NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

___________ No. 10

- 2914

___________ In re: DANIEL F. FLYNN,

Appellant

____________________________________ On Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 10

- cv - 00577 ) District Judge: Honorable Joseph E. Irenas

____________________________________ Submitted Pursuant to Third Circuit LAR 34.1(a)

February 22, 2011 Before: AM BRO, HARDIMAN and STAPLETON , Circuit Judges

(Opinion filed : March 15, 2011 )

___________ OPINION

___________ PER CURIAM Appellant Daniel Flynn appeals pro se from the order of the District Court dismissing as moot Flynn’s appeal from an order of the United States Bankruptcy Court , and denying Flynn’s motion to void the sale of his b usiness. We agree with the District Court that the appeal was moot under 11 U.S.C. § 363(m) , and will affirm

.2 I. This appeal arises out of a Chapter 11 Bankruptcy involving Daniel Fly nn , the former owner of several Burger King restaurant franchises . Flynn filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey. On August 28, 2009 , the Bankruptc y Court entered a consent order which established procedures for the sale of Flynn’s business assets (the “Assets”). Notice of the proposed sale was served on cre ditors and parties in interest. O n November 4, 2009, an order was entered approving a sale o f the
Assets to Cape

- Atlantic Holdings LLC (“Cape”)

. 1 Thereafter, Flynn refused to execute the closing documents . The Bankruptcy
Court then converted his case from a Chapter 11 to a C hapter 7 proceeding and appointed Brian S. Thomas as his C hapter 7 t rus tee. Shortly a fter his appointment, Thomas filed a motion for authorization to execute all necessary closing documents for the sale . Flynn, through counsel, objected to the motion on the grounds that he did not have any post

closing obligations to Burger King Corporation. Following a hearing on the motion, Burger King Corporation agreed to withdraw its request that Flynn have any continuing contingent liability following the sale. Finding that Flynn’s objection was now moot , on December 22, 2009, the Ba nkruptcy Court en tered an order authorizing Thomas to execute corporate resolutions and all doc uments necessary to effectuate the court

- ordered

1 Cape is comprised of a group of Flynn’s former business partners (the “Shareholders”).3

closing (the “Order”). On January 3, 2010, Flynn appealed the Order to the United States District Court for the District of New Jersey, but did not seek a stay of the sale pending appeal pursuant to Federal Rule of Bankruptcy Procedure 8005. On January 6, 2010, Thomas closed on
the sale of the Assets to Cape

. At closing, Thomas, as Flynn’s t rustee, received $278, 000 from Cape. Cape assumed hundreds of thousands of dollars of liabilities and took over operation of the subject Burger King franchises

. On April 9, 2010, Thomas moved the District Court to dismiss Flynn’s appeal on the grounds of mootness under 11 U.S. C. § 363(m) . In response, Flynn filed a brief in opposition and a “Motion for an Order Voiding the Sale of the Business,” arguing that the Order was not a valid order , that Thomas had no authority to remove Flynn as the managing owner of the franchises, a nd that Thomas arranged for the closing over Flynn’s objections and did not provide a proper accounting of the sale . He also alleged bad faith on the part of the t rustee and the Shareholders in connection with the sale

. On June 15, 2010, the District Cou rt denied Flynn’s motion and granted Thomas’s motion to dismiss the appeal on the grounds of mootness. Flynn timely appealed.
II. We have jurisdiction under 28 U.S.C. § 158(d). We exercise plenary review over the District Court's legal conclusions but wi ll reverse findings of fact only if clearly

erroneous. See In re Marvel Ent m’t Gr p , Inc. , 140 F.3d 463, 470 (3d Cir. 1998).4 III. Sales in bankruptcy are governed by the provisions of 11 U.S.C. § 363 which, inter alia , authorize the t rustee , after notice and a hearing, to use, sell , or lease property of a debtor’s estate. 11 U.S.C. § 363(b)(1). Property of the estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). Franchis e agreements are the property of the estate as defined in 11 U.S.C. § 541; thus the sale thereof is governed by § 363

. See Krebs Chrysler

- Plymouth v. Valley Motors, Inc. , 141 F.3d 490, 497 (3d Cir. 1998) ; In re Rickels Home C trs. , Inc. , 209 F.3d 291, 300 (3d Cir. 2000). To promote certainty and finality with respect to such sales, as well as to encourage parties to bid for assets in bankruptcy cases, 11 U.S.C. § 363(m) prohibits the reversal of a sale to a good faith purchaser of bankruptcy estate property if a party failed to obtain a stay of the sale. See Cinicola v. Scharff enberger , 248 F.3d 110, 121

- 22 (3d Cir. 2001). The statute provides: The reversal or modification on appeal of an authorization

... of a sale or lease of property does not affect the v alidity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appea l. 11 U.S.C. § 363(m). Although section § 363(m) is sometimes referred to as a “statu tory mootness” provision , we have rejected a per se rule and i n s tead formulated a two

- prong test for whether an appeal of a sale or lease in bankruptcy is moot under § 3 63(m) : (1) the underlying sale or lease must not have been stayed pending appeal, and (2) reversing or5

modifying the authorization to sell would affect the validity of the sale or lease. See Cinicola , 248 F.3d at 128 ; Krebs , 141 F.3d at 499

. In this case, Flynn did not seek a stay; therefore the only issue is whether this appeal is now moot because vacation or modification of the Order would affect the validity of the sale

. The Shareholders paid $278,000 for the sale of the franchises, and
assumed several times that amount in liabilities at closing. Further, the Shareholders have been operating the Burger King franchises independently without Flynn since assuming the franchise agreements. Allowing a debtor to reject a franchise agreement after it has bee n assumed and sold has an impact on the validity of the sale because it

“ necessarily require [s] reversing the subsequent assumption and assignme nt of the underlying franchise.” Krebs , 141 F.3d at 499

. T h us, th e remedy sought by Flynn, voidance of the sal e, would affect the validity of the sale and is therefore impermissible under § 363(m). Flynn argues that the Order was invalid because there was no good

- faith purchaser and Flynn was not given the opportunity to entertain third

- party offers of sale. He a lso contends that the sale was made in bad faith, without proper accounting. There is no evidence in the record to support the contention that Shareholders were not good

- faith purchasers , or that Thomas or the Shareholders acted in bad faith. 2 Notice of the

2 In his argument on appe al, Thomas makes the additional arguments to the Court that Thomas breached his fiduciary duty to Flynn and colluded with the Shareholders in structuring a sale that was not equitable to Flynn. We will not address these arguments as Thomas is barred from raising issues for the first time on appeal. United States v.6

proposed sale was properly served on creditors and parties of interest. One third party submitted a bid for t he Assets, but failed to finalize a contract within the time fixed by the Bankruptcy Court. The order approving the sale to Cape overruled th e only objection to the proposed sale , which was filed not by Flynn, but by Hionis Holdings, LLC. Notably, the sale was approved before Thomas was appointed as trustee, an d Thomas’s motion to execute the closing documents sought only aut horization to clos e on the sale already approved by the Bankruptcy Court. Flynn ’s only objection to the trustee’s motion was to having any post

- closing obligations to Burger King Corporation. These objections were resolved during a hearing on the motion, at which Flynn ap peared. In short, there is no evidence of bad faith on the part of the trustee or the Shareholders in conn ection with the Order or sale.
IV. Because Flynn did not receive a stay of the sale pending appeal, the sale has since been closed, and the relief he seeks would impact the validity of that sale, the District Court correctly dismissed Flynn’s appeal as moot un der § 363(m). We will affirm.

Gilchrist , 215 F.3d 333, 339 (3d Cir. 2000). However, we note that nothing in the record supports Flynn’s allegations of collusion or breach of fiduciary duty.