Official Unsecured Creditors' Committee v. Michaels

689 F.2d 445, 7 Collier Bankr. Cas. 2d 470
CourtCourt of Appeals for the Third Circuit
DecidedSeptember 29, 1982
DocketNos. 81-3083, 81-3084
StatusPublished
Cited by6 cases

This text of 689 F.2d 445 (Official Unsecured Creditors' Committee v. Michaels) 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
Official Unsecured Creditors' Committee v. Michaels, 689 F.2d 445, 7 Collier Bankr. Cas. 2d 470 (3d Cir. 1982).

Opinion

OPINION OF THE COURT

ADAMS, Circuit Judge.

We are called upon in this appeal to determine whether a creditors’ committee in a bankruptcy reorganization has the right to intervene in adversary proceedings instituted by a trustee. We first decide that we have jurisdiction under 28 U.S.C. § 1293(b) to address this issue at this stage of the litigation, and then proceed to ascertain that under the applicable section of the Bankruptcy Code, 11 U.S.C. § 1109(b), a creditors’ committee has a right to intervene, a right that is not satisfied by participation as a mere amicus curiae. Accordingly we affirm the order of the district court granting intervention.

I.

On April 21, 1981, Marin Motor Oil, Inc. filed a voluntary petition in the United States Bankruptcy Court for the District of New Jersey for reorganization under Chapter 11 of the Bankruptcy Code. All outstanding shares of Marin were owned by Nicholas Marin. Marin and his wife, Ilse Marin, also owned and controlled several related companies.

Two weeks after the petition was filed, the United States Trustee 1 appointed the Official Unsecured Creditors’ Committee (“Committee”) pursuant to 11 U.S.C. § 151102, and on May 11 the Committee moved for the appointment of a trustee of the estate. Before a trustee was appointed, the Committee filed a complaint seeking to have the various related companies included in the proceedings. Several days later, on May 19, the United States Trustee appointed a trustee of the estate (hereinafter referred to as “Trustee”). See 11 U.S.C. § 151104. Appointment of a trustee is the exception and not the rule in a Chapter 11 case, Weintraub & Resnick, Bankruptcy Law Manual ¶ 8.13[1] (1980), but appointment of a trustee was requested by the United States Trustee because the facts of this case indicated a need for a disinterested third party to investigate the situation, to take appropriate action, and to oversee and manage the business.

The Trustee entered into a stipulation on June 16 with the Marins and the various Marin companies, freezing their assets; the stipulation was to terminate in 45 days. On July 2, the Committee voluntarily withdrew its complaint with the understanding that an order freezing the assets of the Marins and the Marin companies would be sought and that the Trustee would vigorously pursue his own complaint.

The Trustee then instituted the two adversary proceedings in which the Committee ultimately sought to intervene, and which gave rise to this appeal. The first adversary proceeding, instituted July 14, 1981, sought to recover for the estate a home and furnishings in Tenafly, New Jersey. The home was purchased with money that Nicholas Marin had borrowed from Marin Motor Oil. Nominal title to the home was held by the Marin Holding Company, a company under the complete control of Nicholas Marin. The Trustee asked for the imposition of a constructive trust on the [447]*447home and furnishings, and for a declaration that Marin Motor Oil was the beneficial owner. The second adversary proceeding, instituted July 17, 1981, sought to extend the pending Chapter 11 proceedings to include the Marins individually and the various Marin companies besides Marin Motor Oil. The Trustee’s complaint alleged that the various companies had been operated as a single economic unit, without observance of the requisite formalities; that the Marins had “complete control” over the various companies; that the Marins’ personal assets were inextricably intertwined with those of the companies; that Marin Motor Oil financed the other companies; and that the purpose and effect of forming the other companies was to delay and defraud creditors.

During the following months, the Committee became increasingly dissatisfied with the Trustee’s performance. It was especially disturbed that the Trustee had allowed the stipulation freezing the assets to lapse, although another stipulation was eventually extended to September 14. In early October, the Committee sought, under 11 U.S.C. § 1109(b), to intervene in the two adversary proceedings brought by the Trustee. Although the Committee’s supporting affidavit contained serious complaints about the Trustee’s handling of the proceedings, the Committee based its motion almost entirely on the claim that section 1109(b) accorded it an absolute right to intervene regardless of the Trustee’s performance.

Reading section 1109(b) as permissive rather than mandatory, the bankruptcy court refused to grant intervention. It did, however, afford the Committee amicus curiae status “limited to the submission of briefs on all factual and legal issues raised and considered.” Appendix at 5. The Committee then filed a Notice of Appeal to the United States District Court for the District of New Jersey. The district judge reversed, holding that section 1109(b) was mandatory, and could not be satisfied by allowing the Committee to participate as an amicus curiae. The district court’s order was appealed to this Court by the Trustee and by the Marins and the Marin companies.

II.

Before we can reach the merits of this dispute, it is necessary for us to determine that we have appellate jurisdiction at this juncture of the proceedings. Although the question is not free from doubt, we conclude that there is jurisdiction.

The usual rule in this Circuit is that “[w]hen an absolute right to intervene in a lawsuit is claimed, and the claim is rejected, the order denying intervention is considered final and appealable.” Commonwealth of Pennsylvania v. Rizzo, 530 F.2d 501, 504 (3d Cir.), cert. denied, 426 U.S. 921, 96 S.Ct. 2628, 49 L.Ed.2d 375 (1976) (quoting Philadelphia Electric Co. v. Westinghouse Electric Corp., 308 F.2d 856, 859 (3d Cir. 1962), cert. denied, 372 U.S. 936, 83 S.Ct. 883, 9 L.Ed.2d 767 (1963)). On the other hand, an order granting intervention is ordinarily not considered appealable. EEOC v. American Telephone & Telegraph Co., 506 F.2d 735, 742 (3d Cir. 1974). See also C. Wright and A. Miller, 7A Federal Practice and Procedure § 1923 (1972 & Supp. 1982): “An order granting leave to intervene is not final and is not appealable as of right” (footnote, citing cases, omitted).

These rules, however, were developed in appeals under 28 U.S.C. § 1291, not in the special context of appeals under 28 U.S.C. § 1293(b), “a comprehensive and exclusive schema for jurisdiction of bankruptcy appeals,” Universal Minerals, Inc. v. C. A. Hughes & Co., 669 F.2d 98, 101 n.3 (3d Cir. 1981). 28 U.S.C. § 1293(b) reads:

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689 F.2d 445, 7 Collier Bankr. Cas. 2d 470, Counsel Stack Legal Research, https://law.counselstack.com/opinion/official-unsecured-creditors-committee-v-michaels-ca3-1982.