Opinion ID: 782113
Heading Depth: 3
Heading Rank: 2

Heading: Appointment of an examiner with authority to sue

Text: 115 Amicus Smurfit-Stone Corporation submits that, if appointing a trustee is too radical an alternative, a creditors' committee might instead move the court to appoint an examiner under § 1104(c). That provision states that a party in interest may request the appointment of an examiner to conduct such an investigation of the debtor as is appropriate, and that the court may order an appointment after notice and a hearing. An examiner's duties include investigation of the debtor, the debtor's business, and any other matter relevant to the case or to the formation of a plan. See § 1106(b). Smurfit-Stone observes that a debtor's management remains in place when an examiner is appointed. Perhaps most important, however, is the fact that an examiner has all of the duties of a trustee that the court orders the debtor in possession not to perform. 11 U.S.C. § 1106(b). At least one court has interpreted this language to mean that an examiner may initiate and pursue causes of action on behalf of the debtor. See In re Carnegie International Corp., 51 B.R. 252, 256 (Bankr.S.D.Ind. 1984). 116 Although this alternative is less drastic than the appointment of a trustee, we nevertheless harbor doubts about its ability to substitute for derivative suit. One concern is that, like a trustee, an examiner would incur direct costs through its fees, so to that extent this remedy is inferior to the alternative of derivative suit by a creditors' committee. The more serious problem, however, is that it is less than obvious that § 1106(b) actually does permit examiners to initiate actions on the debtor's behalf. The full text of that section states: 117 An examiner appointed under section 1104(d) of this title shall perform the duties specified in paragraphs (3) and (4) of subsection (a) of this section, and, except to the extent that the court orders otherwise, any other duties of the trustee that the court orders the debtor in possession not to perform. 118 11 U.S.C. § 1106(b). Although this catch-all language is expansive, it is subject to the interpretive canon ejusdem generis, which states that where general words follow specific words in a statutory enumeration, the general words are construed to embrace only objects similar to those enumerated by the preceding specific words. Circuit City Stores, 532 U.S. at 114-15, 121 S.Ct. 1302 (citation omitted). Sections (3) and (4) allow the examiner to investigate the acts, conduct, assets, liabilities, and financial condition of the debtor, the operation of the debtor's business and the desirability of the continuance of such business, and any other [relevant] matter, and also to file a statement of investigation. 11 U.S.C. §§ 1106(a)(3)-(4). Critically, these sections permit only investigating and reporting on that investigation — they stop far short of authorizing examiners to litigate based on their findings. 119 Therefore, although an examiner's proper role in Chapter 11 proceedings is hardly at issue in this case, we conclude that § 1106(b)'s broad grant is most naturally interpreted to authorize only acts relating directly to investigation. This conclusion comports with Congress's evident understanding of the examiner's role, for the sponsors of the Code stated: The investigation of the examiner is to proceed on an independent basis from the procedure of the reorganization under chapter 11 in order to ensure that the examiner's report will be expeditious and fair. 124 Cong. Rec. H11,103 (daily ed. Sept. 28, 1978), reprinted in 1978 U.S.C.C.A.N. 6472-73. This independent role would likely be jeopardized by an examiner's litigation against a debtor, and we therefore do not believe that an examiner can serve as a substitute for either a trustee or a creditors' committee for the purpose of avoiding fraudulent transfers. 120