Court Opinion

ID: 9522390
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:24:34.617049+00
Date Added: 2024-06-11T13:02:42.194090
License: Public Domain

VOTOLATO, Bankruptcy Judge,
dissenting:
I disagree with the majority and would hold that the bankruptcy judge was acting within his authority in ordering the United States trustee to investigate the representativeness of the creditors’ committee as it was constituted by the United States trustee.
In this Chapter 11 proceeding, the bankruptcy judge was asked by the Debtor to exercise his power to change the membership of the committee because it was “not representative of the different kinds of claims or interests to be represented.” 11 U.S.C. § 1102(c). Specifically, it was requested that two members of the committee be removed because of possible criminal conduct. After hearing, and based on the evidence, the bankruptcy judge ordered the United States trustee to investigate the suitability of the creditors’ committee members in question to remain on the committee.
The Bankruptcy Reform Act of 1978, 11 U.S.C. § 101 et seq. (1979), is not explicit as to how the bankruptcy court should exercise its duty under § 1102(c), or how it should deal with problems like the one now before the Court. However, it is clear that “[a] general grant of power, unaccompanied by definite directions as to how the power is to be exercised, implies the right to employ means and methods necessary to comply with statutory requirements.” United States v. Jones, 204 F.2d 745, 754 (7th Cir. 1953); 67 C.J.S., Officers §§ 192-193 (1978); 63 Am.Jur.2d, Public Officers and Employees § 177 (1972). Here, the bankruptcy judge, conservatively in my view, employed the minimum means necessary to properly exercise his power under § 1102(c), by ordering an investigation of the alleged criminal conduct of certain creditors. As that court pointed out:
The membership of a committee of creditors holding unsecured claims may be changed by the bankruptcy court. The proper exercise of its power presupposes in the court the inherent power to direct appropriate inquiry into the challenged representativeness of the committee. The court may direct the United States trustee to investigate serious charges upon which a demand for removal is predicated. The instant challenges to the representativeness of the committee are of such a nature as to require investigation by the United States trustee.
In re Kontaratos, 10 B.R. 370, 7 BCD 430, 432 (Bkrtcy.D.Me.1981).
The United States trustee argues that the theory of separation of powers insulates it from the order in question. I agree with the United States trustee and the majority that the United States trustee’s office was created to separate the judicial and administrative functions involved in a bankruptcy proceeding. In this case, however, the judge, after hearing testimony, was performing a judicial function based on evidence received at an adversary hearing. I think that he has both the authority and the duty to order an investigation in the context of the judicial proceeding in question. To hold otherwise would countenance a situation where the United States trustee, who is certainly privy to proceedings before the Bankruptcy Court (although not always a party), and whose actions bear directly on the outcome of such proceedings, would be totally free from control by the Court due to his claim of separation of powers.
In my view, nothing could be further from the intent of Congress. To be sure, the United States trustee as an arm of the executive branch is insulated from Court interference in certain areas.1 That argument, however, is not relevant here where the United States trustee has created the membership of the very committee which is *304being challenged in this specific case. In the present circumstances, the United States trustee is and must be subject to the Court’s inherent power to control proceedings before it in order to assure the efficient administration of justice. Ex Parte United States, 101 F.2d 870 (7th Cir. 1939), aff’d sub. nom. United States v. Stone, 308 U.S. 519, 60 S.Ct. 177, 84 L.Ed. 441 (1939); Mirin v. Justices of Supreme Court of Nevada, 415 F.Supp. 1178 (D.Nev.1976); 46 Am.Jur.2d, Judges § 21 (1969).
In fact, the order in this case does not go as far as the order directed to the United States trustee in the case of In re Stewart, 10 B.R. 472, 7 BCD 609 (Bkrtcy.E.D.Va.1981). That case involved deceptive advertising by an attorney with respect to the cost of legal services, and the Court directed the United States trustee to investigate such conduct in the future and to refer specific cases to the appropriate disciplinary committee of the state bar.
Here the order appears to be even more appropriate. Only a single case is involved, there are specific allegations of misconduct, supported by evidence, and most important, it is the United States trustee’s own appointments, made without the benefit of the information later adduced at the hearing, which are being questioned. On the facts before the court, I agree with the bankruptcy judge’s conclusion that the responsibility to investigate lies with the United States trustee.
It is the responsibility of the United States trustee, in the first instance, to appoint a representative creditors’ committee. It cannot have been the intention of Congress to relieve the bankruptcy court of the responsibility to appoint individuals to serve on creditors’ committees, only to impose upon the court the responsibility to investigate and the ultimate responsibility to adjudicate the representativeness of the committee. It seems similarly implausible that the power of appointment presently vested in the United States trustee would not import the duty to investigate serious charges respecting the representativeness of the committee. Any other placement of that responsibility would conflict with the congressional purpose underlying the establishment of the office of the United States trustee.
In re Kontaratos, 10 B.R. at 373, 7 BCD at 431 (footnote omitted).
I specifically reject the United States trustee’s argument that his duties are completed when he appoints a committee. Certainly the power to appoint a committee includes the duty to make appropriate selections and, therefore, to consider assertions of impropriety brought against his appointments. Similarly, the Court’s power to remove committee members must rationally encompass the lesser power to cause an investigation prior to the more extreme judicial act of removal.
Contrary to the view of the majority, I do not find the legislative history of the Bankruptcy Reform Act particularly helpful in this case. Although descriptive of the reasons for placing the internal structure of the United States trustee’s office outside the control of the bankruptcy court, it is relatively silent as to their duties vis-a-vis each other within an individual bankruptcy case. The United States trustee asserts that since his role is purely administrative, he therefore may not be called upon to exercise the discretion necessary to undertake the investigation ordered by the bankruptcy judge. That position, however, is not consistent with the adversarial role he often assumes (and properly so) in proceedings in which he regularly appears to contest applications for allowances, to request the appointment of a trustee or examiner, to contest claims of creditors, or to object to the sufficiency of disclosure statements, or to the appointment of certain professionals. Although the distinction between the function of the bankruptcy court and the function of the United States trustee is unclear, I believe the order below struck a proper balance.

. As an example, the United States trustee analogizes his position to that of a United States attorney, and points out that a District Court may not order the United States attorney to “clean up crime” in a given area.