DANN S. SHEFTELMAN, ET AL., PETITIONERS V. STANDARD METALS CORP.,
ET AL.

   No. 88-243

   In the Supreme Court of the United States

   October Term, 1988

   On Petition for a Writ of Certiorari to the United States Court of
Appeals for the Tenth Circuit

   Brief for the Securities and Exchange Commission as Respondent

   Pursuant to 11 U.S.C. 1109(a), the Securities and Exchange
Commission, as a statutory party in Chapter 11 bankruptcy
reorganization cases, acts as an advisor to the courts and seeks
primarily to protect the interests of public investors.  /1/ The
Commission appeared in this case in the bankruptcy court, in the
district court, and in the court of appeals.  The Court has at least
twice before treated the Commission as a respondent in these
circumstances.  Caplin v. Marine Midland Grace Trust Co., 406 U.S.
416, 419 n.8 (1972);  Protective Comm. v. Anderson, 390 U.S. 414, 420
n.3 (1968).  The Commission accordingly appears here as respondent.

            TABLE OF CONTENTS
   Question Presented
   Opinions below
   Jurisdiction
   Statement
   Argument
   Conclusion

                            OPINIONS BELOW

   The initial opinion of the court of appeals (Pet. App. 1a-18a) is
reported at 817 F.2d 625.  The opinion of the court of appeals on
rehearing (Pet. App. 19a-26a) is reported at 839 F.2d 1383.  The order
of the court of appeals clarifying its earlier opinions (Pet. App.
27a) is not reported.  The order of the district court dismissing the
appeal from the bankruptcy court (Pet. App. 29a) is not reported.  The
opinion of the bankruptcy court (Pet. App. 31a-49a) is reported at 48
Bankr. 778.

                             JURISDICTION

   The initial judgment of the court of appeals was entered on April
20, 1987.  The judgment of the court of appeals on rehearing was
entered on December 29, 1987.  An order clarifying the ruling was
entered on March 28, 1988.  A petition for rehearing and suggestion
for rehearing en banc were denied on April 8, 1988 (Pet. App. 28a).
On June 20, 1988, Justice White granted an extension of time within
which to file a petition for a writ of certiorari to and including
August 8, 1988.  The petition for a writ of certiorari was filed on
that day.  The jurisdiction of this Court is invoked pursuant to 28
U.S.C. 1254(1).

                          QUESTION PRESENTED

   The Securities and Exchange Commission will address the question
whether the filing of class proofs of claim is permissible in
bankruptcy proceedings.

                               STATEMENT

   1. In February 1983, the New Jersey Economic Development Authority
issued on behalf of National Smelting of New Jersey (NSNJ)
approximately 1500 industrial revenue bonds, with a face amount of
$5000 each, the proceeds of which were to be used by NSNJ to purchase,
renovate, and operate a lead smelting plant (Pet. App. 31a-36a).  NSNJ
was wholly owned by National Smelting and Refining Co. (NSR), which in
turn was half-owned by respondent Standard Metals Corporation
(Standard) (ibid.).  Petitioner Dann Sheftelman purchased some of the
bonds.  /2/ He still owned them when a default was declared in January
1984 (id. at 3a).  Two months later, Standard, NSNJ, and NSR all filed
for reorganization in bankruptcy in the United States Bankruptcy Court
for the District of Colorado (id. at 2a).  This case involves
Standard's reorganization proceeding.

   In early May 1984, the bankruptcy court in Standard's case set a
claims bar date of June 10, 1984, so that claims against the estate
had to be filed before that date (Pet. App. 32a-33a).  The court also
ordered that notice be sent to all of the creditors listed by Standard
on its schedules of liabilities (id. at 33a).  Neither petitioner nor
any of the bondholders was listed on Standard's schedules, /3/ and
Standard gave no notice of the claims bar date to them.  Nor was
notice of the claims bar date published in any form (id. at 23a).

   On August 8, 1984, petitioner filed a securities-fraud class action
in the United States District Court for the District of New Jersey on
behalf of the bond purchasers.  Although the named defendants did not
include Standard (or NSNJ or NSR), /4/ the complaint alleged that
Standard, NSNJ, and NSR participated in the wrongful acts by making
material misrepresentations regarding the smelting plant and the
purposes of the bond issue (Pet. App. 33a).  In particular, petitioner
alleged that some of the proceeds of the bond issue were used, not for
NSNJ's purchase and operation of the smelting plant, but to extinguish
Standard's preexisting debt to the seller.  Complaint, Sheftelman v.
N.L. Indus. Inc., Civ. No. 84-3199 (D.N.J. Aug. 8, 1984).

   On August 30, 1984, petitioner filed in Standard's reorganization
proceeding in the Colorado bankruptcy court a class "proof of claim,"
individually and on behalf of the class of bondholders, seeking relief
from Standard based on the same allegations of securities fraud.
Three months later, Standard objected that the claims were not timely
and that, in any event, a class proof of claim is not permitted in
bankruptcy (Pet. App. 3a, 33a-34a).  In response, petitioner made
motions requesting that leave be given for him to file out of time,
that the claims bar date be extended and notice be given to the
bondholders, and that, pursuant to Bankruptcy Rule 9014, the class
action procedures of Bankruptcy Rule 7023 (which incorporates Rule 23,
Fed. R. Civ. P.) be made applicable to the contested proceedings
related to the securities-fraud claim (Pet. App. 34a).  /5/

   2. The bankruptcy court denied petitioner's motions (Pet. App.
31a-49a).  In addition to dismissing his individual claim, /6/ the
court rejected petitioner's effort to file a class proof of claim.
After stating that petitioner had not yet satisfied several ordinary
prerequisites to a class action (assuming that class claims are ever
allowable) (id. at 38a-39a), the court concluded that, even apart from
those concerns, petitioner's class claim should not be permitted.
First, petitioner failed to meet the requirements of Rule 3001(b),
Bankr. R., because he did not show that he had been authorized to act
as an agent of the class members (Pet. App. 39a-40a).  /7/ Second,
petitioner's class claim contravened Section 501 of the Bankruptcy
Code, 11 U.S.C. 501, which, in subsection (a), states that "(a)
creditor or an indenture trustee may file a proof of claim." The court
evidently construed that language to require "that each creditor must
file a proof of claim" individually, unless it is filed by an
indenture trustee or an agent specifically authorized by the creditor,
which did not occur here (Pet. App. 39a-40a).  The district court,
while affirming other rulings of the bankruptcy court without opinion,
did not reach the class-claim issue.  Id. at 29a.  /8/

   3. a. In the first of two rulings on appeal, the court of appeals
affirmed (Pet. App. 1a-18a).  The court began by upholding the
dismissal of petitioner's individual claim as a discovery sanction
(id. at 5a-7a).  After concluding that the class-claim issue should
nonetheless be reached (id. at 8a-9a), the court held that "class
proofs of claim violate the statutory scheme of the (Bankruptcy
Reform) Act and the Rules" (id. at 9a).

   The court observed that, while Section 501 of the Code provides
that a creditor may file a proof of claim, Congress had directed that
the Bankruptcy Rules would determine when the filing of a proof of
claim is necessary (Pet. App. 9a).  The court then stated that Rule
3003(c)(2) sets forth a "stringent requirement" that "an unscheduled
creditor must file a proof of claim in order for that claim to be
allowed" (Pet. App. 9a-10a (emphasis in original;  footnote omitted)).
 /9/ The court said that the Code and Rules do not "expressly permit
or expressly prohibit" class proofs of claim (id. at 10a).  But it
read (ibid.) Rule 3001(b), which states that "(a) proof of claim shall
be executed by the creditor or the creditor's authorized agent," to
require "that each individual claimant must file a proof of claim or
expressly authorize an agent to act on his or her behalf." Even a
representative of a class that has been certified, the court continued
(Pet. App. 11a), does not have the express authorization from each
individual creditor that the court found was required to be an
"authorized agent."

   The court distinguished between "the permissibility of class proofs
of claim and the availability of class action procedures to a group of
individually filed proofs of claim" (Pet. App. 11a n.10), concluding
that Bankruptcy Rules 7023 and 9014 apply only to the latter.  The
court acknowledged that "class action procedures can be appropriate in
some instances where a large number of individual creditors have filed
similar claims" (Pet. App. 12a).  But it stated that class action
procedures cannot be used to "evade" the "requirement of individual
filing" (ibid.).

   The court bolstered its conclusion in two additional ways.  First,
it stated (Pet. App. 12a) that "class proofs of claims are unnecessary
in a bankruptcy proceeding," because the historical purpose of class
actions is "to avoid a multiplicity of suits in a variety of forums,"
and that purpose is automatically served in bankruptcy proceedings,
which concentrate litigation against the estate in one forum, without
resort to the class device.  Second, the court pointed (id. at 13a) to
the weight of authority against such a practice.  It noted that the
handful of published decisions on the issue (all by bankruptcy courts)
had uniformly rejected class proofs of claim and that, of the three
contrary unpublished decisions called to its attention, only one
remained standing that allowed a class proof of claim over the
objection of the debtor.  /10/

   The court concluded its initial opinion by determining, in view of
its resolution of the other issues in the case, that it need not
decide whether the bondholders were entitled to notice of the claims
bar date (Pet. App. 13a).  It therefore affirmed the judgment of the
district court.  Judge Seth dissented from the court's affirmance (id.
at 14a-18a), stating that the court should have reached the notice
issue and reversed on that ground.

   b. After its initial ruling, the court granted a petition for
rehearing on the notice question and reversed the district court and
bankruptcy court on that issue.  It held that notice must be given to
the bondholders once their claims were brought to the attention of the
bankruptcy court and that a new claims bar date should have been set
(Pet. App. 19a-26a).  While reaffirming the dismissal of petitioner's
individual claim (id. at 26a), the court stated that it was no longer
"necessary to consider the class action claims issues" (ibid.).  By
order dated March 28, 1988, however, the court responded to requests
for clarification of the status of its initial ruling on the
class-claim issue by declaring that the original panel opinion was not
vacated as to that issue (id. at 27a).  Accordingly, the ruling that
class proofs of claim are not permitted in bankruptcy stands as part
of the holding in the case.

                               ARGUMENT

   The court of appeals' decision holding class proofs of claim
impermissible in bankruptcy proceedings conflicts with the Seventh
Circuit's recent decision in In re American Reserve Corp., 840 F.2d
487 (1988).  The court of appeals' rejection of class proofs of claim
is also incorrect.  Nevertheless, we believe that the Court should not
grant certiorari in this case on the class-claim question.  /11/

   1. There is a direct conflict between the decision of the Tenth
Circuit in this case and the decision of the Seventh Circuit in
American Reserve, which was rendered after the decision on rehearing
in this case.  /12/ American Reserve held that class proofs of claim
are permissible because they are authorized by the Bankruptcy Rules
and are not prohibited by the Code.  At the outset, the court found
that class proofs of claim were expressly authorized by Rule 9014,
because that rule allows bankruptcy courts to apply Rule 7023 -- which
in turn makes applicable Fed. R. Civ. P. 23 -- at "any stage" in
contested matters.  The filing of a proof of claim that is contested
is one such stage (840 F.2d at 488).  Rule 9014's express
authorization of class proofs of claim, the court then explained, was
not overridden by statute or relevant policy arguments.

   The court acknowledged that permitting class proofs of claim in
bankruptcy may not be necessary in order to serve the main procedural
policy underlying class actions -- to consolidate related litigation
in one forum (840 F.2d at 489).  The court observed, however, that the
important substantive policy behind class actions -- to allow the
pursuit of many small claims that otherwise would lie dormant -- is
served by allowing class proofs of claim in bankruptcy (ibid.).  Under
bankruptcy law, small claimants have no less right to recover,
according to their entitlements under substantive law, than larger
claimants;  and, whether out of ignorance of their claims or as a
result of the prohibitive costs of investigating and pursuing a claim,
the class device is all that enables many small claimants to do so
(ibid.).  Further, permitting the pursuit of valid class claims raises
the level of deterrence of wrongful conduct (id. at 489-491).  Not
surprisingly in light of those policies, the court pointed out (id. at
490), "(t)here is nothing unusual about representative litigation in
bankruptcy cases," as some of the earliest class suits were the
creditors' bills that preceded the enactment of the 1898 Bankruptcy
Act.  Hence, the court concluded (id. at 492), class-action policies
offer no ground for depriving Rule 9014 of its ordinary meaning.
Indeed, "(o)ur benchmark -- that bankruptcy courts exist to marshal
assets and make awards justified by non-bankruptcy entitlements --
calls for employing the class device in such cases" (840 F.2d at 492).

   The court then explained that Section 501 of the Code, on which the
Tenth Circuit in this case had partly relied, does not override Rule
9014's authorization of class proofs of claim.  The court followed
(840 F.2d at 492) this Court's decision in Califano v. Yamasaki, 442
U.S. 682 (1979), which held that a statute allowing suit by an
"individual" did not provide the required "direct expression by
Congress of its intent to depart from the usual course" of allowing
class actions under Fed. R. Civ. P. 23 (442 U.S. at 700).  The Seventh
Circuit observed (840 F.2d at 492) that Section 501 established no
such intent in the bankruptcy context.

   Thus, the court explained (840 F.2d at 492) that Section 501
identifies several "representatives" who may file claims for creditors
-- an indenture trustee, the bankrupt's co-debtor or guarantor, and
the bankrupt itself -- but gives no indication that that list is
exclusive.  Neither the legislative history nor the structure of the
Code suggests that no other representative filings are permitted, the
court added (ibid.), and the filing of representative claims other
than those listed in Section 501 was plainly intended in at least some
instances (840 F.2d at 493).  In particular, Rule 3001(b), and not
Section 501, provides for "the most common representative filing of
all:  by an agent on behalf of the principal" (840 F.2d at 493).  In
short, "Section 501 does not interfere with filing by agents.  The
representative in a class action is an agent for the missing" (ibid.)

   2. The court of appeals' contrary ruling in this case is incorrect.
 As we have argued in this case below, in American Reserve, and in
other cases, for much the same reasons as were given by the Seventh
Circuit, class proofs of claim are permissible in bankruptcy
proceedings under the Code and Rules.

   a. The court of appeals did not rule that the Bankruptcy Code,
independently of the Rules, precluded recognition of class proofs of
claim, but it stated that "class proofs of claim violate the statutory
scheme of the (Code) and Rules" (Pet. App. 9a).  The only provision of
the Code it relied on, however, is Section 501(a).  That section
simply does not answer the question whether class proofs of claim are
permitted.

   Califano v. Yamasaki, supra, provides the proper framework.  This
Court there considered whether Section 205(g) of the Social Security
Act, 42 U.S.C. 405(g), which states that "(a)ny individual" may obtain
review of certain administrative decisions to which he was a party,
permits the filing of a class action.  Although it was not disputed
that, in the absence of that provision, Rule 23, Fed. R. Civ. P.,
would apply, the government argued that the language of the statutory
provision showed that "Congress contemplated a case-by-case
adjudication of claims under Section 205(g) that is incompatible with
class relief" (442 U.S. at 699).  The Court rejected the argument,
concluding (id. at 700) that it could not find "the necessary clear
expression of congressional intent to exempt actions brought under
(Section 205(g)) from the operation of the Federal Rules of Civil
Procedure." Citing numerous similar statutes that use singular terms
but had never been thought to preclude class actions, the Court ruled
(id. at 700-701) that the statute's use of the word "individual" was
no indication that class actions were precluded.  The Court also
explained (id. at 701) that class action procedures themselves fully
accommodate any need for individualized adjudication and that the
class device was peculiarly appropriate where, as in Yamasaki, it
makes possible the efficient litigation of common legal issues
applicable to numerous small claimants.

   The Yamasaki analysis fully applies here.  Nothing in Section 501
suggests that otherwise-authorized class proofs of claim are
impermissible.  Section 501(a)'s statement that "a creditor" (or an
indenture trustee) may file a proof of claim no more indicates a
preclusion of class claims than did the use of "individual" in the
statute at issue in Yamasaki.  And nothing in the legislative history
discloses an intention on the part of Congress that class proofs of
claim be forbidden;  there is no discussion of the subject.  See S.
Rep. 95-989, 95th Cong., 2d Sess. 61 (1978);  H.R. Rep. 95-595, 95th
Cong., 1st Sess. 351-352 (1977);  124 Cong. Rec. 32396 (1978) (joint
explanatory statement);  id. at 33996 (1978) (explanatory statement).
Indeed, as the court of appeals recognized (Pet. App. 9a), Congress
did not intend the Code to establish when a particular creditor must
file a proof of claim, but rather left that task to the Bankruptcy
Rules.  See S. Rep. 95-989, supra, at 61;  H.R. Rep. 95-595, supra, at
351.  /13/

   Further, there is no reason to infer an intent to preclude a
"creditor" from filing a proof of claim as a representative of a class
from the fact that Section 501 expressly authorizes proofs of claim to
be filed on creditors' behalf in certain circumstances by indenture
trustees, the bankrupt's co-debtors and guarantors, bankrupts
themselves, and trustees in bankruptcy.  As the Seventh Circuit
pointed out in American Reserve (840 F.2d at 493), reading Section 501
as furnishing an exhaustive list of representatives of creditors would
exclude the most common type of representative of all -- the
creditor's agent.  Moreover, as noted, Congress simply was not
addressing either the class-claim issue in particular or the general
question of how and when proofs of claim must be filed in general.
And in any event, the categories of persons enumerated, unlike class
plaintiffs, are not such familiar representatives of others' claims
that, without separate mention, they could naturally be covered by the
term "creditor," as a class representative would.

   In short, Section 501 does not preclude a bankruptcy court from
adopting class-action procedures to permit a named claimant to file a
proof of claim as the representative of a class of claimants against
the debtor, so that those claimants may litigate and, if warranted,
recover against the debtor without the need for individual proofs of
claim.  /14/ Hence, the Code would not invalidate any Bankruptcy Rule
that authorized class proofs of claim where, for example, the ordinary
requirements for class actions are met.  /15/

   b. The Bankruptcy Rules, though not expressly stating that "class
proofs of claim may be filed," do authorize class proofs of claim.
That authorization is furnished by Rule 7023 for those claims which
create "adversary proceedings" within the meaning of Rule 7001.  For
other claims, which create "contested matters" when disputed, the
authorization is provided by Rule 9014.

   Rule 7023 states that "Rule 23 F.R. Civ. P. applies in adversary
proceedings." Because Fed. R. Civ. P. 23 authorizes the initiation of
a single action on behalf of a class (and not just the consolidation
of numerous individually filed complaints), Rule 7023 of the
Bankruptcy Rules likewise authorizes a class representative to
initiate an adversary proceeding, as defined in Rule 7001, /16/ on
behalf of a class.  Rule 7023, which simply adopts Rule 23, Fed. R.
Civ. P., cannot reasonably be read -- as the court of appeals read it
(Pet. App. 11a n.10) -- merely to authorize the joinder of numerous
individually filed claims, because Rule 23 in its post-1966 form
clearly is not so limited.  Rather, Rule 23 is typically used to file
class claims.

   Rule 9014 provides a similar, if more flexible, authority to allow
class proofs of claim when the claim does not fall within the
"adversary proceeding" definition of Rule 7001.  In any "contested
matter," which includes a dispute over any proof of claim that has
been met by an objection, /17/ Rule 9014 states that Rule 7023 may be
invoked by the bankruptcy court.  Thus, after specifying that certain
rules from Part VII of the Rules "shall apply," Rule 9014 provides
that the bankruptcy court "may at any stage in a particular matter
direct that one or more of the other rules in Part VII shall apply."
That authorization permits bankruptcy courts, in their sound
discretion, to apply Rule 7023 and, hence, to permit the filing of a
class proof of claim.  See American Reserve, 840 F.2d at 488.

   Both class-action and bankruptcy policies support this construction
of Rules 7023 and 9014.  Contrary to the court of appeals' apparent
belief (Pet. App. 12a), the class-action device does not serve only
the procedural goal of enabling similar claims to be joined in a
single forum.  An equally important purpose of class actions is to
permit a representative to assert multiple claims that would not be
brought individually.  /18/ As the Seventh Circuit explained in
American Reserve, 840 F.2d at 489, the cost of investigating a claim
may be substantial, and many persons may not even be aware of the
existence of a contingent claim.  /19/ This "means that for many small
claims, it is class actions or nothing" (ibid.).  Far from being
"unnecessary in a bankruptcy proceeding" (Pet. App. 12a), a class
proof of claim enables such claims to be brought and thereby promotes
the redress of legitimate claims on their merits.

   Permitting class proofs of claim also serves the policies of the
Bankruptcy Code.  Thus, the broad definition of the term "claim" in
the Code (11 U.S.C. 101(4)) reflects Congress's intent to enable all
claims against the debtor to be heard in bankruptcy.  The House Report
states (H.R. Rep. 95-595, supra, at 309):  "By this broadest possible
definition, and by the use of the term throughout the title 11,
especially in subchapter I of Chapter 5 (concerning the filing and
treatment of claims), the bill contemplates that all legal obligations
of the debtor * * * will be able to be dealt with in the bankruptcy
case." The holders of small claims are no less claimants than are
those with a single large claim against the debtor that is easily
identified and filed.  As the American Reserve court explained (840
F.2d at 489 (footnote omitted)), "other creditors have no right to the
higher share of the debtor's assets they can achieve by excluding
rival creditors at the threshold." Adopting a construction of the
Rules so as to erect a procedural barrier to the pursuit of small
creditors' claims would run counter to that principle.  /20/

   History lends additional support to the recognition of class proofs
of claim in bankruptcy.  First, although very few cases reached the
stage of judicial decision on the permissibility of such class claims
until recent years, /21/ class claims have been filed in bankruptcy,
and settled, for many years (see note 11, supra).  And, as the Seventh
Circuit observed in American Reserve (840 F.2d at 490), some of the
earliest class actions involved claims filed on behalf of a class of
creditors.  Second, current Rules 7023 and 9014, Bankr. R., are the
successors of Rules 723 and 914 of the Bankruptcy Rules of 1973, which
were in all material respects identical to their present counterparts.
 See 11 U.S.C. (Supp. III 1973) App. at 304, 317.  Prior to 1973,
bankruptcy practice was governed by orders of this Court, including
General Order 37, which stated (11 U.S.C. (1970 ed.) App. at 2211)
that in bankruptcy proceedings the Federal Rules of Civil Procedure
"shall, in so far as they are not inconsistent with the (Bankruptcy)
Act or with these general orders, be followed as nearly as may be."
That broad language encompassed application of Rule 23, Fed. R. Civ.
P., which permits the filing of class claims.  There is no indication
of an intent to adopt a much more constricted form of class-action
procedures when more detailed bankruptcy rules were prescribed in
1973.

   Finally, Rules 3003(c)(2) and 3001(b), on which the court of
appeals relied (Pet. App. 9a-10a), do not suggest that Rules 7023 and
9014 should not be given their natural meaning.  Rule 3003(c)(2)
states that a "creditor" in certain circumstances must file a proof of
claim in order to recover, but the provision does not address who may
file on the creditor's behalf, let alone whether a class
representative may file.  Rule 3001(b) likewise does not purport to
address the issue of class claims;  and in any event, its language,
like that of Code Section 501(a), readily encompasses class proofs of
claim.  In particular, when a class representative is certified to
represent unnamed creditors, such a representative is an "authorized
agent" within the meaning of Rule 3001(b).  See American Reserve, 840
F.2d at 490.  /22/

   3. Although, for the above reasons, the court of appeals erred in
holding that class proofs of claim are not permissible in bankruptcy,
several considerations make it inadvisable, we think, for the Court to
grant the petition in this case in order to address the question.
First, the parties appear to be well on their way toward a settlement
of the class claim in this case.  Petitioner states (Pet. 8 n.4) that
"a settlement agreement in principle has been reached but has not
received the necessary approvals of various courts." The case might
well become moot before the Court could hear it, let alone decide it.

   Second, we are informed that the Advisory Committee on Bankruptcy
Rules is now meeting regularly to consider proposed changes in the
Bankruptcy Rules.  The Committee is expected to propose revisions some
time during 1989, and those proposals would then be subject to public
comment and, with further revisions, would be forwarded to this Court
(28 U.S.C. 2075).  While the current Rules are sufficient to authorize
bankruptcy courts to permit class proofs of claim, the issue could,
and might well, be addressed further in the current round of revisions
of the Bankruptcy Rules.  /23/ Such action might make it unnecessary
for this Court to decide the question under present law.

   Third, the conflict between the Seventh and Tenth Circuits is not
so pressing as to demand immediate resolution.  No other court of
appeals has ruled on the question, although the issue is now before
the Eleventh Circuit in In re The Charter Co., No. 88-3303.  If, as
has started to happen, the issue begins to arise more frequently, it
will be brought to this Court again.  At that time, if the conflict
among the circuits persists and the Rules do not resolve it,
certiorari will be warranted.  This Court's review, however, is not
currently necessary.

                              CONCLUSION

   The petition for a writ of certiorari should be denied as to the
first question.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   DONALD B. AYER

      Deputy Solicitor General

   RICHARD G. TARANTO

      Assistant to the Solicitor General

   DANIEL L. GOELZER

      General Counsel

   PAUL GONSON

      Solicitor

   JACOB H. STILLMAN

      Associate General Counsel

   RICHARD A. KIRBY

      Assistant General Counsel

   MARTHA H. MCNEELY

      Special Counsel

   LESLIE E. SMITH

      Attorney Securities and Exchange Commission

   AUGUST 1988

   /1/ Section 1109(a) states:  "The Securities and Exchange
Commission may raise and may appear and be heard on any issue in a
case under this chapter, but the Securities and Exchange Commission
may not appeal from any judgment, order, or decree entered in the
case."

   /2/ Dann Sheftelman died while the case was pending in the court of
appeals.  The court of appeals substituted Sandra Centeio, the
executrix of Sheftelman's estate, as the appellant.  Pet. App. 4a n.2.
 The instant petition has nevertheless been filed in the name of Dann
Sheftelman.  We refer in this brief to "petitioner" without regard to
Centeio's substitution for Sheftelman.

   /3/ The indenture trustee of the bond purchasers, the National Bank
of Georgia, was listed as a scheduled creditor of NSNJ but not of
Standard (Pet. App. 10a n.7).  Although the bonds had been issued in
bearer form, by January 1985 the indenture trustee had compiled a
mailing list of approximately 600 names and addresses of bondholders
(id. at 32a).

   /4/ Any such action against those entities would have been barred
by the automatic-stay provision of the Bankruptcy Code, 11 U.S.C.
362(a), because they were in reorganization.

   /5/ Rule 7023, Bankr. R., states:  "Rule 23 F.R. Civ. P. applies in
adversary proceedings." Although the debtor's objection to
petitioner's claim would not appear to have created an "adversary
proceeding" as that term is defined in Rule 7001, the objection did
create a "contested matter" within the meaning of the Bankruptcy
Rules.  See Bankr. R. 9014, advisory committee's note.  Rule 9014,
pertaining to contested matters, provides that "(t)he court may at any
stage in a particular matter direct that one or more of the other
rules in Part VII shall apply." Rule 7023 is contained in Part VII of
the Bankruptcy Rules.

   /6/ The court struck petitioner's individual claim as untimely and
denied the motion for an extension of the claims bar date for two
reasons (Pet. App. 40a-49a).  First, the court concluded that
petitioner had failed to comply with discovery orders (id. at
42a-43a).  Second, it ruled that he had failed to show cause
justifying the late filing (id. at 43a-49a), concluding in the course
of that ruling that Standard was not required to give notice of the
bar date to petitioner or to other bondholders.

   /7/ Rule 3001(b) states:  "Who May Execute.  A proof of claim shall
be executed by the creditor or the creditor's authorized agent except
as provided in Rules 3004 and 3005." Rule 3004 permits the debtor or
trustee to file a proof of claim for a creditor in specified
circumstances.  Rule 3005 permits such a filing, in certain
circumstances, by a person that may be liable with the debtor to the
particular creditor or that has secured that creditor.  Neither is
applicable in this case.

   /8/ In May 1985, following the ruling of the bankruptcy court, the
district court in the New Jersey action certified the class (Pet. App.
3a n.1).

   /9/ Rule 3003(c)(2) states in pertinent part:  "Any creditor * * *
whose claim * * * is not scheduled * * * shall file a proof of claim *
* * and (any) creditor who fails to do so shall not be treated as a
creditor with respect to such claim for the purposes of voting and
distribution."

   /10/ One of the other two decisions was subsequently reversed on
the class-claim issue by the district court.  (That reversal,
following the court of appeals decision in this case, was itself
reversed on appeal.  In re American Reserve Corp., 840 F.2d 487 (7th
Cir. 1988).) In the other unpublished decision cited by the court of
appeals, the class-claim issue was not contested.

   /11/ We construe the first question in the petition as raising the
class-claim issue.  We do not take a position on the second, narrower
question presented by petitioner -- whether the dismissal of his
individual claim as a discovery sanction was proper (Pet. i, 11-13).

   Should the Court deny certiorari on the individual-claim question,
petitioner would cease to be a proper class representative in this
case, as he would no longer have an individual claim as a bondholder
against the debtor's estate.  Nevertheless, petitioner may have a
sufficient financial stake in the outcome of the class-claim issue to
prevent the issue from becoming moot even as to him.  Although he has
not yet so alleged, petitioner may have a continuing financial
obligation to counsel in this case that might be partly satisfied out
of a class recovery even if there were a new class representative on
remand.  Deposit Guar. Nat'l Bank v. Roper, 445 U.S. 326, 338 n.9
(1980);  see also United States Parole Comm'n v. Geraghty, 445 U.S.
388 (1980).  In addition, Gonzalo Agosto and James R. Mitcham, two
class members who were certified as representatives of the bondholder
class by the district court in New Jersey, have filed a motion in this
Court seeking to intervene and to be joined as co-petitioners, thus
demonstrating the continuing active interest in the class-claim issue
of bondholders who still have live claims against Standard.  That
interest should allay prudential concerns about whether a ruling on
the issue by this Court would be merely advisory.  Cf. United
Airlines, Inc. v. McDonald, 432 U.S. 385 (1977) (unnamed class members
may timely intervene in the district court to appeal a denial of class
certification after the named plaintiffs' claims have been dismissed).

   /12/ No other court of appeals has ruled on the permissibility of
class proofs of claim.  As noted by the Tenth Circuit (Pet. App. 13a)
and the Seventh Circuit (840 F.2d at 488), most bankruptcy courts that
have considered the issue have ruled against the filing of a class
proof of claim in bankruptcy.  See, e.g., In re Arrow Air, Inc., 75
Bankr. 372, 373-374 (Bankr. S.D. Fla. 1987);  In re Electronic Theatre
Restaurants Corp., 57 Bankr. 147, 148-149 (Bankr. N.D. Ohio 1986);  In
re Johns-Manville Corp., 53 Bankr. 346, 350-351 (Bankr. S.D.N.Y.
1985);  In re Baldwin-United Corp., 52 Bankr. 146, 149 (Bankr. S.D.
Ohio 1985);  In re Computer Devices, Inc., 51 Bankr. 471, 474-476
(Bankr. D. Mass. 1985);  Pet. App. 31a-49a (this case;  subsequent
history described in text above);  In re Grocerland Cooperative, Inc.,
32 Bankr. 427, 435 (Bankr. N.D. Ill. 1983);  In re Shulman Transport
Enterprises, Inc., 21 Bankr. 548, 551 (Bankr. S.D.N.Y. 1982), aff'd on
other grounds, 33 Bankr. 383 (S.D.N.Y. 1983), aff'd, 744 F.2d 293 (2d
Cir. 1984);  In re Woodmoor Corp., 4 Bankr. 186, 190-192 (Bankr. D.
Colo. 1980).  At least two unreported decisions by bankruptcy courts
have held class proofs of claim permissible.  See American Reserve,
840 F.2d at 488 (noting that bankruptcy court in that case had
recognized a class proof of claim, a ruling that was reversed by the
district court, 71 Bankr. 32 (N.D. Ill. 1987), only to be reinstated
by the Seventh Circuit);  In re Wickes Cos., Inc., No. LA-82-06657-WL
(Bankr. C.D. Cal. July 15, 1983) (described in Pet. App. 13a).

   /13/ The Senate Report says of Section 501(a) (S. Rep. 95-989,
supra, at 61):  "This subsection is permissive only, and does not
require filing of a proof of claim by any creditor.  * * * The Rules
of Bankruptcy Procedure and practice under the law will guide
creditors as to when filing is necessary and when it may be dispensed
with.  * * * The Rules of Bankruptcy Procedure will set the time
limits, the form, and the procedure for filing, which will determine
whether claims are timely or tardily filed."

   Also, in describing an amendment to 28 U.S.C. 2075, the provision
that authorizes this Court to prescribe rules of bankruptcy procedure,
the Senate and House Committees explained more generally (S. Rep.
95-989, supra, at 158;  H.R. Rep. 95-595, supra, at 499):  "Nearly all
procedural matters have been removed and left to the Rules of
Bankruptcy Procedure."

   /14/ Of course, if a class claim is ultimately allowed in a
particular bankruptcy proceeding (i.e., if the class is found entitled
to recover), members of the class presumably would have to submit
individual claims for their shares of the recovery.  They would not
have to do so, however, before the class claim is litigated, as the
Tenth Circuit view would require.

   /15/ There is no basis for a contention that the 1978 Congress, in
enacting the Code, implicitly precluded class proofs of claim by
ratification of prior law.  There was no settled law at the time of
the Code's enactment:  the issue had barely been litigated, and there
was debate about its proper resolution.  See Wohlmuth, The Class
Action and Bankruptcy:  Tracking the Evolution of a Legal Principle,
21 UCLA L. Rev. 577 (1973) (only one decision at the time of writing).
 No court of appeals had reached the issue.  One reported bankruptcy
court decision rejected class claims.  In re Society of The Divine
Savior, 15 Fed. R. Serv. 2d (Callaghan) 294, 298 (Bankr. E.D. Wis.
1971).  And two district courts reached a similar conclusion in
decisions that were not reported but were mentioned in the court of
appeals opinions reviewing them on other grounds.  In re Stirling
Homex Corp., 579 F.2d 206, 209-210 n.5 (2d Cir. 1978), cert. denied,
439 U.S. 1074 (1979);  In re Cartridge Television, Inc., 535 F.2d
1388, 1389-1390 (2d Cir. 1976).

   Especially in view of the scholarly debate on the issue, and the
absence of any supportive evidence in the legislative history, it is
implausible to suppose that Congress was silently ratifying the
position taken in this handful of lower court cases.  Any such
inference would be especially inappropriate where, as here, the
legislative history indicates that Congress was deliberately declining
to address the issue -- i.e., to specify when and how proofs of claim
must be filed for a claimant to recover.  We note, too, that in the
course of conducting its statutory reviews of reorganization plans
under Chapter 10 of the former Bankruptcy Act (see 11 U.S.C. (1976
ed.) 572), the Security and Exchange Commission reviewed a number of
plans that included provisions settling class claims.

   /16/ Rule 7001 sets forth ten categories of bankruptcy litigation
that it defines as "adversary proceedings." Rule 7001 would not cover
claims for money damages against the debtor, but it would reach claims
that property in the hands of the debtor belongs to the claimants,
such as a class claim that the debtor holds proceeds of a stock fraud
in constructive trust for the claimants.

   /17/ See Bankr. R. 9014 advisory committee's note ("Whenever there
is an actual dispute, other than an adversary proceeding, before the
bankruptcy court, the litigation to resolve that dispute is a
contested matter.  For example, the filing of an objection to a proof
of claim * * * creates a * * * contested matter.").

   /18/ See, e.g., Deposit Guar. Nat'l Bank v. Roper, 445 U.S. at 339;
 Califano v. Yamasaki, 442 U.S. at 701;  Wohlmuth, 21 UCLA L. Rev. at
593-594;  Kalven & Rosenfeld, The Contemporary Function of the Class
Suit, 8 U. Chi. L. Rev. 684, 685-686, 714 (1941).

   /19/ For example, in this case, some bondholders might have
believed that only NSNJ, and not Standard, could be liable to them.
Moreover, although the form that is used for filing a proof of claim
(see Bankruptcy Rules, Official Form 19) may be simpler and less
expensive to complete than a civil complaint, Rule 9011 of the
Bankruptcy Rules incorporates Rule 11, Fed. R. Civ. P., which requires
that a claimant make a reasonable inquiry into the facts and the law
supporting his claim before filing.  The burden and cost of such an
investigation of a claim for securities fraud can be substantial.

   /20/ Although the Code and Rules aim at efficiency in bankruptcy
administration, concerns about the potential for delay are no ground
for rejecting class proofs of claim.  First, the price of denying
class claims would be the sacrifice of some legitimate claims for the
sake of others.  Second, there is no reason to think that allowing
class proofs of claim would produce any unreasonable delay.  And, in
any event, the Code specifically provides tools to promote a speedy
distribution to creditors and shareholders.  Section 502(c)(1), 11
U.S.C. 502(c)(1), provides for estimation of "any contingent or
unliquidated claim, the fixing or liquidation of which, as the case
may be, would unduly delay the closing of the case." That procedure --
which might have to be employed even for individually filed claims --
can be used together with the notice procedures of Rule 23 to
determine the amount of potential liability if the claims are not
settled and such a determination becomes necessary.  See American
Reserve, 840 F.2d at 491-492.

   /21/ The paucity of such judicial decisions during the period
before 1966 is due in part to the fact that it was not until 1966 that
Rule 23, Fed. R. Civ. P., greatly broadened the availability of class
actions in civil actions in the district courts.

   /22/ Even if the current Bankruptcy Rules were construed not to
grant affirmative authorization for class proofs of claim, it would
still remain true that nothing in the Rules expresses an affirmative
prohibition.  If the Rules were thus read as silent on the subject,
the question would arise whether the bankruptcy courts should
nonetheless permit the filing of class proofs of claim.  Against the
background of bankruptcy courts' traditional equity powers (see Pepper
v. Litton, 308 U.S. 295, 304 (1939)), Section 105(a) of the Code, 11
U.S.C. 105(a), declares that "(t)he bankruptcy court may issue any
order, process, or judgment that is necessary or appropriate to carry
out the provisions of (the Code)." See generally S. Rep. 95-989,
supra, at 29;  H.R. Rep. 95-595, supra, at 316-317.  As noted in
American Reserve, 840 F.2d at 490, courts of equity historically have
permitted class claims, and doing so serves the purposes of the
Bankruptcy Code.

   /23/ The Securities and Exchange Commission has brought the matter
to the Committee's attention and is urging the Committee to propose
language that makes even more explicit than the Rules already do that
class proofs of claim are permitted in bankruptcy.