Exploring the Outer Limits of ' 363(f) Clearance

Notwithstanding that grant of authority, however, the Bankruptcy Code does not specifically define the phrase 'any interest in such property' or otherwise specify the scope of interests that the phrase is intended to cover. Therefore, as the Fourth Circuit has noted, 'the precise boundaries of the phrase likely will be defined only as the courts continue to apply it to the facts presented in the cases brought before them.' UMWA 1992 Benefit Plan v. Leckie Smokeless Coal Co. (In re Leckie Smokeless Coal Co.), 99 F.3d 573, 582 (4th Cir. 1996).

This article explores the boundaries of interest clearance under ' 363(f) as examined in four preeminent cases at the Court of Appeals level. Applying ' 363(f)'s key phrase 'any interest in such property' to circumstances involving successor liability, contract defenses, and possessory leaseholds, these cases collectively mark the current boundaries. In that regard, they have had, and will continue to have, a profound impact on the value that bankruptcy estates can expect to generate from the sale of their assets. After all, from a buyer's point of view, asset value necessitates a discount to the extent that any strings are attached to the asset in the form of associated liabilities. Therefore, in order to maximize asset value for their bankruptcy estates, trustees and debtors in possession will continue to push the outer limits of interest clearance to the extent of existing case law and beyond. These decisions show the available paths in varying contexts.