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May 18, 2023

Good Faith Buyer Lessons from 5th Circuit Bankruptcy Ruling

By Shane G. Ramsey


In an article published on May 17, 2023, Nelson Mullins partner and vice chair of the firm's bankruptcy and financial restructuring practice group, Shane Ramsey, offered his insight and penned an article that focuses around lessons that can be learned from a recent U.S. Court of Appeals for the Fifth Circuit bankruptcy ruling. What occurred in the matter of question is that a hotel developer, Palm Springs LLC, was unable to pay millions of dollars it owed to the construction firm it had contracted for a project. 

"On April 17, the U.S. Court of Appeals for the Fifth Circuit, in the Matter of: RE Palm Springs II LLC,[1] held that a senior lender who uses economic leverage and asserts its legal rights to squeeze out a junior lender remains a good faith purchaser entitled to declare an appeal moot based on a sale under Section 363(m) of the U.S. Bankruptcy Code," Ramsey wrote.