In Re: First Merch. Accept. Corp. v. JC Bradford & Co. ( 1999 )

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
12-14-1999
In Re: First Merch. Accept. Corp. v. JC Bradford &
Co.
Precedential or Non-Precedential:
Docket 98-5377
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Filed December 14, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 98-5377
IN RE: FIRST MERCHANTS ACCEPTANCE CORPORATION,
Debtor
v.
J. C. BRADFORD & CO.,
Appellant
On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 97-cv-01500)
District Judge: Hon. Joseph J. Farnan, Jr.
Argued July 26, 1999
Before: SLOVITER, NYGAARD and McKEE, Circuit Judges
(Filed: December 14, 1999)
Lawrence R. Ahern, III (Argued)
Gullett, Sanford, Robinson & Martin
Nashville, TN 37219-888
Attorney for Appellant
Laura Davis Jones
James P. Hughes, Jr.
Brendan L. Shannon (Argued)
Christian Douglas Wright
Young, Conaway, Stargatt & Taylor
Wilmington, DE 19899-0391
Attorneys for In Re: First
Merchants Acceptance Corp.
P. Matthew Sutco (Argued)
Martha L. Davis
United States Department of Justice
Washington, D.C. 20530
Patricia A. Staiano
John D. McLaughlin, Jr.
Frederic J. Baker
Daniel K. Astin
United States Department of Justice
Philadelphia, PA 19106
Attorneys for United States
Trustee
OPINION OF THE COURT
SLOVITER, Circuit Judge.
This appeal raises a statutory interpretation question of
first impression in this court and, as far as can be
ascertained, in any of the courts of appeals. At issue is
whether the 1994 amendment to S 503 of the Bankruptcy
Code which added the authorization for reimbursement of
expenses to a member of a creditors committee thereby also
authorized reimbursement of attorney's fees incurred by
such a member. The Bankruptcy Court1 ruled that the
Code prohibits any reimbursement of professional fees
incurred by committee members. The creditor appeals.
I.
First Merchants Acceptance Corp. ("FMAC" or"the
Debtor"), a company that purchases used-car loans from
auto dealers, filed a petition for reorganization under
Chapter 11 of the Bankruptcy Code on July 11, 1997.
Appellant J.C. Bradford & Co. ("Bradford"), which holds a
number of FMAC promissory notes, is a general unsecured
_________________________________________________________________
1. The District Court sat as the Bankruptcy Court. Because the rulings
at issue are in the province of a Bankruptcy Court in the first instance,
we will refer to the court in that capacity.
2
creditor of FMAC. Bradford states that the assets and
liabilities of FMAC were each over $100 million and that
there were between 200 and 299 creditors.
Shortly after the petition was filed the United States
Trustee formed an eight-member committee of unsecured
creditors ("the committee"). Bradford, being a holder of one
of the largest claims against the Debtor, was appointed to
the committee and served as its chairman.
Pursuant to S 1103(a) of the Bankruptcy Code, which
permits the committee to employ attorneys and other
professionals with the approval of court, the committee filed
two successive applications with the Bankruptcy Court to
retain the services of two firms as legal counsel. The
Bankruptcy Court in successive orders granted the
applications to employ the law firm of Pepper, Hamilton &
Scheetz LLP (now Pepper Hamilton LLP) and Faegre &
Bensen LLP as counsel.
Bradford retained the law firm of Bass, Berry & Sims,
PLC ("Bass"), as its own counsel in the course of the
bankruptcy. Bass had apparently represented Bradford
with respect to the notes before the bankruptcy. According
to Bradford, Bass was retained by Bradford to assist it both
in its capacity as a creditor and as a member and chair of
the committee. Bradford also contends that some services
Bass performed were with the knowledge of, and at the
request of, the committee's counsel and members of the
committee.
The Bankruptcy Court approved a Chapter 11 plan for
FMAC on March 16, 1998. Shortly thereafter, Bradford
applied for reimbursement, as an administrative expense, of
some of the attorney's fees it paid to Bass that it incurred
as a member and the chairman of the committee.
Applications for reimbursement for legal services and
financial services were also filed by the Debtor and by the
committee as a whole. The Bankruptcy Court approved the
applications filed by the Debtor and the committee, but
denied Bradford's application. In so doing, the court
reasoned that the relevant statutory provisions, 11 U.S.C.
S 503(b)(3) and (4), were ambiguous with respect to whether
an individual committee member may obtain
3
reimbursement for professional fees and that the legislative
history and the policies of the Bankruptcy Code suggest
that Congress intended to prohibit recovery of such fees as
administrative expenses. See In Re First Merchants
Acceptance Corp., No. 97-1500, slip op. at 5-8 (Bankr. D.
Del. June 26, 1998) (herein slip op.). Bradford timely
appealed this decision.
II.
Bradford's position is based squarely on the language of
the statute. It contends that S 503(b) of the Code, as
amended in 1994, expressly permits a member of a
creditors committee to recover reasonable compensation for
professional services incurred in its capacity as a member
of that committee. It argues that because the meaning of
the statute is clear on its face, our inquiry should be
limited to the text of the provision, without recourse to
other evidence of congressional intent.
The Debtor, following the District Court's reasoning,
urges that the 1994 amendment to S 503(b) created an
ambiguity in the statute because S 503(b)(4) authorizes fees
for reimbursable professional services rendered by the
attorney of an "entity," but a "member of a committee" is
not included within the definition of an "entity" in S 101(15)
of the Code. The Debtor then argues that as a result of this
ambiguity we can resort to the statute's purpose and its
legislative history to ascertain whether a member of a
committee is included within an "entity." The Trustee, who
also urges affirmance, places his principal emphasis on the
argument that Bradford's reading of the statute is
demonstrably at odds with the purpose of the Bankruptcy
Code as a whole and the legislative history of S 503(b)(3)(F).
He argues that the better reading of S 503(b) would not
allow recovery of attorney's fees by a member of a
committee.
A.
THE TEXT OF THE STATUTE
We turn first to the text of S 503(b)(3)(F) and S 503(b)(4)
because their interaction is central to this appeal. Section
4
503(b)(3) lists those entities who are entitled to recover as
administrative expenses their "actual, necessary expenses"
(other than the professional fees specified in subsection
(b)(4)). That section reads:
(b) After notice and a hearing, there shall be all owed,
administrative expenses . . . of this title, including --
. . .
(3) the actual, necessary expenses, other than
compensation and reimbursement specified in
paragraph (4) of this subsection, incurred by--
(A) a creditor that files a petition under s ection
303 of this title;
(B) a creditor that recovers, after the court' s
approval, for the benefit of the estate any property
transferred or concealed by the debtor;
(C) a creditor in connection with the prosecut ion of
a criminal offense relating to the case or to the
business or property of the debtor;
(D) a creditor, an indenture trustee, an equit y
security holder, or a committee representing
creditors or equity security holders other than a
committee appointed under section 1102 of this
title, in making a substantial contribution in a
case under chapter 9 or 11 of this title;
(E) a custodian superseded under section 543 o f
this title, and compensation for the services of
such custodian; or
(F) a member of a committee appointed under
section 1102 of this title, if such expenses are
incurred in the performance of the duties of such
committee[.]
11 U.S.C. S 503. It was Subsection (F), the last of the six
subsections, that was added to S 503 by the Bankruptcy
Reform Act of 1994, Pub. L. No. 103-394, S 110, 108 Stat.
4106, 4113. It is that section that authorizes members of
creditors committees (who are among those who are
"appointed under section 1102") to recover their "actual"
5
and "necessary expenses." No party to this appeal questions
that.
The case has arisen because the addition of S 503(b)(3)(F)
affects those who are authorized under S 503(b)(4) to seek
reasonable compensation for professional services, such as,
inter alia, an attorney. Section 503(b)(4) allows as
"administrative expenses"
(4) reasonable compensation for professional services
rendered by an attorney or an accountant of an entity
whose expense is allowable under paragraph (3) of this
subsection, based on the time, the nature, the extent,
and the value of such services, and the cost of
comparable services other than in a case under this
title, and reimbursement for actual, necessary
expenses incurred by such attorney or accountant[.]
11 U.S.C. S 503(b)(4) (emphasis added).
Section 503(b)(4) was not amended in 1994. However,
because the two subsections, (b)(3) and (b)(4), are
interdependent, and the allowance for reimbursement of
professional fees in (b)(4) is tied to the list of"entities" in
(b)(3), Bradford sees the language as unambiguous. Section
503(b)(4) authorizes claims for attorney's and accountant's
fees incurred by all entities who are allowed to claim
administrative expenses under S 503(b)(3). Members of a
creditors committee are plainly entitled to recover
administrative expenses under S 503(b)(3)(F). A
straightforward reading of the statute, therefore, authorizes
reasonable allowances for attorney's fees or other
professional fees incurred by a member of a committee, "if
such expenses are incurred in the performance of the
duties of such committee." 11 U.S.C. S 503(b)(3)(F). It seems
inescapable from the statutory language that when
Congress enacted the 1994 Bankruptcy Reform Act and
added members of creditors committees to the list in
S 503(b)(3) of those who can claim "actual" and "necessary
expenses," it simultaneously expanded the list of entities
who are entitled to reimbursement for professional fees
under S 503(b)(4).
Notwithstanding what appears to be the unambiguous
language of S 503(b) to the effect that a committee member
6
may recover attorney's fees, the Bankruptcy Court found an
ambiguity in the term "entity" as used inS 503(b)(4) insofar
as it applies to a member of a creditors committee. Slip op.
at 4-5. The Bankruptcy Court followed the earlier holding of
a California bankruptcy court, see In Re County of Orange,
179 B.R. 195 (Bankr. C.D. Cal. 1995), when it denied
Bradford's application for attorney's fees. In doing so, it
stated that "[s]ection 101(15) does not specifically include `a
member of a committee' as that phrase is specifically
utilized in Section 503(b)(3)(F), and the Court will not graft
that language into the provision in the context of a Section
503(b)(4) application." Slip op. at 5.
We do not find that reasoning persuasive. The term
"entity" is defined by the Bankruptcy Code as a person,
estate, trust, governmental unit, and United States trustee.
11 U.S.C. S 101(15). A "person" is defined broadly to
include individuals, partnerships, and corporations. 11
U.S.C. S 101(41). Bradford, as a corporation, falls within the
broad definition of "entity." In addition, Bradford falls
within the definition of a creditor, defined by the Code as
an "entity that has a claim against the debtor. . . ." 11
U.S.C. S 101(10) (emphasis added).
The Debtor seeks to avoid the inevitable logic of these
definitions by arguing that Bradford does not request
reimbursement as a "corporation" or as a "creditor" but as
a "member of a committee," which is not specifically defined
as an entity in S 101(15). This is the same point made by
the Bankruptcy Court. However, S 503 itself plainly
provides that a member of a committee is an entity entitled
to reimbursement for administrative expenses. Section
503(a) begins with the broad authorization that"[a]n entity
may timely file a request for payment of an administrative
expense," 11 U.S.C.S 503(a) (emphasis added), and the next
subsection proceeds to list all entities entitled to
reimbursement, see 11 U.S.C. S 503(b)(3), which specifically
includes committee members, see 11 U.S.C.S 503(b)(3)(F).
Although finding an ambiguity in the language would
have the advantage of permitting the court to resort to the
legislative history, we cannot turn the language upside
down and inside out to do so. To say that a member of a
creditors committee -- who is, ipso facto, a creditor -- is
7
not an entity under the Code flatly contradicts both the
ordinary understanding of the term "entity" and its usage in
the Code. We therefore disagree with the Bankruptcy
Court's conclusion that the term "entity" or its use in
S 503(b)(4) is ambiguous.
The Trustee takes a slightly less jarring position. The
Trustee focuses on the phrase "if such expenses are
incurred in the performance of the duties of such
committee," and contends that the language of
S 503(b)(3)(F) supports an alternative interpretation. The
Trustee argues that this language limits reimbursement to
committee members for expenses incurred in performance
of "duties `of ' the committee," and does not permit
reimbursement for duties that merely "pertain" or "relate"
to the committee. Trustee's Br. at 19. Therefore, the Trustee
continues, the duties of the committee must "involve formal
committee work . . . , not a member's informal or personal
response to its formal committee appointment." Id.
According to the Trustee's interpretation, a member's
voluntary consultation with private counsel is not incurred
in the performance of the duties of the committee even if it
pertains to the work of the committee and inures to its
benefit. Presumably, it follows that if a member's personal
lawyer successfully negotiated a substantial reduction of a
creditor's large claim, that service would not qualify as
incurred in the performance of the duties of the committee
because that lawyer had not been authorized to represent
the committee. However, as interpreted by the Trustee, if
the identical service was performed by one of the
committee's lawyers it would be considered as incurred in
the performance of the duties of such committee.
Although there may be reasons why the work done by the
attorney for the creditor should not be reimbursed, we do
not think they can be found in the phrase "duties of the
committee." The nature of the services does not depend on
the identity of the actor; either the service is or is not
incurred in the performance of the duties of such
committee. For example, a phone call to a creditor to
negotiate a reduction in the Debtor's liability is an expense
incurred in the performance of the duties of such
8
committee, whether the call was made by a committee
member, an aide to that member, or the member's attorney.
We fail to find an ambiguity in S 503(b)(3)(F) or S 503(b)(4)
that would overcome the straightforward reading of the
provision as permitting committee members to recover
attorney's fees for work performed in connection with that
entity's service on the committee. There is no principled
way to read the language of S 503(b)(4) that allows recovery
of attorney's and accountant's fees "of an entity whose
expense is allowable under paragraph (3)" to include as
"entities" those in subsections (A)-(E) of paragraph (3) but
not those in subsection (F).
Our conclusion that the language of S 503 is not
ambiguous does not mean that creditors committee
members may necessarily receive compensation for their
lawyer's fees incurred in relation to their duties as
committee members. However, we would have to find
reason to exclude such compensation elsewhere.
B.
APPELLEES' ARGUMENTS
1. Tension with S 1103(a) of the Bankruptcy Code
Both the Debtor and Trustee find reason to preclude
recovery for the entire category of attorney's fees for
committee members in the sharp conflict such an
interpretation would create with S 1103(a) of the
Bankruptcy Code. Section 1103(a) sets forth the process by
which the committee as a whole may employ professionals.
It provides that the committee, at a scheduled meeting in
which a majority of the members are present and with the
court's approval, may "select and authorize the employment
. . . of one or more attorneys, accountants, or other agents,
to represent or perform services for [the] committee." 11
U.S.C. S 1103(a).
We have previously emphasized the importance of the
requirement of prior court approval for the hiring of
committee counsel. In Matter of Arkansas Co., Inc., 798
F.2d 645, 649 (3d Cir. 1986), we held that a court may
9
authorize employment of counsel nunc pro tunc only under
extraordinary circumstances, explaining that the
requirement of prior court approval "was designed to
eliminate the abuses and detrimental practices that had
been found to prevail," such as "cronyism" and "attorney
control of bankruptcy cases." We stressed that the prior
approval requirement ensures "that the court may know the
type of individual who is engaged in the proceeding, their
integrity, their experience in connection with work of this
type, as well as their competency concerning the same." Id.
at 648 (quoting In re Hydrocarbon Chemicals, Inc., 411 F.2d
203 (3d Cir. 1969) (en banc)).
Bradford's plain language interpretation of the statute
would allow committee members to retain counsel privately,
without prior review by the court and without notice to the
committee or other creditors. The only review would come
after the fact, when the court is called upon to determine:
(1) whether the fees are "reasonable . . . based on the time,
the nature, the extent, and the value of such services, and
the cost of comparable services other than in a case under
this title," S 503(b)(4); and (2) if such fees were "incurred in
the performance of the duties of such committee,"
S 503(b)(3)(F). Consequently, the potential for the abuses
that S 1103 was designed to eliminate is a real concern. In
addition, if every member of a committee were to claim
attorney's and accountant's fees, there would be a
proliferation of administrative expenses which could
unnecessarily drain estate assets.
Accordingly, we cannot lightly dismiss the argument that
the plain language reading of S 503(b)(4) leads inescapably
to tension with the statutory scheme for retention of
professionals by the committee established by S 1103.
2. Legislative History
The Debtor and the Trustee also urge that we examine
the legislative history of the 1994 Amendment toS 503 of
the Bankruptcy Code, which they contend supports their
interpretation that S 503(b)(4) does not authorize committee
members to recover attorney's fees as administrative
expenses. Assuming arguendo that we are free to resort to
that legislative history in the absence of an ambiguity in the
10
statutory language, we conclude that the legislative history
does not resolve the issue before us.
In 1993, the Senate passed S.B. 540 which contained a
number of substantial changes in the Bankruptcy Code.
Included in the bill was a proposal to add S 503(b)(7) as a
new provision that would have allowed reimbursement of:
the actual, necessary expenses incurred by a member
of a committee appointed under section 1102 in the
performance of duties of the committee (including fees
of an attorney or accountant for professional services
rendered for the member to the extent allowable under
paragraph (4)) other than claims for compensation for
services rendered as a member of the committee.
S. Rep. No. 103-168, at 6 (1993) (emphasis added). When
the amendments to the Bankruptcy Code finally passed
Congress in 1994,2 it was the House Bill that was passed in
lieu of the Senate Bill, and the House Bill did not contain
the language emphasized above in proposed S 503(b)(7).
There was no explanation from the Senate when it
concurred in the House version.
The House Report on the 1994 Amendments suggests
that the addition of subsection (F), adding members of
creditor and equity holder committees to the list of entities
entitled to recover "actual and necessary expenses," was
intended only to allow those members reimbursement for
their incidental out-of-pocket expenses and was not
intended to include compensation for professional services.
The House Report states:
The current Bankruptcy Code is silent regarding
whether members of official committees appointed in
_________________________________________________________________
2. The Bankruptcy Reform Act of 1994 was the culmination of several
years of hearings and testimony on bankruptcy reform before
Congressional committees. The amendment at issue,S 110 of H.R. 5116,
was one of fifty-three sections intended to effectuate some degree of
reform. Other changes of varying significance included provisions to
expedite the filing of plans under chapter 11, a limitation on the ability
of small investment companies to file for bankruptcy protection, and
amendments to provide greater protection for alimony and child support
owed by a debtor in bankruptcy.
11
chapter 11 cases are entitled to reimbursement of their
out-of-pocket expenses (such as travel and lodging),
and the courts have split on the question of allowing
reimbursement.
This section of the bill amends section 503(b) of the
Bankruptcy Code to specifically permit members of
chapter 11 committees to receive court-approved
reimbursement of their actual and necessary out-of-
pocket expenses. The new provision would not allow the
payment of compensation for services rendered by or to
committee members.
H.R. Rep. No. 103-835, at 39 (1994), reprinted in 1994
U.S.C.C.A.N. 3340, 3348 (footnote omitted) (emphasis
added). It is the underlined language that the Debtor and
Trustee emphasize.
As this case demonstrates, attempting to divine legislative
intent on the basis of "Congress's unexplained modification
of language in earlier drafts of legislation" can be
problematic. Appalachian Power Co. v. E.P.A., 135 F.3d
791, 810 (D.C. Cir. 1998). It may be, as the Debtor argues,
that the adoption by Congress of the House version was a
deliberate policy decision to reject the language in the
earlier Senate version that expressly provided for the
recovery of professional fees for committee members. Cf.
NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 248
(1978) (Powell, J., concurring in part and dissenting in part)
("One must assume that a deliberate policy decision
informed Congress' rejection of [earlier considered]
alternatives in favor of the language presently contained in
[the statute in question]."). However, it is difficult to draw
that conclusion in light of our reading of the plain language
of the Act, which adopted the House version, to authorize
reimbursement for professional fees. We have no conclusive
evidence that the Senate adopted the statement in the
House Report that the revised Act bars reimbursement of
lawyer fees, as neither the Bankruptcy Court nor the
parties have any basis to assume the Senate was aware of
the one sentence in the House Report upon which the
parties rely.
The Debtor urges us to bear in mind that every year
following the adoption of the 1994 Bankruptcy Reform Act,
12
there has been an effort in Congress to amend S 503(b)(3)(F)
to clarify that "[e]xpenses for attorneys or accountants
incurred by individual members of creditors `and equity
security holders' committees would not be recoverable, but
expenses incurred for such professional services by the
committees themselves would be." S. Rep. No. 105-253 at
52 (1998); see also Bankruptcy Technical Corrections Act of
1996, S. 1559, 104th Cong. S 7 (1996), reprinted in 142
Cong. Rec. 21787 (1996); Bankruptcy Amendments of 1997
Act, H.R. 764, 105th Cong. S 13 (1997), reprinted in H.R.
Rep. No. 105-324 (1997); Consumer Bankruptcy Reform
Act of 1998, S. 1301, 105th Cong. S 411, reprinted in S.
Rep. No. 105-253 (1998); Bankruptcy Reform Act of 1999,
H.R. 833, 106th Cong. S 1110 (1999); Bankruptcy Reform
Act of 1999, S. 625, 106th Cong. S 1109 (1999) (currently
pending before the Senate).
But, as the Trustee conceded at oral argument,
subsequent legislative history, particularly when the
proposals do not become law, "is a `hazardous basis for
inferring the intent of an earlier' Congress." Pension Benefit
Guaranty Corp. v. LTV Corp., 496 U.S. 633, 650 (1990)
(citing United States v. Price, 361 U.S. 304, 313 (1960)); see
also United States v. United Mine Workers of America, 330
U.S. 258, 282 (1947) ("We fail to see how the remarks of
these Senators in 1943 can serve to change the legislative
intent of the Congress expressed in 1932 . . . ."). These
subsequent failed attempts by Congress lack "persuasive
significance" because we can draw numerous equally
reasonable inferences therefrom. See LTV, 496 U.S. at 650.
While the immediate and continuous attempts in Congress
to specify that there may be no reimbursement of attorney's
fees for committee members may show that the 1994
Congress failed to realize the effect of its addition of
S 503(b)(3)(F), it is equally plausible that the unsuccessful
attempts in subsequent Congresses reflect satisfaction with
the plain language of the provision. Accordingly, we can
give no conclusive weight to the subsequent legislative
history as evidence of the intent of Congress in 1994.
III.
As the foregoing makes clear, the plain language of the
statute arguably is in conflict with the intent of Congress as
13
reflected in the House Report but definitely conflicts with
the requirement of S 1103 that the bankruptcy courts must
approve the selection of lawyers to represent the committee.
This, the appellees contend, is adequate reason for us to
disregard the plain language and instead effectuate
Congress's intent.
However, Supreme Court cases declaring that clear
language cannot be overcome by contrary legislative history
are legion. See, e.g., United States v. Gonzales, 520 U.S. 1,
8 (1997) ("We . . . follow the text, rather than the legislative
history [of the statute]."); Toibb v. Radloff, 501 U.S. 157,
162 (1991) ("[T]his Court has repeated with some
frequency: `Where, as here, the resolution of a question of
federal law turns on a statute and the intention of
Congress, we look first to the statutory language and then
to the legislative history if the statutory language is
unclear.' ") (citing Blum v. Stenson, 465 U.S. 886, 896
(1984)); Garcia v. United States, 469 U.S. 70, 76 n.3 (1984)
("Resort to legislative history is only justified where the face
of the [statute] is inescapably ambiguous. . ..") (quoting
Schwegmann Brothers v. Calvert Distillers Corp., 341 U.S.
384, 395 (1951) (Jackson, J., concurring)); United States v.
Ron Pair Enterprises, Inc., 489 U.S. 235, 241 (1989)
("[W]here, as here, the statute's language is plain, `the sole
function of the courts is to enforce it according to its
terms'.") (quoting Caminetti v. United States, 242 U.S. 470,
485 (1917)).
Admittedly, the Court has made an exception for "rare
cases" in which "the literal application of a statute will
produce a result demonstrably at odds with the intentions
of its drafters." Griffin v. Oceanic Contractors, Inc., 458 U.S.
564, 571 (1982). In such situations, "those intentions must
be controlling." Id.; see also Public Citizen v. U.S. Dep't of
Justice, 491 U.S. 440, 455 (1989) ("Looking beyond the
naked text for guidance is perfectly proper when the result
it apparently decrees is difficult to fathom or where it seems
inconsistent with Congress' intention, since the plain-
meaning rule is `rather an axiom of experience than a rule
of law, and does not preclude consideration of persuasive
evidence if it exists.' ") (quoting Boston Sand & Gravel Co. v.
United States, 278 U.S. 41, 48 (1928)). Moreover, we are
14
enjoined to interpret statutes in light of the context of the
statutory scheme. See, e.g., Richards v. United States, 369
U.S. 1, 10 (1962) ("[A] section of a statute should not be
read in isolation from the context of the whole Act.").
Statutory interpretations "which would produce absurd
results are to be avoided if alternative interpretations
consistent with the legislative purpose are available."
Griffin, 458 U.S. at 575 (1982).
But only absurd results and "the most extraordinary
showing of contrary intentions" justify a limitation on the
"plain meaning" of the statutory language. Garcia, 469 U.S.
at 75. As we discussed earlier, the legislative history is far
from clear.
In addition, although the Debtor and Trustee adduce
many reasons why it might be incongruous or unwise to
allow claims for reimbursement for services of professionals
retained by members of a committee, there has been no
showing that the result apparently commanded by the plain
language of the statute is truly "absurd." In Chapter 11
proceedings, a creditors committee has an active role in the
reorganization, as it helps develop a plan of reorganization
and ultimately decides whether to accept or reject a
Chapter 11 plan. The creditors committee also monitors the
conduct of the debtor to ensure its compliance with the
Bankruptcy Code and advises the creditors of their rights.
See 11 U.S.C. S 1103(c); Pension Benefit Guaranty Corp. v.
Pincus, Verlin, Hahn, Reich & Goldstein Prof. Corp., 42 B.R.
960, 963 (Bankr. D.C. 1984). Responsible fulfillment of
these duties may entail a substantial amount of work by
committee members which is of value to the committee as
a whole and may require services by a creditor's counsel.
Further, it is not at all clear that the allowance of
professional fees to committee members is necessarily an
invitation to chaos in the functioning of committees or will
cause the wholesale depletion of bankruptcy estates. The
bankruptcy court retains the power to ensure that only
those fees that are demonstrably incurred in the
performance of the duties of the committee, the statutory
standard, are reimbursed. Moreover, in its review of each
application to determine whether the fee requested is
reasonable, as required by the statute, the bankruptcy
15
court must necessarily determine whether the services were
necessary. This review is committed to the sound discretion
of the bankruptcy courts. See Matter of DP Partners Ltd.
Partnership, 106 F.3d 667, 674 (5th Cir. 1997). Thus, many
of the concerns expressed by the Trustee can be
accommodated within the plain language interpretation of
the statute, and the ruling of the Bankruptcy Court on
remand will set the tone for future applications, even if
Congress fails to amend the statute once more to make
clear its intent, the result we believe would be preferable.3
Although we acknowledge that the plain language of
S 503(b)(4) presents serious tension with the scheme for
retention of professionals by the committee as a whole
created by S 1103, it is insufficient reason to justify failure
to follow the unambiguous directive contained in the
language of S 503. Accordingly, we leave any redrafting of
the statute in Congress' hands.
IV.
For the foregoing reasons, we will reverse the Bankruptcy
Court's decision and remand for proceedings consistent
with this opinion.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
_________________________________________________________________
3. As of this writing, Congress has not yet passed a pending bill that
would resolve the issue before us.
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