Doing the Splits Committees , Adversary Proceedings and Intervention : The Meaning of “ Case ” in Section 1109 ( b )
Annette W . Jarvis , Greenberg Traurig , LLP Secretary , American College of Bankruptcy
The question that first reached the Third Circuit in 1982 in In re Marin Motor Oil , Inc ., 689 F . 2d 445 ( 3rd Cir . 1982 ) is one that is still subject to disagreement among the circuits : whether a creditors ’ committee has an absolute right to intervene in an adversary proceeding in a Chapter 11 case . The Third Circuit in Marin , citing extensively to pre- Code law , held that Section 1109 ( b ) grants a creditors ’ committee an absolute right to intervene in an adversary proceeding that had been commenced by a Chapter 11 trustee . Three years later , the Fifth Circuit in Fuel Oil Supply and Terminaling v . Gulf Oil Corp ., 762 F . 2d 1283 ( 5th Cir . 1985 ) created the now 38-year-old circuit split when it held that a creditors committee has no absolute right to intervene in an adversary proceeding in Chapter 11 under Section 1109 , but must meet other requirements for intervention under Fed R . Civ . P . 24 , made applicable by Fed . R . Bankr . P . 7024 . It was not until 2002 when the Second Circuit lined up with the Third Circuit in deciding that a creditors committee has an unconditional statutory right to intervene under 1109 ( b ) in In re Calder Corp ., 303 F . 3d 161 ( 2d Cir . 2002 ), followed by the 2017 decision by the First Circuit taking the same position in In re Fin . Oversight and Mgmt . Bd . for Puerto Rico , 872 F . 3d 57 ( 1st Cir . 2017 ). While the First , Fourth and Tenth Circuit have addressed this issue only in dicta , these circuits appear to follow the Fifth Circuit ’ s view , continuing the debate over this issue . See In re Thompson , 965 F . 2d 1136 , 1142 n . 8 ( 1st Cir . 1992 ); In re Richman , 104 F . 3d 654 , 658 ( 4th Cir . 1997 ); In re Kaiser Steel Corp ., 998 F . 2d 783 , 790 ( 10th Cir . 1993 ).
The crux of this circuit court disagreement on a creditors ’ committee ’ s statutory right to intervene is the interpretation of the phrase “ any issue in a case ” found in Section 1109 ( b ). This section reads : “ A party in interest , including the debtor , the trustee , a creditors ’ committee , an equity security holders ’ committee , a creditor , an equity security holder , or any indenture trustee , may raise and may appear and be heard on any issue in a case under this chapter .” It is a close restatement of Section 206 of the former Bankruptcy Act , which has complicated the “ plain language ” analysis engaged in by both sides of this debate .
Marin Motor , decided only three years after the Bankruptcy Code went into effect , naturally looked extensively to pre-Code law to interpret the new statute . This case involved the granting of the committee ’ s motion to appoint a Chapter 11 trustee , and the committee ’ s subsequent motion to intervene in two adversary proceedings brought by the trustee after it became dissatisfied when the trustee allowed a stipulation freezing the assets of various companies and individuals related to the continued on page 26
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