by July 31, 2025 — In Humphrey v. Christopher, No. 24-1854, the U.S. Court of Appeals for the Eighth Circuit sidestepped a key question in consumer bankruptcy law: whether a debtor’s defensive appellate rights are part of the bankruptcy estate and may be sold by the trustee. Instead, the court resolved the case on procedural grounds, holding that because the debtor failed to obtain a stay of the bankruptcy court’s sale order, review of that order was statutorily moot under 11 U.S.C. § 363(m). While declining to reach the merits, the decision underscores the critical importance of seeking a stay pending appeal when challenging sales of purported estate assets.
The Case Below
LaDonna Humphrey, a Chapter 7 debtor, was the defendant in a state court civil action in Arkansas in which the trial court struck her answer and dismissed her counterclaims as a sanction for discovery misconduct. The court proceeded to a bench trial and entered a judgment against her for $3.57 million.
While her appeals of the sanctions order and judgment were pending in state court, Humphrey filed for bankruptcy. The Chapter 7 trustee subsequently moved to sell her appellate rights back to her litigation opponents, Anthony Christopher and Absolute Pediatric Therapy. The bankruptcy court approved the sale, finding that the appellate rights were estate property and the sale was in the best interest of the estate.
Humphrey appealed. The district court reversed, holding that appellate rights under Arkansas law are not “personal property” and therefore not estate property under § 541. The district court also found that the sale was not in the best interest of the estate and that Humphrey’s appeal was not barred by § 363(m) because she had timely sought review.
Appellants’ (Creditors’) Position
The creditors argued that all of Humphrey’s appellate rights—defensive or otherwise—were property of the estate under 11 U.S.C. § 541. They contended that the bankruptcy court correctly approved the sale under § 363 and that the sale was in the best interest of the estate.
They further asserted that Humphrey’s appeal was barred by § 363(m) because she failed to obtain a stay of the sale order, and the sale was consummated before the appeal was decided. They cited longstanding Eighth Circuit precedent establishing that failure to secure a stay moots appellate challenges to § 363 sales.
Debtor’s Position
Humphrey argued that her right to challenge the state court judgment—particularly the orders striking her answer and denying her a jury trial—was not “property” that could be sold by the trustee. She maintained that defensive appellate rights are personal to the litigant and are not assignable under Arkansas law. She also argued that selling those rights to her litigation opponents was fundamentally unfair and not in the best interest of the estate.
Humphrey further asserted that § 363(m) did not apply because the state court stayed the proceedings, and that the Court could supply a remedy given that the interests of the parties have been preserved
NCBRC and NACBA Position
NCBRC and NACBA filed an amicus brief warning that allowing trustees to sell a debtor’s defensive appellate rights to litigation adversaries raises grave concerns. The amici argued:
- Defensive appellate rights are not property of the estate because they are not assignable under Arkansas law and cannot be monetized apart from the debtor’s legal interest.
- The sale raised serious federal interests by allowing the opposing party in litigation to purchase control over the debtor’s access to appellate review, thus making a bankruptcy a dangerous endeavor for any debtor with an adverse judgment on appeal.
- Section 363(m) does not bar this appeal because the Supreme Court held that § 363(m) is not a jurisdictional provision that would deprive the court of the ability to take appropriate corrective action in a case like this, citing MOAC Mall Holdings LLC v. Transform Holdco LLC, 598 U.S. 288 (2023).
The amici urged the Eighth Circuit to affirm the district court’s reversal of the sale order and to hold that the debtor’s right to challenge an adverse judgment is not a commodity subject to sale in bankruptcy. The amicus brief was filed by NCBRC and NACBA and prepared by the Hon. Allan Gropper (Ret.).
Outcome
The Eighth Circuit avoided the substantive property-of-the-estate question and instead held that Humphrey’s failure to obtain a stay of the bankruptcy court’s sale order rendered the appeal statutorily moot under § 363(m). The court emphasized that a sale authorized under § 363(b) cannot be undone on appeal unless the order was stayed, and it found no basis to invoke the limited exception recognized in MOAC Mall Holdings, LLC v. Transform Holdco LLC, 598 U.S. 288 (2023).
The ruling leaves unresolved whether a debtor’s defensive appellate rights may be sold in bankruptcy, but it sends a clear message: parties who wish to challenge § 363 sales must act swiftly to obtain a stay or risk forfeiting their appeal.