Opinion ID: 669071
Heading Depth: 1
Heading Rank: 2

Heading: marin

Text: 8 Federal Rule of Civil Procedure 24(a)(1) provides that upon timely application anyone shall be permitted to intervene in an action when a statute of the United States confers an unconditional right to intervene. Fed.R.Civ.P. 24(a)(1). Whether Sec. 1109(b) gives the Committee such an unconditional right to intervene in this litigation turns on our reading of Marin. As has been mentioned, this court held in Marin that Sec. 1109(b) gives a creditors' committee an unconditional right to intervene in an adversary proceeding initiated by a trustee in a case under Chapter 11. In Marin, the debtor, Marin Motor Oil, Inc., filed a voluntary Chapter 11 petition and the trustee initiated two adversary proceedings--one to impose a constructive trust on a home bought with money borrowed from the debtor corporation by its owner, and another to pierce the debtor corporation's veil so as to extend the Chapter 11 proceedings to the Marins' other businesses and the Marins personally and bring the non-debtors' assets into the debtor's estate. 689 F.2d at 446-447. The creditors' committee, unhappy with the trustee's performance, moved to intervene in the adversary proceedings. Id. at 447. The trustee opposed the intervention, arguing that Sec. 1109(b) was limited to cases, 5 and that since the trustee was involved in adversary proceedings, Sec. 1109(b) did not apply. Id. at 450. 9 We rejected the trustee's argument, stating that Sec. 1109(b) gave parties in interest an unqualified right to be heard, and, therefore, the term case in Sec. 1109 includes any adversary proceeding instituted by a trustee under Chapter 11. Id. at 451. We viewed such an interpretation of Sec. 1109(b) not only as the one best supported by the legislative history, but also as the one that comported with the usual expectation of parties in interest that they will have a right to be heard, ... by the tribunal adjudicating their interests. Id. at 450-51, 457. 10 Although a number of courts have agreed with Marin's interpretation of Sec. 1109(b), see In re Neuman, 124 B.R. 155, 159-160 (S.D.N.Y.1991); In re D.H. Overmyer Telecasting Co., 53 B.R. 963, 975 (N.D.Ohio 1984), aff'd without op., 787 F.2d 590 (6th Cir.1986); cf. In re Sapolin Paints, Inc., 6 B.R. 582, 583-84 (Bankr.E.D.N.Y.1980) (pre-Marin case employing a similar rationale to allow intervention in adversary proceedings pursuant to Sec. 1109(b)), a number of courts have rejected it, see, e.g., Fuel Oil Supply & Terminaling v. Gulf Oil Corp., 762 F.2d 1283, 1286-87 (5th Cir.1985); 995 Fifth Ave. Assocs., L.P. v. New York State Dep't of Taxation & Fin. (In re 995 Fifth Ave. Assocs., L.P.), 157 B.R. 942, 951 (S.D.N.Y.1993); In re CVC, Inc., 106 B.R. 478, 479 (Bankr.N.D.Ohio 1989); In re Charter Co., 50 B.R. 57, 62 (Bankr.W.D.Tex.1985). These latter courts have held that Sec. 1109(b) does not give a creditors' committee an unconditional right to intervene in any adversary proceedings, not even those that are brought under Chapter 11. 11 The courts rejecting Marin have advanced three reasons why Marin 's interpretation of the scope of Sec. 1109(b) is incorrect. First, Congress has consistently drawn a distinction between bankruptcy cases and adversary proceedings related to them in other parts of the bankruptcy statutory scheme. Second, courts have construed Rule 24(a)(1) narrowly; these courts have been reluctant to interpret statutes to grant an unconditional right to intervene to private parties. Third, Bankruptcy Rule 7024 and its accompanying advisory committee note indicate that Congress was aware of a distinction between cases and adversary proceedings and that Congress intended to differentiate between them in the context of intervention. 6 12 According to the courts critical of Marin, these legislative and judicial developments indicate that Congress was aware of the distinction between adversary proceedings and cases, and deliberately did not extend the right to intervene to adversary proceedings. These courts believe that Congress intended that motions to intervene under Sec. 1109(b) would be controlled by Rule 24(a)(2) rather than Rule 24(a)(1). 13 A leading treatise on bankruptcy has also criticized Marin. Collier on Bankruptcy has taken the position that the Marin panel probably interpreted the legislative history of Sec. 1109(b) incorrectly, and that the case law holding that Sec. 1109(b) does not grant an automatic right to intervene under Rule 24(a)(1) appears to be the better view. 9 Collier on Bankruptcy p 7024.03 (15th ed. 1993). According to that treatise, if Congress had meant for section 1109(b) to be so broadly construed, it would have used a word other than case. 5 Id. p 1109.02. Collier has pointed out that since at least as far back as 1973, the Bankruptcy Rules drew a distinction between a case and a proceeding. Id. A case is commenced by the filing of a petition under the Bankruptcy Code. Id. In contrast, any disputed matter within the case is either a contested matter, which is commenced by filing a motion, or an adversary proceeding, which is commenced by filing a complaint. Id. According to Collier, Congress must have been aware of the specialized use of the term case when it created Sec. 1109(b), and, by limiting Sec. 1109(b) intervention to cases, Congress meant to allow intervention as of right only in those proceedings involving the administration of the bankruptcy case and not any disputed matter within the bankruptcy case. 14 Nevertheless, Marin remains binding precedent, and whether or not it is the better view, this Court's internal operating procedures bar us from overruling it. See I.O.P. 9.1. 7 Recognizing this limitation on our review of Marin, Phar-Mor and Coopers seek to limit its reading, contending that the substantive right to intervene in adversary proceedings under Sec. 1109(b) recognized in Marin extends only to adversary proceedings brought under Chapter 11, not to common law malpractice actions related to a case under Chapter 11. They attempt to distinguish Marin by arguing that it merely held that the term case includes some adversary proceedings, but that since the adversary proceedings in Marin were proceedings under Chapter 11, the case said nothing about proceedings related to a Chapter 11 case. In their submission, a holding that the Committee has an absolute right to intervene in the Phar-Mor/Coopers litigation--a proceeding which, in their view, even if an adversary proceeding at all, is merely related to a bankruptcy case--would constitute an unwarranted extension of Marin. 15 We must decide whether the limitations on Marin that Phar-Mor and Coopers have advanced here are consistent with the principles underlying Sec. 1109(b) as interpreted by Marin. Both bases of limiting Marin that Phar-Mor and Coopers press here--the adversary proceeding/non-adversary proceeding distinction and the related to/under distinction--implicate some of the fundamental changes in bankruptcy jurisdiction that have occurred since this court decided Marin. Although these changes are familiar to many, they are essential background, and it is necessary to discuss them briefly before addressing Phar-Mor and Coopers' specific challenges to Marin 's reach.