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Despite some initial holdings that a sale of essentially all assets of the estate should not be permitted under § 363 absent an emergency, most courts today follow the Second Circuit's lead in Lionel137 and permit such sales, but may impose somewhat higher standards.138
If such a sale also includes elements that will control a subsequent plan of reorganization, it could be denied as being a sub rosa or "creeping" plan.139 But that argument will not generally be heard if the asset sale does not dictate plan terms and the objector cannot particularize a protection that would be provided by the confirmation process that cannot be satisfied in the § 363 sale context.140
To protect their investment of time and expenses, initial "stalking horse"141 bidders frequently insist upon a contractual provision, approved by the bankruptcy court, for payment of a "breakup" fee in the event the property is sold to a higher bidder. Such agreements also frequently include "window shop" provisions, which preclude the debtor from actively soliciting competing bids but permit the debtor to respond to inquiries,142 and "overbid" requirements so
137 In re Lionel Corp., 722 F.2d 1063 (2nd Cir. 1983).
138 E.g., Stephens Indus., Inc. v. McClung, 789 F.2d 386 (6th Cir. 1986); In re Continental Air Lines, Inc., 780 F.2d 1223 (5th Cir. 1986)(must have articulated business justification).
139 In re Braniff Airways, Inc., 700 F.2d 935 (5th Cir. 1983).
140 In re Continental Air Lines, Inc., 780 F.2d 1223 (5th Cir. 1986). See also In re Cajun Elec. Power Coop, Inc., 119 F.3d 349 (5th Cir. 1997).
141 For an analysis of why this is an inappropriate metaphor, as well as a delightful critique of the misuse of metaphors in bankruptcy cases generally, see In re Integrated Resources, Inc., 147 B.R. 650 (S.D.N.Y. 1992)(affirming bankruptcy court's approval of breakup fee), appeal dismissed as nonfinal, 3 F.3d 49(2nd Cir. 1993).
142 See In re Integrated Resources, Inc., 147 B.R. 650 (S.D.N.Y. 1992)(affirming bankruptcy court's approval of breakup fee and discussing the "window shop" provision), appeal dismissed as nonfinal, 3 F.3d 49(2nd Cir. 1993).
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