Opinion ID: 75880
Heading Depth: 2
Heading Rank: 1

Heading: Reconsideration Order

Text: 15 In our view, the district court erred by applying a real party in interest standard to determine whether the Unofficial Committee had standing to appeal the Reconsideration Order. While the court correctly noted that the Debtor is the real party in interest in this case, standing to appeal a bankruptcy order is not limited to a real party in interest. 5 Rather than focusing on the real party in interest, the proper inquiry is whether the party seeking to appeal is a person aggrieved by the bankruptcy court's order. 16 After reviewing the record, we conclude that the Unofficial Committee has standing to appeal the Reconsideration Order because it is a person aggrieved. This order, in which the bankruptcy court denied reconsidering the allowed claims, directly and adversely affects pecuniarily the Unofficial Committee because the Trustee assessed the Unofficial Committee's members to satisfy these claims. The Unofficial Committee's members each must pay thousands of dollars because the bankruptcy court allowed the claims. The Unofficial Committee, therefore, has standing to appeal the Reconsideration order. 17 Although the bankruptcy court allowed the Unofficial Committee to appear in the bankruptcy proceedings, that fact alone does not give the Unofficial Committee standing to appeal an order of the bankruptcy court. See In re Thompson, 965 F.2d 1136, 1141-42 (1st Cir.1992)(stating mere participation in a hearing on the approval of a settlement or compromise in an adversary proceeding does not constitute de facto intervention: [T]he fact that the appellants were given an opportunity to be heard in the bankruptcy court does not provide a basis for standing on appeal.). A person's standing to initially petition a bankruptcy court to reconsider an order is provided by section 502(j) of the Bankruptcy Code. 6 A party in interest may move for reconsideration of an order allowing or disallowing a claim against the estate. Fed. R. Bankr. P. 3008. Although no definition of party in interest exists in Chapter 7 of the Bankruptcy Code, Chapter 11 defines a party in interest as the debtor, the trustee, a creditors' committee, an equity security holders' committee, a creditor, an equity security holder, or any indenture trustee. 11 U.S.C. § 1109(b) (1978). Despite the fact that Chapter 7 does not define party in interest, the First Circuit recognized that the right for a party in interest to be heard in a bankruptcy proceeding, as set out in Chapter 11, also applies in a Chapter 7 case. In re Mailman Steam Carpet Cleaning Corp., 196 F.3d 1, 5 (1st Cir.1999)(noting that Chapter 7 includes no comparable provision, but in practice bankruptcy courts routinely entertain adversary proceedings against the Chapter 7 trustees. [citations omitted]. In light of the structure and purposes of the Bankruptcy Code, we agree with these courts that the right to be heard applies in the liquidation context.). We agree with the First Circuit that a party in interest has a right to be heard in a Chapter 7 bankruptcy proceeding. In this case, the Unofficial Committee, brought an adversary proceeding in the bankruptcy case and also moved the bankruptcy court to reconsider its allowance of claims. Under section 502(a) of the Bankruptcy Code, any claim is deemed allowed, unless a party in interest... objects. 11 U.S.C. § 502(a) (1978). The Unofficial Committee, as a party in interest, properly objected to these claims under section 502(j). The Unofficial Committee's appearance in the bankruptcy case, however, did not give it standing to appeal. Rather, as previously noted, the Unofficial Committee has standing to appeal because it was a person aggrieved by the order. 18 In sum, although the party in interest standard is pertinent to determine who may object to the allowance or disallowance of claims, the proper inquiry to determine who may appeal a bankruptcy court order is the person aggrieved standard. In this case, the Unofficial Committee is a person aggrieved because the order denying the reconsideration of claims directly and adversely affects it pecuniarily. Thus, the Unofficial Committee had standing to appeal the bankruptcy court's order to the district court.