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9. Appeals — Mootness.
The debtor was a hospital. The trustee for the debtor sought to assume and assign physician contracts to a successor. The physicians objected, appealed and terminated their employment. The appeal was not moot because the buyer would assert the non-competition clauses in the employment contracts remained enforceable and binding during their two-year term. Accordingly, the appellate court considered whether the appeal was moot under § 363(m), in turn requiring it to determine whether the reversal or modification of the sale or lease on appeal would void the validity of the transaction. If the assumption and assignment of executory contracts involved the sale, the § 363(m) mootness could apply, even though there is no statutory mootness provision in § 365. In the case before the court, the assumption and assignment of the physician contracts was enter-twined with the sale of the hospital. Accordingly, the matter was remanded to the district court to determine if relief could be fashioned for the physicians that would not affect the validity of the sale.
The Third Circuit continued the trend of circuit courts applying statutory mootness principles of § 363(m) to assumption and assignment of executory contracts under § 365. Section 365 does not contain a statutory mootness provision, although § 363(m) moots appeals from sales of property of the estate in most circumstances. A number of courts have applied the statutory mootness principle to transactions involving assumption and assignment of a lease in connection with a sale of assets. The Third Circuit noted that an unexpired lease is property of the estate, thus properly potentially subject to sale under § 363. Accordingly, principles of statutory mootness could be applied to the sale of a lease. The problem with relying on statutory mootness from another section, rather than traditional common law principles of mootness, is that creative debtors' and trustees' counsel will
