American Bankruptcy Institute
36 IV. Proposed Recommendations: Commencing the Case
Accordingly, the examiner provides an independent assessment of the matter at hand and can identify value, encourage parties to recognize the strengths and weaknesses of their respective positions in the case, facilitate quicker resolutions of disputes, and ultimately produce benefits for the estate. Nevertheless, one criticism of the process is that the examiner’s report, which may identify this value and was paid for by the estate, may not be admissible as evidence in prosecuting or defending the causes of action investigated in the report.
Under current law, the role of an examiner is limited to the investigatory function described above. Yet examiners may add value to cases in other capacities given their uniquely independent and neutral posture. For example, courts have appointed mediators and facilitators to help chapter 11 cases progress, either when plan negotiations are stalled or major litigation threatens to derail reorganization efforts.137 Such mediators and facilitators have proven effective in some cases, but they currently are appointed on an ad hoc basis and with little governing authority. Expanding the potential scope of an examiner to include the role of mediator and facilitator as well as similar functions would allow parties in interest and the court to use an independent neutral party to address specific issues in a particular case in an efficient and controlled manner. Many courts interpret section 1104 as currently prohibiting this kind of appointment, whether termed an “examiner” with expanded powers or a “trustee” with limited powers.138
The Estate Neutral: Recommendations and Findings
The Commission reviewed the case law and academic literature concerning the frequency and use of examiner appointments and the interpretation of the current statute, which mandates the appointment of an examiner in certain circumstances. The Commissioners explored, in the alternative, the utility of a new estate neutral, particularly in cases when, for example, stakeholders found value in leaving the debtor in possession in control, but certain matters in the case needed an independent assessment either because it was difficult for a debtor to investigate itself or because the debtor and stakeholders were too vested in their respective positions to identify areas of potential
137 Examples of cases using court-appointed mediators: In re R.H. Macy & Co., Inc. 1994 WL 482948 (Bankr. S.D.N.Y. Feb. 23, 1994); In re Lehman Bros., Inc., Ch. 11 Case No. 08-13555 (JMP) (Bankr. S.D.NY.) (Jan. 16, 2009) [Docket No. 2569]. See also Cassandra G. Mott, Macy’s Miracle on 34th Street: Employing Mediation to Develop the Reorganization Plan in a Mega-Chapter 11 Case, 14 Ohio St. J. on Disp. Resol. 193, 207–10 (1998); Harvey R. Miller, The Changing Face of Chapter 11: A Reemergence of the Bankruptcy Judge as Producer, Director, and Sometimes Star of the Reorganization Passion Play, 69 Am. Bankr. L.J. 431, 437 (1995). For an example of a court-approved arbitration procedure in the context of claims resolutions, see Meyer v. Dalkon Shield Claimants Trust, 164 F.3d 623, at *1 (4th Cir. 1998) (unpublished table decision) (explaining alternative dispute resolution procedures used to address products liability claims). 138 See, e.g., Official Comm. of Asbestos Pers. Injury Claimants v. Sealed Air Corp. (In re W.R. Grace & Co.), 285 B.R. 148, 156–57 (Bankr. D. Del. 2002) (denying debtor’s motion to appoint examiner with expanded powers or trustee with limited purpose to prosecute fraudulent transfer claims because “the basic job of an examiner is to examine, not to act as a protagonist in the proceedings” and “[t]here is no such entity as a limited purpose trustee under the [Bankruptcy] Code”); Kovalesky v. Carpenter, 1997 WL 630144, at *3 (S.D.N.Y. Oct. 9, 1997) (“Examiners . . . play a chiefly information-seeking role and, like the court itself, must remain a neutral party in the bankruptcy process.”); In re Interco Inc., 127 B.R. 633, 638 (Bankr. E.D. Mo. 1991) (“[T]he examiner’s role is by its nature disinterested and non-adversarial. There is no doubt that the examiner is a neutral party in a bankruptcy case.”); In re Baldwin United Corp., 46 B.R. 314, 316–17 (Bankr. S.D. Ohio 1985) (“[W]e never contemplated, nor in our opinion does the Bankruptcy Code contemplate, that the examiner act as a conduit of information to fuel the litigation fires of third-party litigants.”); In re Hamiel & Sons Inc., 20 B.R. 830, 832 (Bankr. S.D. Ohio 1982) (an examiner “constitutes a court fiduciary and is amenable to no other purpose or interested party”). But see S. Rep. No. 989, 95th Cong. 2d Sess. 116 (1978), reprinted in 1978 U.S.C.C.A.N. 5787 (“The [bankruptcy] court is authorized to give the examiner additional duties as circumstances warrant.”); In re Mirant Corp., 2004 WL 2983945, at *2–3 (Bankr. N.D. Sept. 1, 2004) (examiner authorized to monitor and mediate plan negotiations); In re Pub. Serv. Co. of N.H., 99 B.R. 177 (Bankr. D.N.H. 1989) (examiner authorized to mediate negotiations related to chapter 11 plan); In re UNR Indus., Inc., 72 B.R. 789 (Bankr. N.D. Ill. 1987) (examiner appointed to negotiate chapter 11 plan and facilitate resolution of substantive differences).