Opinion
M-47 (JSM); Bankruptcy Index Nos. Lead Case No. 02-11259 (CB), Case No. 02-127722 (CB).
September 5, 2002
OPINION AND ORDER
The Government's application for a stay pending appeal is denied and the temporary restraining order previously entered is vacated.
The Government seeks to appeal an order of the Bankruptcy Court approving the sale of certain assets to RS Acquisition LLC. However, after the Bankruptcy Court signed the order approving the sale and before the Government sought a stay from this Court the parties consummated the sale.
The Debtor argues that, since the sale has been consummated, the Government's appeal is moot under § 363(m) of the Bankruptcy Code. The Government contends, however, that the sale was never properly consummated because the sale occurred between the time the order was signed by the Bankruptcy Judge and the time that order was entered on the Bankruptcy Court docket. In response, the Debtor and the other interested parties respond that, even though the documents were signed prior to the sale, the entry of the Bankruptcy Court order approving the sale was an express condition of the sale and, therefore, the sale was not consummated until that order was entered.
The Court does not doubt that in closing the asset sale, the Debtor, the purchaser and the banks that released their liens acted in the good faith belief that their actions were fully authorized by the order signed by the Bankruptcy Court. In these circumstances, it would be inconsistent with the policy embodied in § 363(m) to set aside a transaction entered into in good faith. Thus, even if there was a technical defect in the timing of the sale, it would be inappropriate to grant the injunction which the Government seeks.
"In this Circuit, four factors are considered before staying the actions of a lower court: (1) whether the movant will suffer irreparable injury absent a stay, (2) whether a party will suffer substantial injury if a stay is issued, (3) whether the movant has demonstrated "`a substantial possibility, although less than a likelihood, of success'" on appeal, and (4) the public interests that may be affected." Hirschfeld v. Board of Elections in City of New York, 984 F.2d 35, 39 (2d Cir. 1993). While the Government has demonstrated that it has a "substantial possibility" of success on its appeal from the order approving the sale, it has not demonstrated a "substantial possibility" that it will prevail on its argument that the sale should be vacated because it was consummated in the period between the time the order was signed and the time it was entered on the docket. This factor together with the irreparable injury that would be suffered by the purchaser and the banks make it inappropriate to enter a stay of the sale.