From “Equitable” to “Statutory”: The Eleventh Circuit’s Clarification of Mootness in § 363(b) Bankruptcy Sale Appeals

1. Introduction

The Eleventh Circuit’s decision in Payam Katebian v. Tamara Ogier, No. 23-13134 (11th Cir. Aug. 14, 2025), tackles an increasingly litigated question in bankruptcy appeals: when is a dispute truly “moot,” and under which of the three bankruptcy-specific doctrines— constitutional, equitable, or statutory—should a court dismiss the appeal?

At its core, the case concerns a Chapter 11 debtor (Morrow GA Investors, LLC), its secured creditor (1590 Adamson, LLC/DIP), and the debtor’s guarantors (Payam and Morteza Katebian). The guarantors wished to unravel a settlement and a § 363(b) sale approved by the bankruptcy court, asserting that the secured claim was overstated. Both the bankruptcy and district courts refused to grant relief. On further appeal, the Eleventh Circuit—while affirming—split on the rationale: a per curiam opinion invoked the judge-made doctrine of equitable mootness, whereas Judge Newsom’s concurrence argued the case was more properly dismissed as statutorily moot under § 363(m). The dialogue between the opinions cements valuable guidance for future litigants.

2. Summary of the Judgment

• Holding: The district court’s dismissal of the guarantors’ appeal is affirmed.
• Per Curiam reasoning: The appeal is barred by equitable mootness because no stay was sought, the sale closed, and unwinding it would be inequitable.
• Concurrence (Newsom, J.): The better ground is statutory mootness under 11 U.S.C. § 363(m). Once a good-faith § 363 sale closes without a stay, appellate courts are “powerless” to alter the transaction, including its price.
• Outcome: All pending motions denied; district court affirmed.

3. Detailed Analysis

3.1 Precedents Cited

Key authorities shaped the Court’s reasoning:

• In re Stanford, 17 F.4th 116 (11th Cir. 2021)
  Identified the “three flavors” of mootness and articulated the § 363(m) test; heavily relied upon by Judge Newsom.
• In re Hazan, 10 F.4th 1244 (11th Cir. 2021)
  Described equitable mootness as primarily guarding confirmed reorganization plans. Cited by both opinions; Newsom used it to limit equitable mootness’ reach.
• Bennett v. Jefferson County, 899 F.3d 1240 (11th Cir. 2018)
  Explained that equitable mootness is an exercise of judicial discretion where relief would be “inequitable.”
• In re The Charter Co., 829 F.2d 1054 (11th Cir. 1987)
  Early application of statutory mootness: price attacks on a closed § 363 sale are barred.
• RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639 (2012)
  Defined “credit bid”—central to why Adamson could purchase the building without cash.
• Out-of-Circuit guidance: Matter of Sneed Shipbuilding (5th Cir. 2019); In re ICL Holding (3d Cir. 2015) – used to show other courts limit equitable mootness to plan confirmations.

3.2 Legal Reasoning

1. No Stay Obtained
   Both the district court and the Eleventh Circuit emphasized the appellants’ failure to request a stay. This point is dispositive under § 363(m) and weighty under equitable mootness.
2. Good-Faith Purchaser Protection (§ 363(m))
   Judge Newsom underscored that Adamson was a “good-faith purchaser.” Under § 363(m), even a court of appeals “is powerless” to change the deal once the sale closes absent a stay.
3. Scope of Equitable Mootness
   The per curiam relied on equitable mootness because undoing the valuation would require “unscrambling the egg,” affecting third parties and undermining the settled expectations created by the sale.
4. Need to Protect Judicial Duty vs. Congress’ Command
   The concurrence warned that equitable mootness, a judicial invention, risks eroding the “virtually unflagging obligation” to decide cases; statutory mootness rests directly on congressional text, avoiding that tension.

3.3 Impact of the Decision

• Clarifies Hierarchy of Mootness – While the majority opinion applies equitable mootness, the concurrence’s analytic rigor is likely to steer future litigants (and district courts) toward invoking § 363(m) first when closed asset sales are challenged.
• Guardrails for Guarantors and Junior Stakeholders – Parties hoping to re-value secured claims after a § 363 sale must obtain a stay or risk an automatic jurisdictional bar.
• Narrowing Equitable Mootness – By labeling over-use of equitable mootness as “mislabeling,” the concurrence aligns the Eleventh Circuit with Fifth and Third Circuit precedent, signaling that equitable mootness should remain tethered to plan-confirmation appeals.
• Transactional Certainty – Good-faith purchasers can rely on the finality of § 363 sales so long as no stay issues. This fosters robust bidding and maximizes estate value.

4. Complex Concepts Simplified

• Three “Flavors” of Mootness
  
  • Constitutional: Article III “live case or controversy” requirement. If a court cannot grant any effective relief, the case is dead.
  • Equitable: Judge-made prudential doctrine letting courts dismiss certain bankruptcy appeals even if relief is theoretically possible, where unraveling the transaction would be inequitable and harm innocent parties (typically used for confirmed plans).
  • Statutory (§ 363(m)): A hard-edged rule Congress enacted. If a good-faith purchaser buys estate property and no stay was obtained, appellate courts cannot alter the sale.
• Credit Bid (§ 363(k))
  A secured lender may bid the amount of its debt instead of cash at a bankruptcy sale. Here, Adamson “bid” $3,999,000 credit, cancelling its secured claim and taking title to the building.
• Subrogation Right of Guarantors
  Because the Katebians guaranteed the debt, Georgia law gives them a reimbursement claim against the debtor if they pay the creditor. This creates an indirect financial stake in the bankruptcy estate, but it is subordinate to the secured creditor’s claim.

5. Conclusion

Payam Katebian delivers two intertwined lessons. First, once a § 363(b) sale closes without a stay and in good faith, appellate challenges to the underlying valuation—or any term essential to the sale—will almost surely be dismissed as statutorily moot. Second, the Eleventh Circuit has signaled that equitable mootness should remain a tool of last resort, reserved mainly for attacks on consummated reorganization plans rather than discrete asset sales.

Practitioners must therefore move quickly in bankruptcy court to seek stays and preserve appellate rights. Purchasers, meanwhile, gain heightened confidence that closed § 363 deals will not later be upended. In the broader legal landscape, the decision tightens the doctrinal lines between statutory command and judicial discretion—fortifying the finality of bankruptcy sales and clarifying the boundaries of appellate review.