Document Type

Amicus Brief

Publication Date


Case Name

MOAC Mall Holdings LLC v. Transform Holdco LLC


Your amici have taught courses on bankruptcy and commercial law, conducted research, and have been frequent speakers and lecturers at seminars and conferences throughout the United States. Each is highly regarded in this field, and each has made substantial contributions to bankruptcy scholarship and jurisprudence.

The question presented to this Court is as follows: “Whether Bankruptcy Code Section 363(m) limits the appellate court’s jurisdiction over any sale order or order deemed integral to a sale order. . . .” (emphasis added). Pet. i. The answer is that § 363(m) does not limit appellate review of the transaction involved in this case—the assignment of a commercial lease to a new tenant by a bankruptcy debtor. The assignment of commercial leases is governed exclusively by 11 U.S.C. § 365.

The appeal in this case was from an order concerning the assignment of a retail lease in the Mall of America (the “Assignment Order”). The Assignment Order was entered pursuant to Code § 365 which is the exclusive Code section that governs the assumption and assignment of commercial leases. It is a standalone provision with its own specific requirements, and it operates independently of anything in § 363. Section 365(b) contains no mootness provision, and appellate review of orders under § 365(b) is not limited by § 363(m).

Section 365(b) mandates that if a debtor-tenant in a commercial shopping center assigns its lease as part of a bankruptcy transaction, the landlord (such as a mall owner) must receive what the Bankruptcy Code calls “adequate assurance of future performance.” This statutory protection was deemed critical to mall owners when Congress adopted the Shopping Center Amendments in 1984. These statutory provisions have been recognized as vital in protecting mall owners from serious harm when retail tenants within a shopping center file for bankruptcy.

In this case, the District Court made detailed findings laying out why the proposed assignment of a lease by Sears Holding Corp. (“Sears”) to Transform Leaseco LLC (“Leaseco”) (a subsidiary of Transform Holdings LLC) failed to satisfy the statutory standard of adequate assurances of future performance to MOAC Mall Holdings LLC (“MOAC”)—the owner of the Mall of America.

Two key issues surfaced: whether the assignment would impair the “tenant mix” at the mall, and whether the proposed assignee could satisfy the test that its financial condition be similar to that of the original tenant when it first signed its lease. See § 365(b)(3)(A). Both tenant mix and the tenants’ creditworthiness are critical underwriting standards that lenders evaluate when providing financing for mall owners. This is because a mall’s value and economic viability depend heavily on tenant mix and tenant creditworthiness. Congress addressed both issues when it amended § 365(b) by passing the Shopping Center Amendments.

However, on rehearing, the District Court dismissed the appeal as moot. It did so by appending to § 365(b) a mootness provision found in § 363(m), which deals with sales of estate property. However, it cited no authority for the view that Congress intended to permit courts to append a mootness provision from § 363 to the highly specific requirements found in § 365(b). Instead of looking to the text of § 365(b), it created a judge-made rule that appended mootness when a lease assignment was somehow “integral” or “intertwined” with a prior sale. The court’s reasoning rests on federal common-lawmaking that did not survive Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938).

In addition, our interest in filing this brief is to address the serious harm the ruling by the Second Circuit will cause, as it will substantially impair the rights of mall owners which Congress has carefully detailed in § 365(b). This case well illustrates the harm: the District Court held that the errant ruling by the Bankruptcy Court effectively “rewrote” the Bankruptcy Code, and yet found itself powerless to correct the harm. Unrestricted assignment of leases in a shopping center can cause a host of financial issues, including cross-defaults in mortgage loans and tenant leases, and downgrading of securities that are collateralized by mall properties.

We write to address a larger issue as well. Because similar outcomes have become all too common, both scholars and courts now urge restraint on theories that enlarge and “weaponize” mootness arguments. There is substantial concern over the abuse of theories of mootness—be it statutory or equitable. Justice Alito, then sitting on the Third Circuit, noted that equitable mootness unduly restricts appellate review and “places too much power in the hands of bankruptcy judges.” The same problem is evident here—where a purported statutory mootness provision is engrafted onto a Code section which has no such provision, and then is interpreted broadly as jurisdictional. The harm is evident: an erroneous ruling by a non-article III court is then asserted to be immune from appellate review. This problem is exacerbated by the similar extension of finding many transactions to be either § 363 “transfers” or somehow “integral” to a § 363 transfer—all in the name of invoking appellate immunity.

We urge this Court not to permit an unwarranted expansion of the concept of mootness, be it statutory or otherwise.