474 B.R. 112
Bankr. S.D.N.Y.2012Background
- Debtors filed Chapter 11 petitions; joint administration authorized.
- Berkshire moved to appoint an examiner under 11 U.S.C. § 1104(c).
- Creditors Committee and Debtors object to examiner; UST urged mandatory appointment.
- Court previously granted the Creditors Committee’s Rule 2004 motion for broad investigation.
- Debtors’ pre- and post-petition transactions with Ally and related party transactions central to case.
- Court must decide whether § 1104(c)(2) mandates appointment, and scope, timing, and budget will follow the appointment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1104(c)(2) mandates appointment of an examiner when debts exceed $5 million | Berkshire/UST: mandatory appointment required | Debtors/Creditors Committee: not mandatory; ‘as is appropriate’ limits scope | Appointment required under § 1104(c)(2) in this case |
| Whether the “as is appropriate” language permits denying appointment despite the $5 million debt threshold | N/A | Court may deny if appropriate under circumstances | Such discretion exists; however, here it does not preclude appointment |
| Scope and speed of investigation once appointed | Expedited investigation needed due to plan releases to Ally | Investigation can proceed with Creditors Committee; examiner not yet necessary | Examiner to be appointed; scope/tunding to be determined after appointment |
Key Cases Cited
- Plaut v. Spendthrift Farm, Inc., 1 F.3d 1487 (6th Cir. 1993) (mandatory language can express duty; context matters)
- Barbarzi v. RAJ Acquisition Corp. (In re Barbieri), 199 F.3d 616 (2d Cir. 1999) (‘shall’ generally mandatory; discretion exists in bankruptcy context)
- Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (U.S. 1998) (mandatory language interpreted in complex proceedings)
- Morgenstern v. Revco D.S., Inc. (In re Revco D.S., Inc.), 898 F.2d 498 (6th Cir. 1990) (circuit adopted mandatory view under §1104(c)(2))
- In re UAL Corp., 307 B.R. 80 (Bankr.N.D.Ill. 2004) (discretion to determine scope of examiner’s investigation)
- In re Metromedia Fiber Network Inc., 416 F.3d 136 (2d Cir. 2005) (nondebtor releases; abuse potential; jurisdictional concerns)
- In re Johns-Manville Corp. v. Chubb Indem. Ins. Co., 600 F.3d 135 (2d Cir. 2010) (non-debtor releases and related jurisdictional limits)
- Travelers Indem. Co. v. Bailey, 557 U.S. 137 (2009) (Supreme Court on broad non-debtor release considerations)