Creditor Committee’s Concurrent Investigation Did Not Vitiate Need f...

By: Brendan A. Bertoli

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

The Bankruptcy Court for the Southern District of New York held that courts have discretion to appoint an independent examiner in cases where the debtor’s fixed debts exceed five million dollars, but the facts of In re Residential Capital, LLC[1] warranted appointment.[2] Berkshire Hathaway (“Berkshire”), joined by the Trustee, sought the appointment of an independent examiner to investigate certain pre-petition transactions between the debtor, GMAC, Ally and Cerebus Capital.[3] Berkshire claimed that appointment was mandatory pursuant to section 1104(c)(2) of the Bankruptcy Code.[4] The Official Committee of Unsecured Creditors (“the Committee”) objected to appointment, arguing that its own investigation obviated the need for an independent examiner.[5] The court held that appointment was not mandatory because section 1104(c)’s mandatory language is qualified by the phrase “as is appropriate.”[6] However, the court held that the Committee’s concurrent investigation, by itself, was not enough to render an independent examiner’s appointment inappropriate.[7]

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