Nolan v. Judicial Council

481 F.2d 41, 1973 U.S. App. LEXIS 10337
CourtCourt of Appeals for the Third Circuit
DecidedApril 23, 1973
DocketNos. 72-1566, 72-1920
StatusPublished
Cited by28 cases

This text of 481 F.2d 41 (Nolan v. Judicial Council) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nolan v. Judicial Council, 481 F.2d 41, 1973 U.S. App. LEXIS 10337 (3d Cir. 1973).

Opinions

OPINION OF THE COURT

ALDRICH, Senior Circuit Judge.

These consolidated appeals from two proceedings in the New Jersey District Court present a single issue, the propriety, viewed in the circumstances under which it was adopted, of a resolution of the Judicial Council of the Third Circuit (Council), dated February 10, 1972, which provides as follows:

“RESOLVED that in all bankruptcy proceedings this Council holds as incompatible the continued representation as attorney for the trustee by any lawyer or his firm who represents a third party who submits a plan for reorganization in the bankruptcy; and that recusal by the attorney only from commenting on proposed reorganization plans is not an adequate immunization from the appearance of a conflict of interest.”

On May 2, 1972 the district court, pursuant to this resolution, removed appellant, Joseph M. Nolan, Esq., as counsel for the trustee in reorganization of Imperial “400” National, Inc. Nolan appealed that order and also brought a petition of mandamus, or declaratory judgment, against the Council. The district court1 dismissed the mandamus action, July 29, 1972, agreeing with the Council that Nolan had an adequate remedy by way of appeal to this court, and that the district court was without jurisdiction. D. C., 346 F.Supp. 500. We, too, agree, and Nolan’s appeal from that dismissal must fail. We must, however, address ourselves to our dissenting brother Lumbard’s claim that we lack jurisdiction of the appeal from the original removal order. Since jurisdiction is always open it is, of course, not determinative that in the mandamus proceeding the Council itself took the position that we would have jurisdiction. We believe, however, that the Council — and the district court ■ — were correct.

On this we see no real issue. We are not reviewing the action of the Court of Appeals, but, directly, of the district court. Admittedly we are reviewing indirectly the action of the Council, but the dissent’s assertion that we have no power to do this is just that. The circuit council, while composed of judges, is an administrative body, and not a court. Chandler v. Judicial Council, 1970, 398 U.S. 74, 86 n. 7, 90 S.Ct. 1648, 26 L.Ed.2d 100. Reviewing the district court’s May 2 order, which drew its substance from the Council’s resolution, seems in no material respect different from reviewing a similar district court order which drew its substance from statutory provisions such as 11 U. S.C. §§ 557, 558. The latter task is our statutory duty under 11 U.S.C. § 47. At least in a situation where there is a district court order capable of being reviewed, we see no reason, in the absence of any statutory provision, why the Council’s actions are untouchable except by the Supreme Court, and we greatly doubt that that Court so thought when it declined to permit the filing of a petition for mandamus. Nolan v. Judicial Council of the Third Circuit of the United States, 1972, 409 U.S. 822, 93 S.Ct. 111, 34 L.Ed.2d 154. On this assumption we pass to the merits after, necessarily, a complex statement of the facts.2

[43]*43THE APPEARANCE OF CONFLICT OF INTEREST

Appellant, Joseph M. Nolan, Esq., an experienced member of the bankruptcy bar, was appointed in February, 1966, as counsel for the trustee in reorganization of Imperial “400” National, Inc., a chain of motels doing business in thirty-five states. The trustee successfully continued the operation of the business, but acceptable plans for reorganization did not materialize. Two plans, although allegedly favored by many creditors, were opposed by the trustee through Nolan as his counsel.3 On April 14, 1971, orally, and April 19 in writing, Nolan advised the district judge in charge of the reorganization, Hon. Robert Shaw, now deceased, that a client of his law firm, Schiavone Construction Company, was interested in filing a plan. Judge Shaw replied on April 21 by a letter, with copies to all creditors:

“If a good plan of reorganization which is more fair, equitable and feasible than any heretofore submitted may be available by participation of Schiavone Construction Co., I do not think stockholders, creditors and other parties in interest should be deprived of the benefit of such plan by reason of the fact that Mr. Nolan represents that corporation in other matters.”

He went on to state that the trustee himself had no conflict of interest, and was a well-qualified attorney capable of representing himself with respect to reorganization plans, and that accordingly he was ordering Nolan to “refrain completely from any participation therein,” but to continue to represent the trustee in all other matters.

“If it is felt by any interested party that this is not the appropriate way to proceed to gain the financing of Schiavone Construction Co., the Court will entertain and consider objections which, if any, should be promptly presented.”

We will not pause to consider the oversolicitude, if any, the court exhibited towards the trustee’s counsel vis-a-vis the estate. In any event, no one objected, and two affirmatively assented — Union Bank of Los Angeles, a large creditor, hereinafter Union Bank, and the SEC. The SEC wrote that because it felt “the estate should not be deprived of the possible benefits arising from Schiavone’s participation” it had no objection to the proposed procedure; the bank concurred, with a similar statement. Thereafter New York counsel appeared for Schiavone, and Nolan continued to represent the trustee in a substantial amount of day-to-day legal work unconnected with reorganization plans.

THE CLIMATE

Pre-Schiavone

Thus no conflict of interest of a disqualifying nature was perceived, at least to the point of accepting the court’s open invitation to speak up. ' We lay particular emphasis upon this not only because of its general significance, but because well before that date matters had not been going to everyone’s satisfaction, and the parties had become engaged in recriminations on a markedly personal level. Union Bank was represented by one Laurence W. Levine, Esq., who was also chairman of the creditors’ committee. His vigorous attacks on the trustee and his counsel in connection with their requests for interim fees, of which there were several, were characterized by the district judge at one point as “allegations of lack of integrity and suggestions that there is deliberate mismanagement of the estate.” Nor did Nolan fail to respond in kind. The Court of Appeals had found one of the district court’s fee allowances substantially excessive,4 and doubtless the con[44]*44troversy was exacerbated when the district court, on receipt of the mandate, on March 10, 1971 excused the trustee from paying interest on the amount obliged to be refunded, but not Nolan. Nolan appealed, and the creditors cross-appealed.

Post-Schiavone

In April, 1971, Nolan’s new, in the sense of more limited, position was approved.

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Bluebook (online)
481 F.2d 41, 1973 U.S. App. LEXIS 10337, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nolan-v-judicial-council-ca3-1973.