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it replaced a statutory provision that “ had given creditors and stockholders an absolute right to be heard on only a limited number of issues , and it was to remedy perceived deficiencies in this system of limited rights that section 206 was enacted .” Id . Citing from Collier on Bankruptcy , the Third Circuit further explained that “[ t ] he standing conferred by Section 206 of the Bankruptcy Act and Chapter X Rule 10- 210 ( a )( 1 ) was absolute and unlimited , and gave the debtor , creditors , stockholders and indenture trustees the same rights as if they were successful intervenors in the case , but without the necessity of a formal order of intervention .” Id . at 452 . Citing to the pre-Code case of Matter of Duplan Corp , 450 F . Supp . 790 , 791 ( S . D . N . Y . 1978 ), the court noted that the court there “ granted the indenture trustee a right to participate without even filing a motion to intervene , and read section 206 as intended ‘ to remove procedural barriers to full participation ’ by interested parties .” Id . The Third Circuit compared the permissive intervention provision under Chapter X , which was section 207 , with the mandatory provision in section 206 . As stated by the court : “ When Congress chose to derive section 1109 ( b ) from section 206 rather than from section 207 , it understood that it was adopting the mandatory and not the permissive provision .” Id . The court rejected the argument that the change in language from “ all matters arising in a proceeding under this chapter ” to “ any issues in a case under this chapter ” meant any change in the law with respect to participation in litigated matters connected with a reorganization . The Court also used the pre-Code caselaw and practice to reject the policy arguments that mandatory intervention would complicate and cause disorder and expense to the process by
pointing out that “ the unqualified right of creditors and stockholders to intervene appears to have been the rule under section 206 for approximately 40 years , and the legislative history of section 1109 ( b ) shows no dissatisfaction with it .” Id . at 453 . Turning to the situation before it , the court found that the intervention sought by the creditors committee would “ speed up the proceedings and prevent dissipation of the estate .” Id . The Court also embraced the reasoning of lower court decisions under Fed . R . Civ . P . 24 ( a )( 1 ), incorporated into Bankruptcy Rule 7024 , which allowed intervention as of right based on the intervention rights granted under Section 1109 ( b ). Distinguishing some cases , the court left for another day the decision on whether a committee has to formally intervene under Fed . R . Civ . P . 24 or whether Section 1109 ( b ) bypasses technical intervention because in this case , the committee had formally moved to intervene .
Creating the circuit split , the Fifth Circuit in Fuel Oil Supply held that a committee has no statutory right to intervene in a bankruptcy adversary proceeding . In this case , the committee filed a motion to intervene under Rule 24 ( a ) as of right in an adversary proceeding brought to set aside a claimed preferential transfer . While acknowledging the persuasive elements of the Third Circuit ’ s Marin decision , the Fifth Circuit ultimately reached the opposite conclusion based on its reading and interpretation of the procedural rules governing intervention found in Fed . R . Civ . P . 24 . The Fifth Circuit noted that this provision “ has been narrowly construed ; courts have been hesitant to find unconditional statutory rights of intervention ” and explained that “ private parties are rarely given an unconditional
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