Monday, October 23, 2006

Appeal of "Debt Relief Agency" Decision Dismissed for Lack of Standing

Within hours after the main provisions of BAPCPA became effective on October 17, 2005, a Bankruptcy Court in Georgia issued a sua sponte order entitled "In re Attorneys at Law and Debt Relief Agencies" which determined that attorneys are not included in the definition of "debt relief agency," and accordingly not subject to the obligations imposed on such entities under 11 U.S.C. 526. See "Georgia Judge Says Attorneys Not 'Debt Relief Agencies'".

The United States Trustee took an appeal of Judge Davis' order, arguing that it should be vacated because there was no actual "case or controversy" and that no "action, suit or proceeding" had been commenced. In ironic fashion, the District Court effectively agreed with the US Trustee that there was no case or controversy, but as a result dismissed the US Trustee's appeal for lack of standing! In re Attorneys at Law and Debt Relief Agencies, 2006 WL 2925199 (S.D. Ga. 8/25/06).

District Judge Moore noted that the order was entered sua sponte and posted on the Bankruptcy Court's website and later docketed as a miscellaneous proceeding, after which the United States Trustee took an appeal and "vaulted this Court into the BAPCPA rat's nest." The US Trustee argued, among other things, that the Bankruptcy Court lacked jurisdiction to enter the order because there was no "case or controversy" under Article III of the Constitution and no properly commenced "action, suit or proceeding" as required by 28 U.S.C. 151. After the appeal was filed, a local lawyer was permitted to intervene in the appeal on behalf of his law firm as an interested party in support of the order, and was later joined by two other attorneys. They argued in turn that the US Trustee lacked standing to challenge Judge Davis' order.

The District Court noted that standing typically requires that the party have suffered some actual or threatened injury that can be traced to the challenged action which is likely to be redressed by the relief sought. It also noted that the US Trustee in some circumstances also has standing to be heard on behalf of the "public interest" in matters relating to the US Trustee's ability to enforce a bankruptcy law. However, it found that the US Trustee's "public interest" standing only arises in "cases and proceedings" (see 11 U.S.C. 307). As a result, the District Court effectively agreed with the US Trustee -- finding that no petition was filed initiating this matter, and no "case or proceeding" was ever in existence -- but as a result, concluded that Congress "has not authorized [the US Trustee] to advance this peculiar appeal." Accordingly, the appeal was dismissed. (And yes, I think he meant to use "peculiar" and not "particular").

1 comment:

California Bankruptcy Lawyers said...

That is an interesting comment. Even though it was made in 2006 it still applies to the large number of bankruptcies that will be filed in 2008 and especially into 2009.