New Cases For the Week of April 21, 2003 - April 25, 2003

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April 25, 2003

Case

Court

Holding

In re Mickey Thompson Entertainment Group
(DBN Subscription Required)
9th Cir. BAP A trustee's duty is to maximize the return from estate assets.  Since the settlement of a cause of action of the trustee against third parties is sometimes tantamount to a sale of the cause of action to the third parties, the trustee does not fulfill his duty to maximize the value of the cause of action if he refuses to sell the cause of action to overbidders.
Precision Industries, Inc. v. Qualiftech Steel SBQ, LLC
(DBN Subscription Required)
7th Cir. Under the plain terms of section 363(f), a free and clear sale order extinguishes a lessee's possessory interest in estate property sold to a buyer.

April 21, 2003

Case

Court

Holding

In re M Capital Corp.
(DBN Subscription Required)
9th Cir. BAP When the seller and buyer withdrew a contested motion seeking section 363(m) good faith findings, they lost the safe harbor protection against appellate review of the sale. The opponent of good faith does not have the burden to demonstrate the absence of good faith.  When an appellate court assesses the propriety of a sale in which the bankruptcy court has made no good faith findings, it deals with the merits of the appeal without the 363(m) limitation.

The choice of whether to make a finding of "good faith" as part of the initial sale process belongs to the bankruptcy court. Because findings of "good faith" made at the time of the sale may be premature because they are made before the really interesting facts emerge, the bankruptcy court is not required to make a finding of "good faith" at the time of sale (rejecting the Third Circuit's contrary rule). The bankruptcy court is not required to make a finding of good faith simply because there was no evidence of a lack of good faith. Where good faith has been challenged, facts must be established to obtain the safety that section offers. Boilerplate good faith findings in orders will not suffice, and courts should avoid the temptation to sign such orders without an evidentiary foundation.

In re Robinson
(DBN Subscription Required)
6th Cir. Although an objection to a claim based upon an arbitration award may be treated as a motion to vacate the arbitration award, such a motion is untimely unless filed within three months after the arbitration award.
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