A Subchapter V trustee lacks standing to bring an avoidance action on behalf of the debtor, according to an opinion by Chief Bankruptcy Judge Eduardo V. Rodriguez of Houston.

The debtor was a limited liability corporation evidently in the middle of a matrimonial dispute between husband and wife. A pleading filed by the debtor alleges that the LLC was mismanaged by the estranged husband and other employees. It also says that the debtor “may pursue litigation against prior employees and managers for mismanagement of funds.” In his May 31 opinion, Judge Rodriguez refers to the wife as the debtor’s “representative.”

The debtor’s pleading says that the estranged husband “continues to complicate matters as it pertains to the operations of the business. . . . Debtor’s managing member . . . is also seeking appropriate actions within her divorce proceeding to aid in preventing . . . her estranged husband . . . from continuing to interfere with the Debtor, including obtaining a restraining order in the divorce proceeding.”

On May 30, the Subchapter V trustee filed an adversary proceeding against the estranged husband. The complaint is evidently under seal. Judge Rodriguez said that the Subchapter V trustee was seeking “a temporary restraining order and preliminary injunctive relief on behalf of” of the debtor.

Sua sponte, Judge Rodriguez took it upon himself to decide “whether a subchapter V trustee is empowered to seek injunctive relief on behalf of a Debtor in possession pursuant to Federal Rule of Bankruptcy Procedure 7065 and 11 U.S.C. § 105.”

Judge Rodriguez said that Section 1184 “imbues a debtor in possession with independent standing to pursue chapter 5 avoidance actions and other estate causes of action.” Next citing Section 1183, he said that a Subchapter V trustee, “tasked primarily with facilitating consensual plans, occupies a unique position as contrasted with its counterparts in traditional Chapter 11 and other cases, who tend to be adversarial to the debtor by virtue of their duties to protect the bankruptcy estate and its creditors.”

Judge Rodriguez noted that a Subchapter V trustee’s duties are listed in Section 1183(b)(1) but “[n]one of the subchapter V trustee’s general duties authorize the Subchapter V Trustee to pursue claims belonging to the estate, on behalf of the estate.” Therefore, he held that the “debtor in possession has exclusive standing to pursue estate causes of action pursuant to 11 U.S.C. § 1184” and that “the subchapter V lacks statutory standing to bring claims on behalf of the debtor.”

Judge Rodriguez denied the Subchapter V trustee’s motion for a temporary restraining order. He did not dismiss the adversary proceeding, perhaps affording the debtor an opportunity to intervene as plaintiff.