MEMORANDUM OPINION AND ORDER DENYING MOTION OF INDIVIDUAL CREDITOR TO PROSECUTE CHAPTER 7 ESTATE’S CAUSES OF ACTION [DE #46]
I.
INTRODUCTION: SUMMARY OF ISSUE PRESENTED AND HOLDING
Before this court is the “Motion for Order Authorizing The Cadle Company to Prosecute Trustee’s Causes of Action” [doc. no. 46] (the “Standing Motion”), which is opposed by the Debtors and conditionally opposed by the Chapter 7 Trustee. The central issue presented by this contested matter is whether, and under what conditions, an
individual creditor in a Chapter 7 case
has, or may be granted by the bankruptcy court, standing to pursue estate causes of action. In this case, the estate causes of action at issue are a Section 542 “turnover” action and certain state law (i.e., statutory and common law) fraud causes of action. In this court’s view, this exact “standing” question is not resolved by either: (a)
Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A.,
1. In a Chapter 7 case — in contrast to a Chapter 11 case — there is no textual basis in the Bankruptcy Code to support the notion that a non-trustee, such as a creditor: (a) has independent standing to pursue chapter 5 avoidance actions or other estate causes of action; or (b) may be granted derivative standing. Moreover, there is generally not any extra-textual, equitable rationale for granting a non-trustee derivative standing.
2. In Chapter 11, there is both a textual basis (e.g., Section 1103(c)(5), Section 1109(b) and Section 1123(b)(3)(B)) and, frequently, a non-textual, equitable rationale for granting a creditor or creditors committee derivative standing to pursue estate actions (i.e., the equitable rationale coming into play when the debtor-in-possession has a conflict of interest in pursuing an action, such as in the situation of an insider-defendant). In Chapter 11, the practice of creditors committees being granted derivative standing to pursue estate actions is certainly widespread and well recognized.
3. But in Chapter 7, a trustee has a unique role as an independent fiduciary, with a completely different perspective and interest in a bankruptcy estate than an individual creditor. The trustee also does not have the potential for conflicts of interest that a debtor-in-possession sometimes has, since the trustee has no prepetition relationship with the debt- or’s management, shareholders or creditors. For these reasons, there would seem to be no equitable rationale to deviate from the Bankruptcy Code’s apparent remedial scheme vis-a-vis avoidance actions and other estate causes of action.
4. But even if there does exist, in Chapter 7, the power to grant derivative standing to a creditor to pursue estate causes of action, such power should not be exercised in a relaxed manner by bankruptcy courts. Otherwise, a creditor could “hijack” a Chapter 7 bankruptcy ease in a manner Congress did not envision. If a creditor does not agree with a Chapter 7 trustee’s exercise of its fiduciary duties, it can file a motion to compel the trustee to act or file a motion to have the trustee removed. 11 U.S.C. § 324. But, it would seem to be, generally, an unwise idea to allow a creditor to usurp the trustee’s role as a representative of the estate (11 U.S.C. § 323(a))— including being a gatekeeper for what actions make sense and the evaluator of the potential benefits of litigation. 3 A creditor is not a fiduciary. 4
5. Notably, this holding is consistent with horn book trust law that instructs that trust beneficiaries lack standing to sue third parties on behalf of the trust. R. Volmer, Standing to Sue in Trust Litigation, 19 Est. Plan. 384 (1992).
6. In any event, for the reasons that will be more fully explained below, the creditor who is requesting derivativestatus in the case at bar has not presented a compelling argument that warrants conferring upon it derivative standing in this Chapter 7 case.
II.
UNDISPUTED FACTS
The case at bar has a lengthy procedural history, dating back to 1999. Luckily, the only relevant facts for purposes of this contested matter are few and undisputed.
The debtors, Gary R. and Junanne M. Cooper, filed a Chapter 7 bankruptcy case on March 25, 1999. They received a discharge on August 6, 1999. Quite some time later (in 2006), the Chapter 7 Trustee and a large unsecured creditor, The Cadle Company (“Cadle”), 5 as joint plaintiffs, filed an adversary proceeding against Mr. Cooper only (“Mr. Cooper” or the “Debt- or”), seeking to: (a) revoke his discharge, pursuant to Section 727(d), because of his alleged (i) postpetition receipt of and failure to account for and surrender to the Trustee the proceeds of certain non-exempt property sold postpetition (hereinafter, “the Nonexempt Sale Proceeds”) 6 and, relatedly, (ii) Debtor’s alleged failure to abide by an order of the court; (b) compel turnover of the Nonexempt Sale Proceeds, pursuant to section 542; and (c) obtain a judgment against the Debtor for common law fraud or statutory fraud, pursuant to Tex. Bus & Com.Code § 27.01, for the Debtor’s alleged false representations and promises concerning the Nonexempt Sale Proceeds. The amount of the Nonexempt Sale Proceeds in controversy is $168,423.47.
Several months after the filing of the adversary proceeding, the Trustee (without the consent of the Co-Plaintiff Cadle) sought bankruptcy court approval of a compromise and settlement of the adversary proceeding. Pursuant to the proposed settlement, the entire action would be dismissed, the Debtor’s discharge would remain intact, and the Debtor would pay a portion of the amount in controversy (ie., a portion of the Nonexempt Sale Proceeds) to the Trustee. Cadle objected to the settlement asserting, among other things, that the Trustee should not be permitted to fully settle the adversary proceeding over Cadle’s objection, because Cadle could have brought its Section 727(d) objection to the Debtor’s discharge independent of the Trustee. This court approved the settlement over Cadle’s objection. Ca-dle appealed, and the district court affirmed in part and reversed and remanded in part. Specifically, the district court affirmed the portion of the bankruptcy court’s ruling approving the settlement between the Trustee and the Debtor, as fair and equitable and in the best interest of estate. However, the district court reversed the portion of the ruling that essentially forced Cadle to dismiss its Section 727(d) counts as part of the settlement (focusing on the fact that Section 727(d) permits a trustee
or
a creditor to request revocation of a discharge; it is not just an
It was against this backdrop that Cadle filed its Standing Motion, asking that it be granted authority to prosecute all of the causes of action in the Trustee’s stead. The Trustee, at this point, does not have the financial resources to vigorously pursue these claims. After the district court’s decision, the Trustee expressed the desire to simply abandon the causes of action. The Trustee asked Cadle to agree to a Joint Stipulation of Dismissal of the Trustee as Co-Plaintiff in the adversary proceeding. But Cadle would not agree. Rather, Cadle filed the Standing Motion, requesting that it be substituted for the Trustee in the adversary proceeding — apparently because it wanted to pursue, not just its Section 727(d) claims, but the estate-owned causes of action itself the turnover and fraud causes of action). Ca-dle knew, without the Standing Motion, it might otherwise have a “standing” problem.
The Debtor opposed Cadle’s Standing Motion. Initially, the Trustee did not. However, at the hearing on the Standing Motion, it became apparent that the Trustee was under the misunderstanding that she would be consulted and involved in Cadle’s litigation strategies vis-a-vis the estate causes of action. Cadle announced that it would keep the Trustee informed, like it would any other party-in-interest in the case, but that it did not intend to necessarily defer in any special way to the Trustee. Rather, Cadle is seeking full derivative standing to act for the estate— although Cadle acknowledges that any recovery realized will go to the estate and be distributed in accordance with Bankruptcy Code priorities. 8
The Trustee, upon hearing this clarification, opposed the court granting derivative standing to Cadle to pursue the estate actions unless the Trustee is consulted and given deference in the decision making process. Counsel for the Trustee asserted at the hearing on the Standing Motion that the Trustee did not understand that she would be abdicating her responsibilities and authority to settle her claims with the Debtor. Troubled by the prospect of giving up all of her authority as Trustee with regard to this adversary proceeding, the Trustee asserted that, unless the court’s order approving the Standing Motion provided that the Trustee would have continuing authority to settle the estate claims, the Trustee opposed the somewhat forced
III.
CONCLUSIONS OF LAW
A. The Distinction Between Chapter 7 and 11, as it Relates to Non-Trustee Derivative Standing to Pursue Estate Causes of Action.
The court starts with the proposition that, with regard to Chapter 7 cases — in contrast to Chapter 11 cases — there appears to be no textual basis in the Bankruptcy Code to support the notion that a non-trustee, such as a creditor: (a) has independent standing to pursue chapter 5 avoidance actions or other estate causes of action; or (b) may be granted derivative standing. Moreover, there is generally not any extra-textual, equitable rationale for granting a non-trustee derivative standing.
1. Lack of Independent Standing of a Non-Trustee to Bring Causes of Action.
First, on the topic of independent standing, it is rather widely accepted that only the
trustee
(or debtor-in-possession in Chapter 11) has
independent
standing to pursue chapter 5 avoidance actions and other estate causes of action.
See, e.g.,
11 U.S.C. § 323 (“The trustee in a case under this title is the representative of the estate.”); 11 U.S.C. § 704(a) (“The trustee shall ... investigate the financial affairs of the debtor” and “collect and reduce to money the property of the estate” for the benefit of all creditors.)
9
; 11 U.S.C. § 541(1) (The commencement of a case creates an estate comprised of “all legal or equitable interests of the debtor in property as of the commencement of the case.”). “We interpret ‘all legal or equitable interests’ [in Section 541(a)] broadly: The estate includes causes of action belonging to the debtor.”
The Torch Liquidating Trust v. Lyle Stockstill, et al.,
If these statutes were not clear enough, in
Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A.,
First, a situation in which a statute authorizes specific action and designates a particular party empowered to take it is surely among the least appropriate in which to presume nonexclusivity.... Second, the fact that the sole party named—the trustee—has a unique role in bankruptcy proceedings makes it entirely plausible that Congress would provide a power to him and not others.
Id.
at 6-7,
Where Congress deemed it beneficial to give particular rights and powers to creditors and debtors, it did so expressly. See, e.g., 11 U.S.C. § 522(h) (expressly granting debtor standing to invoke the trustee’s section 548 avoidance power in certain circumstances); 11 U.S.C. § 1107 (granting specific trustee powers to Chapter 11 debtor in possession); 11 U.S.C. § 1303 (granting specific trustee powers to Chapter 13 debtor); 11 U.S.C. § 553 (granting creditors power to exercise setoff rights in certain circumstances). Unlike the aforementioned Code sections, Congress made no express provision for creditors in section 548.
Surf N Sun,
But what about derivative standing? This is the question that the Supreme Court left unanswered in
Hartford. Hartford,
a. Chapter 11
This court is of the view that, in Chapter 11, there is both a textual basis and, frequently, a non-textual, equitable rationale for granting a creditors committee (and perhaps an individual creditor) derivative standing to pursue avoidance actions or other causes of action belonging to the estate.
The textual basis in Chapter 11 would seem to be at least the following: ((a) Section 1103(c)(5) (pursuant to which an official committee appointed in a Chapter 11 case under Section 1102, is granted general authority, after a list of specific powers, to “perform such other services as are in the interest of those represented”); (b) Section 1109(b) (pursuant to which various parties in interest, including creditors and creditors committees) are granted the right to raise and appear and be heard on any issue in a Chapter 11 ease);
11
and, most significantly, Section 1123(b)(3)(B) (pursuant to which a Chapter 11 plan may provide for “the retention and enforcement by ... a representative of the estate appointed for such purpose, of any claim or interest”).
See e.g., McFarland v. Leyh (In re Texas General Petroleum Corp.),
The additional non-textual rationale for granting a creditors committee or creditor derivative standing to pursue avoidance or other causes of action comes into play when a debtor-in-possession has a conflict of interest in pursuing an action. Conflicts of interest are, of course, frequently encountered in Chapter 11, where the metaphor of the “fox guarding the hen house” is often apropos.
Louisiana World
is the leading case from the Fifth Circuit describing this situation and articulating when a creditors committee may be permitted standing to pursue estate causes of action.
Louisiana World Exposition, Inc. v. Federal Ins. Co. (In re Louisiana World Exposition, Inc.),
The Fifth Circuit first noted that the causes of action themselves were property of the estate and were enforceable by the debtor or a trustee. The court went on to hold that, “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 debt- or-in-possession have refused unjustifiably to pursue the claim, and that the committee first receive leave to sue from the bankruptcy court.”
Id.
at 247. The Fifth Circuit agreed that these were relevant considerations, though not necessarily “a formalistic checklist.”
Id.
“This list is by no means exhaustive.”
Id.
at 248 n. 14. The court went on to state that when there is a colorable cause of action and the debt- or-in-possession
“is unable or unwilling to fulfill its obligations
— due, for instance, to a conflict of interest — the Committee might assert the cause of action on behalf’ of the estate if authorized by the bankruptcy court to do so.
Id.
at 252 (emphasis added). The Fifth Circuit further added that, in determining whether a debtor-in-possession’s refusal was unjustified, “we must look to whether the interests of creditors were left unprotected as a result. [Citations omitted.] As the interests of creditors are imperiled where valid and profitable state law causes of action are neglected by the debtor-in-possession, the unjustified refusal calculus will generally amount to little more than a cost-benefit analysis.”
Id.
at 253 n. 20.
See also Coral Petroleum, Inc. v. Banque Paribas-London,
Most of the circuit courts have gone the same direction as the Fifth Circuit, in permitting creditors committees, or even creditors, to pursue estate causes of action (1) when a debtor unjustifiably refuses
(see Cybergenics Corp.,
This court notes that the majority approach to granting derivative standing in Chapter 11 cases to creditors committees (and sometimes creditors) — when a debt- or-in-possession unjustiñably refuses to pursue a colorable claim — is consistent with the way that shareholder derivative suits have historically been permitted to proceed in the corporate world:
The derivative form of action permits an individual shareholder to bring “suit to enforce a corporate cause of action against officers, directors, and third parties.” Ross v. Bernhard,396 U.S. 531 , 534,90 S.Ct. 733 , 736,24 L.Ed.2d 729 (1970). Devised as a suit in equity, the purpose of derivative action was to place in the hands of the individual shareholder a means to protect the interests of the corporation from the misfeasance and malfeasance of “faithless directors and managers.” Cohen v. Beneficial Loan Corp.,337 U.S. 541 , 548,69 S.Ct. 1221 , 1226,93 L.Ed. 1528 (1949). To prevent abuse of this remedy, however, equity courts established as a precondition “for the suit” that the shareholder demonstrate “that the corporation itself had refused to proceed after suitable demand, unless excused by extraordinary conditions.”
Kamen v. Kemper,
A basic principle of the General Corporation Law of the State of Delaware is that directors, rather than shareholders, manage the business and affairs of the corporation. * * * The decision to bring a law suit or to refrain from litigating a claim on behalf of a corporation is a decision concerning the management of the corporation. Consequently, such decisions are part of the responsibility of the board of directors. * * * Nevertheless, a shareholder may file a derivative action to redress an alleged harm to the corporation. The nature of the derivative action is ... [i]n essence, ... a challenge to a board of directors’ managerial power. * * * Because the shareholders’ ability to institute an action on behalf of the corporation inherently impinges upon the directors’ power to manage the affairs of the corporation the law imposes certain prerequisites on a stockholder’s right to sue derivatively.* * * [The law] requires that shareholders seeking to assert a claim on behalf of the corporation must first exhaust intracorporate remedies by making a demand on the directors to obtain the action desired, or to plead with particularity why demand is excused.
Id. at 772-774 (internal citations omitted).
b. Chapter 7
This court is of the view that derivative standing should be viewed very dif
In Chapter 7, unlike Chapter 11, there is always a trustee in place. There is not the potential for a conflicted board of directors pulling its punches. There is not the risk of the proverbial fox guarding the hen-house. The trustee does not have the potential for conflicts of interest that a debtor-in-possession sometimes has, since the trustee has no prepetition relationship with the debtor’s management, shareholders or creditors. The trustee has a unique role as an independent fiduciary, with a completely different perspective and interest in a bankruptcy estate than either a debtor or an individual creditor. The trustee also is expected to be a gatekeeper and to exercise reasonable business judgment in deciding what actions to bring and what are not worth the expense. In theory at least (and hopefully in reality), the trustee is a fair, balanced, and experienced (not to mention bonded,
see
11 U.S.C. § 322) official who can be depended upon to exercise good litigation judgment. Because of the unique role of a trustee, there would seem to be no equitable rationale to deviate from the Bankruptcy Code’s apparent remedial scheme
vis-a-vis
avoidance actions and other estate causes of action. If creditors do not like the job the trustee is doing, they can file a motion to compel him or her to act, or a motion for removal of the trustee (11 U.S.C. § 324). In the context of such a motion, the court can scrutinize the business judgment and litigation zeal (or lack thereof) that is being exercised by the trustee. But simply allowing a creditor — a non-statutory fiduciary — to go forward in the Chapter 7 trustee’s stead could facilitate a creditor “hijacking” a Chapter 7 bankruptcy case in a manner that Congress did not envision. This court agrees with one commentator who has suggested that this could run afoul of the Bankruptcy Code’s fresh start policy in the case of individual debtors.
See K. Sharfman, Derivative Suits in Bankruptcy,
10 StaN.J.L. Bus.
&
Fin. 1, 25-26 (Autumn 2004) (“While derivative suits are common in the business context, there is something very odd about bringing them on behalf of individuals. Nonbankruptcy law recognizes the difference by allowing them in the former context but not in the latter.”) An experienced bankruptcy trustee, unlike a potentially angry and out-for-justice creditor, may have a better instinct for what is worth chasing and what is worth foregoing. This court’s concern about running afoul of the fresh start policy is
In any event, the court notes that the issue of derivative standing has been the subject of considerable debate since Hartford and Cybergenics. See Sharfman, 10 Stan. J.L. Bus. & Fin. 1; A. Lepene & S. Gordon, The Case for Derivative Standing in Chapter 11: “It’s the Plain Meaning, Stupid," 11 Am. Bankr. Inst. L.Rev. 313 (Winter 2003). But it seems to be a generally unwise idea, to this court, to allow a creditor to usurp the trustee’s role as a representative of the estate (including being a gatekeeper for what actions make sense, weighing the potential benefits of litigation). 13 If a creditor wants to fund the trustee’s pursuit of litigation, that would appear to be both permissible and reimbursable. 14 See 11 U.S.C. §§ 364 & 503(b)(3). 15
B. Even if there does exist, in Chapter 7, the power to grant derivative standing to a creditor to pursue estate causes of action, such power should not be exercised in a lax manner by bankruptcy courts. Moreover, the creditor in the case at bar has not presented a compelling case for granting it derivative standing.
This court is ever mindful that it is a court of equity, and the grant of derivative status to a party to pursue litigation, as a representative for another, is a long standing equitable remedy with deep roots in our jurisprudence. The equitable remedy was employed by courts when “the intended system broke down” for one reason or another.
Cybergenics,
The concept of derivative standing arose when, despite a lack of express statutory authorization, courts of equity allowed shareholders to pursue valuable actions when the nominal plaintiff (the corporation) unreasonably refused to do so.
Id.
As noted in
Cybergenics,
the Supreme Court has “explained the utility of derivative standing as a means of providing equitable redress, not only from ‘faithless officers and directors,’ but also directly from ‘third parties who had damaged or threatened the corporate properties and whom the corporation through its managers refused to pursue.’ ”
Id.
(citing
Ross v. Bernhard,
The Supreme Court has long recognized that bankruptcy courts are equitable tribunals .... The enactment of the Code in 1978 increased the degree of regulation Congress imposed upon bankruptcy proceedings, but it did not alter bankruptcy courts’ fundamental nature. See H.R.Rep. No. 95-595, at 359 (1977), reprinted in U.S.C.C.A.N. 5963, 6315 (stating that, under the Bankruptcy Code, ‘[t]he bankruptcy court will remain a court of equity’).
Id.
at 567. Despite occasional rumblings to the contrary (particularly after the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005), this court believes that the bankruptcy courts’ equitable powers are still alive and well.
See generally Marrama v. Citizens
Still, at the same time, it has long oeen saia mat a oanKruptcy court can omy fashion equitable remedies to the extent consistent with the otherwise applicable statutory authority in the Bankruptcy Code.
Norwest Bank Worthington v. Ahlers,
With that being said, even if this court does have the power to grant derivative standing to an individual creditor in a Chapter 7 case to pursue estate causes of action, the creditor who is requesting derivative status in the case at bar has not presented a compelling case that warrants conferring upon it derivative standing.
As described earlier herein, the Trustee had heretofore presented a settlement of the entire adversary proceeding that she thought was fair and equitable and in the best interests of the estate. The settlement involved the Debtor keeping his discharge intact, and the Debtor paying to the estate an amount equal to much of the Nonexempt Sale Proceeds. Cadle was not fond of this settlement. Cadle wanted to go forward with its Section 727(d) action. The district court agreed that Cadle should be permitted to proceed with its Section 727(d) action. But now Cadle wants standing to pursue the Trustee’s causes of action, too. Cadle had other options here. As earlier noted, it could have asked approval to fund the Trustee’s pursuit of the estate’s causes of action. 11 U.S.C. §§ 364 & 503(b). Or perhaps Ca-dle’s counsel might have offered to be special counsel to the Trustee in the adversary proceeding on a contingency basis. 11 U.S.C. § 327. But Cadle, for whatever reason, prefers to have standing and to control the estate’s causes of action.
In evaluating Cadle’s request, the court turns to the Fifth Circuit’s holding in
Louisiana
World—assuming it would be the controlling standard in the Chapter 7 context. The Fifth Circuit there, as earlier stated, indicated that relevant considerations were whether the debtor-in-possession (here, Trustee) had a “colorable claim” and, yet, was “unable or unwilling to fulfill its obligations”—the classic example being because of a conflict of interest.
Louisiana World Exposition, Inc. v. Federal Ins. Co. (In re Louisiana World Exposition, Inc.),
So how to resolve this stalemate? If Cadle wants to fund the Trustee’s fees to pursue the estate’s causes of action in the adversary proceeding, the court will consider that. 11 U.S.C. §§ 364 & 503. If the Trustee desires to employ as special counsel Cadle’s counsel (on a contingency basis) to pursue the estate’s causes of action in the adversary proceeding, the court will consider that. 11 U.S.C. § 327. If either of these type motions are filed, the court will want to hear, as part of the evidence, an explanation of why Cadle purchased its claims against the Debtor post-discharge. But, in all events, the court will not allow Cadle to usurp the role of the Trustee in this case and pursue estate causes of action. Cadle may, obviously, proceed with its independent Section 727(d) cause of action, but nothing more.
IV.
CONCLUSION
For all of the foregoing reasons, the Standing Motion [doc. no. 46] of Cadle is DENIED.
IT IS SO ORDERED.
Notes
. See 11 U.S.C. §§ 542, 543, 544, 545, 547, 548, 549, 550 (the so-called "chapter 5 avoidance action” statutes). Admittedly, Section 542(a) — which is the relevant statute in the case at bar — is worded a little differently than most of these other statutes, in that it articulates an obligation of the debtor to "deliver to the trustee” estate property, rather than articulating the type of avoidance and recovery steps that a “trustee may” take.
. The Supreme Court, in a famous footnote in
Hartford,
left open the question of whether a bankruptcy court can allow a creditor or creditors committee the
derivative
right to bring avoidance actions, such as an action pursuant to 11 U.S.C. § 506(c), when the trustee refuses to do so, even though the applicable Code provisions mention only the trustee.
Hartford,
.
See Cybergenics,
.
But see In re Mirant Corp.,
. The court takes judicial notice that Cadle filed a Notice of Transfer of Proof of Claim in this case [doc. no. 66] on May 9, 2005, indicating that it purchased the $1,312,853.42 unsecured judgment claim of Republic Credit One L.P. (Proof of Claim No. 23, filed October 18, 1999) pursuant to an Assignment of Judgment dated September 23, 2004, but effective as of September 17, 2001 (interestingly, this was years after the Debtor's discharge).
. The Nonexempt Sale Proceeds were derived from: (a) the sale of the Debtors' homestead, which the Trustee and Debtors had agreed would be treated as partially non-exempt, because of the large amount of acreage involved, and (b) the sale of certain real property that was part of the Debtor’s parents’ probate estate, of which the Debtor’s sibling was executor, and in which the Debtor had a one-third interest.
. The U.S. Trustee may, of course, also move for relief pursuant to Section 727(d).
. Cadle made clear during argument that, while Cadle might consult with the Trustee regarding strategy or other matters concerning the litigation, it is proposing that sole settlement and litigation authority would lie with Cadle. Cadle's position is that, should the court approve the Standing Motion, Cadle would be the estate representative. Cadle would control all decisions and would, perhaps, consult with the Trustee, as it would with any other party-in-interest. But if the Trustee disagreed with Cadle regarding, for instance, the bona fídes of a settlement, the Trustee could object like any other party and the standard would be whether Cadle is breaching its assumed fiduciary duty. The bottom line for Cadle is that, at the end of the day, it does not want to have to obtain the Trustee's permission to act or not to act.
. See also 11 U.S.C. § 1107(a) (giving a Chapter 11 debtor-in-possession the rights, powers, duties and functions of a trustee).
. All emphases in the quoted statutes are this court’s.
.
But see Hartford,
.
See Official Comm. of Unsecured Creditors of Cybergenics Corp. v. Chinery,
.
See Cybergenics,
. The court asked Cadle’s counsel if Cadle would be willing to waive any conflict and allow him to be special counsel to the Chapter 7 Trustee in pursuing the estate's causes of action. Cadle was not willing to let its counsel represent the Chapter 7 Trustee.
. On the topic of Section 503(b)(3), the court notes that some authority suggests that this statute is textual support for the notion that creditors may be given derivative standing to pursue estate actions in either Chapter 7 or 11. Section 503(b)(3)(B) provides that “a creditor that recovers, after the court's approval, for the benefit of the estate any property transferred or concealed by the debtor” may be entitled to an allowed administrative expense claim for the actual, necessary expenses incurred by it, and Section 503(b)(4) provides a mechanism for a possible administrative expense claim for an attorney for such a creditor. The
Cybergenics
court pondered this statute and decided that, while this statute did not provide an
express
statutory basis for a bankruptcy court conferring derivative standing on a creditor to pursue avoidance actions, the statute would be meaningless unless authority to give a creditor derivative standing somehow otherwise existed.
Official Comm. of Unsecured Creditors of Cybergenics Corp. v. Chinery,