Someone who has been tossed off an official committee doesn’t have standing to appeal having been tossed off, according to District Judge Greg Gerard Guidry of New Orleans. Furthermore, being removed from a committee is not a sanction because no one has a right to serve on a committee.
In the chapter 11 reorganization of the Archdiocese of New Orleans, the bankruptcy court removed four members from the official creditors’ committee along with the lawyer who represented them individually.
The lawyer allegedly had violated a court order by disclosing confidential information. The bankruptcy court also initiated sanction proceedings against the lawyer. The sanction proceedings are under advisement at this writing.
The U.S. Trustee appointed three tort claimants to the committee, raising the membership to five. All have tort claims.
The lawyer and the four former committee members appealed, but the debtor moved to dismiss the appeal, arguing that the appellants lacked appellate standing.
Judge Guidry summarized the Fifth Circuit’s appellate standing principles. First, appellate standing is “more exacting” than Article III standing. To be an appellant in a bankruptcy case, the party must be a “person aggrieved” and show a “higher causal nexus between the act and the injury.” In re Coho Energy Inc., 395 F.3d 198, 202–03 (5th Cir. 2004).
More recently, the Fifth Circuit “narrowed the playing field” for appellate standing by “ensuring that only those with a direct, financial stake in a given order can appeal it.” In re Technicool Sys. Inc., 896 F.3d 382, 385 (5th Cir. 2018). To read ABI’s report on Technicool, click here.
Applying the standards, Judge Guidry held that the appellants lacked appellate standing because they were not directly and adversely affected pecuniarily. He said that the former committee members could point to no pecuniary harm.
The committee members argued that the sanction of removal by itself made them aggrieved and conferred standing. However, the committee members have not been sanctioned, because a sanction requires the invasion of a legal right, and “no person has a general right to serve on a creditors’ committee,” Judge Guidry held.
As a general principle, Judge Guidry said in a footnote that creditors have standing to appeal the disposition of estate property. That rule, he said, “is inapplicable” because removal from the committee did not dispose of estate assets.
Furthermore, removal from the committee did not affect the former members’ claims or their rights as creditors. Any rights they had as committee members flowed from the bankruptcy itself and not from their rights as creditors.
Applying the “more exacting standard” of appellate standing and finding that their pecuniary interests were not affected, Judge Guidry dismissed the appeal for lack of standing. He noted that his decision was “further reinforced” because the former members are “still represented by a five-member” committee.
Stay tuned. The former committee members are appealing to the Fifth Circuit.
Someone who has been tossed off an official committee doesn’t have standing to appeal having been tossed off, according to District Judge Greg Gerard Guidry of New Orleans. Furthermore, being removed from a committee is not a sanction because no one has a right to serve on a committee.
In the chapter 11 reorganization of the Archdiocese of New Orleans, the bankruptcy court removed four members from the official creditors’ committee along with the lawyer who represented them individually.
The lawyer allegedly had violated a court order by disclosing confidential information. The bankruptcy court also initiated sanction proceedings against the lawyer. The sanction proceedings are under advisement at this writing.
The U.S. Trustee appointed three tort claimants to the committee, raising the membership to five. All have tort claims.
The lawyer and the four former committee members appealed, but the debtor moved to dismiss the appeal, arguing that the appellants lacked appellate standing.