Administrative Claimant Who Failed To Appear And Object To Bankruptcy Court Dismissal Order Lacked Standing To Appeal
IN RE: RAY (March 8, 2010)
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Mark Ray and Berwick Black Cattle Company bought, sold, and raised cattle until involuntary Chapter 11 bankruptcy petitions were filed against them. A committee was formed to represent their creditors. The Committee retained Becker & Poliakoff (“Becker”) as litigation counsel. Even after most of their assets were liquidated, unsecured claims remained. Becker represented the Committee in adversary complaints seeking recovery of preferences and fraudulent transfers. Becker filed an interim fee application in September of 2008. The next month, the Becker lawyer responsible for representing the Committee left the firm and his new firm substituted for Becker as Committee counsel. In December of 2008, the bankruptcy court conducted a hearing to consider a number of pending motions, including a motion to dismiss filed by the debtors. Becker neither appeared at the hearing nor responded to any motions. In January 2009, the court dismissed the case. Becker filed two emergency motions seeking reconsideration of the court's ruling, which were denied. The firm appealed to the district court. Although the district court concluded that Becker had standing, it affirmed the dismissal order. Becker appeals.
In their opinion, Circuit Judges Ripple and Rovner in District Judge St. Eve vacated the judgment and remanded with instructions to dismiss for lack of standing. Before reaching the merits of the dismissal, the Court had to determine if Becker had standing. Before it reached the merits of standing, it had to determine if the lack of a cross-appeal resulted in a waiver. Unlike Article III standing, bankruptcy (or "prudential") standing may be waived by a failure to raise the issue. Even if waived, however, a court may raise bankruptcy standing on its own -- and the Court chose to do so here. On the merits of the standing issue, the Court stated that bankruptcy standing lies only with one who is affected pecuniarily by a court order and has attended and objected at a court proceeding. Becker concedes that it did not appear and object until it filed its motion to reconsider. Nevertheless, it claims that it met this requirement either because Committee counsel represented its interest at the hearing directly, or because it actually qualified as an administrative claimant and was therefore represented by Committee counsel at the hearing, or because of its motions to reconsider. The Court found no evidence of the first or second and rejected the third as a matter of law.
