Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

LLC v. Toys "R" US, Inc.

United States District Court, E.D. Virginia, Richmond Division

December 26, 2018

6711 GLEN BURNIE RETAIL, LLC, Appellant,
TOYS "R" US, INC., Appellee.


          John A. Gilney, Jr., Judge

         In July, 2018, the United States Bankruptcy Court for the Eastern District of Virginia ("Bankruptcy Court") approved the assignment of a sublease held by Toys "R" Us, Inc. ("TRU"), in a Maryland shopping center. The owner of the shopping center, 6711 Glen Burnie Retail, LLC ("Glen Burnie"), objects to the assignment.

         Glen Burnie owns The Centre at Glen Burnie. The Bankruptcy Court approved the replacement of TRU with a business known as Ollie's Bargain Outlet. Glen Burnie takes exception to the addition of Ollie's to its mix of stores. The developers of The Centre at Glen Burnie have high class plans for the Centre. They plan to "de-mall," "redevelop," and "reposition" the Centre. Segall Group, The Centre at Glen Burnie, (last visited December 25, 2018). Apparently, this refurbishment will make the Centre more upscale. In contrast to Glen Burnie's vision, Ollie's makes no appeal to aristocratic shoppers; it uses a simple slogan at its several stores: "Good Stuff Cheap." Ollie's Bargain Outlet Home Page, (last visited December 25, 2018). Glen Burnie's plans apparently do not include the like of Ollie's.

         To short circuit the arrival of Ollie's, Glen Burnie tried to exercise its recapture rights under the lease to prevent the assignment. The Bankruptcy Court overruled Glen Burnie's objection and entered an order approving the transfer ("Sale Order"). Glen Burnie now appeals that order.

         Because Glen Burnie did not seek a stay of the assignment to Ollie's, the Court cannot disturb the Sale Order on appeal. In any event, the recapture clause in the parties' lease constitutes an unenforceable anti-assignment provision under the Bankruptcy Code, so Glen Burnie cannot use the clause to prevent the Ollie's assignment. For these reasons, the Court will affirm the Bankruptcy Court's Sale Order.

         I. BACKGROUND

         Glen Burnie and TRU entered into a sublease in 1981 that allowed TRU to put a store in Glen Burnie's shopping center. As part of TRU's bankruptcy proceedings, TRU auctioned its interest in the lease on June 11, 2018. Ollie's bid $2.05 million, defeating Glen Burnie's bid of $2.0 million. After the auction, Glen Burnie sought to invoke a recapture provision in the lease. The provision allowed Glen Burnie to reclaim leased premises by (1) providing notice within a specified time following the tenant's decision to assign the lease, and (2) repaying the tenant for its capital investments in the property.

         The Bankruptcy Court held a hearing on Glen Burnie's objection to the assignment and determined that the recapture provision in the lease constituted an impermissible anti-assignment clause under 11 U.S.C. § 365(f)(1). After the Bankruptcy Court made its decision, Glen Burnie asked the court to delay entering an order deeming Ollie's a good faith purchaser pursuant to 11 U.S.C. § 363(m), a provision that allows good faith purchasers to rely on the finality of bankruptcy orders. The Bankruptcy Court agreed to wait to enter the order so that Glen Burnie could "seek appellate rights, including a stay." (Hr'g Tr. 32:14-24, July 2, 2018.) The Bankruptcy Court thus entered the Sale Order on July 9, 2018, but waited until July 19 to issue a supplemental order characterizing the transaction as a sale agreement and deeming Ollie's a good faith purchaser under § 363(m). Glen Burnie did not seek a stay during this time, but filed the instant appeal seeking to reverse the Sale Order.[1]

         II. DISCUSSION[2]

         I. Statutory Mootness

         This Court's reversal or modification of a sale or lease of property will have no effect unless "such sale or lease [is] stayed pending appeal." 11 U.S.C. § 363(m). "[A] stay keeps the disputed property within the jurisdiction of the bankruptcy court, and it forestalls the transactional complexities that arise if the sale to a third party is completed prior to a final resolution of the claim." In re Rare Earth Minerals, 445 F.3d 359, 363 (4th Cir. 2006) (internal citation omitted). In other words, § 363(m) "curtails the power of appellate courts to undo the authorized sale of estate assets to a good faith purchaser unless the sale has been stayed pending appeal." Otherwise, the appeal becomes statutorily moot. Id. at 361.

         In this case, Glen Burnie failed to seek a stay of the lease assignment pending appeal, despite contemplating a stay at the Bankruptcy Court hearing. Without a stay, this Court cannot "grant effective relief by reversing the Sale Order. In re ICL Holding Co., 802 F.3d 547, 554 (3d Cir. 2015). Glen Burnie cannot avoid this result by arguing that the mootness provision does not apply to the lease assignment in this case. "It is elementary that a leasehold is personal property and possibly of value to the debtor's estate[;] thus the assignment of a lease for a valuable consideration is a sale of property to which § 363(m) applies." In re Adamson Co., 159 F.3d 896, 898 (4th Cir. 1998).

         The Bankruptcy Court found that Ollie's qualified as a good faith purchaser pursuant to § 363(m), and Ollie's deserves the finality that this provision provides. See Rare Earth Minerals, 445 F.3d at 361 (affirming the district court's dismissal for statutory mootness because "hold[ing] otherwise would undercut § 363(m)'s express concern with the finality of bankruptcy sales"). Thus, the Court cannot reverse the Sale Order on appeal.

         2. ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.