Opinion ID: 512405
Heading Depth: 2
Heading Rank: 3

Heading: Standing of Creditors' Committees

Text: 56 The law is well-settled that in some circumstances, a creditors' committee has standing under Title 11, United States Code, section 1103(c)(5) and/or section 1109(b) 13 to file suit on behalf of a debtor-in-possession or a trustee. See In re Louisiana World Exposition, 832 F.2d at 1397; Coral Petroleum, Inc. v. Banque Paribas-London, 797 F.2d 1351, 1363 (5th Cir.1986) (suggesting that section 1109(b) provides a basis for the standing of a creditors' committee); Fuel Oil Supply & Terminaling v. Gulf Oil Corp., 762 F.2d 1283, 1287 (5th Cir.1985) (expressing approval of bankruptcy cases such as In re Toledo Equipment Co., 35 B.R. 315 (Bankr.N.D.Ohio 1983), and In re Joyanna Holitogs, Inc., 21 B.R. 323 (Bankr.S.D.N.Y.1982), which have conceded that a creditors' committee may sue in certain situations); In re Nicolet, Inc., 80 B.R. 733 (Bankr.E.D.Pa.1987); see also In re MortgageAmerica, 831 F.2d 97, 98 (5th Cir.1987) (creditors' committee may, in some circumstances, have the right to initiate an avoidance action); In re STN Enterprises, 779 F.2d 901, 904 (2d Cir.1985) (We agree with these bankruptcy courts that 11 U.S.C. Sec. 1103(c)(5) and 1109(b) imply a qualified right for creditors' committees to initiate suit with the approval of the bankruptcy court.). 57 While the circumstances under which a creditors' committee may sue are not explicitly spelled out in the Code, the bankruptcy courts have generally required that the claim be colorable, that the debtor-in-possession have refused unjustifiably to pursue the claim, and that the committee first receive leave to sue from the bankruptcy court. In re Louisiana World Exposition, 832 F.2d at 1397 (citing cases). 14 We agree that these are relevant considerations, though not necessarily a formalistic checklist. Id. Here, as discussed earlier in this opinion, the Committee is pursuing a colorable claim. The Committee asked LWE to bring the action; LWE in effect refused, apparently being unable to act due to the conflict of interest presented to its decision makers. See id. Finally, the bankruptcy court granted the Committee's request to bring suit on behalf of LWE. Under the circumstances, we can find no fault with the Committee's authority to bring this lawsuit. 15 We must address in greater detail, however, the appellees' argument that LWE's refusal to bring the lawsuit was not unjustified.