For many years, a policy of finality has existed in the legal sphere to protect purchasers after a sale has been completed. This policy serves to create stability and predictability for investors and incentivizes activity in the marketplace. In bankruptcy cases, issues of finality are implicated when a debtor engages in an asset sale, and the court grants a final sale order. The purchasing party wants the sale to be final, so courts have promoted the policy of finality to enhance the efficiency and effectiveness of bankruptcy plans. Sometimes, however, an adverse party claims to have an interest in assets that the debtor sold and wants to challenge the approved sale. In such event, the adverse party can make a Rule 59 motion to compel the court to amend a judgment and attempt to reverse the sale. Alternatively, the adverse party can make a Rule 60 motion and obtain relief from a final order if certain criteria are satisfied. However, to preserve the policy of finality, courts must narrowly assess the facts of each case and may only vacate a sale order in very limited circumstances.
In many asset sales, the purchasing party is afforded an additional protection as a good faith purchaser. Usually, sales made to good faith purchasers are final even if another party appeals them. However, bankruptcy courts may revisit and revoke a finding that one was a good faith purchaser, eliminating the additional protections and making it easier to alter final sales. If the policy of finality does exist, and courts can revisit and revoke final sale orders and affirmative good faith purchaser judgments, an important question arises: when does the court’s discretionary power outweigh the policy of finality?
This memorandum will assess the aforementioned question in three sections. Section I will examine when a court may revoke final sale orders under the Federal Rules of Civil Procedure § 60 (“Rule 60”). Section II will examine when a court may revoke a judgment that granted a good faith purchaser status to a party under the Federal Rules of Civil Procedure § 59 (“Rule 59”). Section III will conclude by examining both rules and their impact on the policy of finality and chapter 11 assets sales.