In Re Kontaratos

15 B.R. 298, 5 Collier Bankr. Cas. 2d 631, 1981 Bankr. LEXIS 2602, 8 Bankr. Ct. Dec. (CRR) 351
Bankruptcy Appellate Panel of the First Circuit·Decided November 12, 1981·No. Bankruptcy 81-9013·Published·Cited by 7 cases

Opinions

GLENNON, Bankruptcy Judge.

This matter is before the Panel upon an appeal by the United States trustee (the “trustee”) of a bankruptcy court order directing the trustee to investigate alleged unlawful acts by two members of the Chapter 11 Official Unsecured Creditors Committee (the “Committee”). The Chapter 11 debtors (Appellees, herein) challenged the representativeness of two members of the Committee appointed by the trustee, because of alleged violations of certain state criminal and usury statutes by those two creditors. By order of the Bankruptcy Court for the District of Maine dated February 19, 1981, the two creditors were suspended from the committee pending the trustee’s investigation into the alleged statutory violations by the creditors in question and to report his findings to the court.1 The trustee made an immediate appeal of that order to this Panel, and the Panel has [299] already allowed the trustee’s Motion for Expedited Appeal. Jurisdiction exists pursuant to Title 28 of the United States Code Section 1482. 28 U.S.C. § 1482. The parties have presented two issues for appeal:

1. Whether the express requirement that the trustee appoint a committee of creditors carries with it the implicit obligation to investigate and insure the representativeness of that committee and,

2. Whether the bankruptcy court’s express power to change the membership or size of a committee also implies the authority to order the trustee to investigate complaints about the committee’s alleged lack of representativeness?

For the reasons that appear below, we feel that the bankruptcy court’s order of February 19, 1981 should be vacated and the case remanded for further findings in accordance with our decision.

DISCUSSION

At issue before the Panel in this appeal are questions bearing upon the very nature of the dual roles of the bankruptcy judge and the U.S. trustee in a bankruptcy case. This is not a question of isolated significance, but one which may occur repeatedly, albeit not in the present form that this appeal takes. The decision today focuses both on the scope of the trustee’s responsibility and the breadth of the bankruptcy court’s power, and involves far greater issues than mere judicial interpretation of statutory language. We are concerned with the impact and implementation of an experimental program, designed to study the feasibility of removing from the bankruptcy judge certain administrative duties heretofore carried out by the judge, and in turn placing those responsibilities in the hands of a United States trustee, an independent officer to be appointed and supervised by the Justice Department and the office of the Attorney General of the United States. As the legislative history of the Bankruptcy Code indicates, the establishment of the office of United States trustee is designed to accomplish the separation of judicial and administrative functions currently performed by bankruptcy judges.

[The U.S. trustee] was not intended to replace private trustees, but rather to perform the supervisory and appointing functions handled by bankruptcy judges under the Act, and to monitor trustee performance in more detail than practicable. The United States trustee will relieve the bankruptcy judges of their current administrative and supervisory role, and will become the principal administrative officers in the bankruptcy system.2

Section 224(a) of the Bankruptcy Reform Act of 1978, Pub.L. 95-598 added Chapter 39 to Title 28 of the United States Code to create the Office of the United States trustee. 28 U.S.C. §§ 581-589. Chapter 39 provides, inter alia, that the Attorney General shall appoint the U.S. trustee for each pilot district enumerated,3 may appoint Assistant U.S. trustees,4 and shall provide general supervision, coordination and assistance to U.S. trustees.5 It is clear, therefore, that the U.S. trustee program as established is to be supervised by and is otherwise subject to the authority of the Executive Department of the federal government. However, Chapter 39 of Title 28 of the U.S. Code merely establishes the procedure for creating the office of United States trustee and establishes the Attorney General as a general supervisor over the program. The substantive duties, responsibilities and function of a U.S. trustee are contained entirely in Chapter 15 of the new Bankruptcy Code. 11 U.S.C. §§ 1501, et seq. The Congressional Record with regard to Chapter 15 is particularly helpful in examining the duties of the trustee and his role in a bankruptcy proceeding.

Under present law bankruptcy judges are required to both resolve disputes and [300] supervise the administration of bankruptcy cases. The main purpose of the U.S. Trustee is to remove administrative duties from the bankruptcy judge leaving the bankruptcy judge free to resolve disputes untainted by knowledge of matters unnecessary to a judicial determination. The U.S. trustee is responsible for supervising panels of private trustees in the district or districts covered by the pilot program. The U.S. trustee, rather than the court, in a pilot district will appoint trustees, supervise administration of bankruptcy cases, and exercise any other function prescribed by the Attorney General, such as presiding at first meetings of creditors, related to bankruptcy administration.6

The clearest example of the transfer of responsibility can be seen in comparing the two sections of the Code which are at issue before us. Section 1102(a) has two numbered paragraphs: the first directs the court to appoint a committee of creditors holding unsecured claims, while the second provides that if the court determines that additional committees are necessary to assure adequate representation of creditors, the court shall appoint such committee.7 In contrast, Section 151102 contains two subsections (a) and (b), which contain virtually identical language to that used in § 1102(a)(l)(2), but for the substitution of “the United States trustee” for “the court”.8 Thus it is clear that the trustee’s duty to appoint committees of creditors is no different than that of a bankruptcy judge in a non-pilot district.

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In Re Kontaratos, 15 B.R. 298, 5 Collier Bankr. Cas. 2d 631, 1981 Bankr. LEXIS 2602, 8 Bankr. Ct. Dec. (CRR) 351 (bap1 1981).

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