Recent Case Shows Final Asset Sales Are Not Always Final

The U.S. Court of Appeals for the Eleventh Circuit, on Aug. 15, 2014, ordered a bankruptcy court to vacate a final asset-sale order almost four years after its entry because of insider misconduct. In re Global Energies LLC, (11th Cir. Aug. 15, 2014). Specifically, the court found that the limited liability company debtor’s insiders had used a bankruptcy case: (1) “to rid [the debtor] of [a] business partner”; (2) “for the improper purpose of prevailing over [that partner] in a business dispute”; and (3) to take “control of [the debtor’s] assets” while “eliminating [the business partner’s] interests.” Id. at *5. Reversing the lower courts, the Eleventh Circuit held that the bankruptcy court had applied “the wrong legal standard, … made clear errors of judgment and abused its discretion.” Id. at *4. In this article, SRZ partner Michael L. Cook discusses the court’s decision, which is highly relevant to the finality of asset-sale orders in reorganization cases.