In upholding the one-year suspension of a chapter 7 panel trustee, District Judge Naomi Reice Buchwald of Manhattan held that 28 U.S.C. Section 586(d)(2), not the Administrative Procedures Act, provides the standards and procedures for judicial review when the Director of the U.S. Trustee Program suspends or terminates a panel trustee.
The Director upheld the decision by the U.S. Trustee for Region 2 to suspend John S. Pereira from receiving new cases for one year. To be reinstated after his suspension, Pereira must complete 10 hours of diversity and sensitivity training. In 1979, he became the first panel trustee appointed in the Southern and Eastern Districts of New York.
The suspension arose from Pereira’s conduct of three Section 341(a) meetings in 2014. In her decision on May 11, Judge Buchwald quoted audio transcripts in which he berated a debtor for not speaking English, allegedly yelled at another, and made two debtors cry. In his 23-page, single-spaced opinion, the Director said that Pereira “was unfair, at times almost cruel” in his interrogation of debtors at the Section 341(a) meetings.
Regulations governing the conduct of panel trustees requires them to be “courteous and accessible to all parties with reasonable inquiries or comments about a case for which such individual is serving as private trustee” and “free of prejudices against any individual.”
In his initial decision, the U.S. Trustee for Region 2 said that Pereira was “overly aggressive and arguably biased on the basis of [one debtor’s] limited proficiency in English.” He went on to say that Pereira’s tone of voice was “harsh, accusatory, demeaning and inappropriate throughout his examination.” He said that Pereira “did not show the debtor even a modicum of respect.”
In another case, the Region 2 trustee said Pereira “made rude or inappropriate statements to and about the debtor” and “wrongly threatened them with a mortgage fraud investigation.”
Pereira brought an action in federal district court in Manhattan to challenge his suspension. He claimed the Director’s action was procedurally and substantively improper under the APA and Section 586(d)(2).
Judge Buchwald said that the APA is limited to reviewing agency actions when there is no other adequate remedy in court. She said that Section 586(d)(2) provides an adequate remedy and the appropriate legal standard. The judge therefore held that the section “furnishes an adequate remedy in a court that forecloses APA review.”
Section 586(d)(2) provides that a trustee no longer receiving case assignments can obtain judicial review after first exhausting his or her administrative remedies. The section goes on to provide that the agency action “shall be affirmed” unless it was “unreasonable and without cause based on the administrative record before the agency.”
Judge Buchwald rejected Pereira’s contention that the procedure was flawed because the Director refused to hold a “face to face” meeting. She said that a hearing can be held “if the trustee so elects,” but that Pereira did not ask for a hearing on the record in his initial request for review.
Reviewing the agency record, the judge said it was “not arbitrary or capricious for the Director to uphold the suspension.” The 574-page administrative record was “comprehensive and voluminous,” while the Director’s ultimate decision was “detailed and exhaustive.”
In the last three years, the Director has suspended two panel trustees. Pereira did not return a call seeking comment.