subject to waiver, estoppel, and forfeiture.

As a non-jurisdictional provision, however, Section 363(m) was subject to waiver, estoppel and forfeiture by Transform. Though the Supreme Court did not address the issue, Transform not only failed to raise, but also expressly represented to the bankruptcy court that it would not invoke any Section 363(m) argument.


  1. An appellate court may reverse or modify an appealed sale order, but may not invalidate the underlying sale. This is because Section 363(m) does not speak to the jurisdiction of courts sitting in an appellate capacity, but simply eliminates one remedy these courts might consider.
  2. Parties to sale transactions should be aware of and negotiate the inclusion or exclusion of good faith findings and provisions purporting to waive the protections of Section 363(m), which, under the Supreme Court’s ruling, is subject to waiver, estoppel, or forfeiture.
  3. Parties defending a sale order on appeal must ensure to invoke the protections of Section 363(m) at the outset, for the same reasons as above.