Westmoreland Human Opportunities, Inc. v. Walsh ( 2001 )


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  •                                                                                                                            Opinions of the United
    2001 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    4-10-2001
    Westmoreland Human v. Walsh
    Precedential or Non-Precedential:
    Docket 00-3070
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    Recommended Citation
    "Westmoreland Human v. Walsh" (2001). 2001 Decisions. Paper 71.
    http://digitalcommons.law.villanova.edu/thirdcircuit_2001/71
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    Filed April 10, 2001
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    No. 00-3070
    WESTMORELAND HUMAN OPPORTUNITIES, INC.,
    Appellant
    v.
    JAMES R. WALSH, Trustee of the Bankruptcy Estate of
    Life Service Systems, Inc.; LIFE SERVICE SYSTEMS, INC.
    On Appeal From the United States District Court
    For the Western District of Pennsylvania
    (D.C. Civ. No. 99-cv-00110)
    District Judge: Honorable D. Brooks Smith
    Argued: October 25, 2000
    Before: BECKER, Chief Judge, SCIRICA and
    FUENTES, Circuit Judges.
    (Filed April 10, 2001)
    DANIEL B. PAGLIARI, ESQUIRE
    (ARGUED)
    Pagletta & Pagliari, LLP
    2773 Leechburg Road
    Lower Burrell, PA 15068-3138
    Counsel for Appellant
    JAMES R. WALSH, ESQUIRE
    (ARGUED)
    Spence, Custer, Sayler, Wolfe,
    and Rose
    400 U.S. Bank Building
    P.O. Box 280
    Johnstown, PA 15907
    Counsel for Appellee
    DAVID W. OGDEN, ESQUIRE
    Assistant Attorney General
    United States Department of Justice
    P.O. Box 878
    Ben Franklin Station
    Washington, DC 20044
    HARRY LITMAN, ESQUIRE
    United States Attorney
    633 U.S. Post Office & Courthouse
    Pittsburgh, PA 15219
    WILLIAM KANTER, ESQUIRE
    H. TYOMAS BYRON, III, ESQUIRE
    Attorneys, Appellate Staff
    Civil Division, PHB Room 9102
    Department of Justice
    601 D Street, N.W.
    Washington, DC 20530-0001
    CAROLE W. WILSON, ESQUIRE
    Associate General Counsel
    ANGELO AIOSA, ESQUIRE
    Assistant General Counsel
    BATINA R. WILLS, ESQUIRE
    Trial Attorney
    Department of Housing and Urban
    Development
    451 7th Street, S.W., Room 10258
    Washington, DC 20410
    Counsel for United States of America
    as Amicus Curiae
    2
    OPINION OF THE COURT
    BECKER, Chief Judge.
    This bankruptcy appeal requires us to define the
    boundaries of the term "property of the estate," as used in
    S 541 of Title 11 of the United States Code (Bankruptcy
    Code), in the context of a federal grant relationship. The
    appeal arises out of an adversary action instituted by the
    trustee of debtor Life Service Systems, Inc. (LSS) against
    defendant Westmoreland Human Opportunities, Inc. (WHO),
    charging the latter with a breach of itsfiduciary duty to
    LSS's Unsecured Creditors Committee (Committee). Both
    LSS and WHO are non-profit organizations which provide
    community services to residents of Westmoreland County in
    western Pennsylvania.
    In 1995, LSS was selected by the Department of Housing
    and Urban Development (HUD) to receive grant moneys
    under the federal Supportive Housing Program; LSS and
    HUD executed a Supportive Housing Grant Agreement
    (Grant Agreement) as part of this grantor/grantee
    arrangement. Shortly thereafter, LSS experienced
    significant financial difficulties, ultimatelyfiling a Chapter
    11 bankruptcy petition. Because WHO was one of LSS's
    largest creditors, it accepted an invitation to join the
    Unsecured Creditors Committee.
    During its tenure on the Committee, WHO, without
    notifying either its fellow Committee members or the
    Bankruptcy Court, assumed LSS's position as r ecipient of
    Supportive Housing Program funds, executing a Supportive
    Housing Grant Agreement Amendment (Grant Agr eement
    Amendment) with HUD. In the adversary action at issue on
    this appeal, LSS's trustee in bankruptcy alleged that WHO,
    by assuming LSS's interest in the grant r elationship in this
    manner, breached its fiduciary duty to Committee
    constituents. WHO defended on the ground that LSS's
    interest in the Supportive Housing Program grant
    relationship was not property of LSS's bankruptcy estate
    and thus did not trigger a fiduciary duty on WHO's part.
    The Bankruptcy Court rejected WHO's defense, holding that
    3
    LSS's interest in the grant relationship constituted part of
    LSS's bankruptcy estate and that WHO had ther efore
    violated its fiduciary obligations. It enter ed judgment
    against WHO in the sum of $135,653. On appeal, the
    District Court affirmed.
    Against this background, WHO's appeal pr esents the
    question whether a debtor non-profit community service
    organization's interest in a HUD-type federal grant
    relationship constitutes property of the debtor's estate.
    Disagreeing with the Bankruptcy and District Courts, we
    hold that LSS's interest in the grant r elationship with HUD
    is excluded from the definition of "pr operty of the estate"
    set forth in S 541 of the Bankruptcy Code. Despite S 541's
    considerable breadth, HUD's singular supervisory interest
    in ensuring the effective administration of the Supportive
    Housing Program, evidenced by the pervasive, strict, and
    minute oversight over the grant relationship imposed by the
    Program's relevant statutory and r egulatory provisions,
    suffices to exclude LSS's interest in the Supportive Housing
    Program grant relationship from S 541's property definition.
    The District Court, in conducting its S 541 pr operty
    analysis, failed to account for HUD's weighty inter est. The
    court mistakenly viewed the provisions of the Grant
    Agreement as the exclusive calipers for measuring the
    rights yielded to LSS by virtue of the grant r elationship,
    and therefore neglected to consider the substantial
    limitations imposed on those rights by the other statutory
    and regulatory components of the Supportive Housing
    Program scheme. As a result, we conclude that the District
    Court erred in deciding that LSS's inter est in the grant
    relationship constituted property of its bankruptcy estate,
    and we therefore set aside the court's judgment.
    However, our conclusion that LSS's inter est does not
    qualify as property for purposes of the Bankruptcy Code
    does not dispose of this appeal. Left unanswer ed is a
    question not considered by either the Bankruptcy or the
    District Court: whether, despite the fact that LSS's interest
    in the grant relationship with HUD was not pr operty of its
    bankruptcy estate, WHO's assumption of LSS's inter est
    without notice to Committee members or to the Bankruptcy
    Court violated the fiduciary duty WHO owed to Committee
    4
    constituents. The Bankruptcy and District Courts, as well
    as the parties themselves, all appear to have assumed that
    resolution of the bankruptcy property question would also
    dispose of the breach of fiduciary duty issue. Because
    neither the District nor the Bankruptcy Court addr essed
    the issue that our disposition of the case now raises,
    relying instead on the erroneous conclusion that LSS's
    interest qualified as property for purposes of the
    Bankruptcy Code, and because the parties failed to
    adequately brief and argue the question to us, we remand
    the case to the District Court, which may in tur n refer it to
    the Bankruptcy Court, for resolution of the issue.
    I. Facts and Procedural History
    A.
    In 1995, LSS, a private non-profit community service
    organization operating in western Pennsylvania, undertook
    a project to provide supportive housing assistance to
    homeless families in Westmoreland County. LSS planned to
    purchase and refurbish two small apartment buildings,
    which it would then use to provide those families with
    transitional housing. As the name suggests, transitional
    housing is not intended to furnish homeless families with
    a permanent residence, but rather is designed to supply
    recipients with temporary shelter while they seek
    permanent housing and learn basic life skills necessary for
    independent living.1 LSS's pr oject was to house some
    twenty families with children, and would have provided
    supportive services, including job training and placement,
    day care, adult education, and instruction in daily life skills
    such as nutrition and budgeting.
    As its primary source of funding for the pr oject, LSS
    turned to HUD, seeking moneys from HUD's Supportive
    Housing Program. The purpose of this Pr ogram "is to
    _________________________________________________________________
    1. Section 11384(b) of the Stewart B. McKinney Homeless Assistance Act
    defines "transitional housing" as "housing the purpose of which is to
    facilitate the movement of homeless individuals and families to
    permanent housing within 24 months." 42 U.S.C. S 11384(b).
    5
    promote the development of supportive housing and
    supportive services, including innovative appr oaches to
    assist homeless persons in the transition fr om
    homelessness, and to promote the provision of supportive
    housing to homeless persons to enable them to live as
    independently as possible." 42 U.S.C. S 11381. The
    Supportive Housing Program facilitates this public purpose
    by furnishing federal moneys to qualified HUD-selected
    applicants, who are to use the funds for several types of
    housing-related activities, including acquisition and/or
    rehabilitation of existing structures, construction of new
    structures, leasing of existing structur es, and provision of
    supportive services for transitional housing r esidents. See
    generally 42 U.S.C. S 11383(a); 24 C.F .R. S 583.100(a)
    (2000).
    Recipients of Supportive Housing Program grants are
    selected through a nationwide competitive pr ocess. See 42
    U.S.C. S 11386(b). As part of this process, LSS was required
    to submit to HUD a detailed application and pr oject
    proposal, which furnished information about: (1) the
    housing project itself, such as the project location, the
    number of homeless families that LSS would accommodate
    at that location, and the types of supportive services that
    would be offered at the site; (2) LSS's past experience in
    providing housing assistance, including pr evious housing
    programs it had operated and prior HUD grants it had
    received; and (3) the budget for the pr oposed project. In its
    application, LSS requested $1,326,965 in Supportive
    Housing Program funds to cover the cost of acquiring and
    rehabilitating the two apartment buildings, the operating
    expenses for those premises, the cost of the supportive
    services that would be offered at those sites, and a five
    percent administrative fee for the expenses LSS would incur
    in administering the Supportive Housing Program grant.
    On February 5, 1996, LSS received final appr oval from
    HUD for a transitional housing project to be located at 49
    Division Street in Greensburg, W estmoreland County.
    Several days later, LSS and HUD executed the Grant
    Agreement, which obligated HUD to provide $1,326,965 to
    the 49 Division Street project, and committed LSS to
    administer those funds at that project site. The Grant
    6
    Agreement, which was subject to renewal, carried a three-
    year term and was scheduled to expire in 1999. Shortly
    after the execution of the Grant Agreement, LSS purchased
    the Division Street property and began r enovations.
    B.
    Several months after entering into the Grant Agr eement
    with HUD, LSS began experiencing significant financial and
    administrative problems. LSS attempted to r esolve these
    difficulties by seeking consulting relationships with other
    non-profit entities. First, in September 1996, LSS entered
    into a consulting agreement with WHO, pursuant to which
    WHO was to furnish management assistance to LSS.
    However, this affiliation ended after a month when WHO
    elected to terminate the agreement upon discovering that
    LSS's financial troubles were mor e serious than originally
    anticipated. Subsequently, on November 9, 1996, LSS
    retained Adelphoi, Inc., another non-pr ofit organization
    operating in Westmoreland County. Pursuant to the
    management agreement entered into with Adelphoi, all of
    LSS's board members resigned and wer e replaced by new
    directors selected by Adelphoi.
    Two months after Adelphoi took over LSS's management,
    LSS filed a voluntary Chapter 11 petition. At the time of the
    petition, LSS had drawn down approximately $288,800 in
    federal Supportive Housing Program moneys. LSS's interest
    in the grant relationship with HUD was not itself listed on
    the schedule of assets LSS submitted to the Bankruptcy
    Court. An Unsecured Creditors Committee was formed, and
    WHO, which had a claim against LSS for compensation
    based on the brief period it spent providing consulting
    services to LSS, accepted an invitation to sit on the
    Committee. WHO resigned from the Unsecur ed Creditors
    Committee in September 1997 due to accusations of a
    conflict of interest. However, WHO's assumption of LSS's
    Supportive Housing Program grant occurr ed prior to the
    date of this resignation.
    Less than two weeks after LSS filed its Chapter 11
    petition, HUD declared LSS in default of the Supportive
    Housing Program grant. By letter dated January 29, 1997,
    7
    HUD notified LSS that it could no longer r eceive Supportive
    Housing Program disbursements. HUD also infor med LSS
    that its grant would be reactivated should LSS develop a
    "workable plan" acceptable to HUD. Further more, HUD
    warned LSS that if a suitable plan was not forthcoming
    within 30 days, HUD would exercise its power to either
    cancel the remainder of the grant, or select a successor to
    administer the program. Although LSS did not r espond
    within the requested 30-day period, HUD did not in fact
    terminate the grant or replace LSS as grantee; rather, on
    March 4, 1997, HUD sent a follow-up communication to
    LSS, once again requesting a "work-out plan for the
    continued implementation of the [49 Division Str eet
    transitional housing] project."
    Ultimately, LSS responded by proposing to HUD that
    Adelphoi acquire ownership of the Division Str eet property
    and that WHO take over administration of the transitional
    housing project located at that site. On May 28, 1997,
    WHO was substituted as recipient of LSS's Supportive
    Housing Program grant, and WHO and HUD executed the
    Grant Agreement Amendment, which identified WHO as the
    project sponsor and as the "Successor to Life Service
    Systems, Inc." The Amendment listed both 49 Division
    Street and a second site at 203 South Maple A venue as the
    relevant project locations for the transitional housing
    project. Apparently, WHO did not fur nish any consideration
    to LSS's estate in exchange for assuming the Grant
    Agreement, and neither WHO nor LSS provided notice of
    the assumption to the Unsecured Creditors Committee or to
    the Bankruptcy Court.
    After assuming LSS's Supportive Housing Program grant,
    WHO did not in fact continue the transitional housing
    project at the Division Street location. Shortly after WHO
    and HUD executed the Grant Agreement Amendment, LSS,
    following its proposal that Adelphoi acquir e the transitional
    housing project's real property, petitioned the Bankruptcy
    Court to sell the Division Street property to Westmoreland
    CHODO, a non-profit entity controlled by Adelphoi (and
    apparently unaffiliated with WHO). With approval of the
    Bankruptcy Court, the Division Street r eal estate was put
    up for auction. However, Westmor eland CHODO was outbid
    8
    by a third party purchaser, and thus did not acquire the
    Division Street real estate. WHO, appar ently uninterested
    in dealing with the third party buyer, discontinued the
    transitional housing project at the Division Street site and
    elected to carry on the program at a dif ferent location.
    C.
    Following the property sale, the Bankruptcy Court
    appointed James Walsh as LSS's Chapter 11 Bankruptcy
    Trustee, at the request of the Unsecur ed Creditors
    Committee. On February 16, 1998, the Trustee instituted
    an adversary action against WHO in the Bankruptcy Court,
    alleging that WHO, as a member of the Unsecur ed Creditors
    Committee, owed a fiduciary duty to the other members of
    the Committee which it breached by taking over LSS's
    status as a recipient of federal Supportive Housing Program
    moneys without furnishing notice to other unsecured
    creditors or obtaining prior court appr oval.2 In its defense,
    WHO argued that it breached no fiduciary duty because
    LSS's interest in the Supportive Housing Pr ogram grant
    relationship with HUD was never property of LSS's
    bankruptcy estate within the meaning of S 541 of the
    Bankruptcy Code.
    The Bankruptcy Court held in the Trustee's favor,
    concluding that LSS's interest in the grant r elationship with
    HUD constituted property of LSS's bankruptcy estate.
    Furthermore, the court determined that WHO did in fact
    breach its fiduciary duty to fellow Committee members, and
    awarded LSS's estate $135,653 in monetary r elief.3 WHO
    (Text continued on page 11)
    _________________________________________________________________
    2. LSS's Bankruptcy Trustee also instituted adversary actions against
    Adelphoi and LSS's board of directors (elected by Adelphoi), claiming,
    inter alia, a breach of fiduciary duty in connection with WHO's
    succession to the Supportive Housing Program grant. These actions were
    settled before trial.
    3. As the remedy for WHO's alleged br each of fiduciary duty, LSS's
    Trustee did not seek to have the Bankruptcy Court void and set aside
    WHO's assumption of the Supportive Housing Pr ogram grant; rather, the
    Trustee only requested monetary damages. The record does not make
    the basis for this monetary relief entir ely clear. The following is our
    rendering.
    9
    The damage request consisted of three components. First, the Trustee
    sought compensation for claims brought by five individuals relocated by
    LSS as part of its acquisition and rehabilitation of the Division Street
    property. The Supportive Housing Program r equires a grant recipient to
    provide compensation to individuals displaced as a direct result of the
    recipient's supportive housing project. See 24 C.F.R. S 583.310 (2000).
    Although the record is silent on this issue, we can infer from the fact
    that these five individuals were listed among LSS's general unsecured
    creditors that LSS had failed to provide the full measure of assistance
    required by the Supportive Housing Pr ogram.
    Second, LSS's Trustee sought recovery for amounts owed to matching
    fund grantors Westmoreland County Housing Authority, United Way, and
    Richard K. Mellon Foundation, also listed among LSS's general
    unsecured creditors. Before a grantee can receive federal funds under
    the Supportive Housing Program for the acquisition or rehabilitation of
    existing structures, or for new construction, it must obtain matching
    funds from non-HUD sources equal to the amount of federal funds it is
    requesting for those activities. See 42 U.S.C. S 11386(e); 24 C.F.R.
    S 583.145 (2000). To satisfy this obligation, LSS contributed its own
    moneys, and secured matching funds from the Westmoreland County
    Housing Authority, the United Way, and the Mellon Foundation.
    Although the record on appeal does not contain the terms of the
    agreements entered into by LSS and the matching fund grantors, the
    grantors apparently conditioned their pr ovision of matching funds on the
    continued use of those funds for a transitional housing project at the 49
    Division Street location. According to the Bankruptcy Court, when WHO,
    after succeeding to LSS's interest in the Supportive Housing Program
    grant relationship with HUD, decided not to continue the project at the
    49 Division Street site, the matching fund grantors acquired a claim
    against LSS's estate for a return of the balance of their donated moneys.
    Finally, LSS's Trustee requested monetary relief in the amount of the
    Supportive Housing grant moneys allocated to the grantee's
    administrative expenses. According to the Bankruptcy Court, WHO
    benefitted by receiving this amount as part of its succession to LSS's
    Supportive Housing Program grant because WHO was able to use those
    moneys to pay part of its employee salaries without having to
    demonstrate that those employees worked exclusively on the
    administration of the transitional housing pr ogram.
    The Bankruptcy Court's $135,653 award cover ed only the latter two
    components of the Trustee's monetary r elief claim. Because WHO
    stipulated at trial that it had assumed LSS's obligation to provide
    10
    appealed to the District Court for the Wester n District of
    Pennsylvania, contending that the Bankruptcy Court had
    erroneously concluded that LSS's interest in the Supportive
    Housing Program grant relationship with HUD qualified as
    property of LSS's bankruptcy estate. The District Court,
    however, affirmed the Bankruptcy Court's judgment, and
    WHO timely appealed to this court.4 In addition to the
    briefs of the parties, we requested (and r eceived) an amicus
    curiae brief from the Bankruptcy Section and the
    Commercial Litigation Department of the Civil Division of
    the Department of Justice stating their position on the
    central issues. We also gave the parties an opportunity to
    reply to this amicus brief.
    II. Property of the Estate
    The filing of a voluntary petition in bankruptcy court
    commences a bankruptcy case and creates a bankruptcy
    estate comprised of the debtor's property as of the
    commencement of the case. See 11 U.S.C.SS 301, 541.
    Section 541(a)(1) of the Bankruptcy Code defines"property
    of the estate" as including "all legal or equitable interests of
    the debtor in property as of the commencement of the
    case." 
    Id. S 541(a)(1).
    As the Supr eme Court observed in
    United States v. Whiting Pools, Inc., 
    462 U.S. 198
    (1983),
    S 541(a)'s legislative history demonstrates that the language
    of this provision was intended to sweep br oadly to include
    "all kinds of property, including tangible or intangible
    property, causes of action . . . and all other forms of
    property currently specified in section 70a of the
    Bankruptcy Act." 
    Id. at 205
    n.9 (quoting H.R. Rep. No. 95-
    595, at 367 (1977), reprinted in 1978 U.S.C.C.A.N. 5963);
    see also In re O'Dowd, 
    233 F.3d 197
    , 202 (3d Cir. 2000).
    In view of this definition, we must determine whether
    LSS's interest in the grant relationship constituted a "legal
    _________________________________________________________________
    relocation assistance to the five displaced individuals (the first
    component), the Bankruptcy Court held that LSS's bankruptcy estate
    could not recover that amount.
    4. The Bankruptcy Court exercised jurisdiction pursuant to 28 U.S.C.
    S 157, the District Court had jurisdiction under 28 U.S.C. S 158(a)(1),
    and we have jurisdiction pursuant to 28 U.S.C. S 158(d).
    11
    or equitable interest[ ]" that, under the terms of S 541(a)(1),
    falls within S 541's property definition. Because a district
    court's conclusion as to whether an item constitutes
    "property of the estate" for purposes ofS 541 raises a
    question of law, our review is plenary. See In re Blatstein,
    
    192 F.3d 88
    , 94 (3d Cir. 1999). W e first identify the specific
    interests regarded by the District Court as constituting
    property of LSS's bankruptcy estate. We next examine the
    ways in which a federal agency's supervisory inter est in a
    grant relationship can alter the dynamics ofS 541's
    property calculus. We then focus on the District Court's
    principal error in this case, i.e., its failur e entirely to
    account for HUD's weighty federal interest in the
    Supportive Housing Program, and conclude that, had the
    court given proper weight to HUD's strong interest, LSS's
    interest in the grant relationship would have been excluded
    from LSS's estate for bankruptcy purposes. Finally, we note
    that considerations of bankruptcy policy militate in favor of
    excluding LSS's interest from S 541's property definition. In
    the course of this discussion, we distinguish LSS's
    Trustee's attempts to rely on case law holding that
    government-issued licenses, in general, qualify as property
    of the estate under the Bankruptcy Code. Our last task will
    then be to delineate the scope of our holding in the instant
    case.
    A.
    Analysis under S 541's property definition must begin by
    focusing directly on the specific inter ests claimed to
    constitute the debtor's property. In the case before us, the
    District Court characterized LSS's interest in the grant
    relationship as a set of contractual rights arising out of the
    Grant Agreement executed between LSS and HUD in 1995,
    ultimately deciding that these contractual rights were
    property of LSS's bankruptcy estate. In r eaching this
    conclusion, the District Court began by turning to relevant
    Pennsylvania state law and determining that, under that
    case law, contractual rights are classified as property
    interests. See, e.g., Klingner v. Pocono Int'l Raceway, Inc.,
    
    433 A.2d 1357
    , 1361 (Pa. Super. Ct. 1981) (noting that
    contractual rights are personal property under
    Pennsylvania law).
    12
    In terms of our analysis, we do not question the District
    Court's reading of Pennsylvania law, and assume that
    ordinary contract rights would qualify as such property
    interests under that state law; it is well-established that
    federal courts typically must look to state law in
    ascertaining the existence and scope of the debtor's"legal
    or equitable interests" for purposes ofS 541(a)(1). See
    Butner v. United States, 
    440 U.S. 48
    , 54 (1979) ("Congress
    has generally left the determination of pr operty rights in the
    assets of a bankrupt's estate to state law.") (footnote
    omitted); 
    O'Dowd, 233 F.3d at 202
    ("While federal law
    defines what types of property comprise the estate, state
    law generally determines what interest, if any, a debtor has
    in property."). It is also settled that the expansive nature of
    S 541's property definition encompasses rights and interests
    arising from ordinary contractual r elationships. See 5
    Collier on Bankruptcy P 541.08[4], at 541-49 (15th ed. rev.,
    King et al. eds., 1996); see also In re Minoco Group of Cos.,
    Ltd., 
    799 F.2d 517
    , 519 (9th Cir. 1986) (holding that
    insurance contracts constitute "property of the estate" for
    purposes of S 541).
    Attempting to delineate the scope of LSS's inter est in the
    grant relationship, the District Court examined the
    provisions of the Grant Agreement executed in 1995
    between LSS and HUD, and identified three sets of
    contractual rights that it believed arose out of the
    relationship: (1) the debtor LSS's right to r eceive payment
    from HUD for authorized expenditures that LSS incurred
    while administering its Supportive Housing Pr ogram
    project; (2) the debtor's right to compel HUD to make
    payments in connection with LSS's administration of the
    Supportive Housing Program; and (3) the debtor's right to
    assign its interest in the Supportive Housing Grant, subject
    to HUD's prior written approval. The court then held that
    LSS's interest in the grant relationship, evidenced by these
    three sets of rights, qualified as pr operty of LSS's
    bankruptcy estate within the meaning of S 541. We
    conclude that this decision was incorrect.
    B.
    At bottom, the problem with the District Court's S 541
    property analysis lies in its failure to take into account
    13
    HUD's strong federal interest in supervising the efficient
    and effective administration of Supportive Housing Program
    grant funds by intermediaries such as LSS, designed to
    ensure that the Program's ultimate beneficiaries (i.e.,
    homeless individuals) receive the full measur e of federal
    assistance afforded to them under the ter ms of the
    Program. As will be seen in detail below, HUD's singular
    interest in preserving such a supervisory role--evidenced by
    the strict and pervasive oversight imposed by the
    Supportive Housing Program scheme on the grant
    relationship--can alter the dynamics of S 541's property
    calculus, resulting in the exclusion of the grantee's interest
    from its bankruptcy estate.
    Our analysis proceeds in several steps. W e first explain
    that a federal agency's supervisory interest over the
    administration of a grant program can r esult in the
    exclusion of a grantee's interest in the grant relationship
    from S 541's property definition if the interest is sufficiently
    weighty. We then present a method for assessing when an
    agency's interest rises to such a level. Finally, we focus on
    the facts of the case before us and on the specific
    provisions of the Supportive Housing Pr ogram, explaining
    the two related ways in which the District Court's failure to
    account for HUD's supervisory interest manifested itself: (1)
    the court neglected to consider the pervasive r estrictions
    imposed on a Program grantee's rights by the substantive
    provisions of two major components of the Supportive
    Housing Program grant scheme; and (2) in light of these
    limitations, the court construed the scope of the LSS's
    rights under the grant arrangement too expansively.
    1.
    A federal agency like HUD clearly has a substantial
    supervisory interest in preserving the coherence and
    integrity of the federal grant scheme it is char ged with
    administering, and in ensuring that federal grant moneys
    disbursed pursuant to that scheme are dispensed by
    intermediaries in an efficient and ef fective manner to the
    ultimate beneficiaries of the grant. While the Bankruptcy
    Code's property definition is certainly expansive, it is not
    limitless, and, as we will demonstrate, a federal agency's
    14
    strong supervisory interest in the administration of a grant
    program can play a significant role in determining whether
    the interests created by a federal grant program fall within
    S 541's definition of "property of the estate."
    We recognize, of course, that each time a federal agency
    executes a contractual agreement with a private party, or
    enters into an arrangement with an entity in or der to
    furnish assistance to the public, a federal interest is
    arguably implicated. We therefor e must take care to
    distinguish those situations in which a federal grantor
    agency's supervisory interest is sufficiently weighty to
    exclude the grantee's interest in the grant r elationship from
    S 541's property definition from those situations in which it
    is not. As we see it, the strength of an agency's supervisory
    interest can best be gauged by examining the substantive
    provisions of the grant scheme established by applicable
    federal statutes and regulations. Cf. In r e Joliet-Will County
    Cmty. Action Agency, 
    847 F.2d 430
    , 431-32 (7th Cir. 1988)
    (analyzing the provisions of a federal "foster grandparents"
    grant program administered by ACTION as part of the S 541
    bankruptcy property inquiry).
    To be sure, if a provision of a federal grant program
    specifically authorizes federal grant moneys to be used to
    pay a debtor grantee's creditors, it will be difficult for us to
    conclude that the federal agency's interest is sufficiently
    weighty to exclude the debtor's interest fr om S 541's
    property definition. Cf. 
    id. at 432.
    But the Supportive
    Housing Program involved in the case befor e us contains no
    such authorization, and thus our analysis of the nature of
    HUD's supervisory interest, as manifested in the
    substantive provisions of the Program, must be more
    searching.
    The strength of an agency's supervisory inter est can best
    be measured by the level of agency oversight over the grant
    relationship preserved in the provisions of the federal grant
    program. A grant framework clearly evidences a desire to
    sustain the federal agency's strong supervisory interest over
    that relationship when it: (1) gives an agency extensive
    control over the identity of the grant r ecipients with whom
    it must deal by limiting the pool of applicants eligible to
    receive funds, and by restricting the grantee's ability to
    15
    substitute a replacement entity in its stead; and (2) imposes
    rigorous federal oversight of the grantee's per formance in
    furtherance of the grant relationship.
    As we see it, a federal agency's retention of pervasive
    restrictions on a grantee's identity and manner of
    performance under a HUD-type grant pr ogram is
    inconsistent with the grantee's assertion of a pr operty
    interest in the grant relationship. As we will discuss below
    after examining the details of the Supportive Housing
    Program, such limitations greatly constrict the scope of the
    rights yielded to the grantee by the terms of the grant
    arrangement, and substantially (if not completely) r estrict
    their transferability and alienability, ther eby effectively
    rendering the grantee's interest essentially valueless.
    Moreover, as we explain infra in Part II.C., inclusion of such
    interests in the grantee's bankruptcy estate would further
    neither the equitable nor the rehabilitative purpose of the
    Bankruptcy Code. As a result, we are satisfied that if these
    controls are sufficiently extensive, i.e., if, under the terms
    of the arrangement between the grantor federal agency and
    the grantee, the agency retains strict, pervasive, and
    minute oversight over the identity of the grant r ecipient and
    the manner of that recipient's perfor mance, the existence of
    such controls can demonstrate that the federal grantor
    agency's interest in ensuring the effective administration of
    that program is weighty enough to exclude the grantee's
    interest from S 541's property definition.5
    A number of federal courts have applied a similar
    approach to resolve the related question whether
    _________________________________________________________________
    5. Our analysis of the supervisory controls and limitations over the grant
    arrangement reserved to HUD is not meant to speak to the relationship
    between federal grantees and grantor agencies in other contexts, such as
    the government's liability for the acts of its grantees for purposes of
    the
    Federal Tort Claims Act. In that context, the Supreme Court has
    distinguished between the pervasive conditions imposed by a grantor
    agency to further federal supervision of the grant's administration, and
    the control over day-to-day operations r etained by the grant recipient.
    Because of this distinction, the Court has held that federal "regulations
    do not convert the acts of entrepreneurs .. . into federal government
    acts." United States v. Orleans, 
    425 U.S. 807
    , 816 (1976) (footnote
    omitted).
    16
    unexpended federal funds themselves and property
    purchased with those moneys once disbursed (as opposed
    to contract rights like those at issue on this appeal)
    constitute bankruptcy property of the debtor within the
    meaning of S 541. For instance, the Seventh Circuit in
    Joliet-Will considered the bankruptcy property status of
    such funds and property in the case of a bankrupt
    nonprofit community service organization. Although the
    debtor's trustee claimed that those items repr esented
    property of the debtor's estate, the Seventh Circuit
    concluded that the federal moneys and personal pr operty
    fell outside of S 541's property definition because the nature
    of the federal grant program and the relationship between
    the grantee community organization and grantor federal
    agency rendered the debtor organization "a trustee,
    custodian, or other intermediary, who lacks beneficial title
    and is merely an agent for the disbursal of funds belonging
    to another." 
    Id. at 432
    (citing to 11 U.S.C. S 541(d)).
    In reaching this conclusion, the court r elied principally
    on the fact that "[t]he grants impose minute controls on the
    use of the funds, such that the recipient has very little
    discretion." 
    Id. (emphasis added).
    More specifically, the
    court noted that each grant required the r ecipient to adhere
    to a budget identifying particular project items and the
    costs chargeable to the grant for each item; that the grantee
    could not re-allocate unused moneys between items; that
    the grantee was required to reconvey title to property
    purchased with grant funds and costing mor e than $1,000
    to the federal government, at the federal agency's direction;
    and that the statutes and regulations cr eating the grant
    scheme did not authorize the grantor federal agency to
    permit grant moneys to be used to pay cr editors of the
    private grantee. See 
    id. Federal district
    and bankruptcy courts have also used
    the pervasiveness of government control over the
    administration of a grant program as the touchstone for
    assessing whether federal grant moneys and the pr operty
    purchased with those moneys constitute pr operty of the
    grantee's bankruptcy estate. See, e.g., In r e Community
    Assocs., Inc., 
    173 B.R. 824
    , 828 (D. Conn. 1994) (holding
    that three vans purchased with grant funds by the debtor,
    17
    a private community service organization, did not constitute
    property of the debtor's estate for bankruptcy purposes, on
    the ground that the agreement between the grantee
    organization and grantor agency imposed " `minute controls'
    on . . . [the] use of the grant funds and the use of the vans"
    purchased with those grant funds); In r e Alpha Ctr., Inc.,
    
    165 B.R. 881
    , 884 (Bankr. S.D. Ill. 1994) (holding that a
    van and state grant moneys transferred by the debtor
    community service organization to a successor grantee were
    not property of the debtor's estate for bankruptcy purposes,
    on the ground that extensive legislation and r egulatory
    rules restricted the debtor community service organization's
    discretion as to the use of grant moneys and vans
    purchased with those grant moneys); cf. In re Southwest
    Citizens' Org. for Poverty Elimination, 
    91 B.R. 278
    , 286-87
    (Bankr. D.N.J. 1988) (noting that, although the federal
    grantor agency conceded that twenty vehicles pur chased by
    the debtor community service organization with federal
    grant funds constituted property of the debtor's estate, the
    federal agency, by virtue of the restrictions imposed by the
    agency on the grantee's use of the funds, retained an
    "equitable reversionary interest" in the vehicles superior to
    the debtor's interest and the debtor's trustee's interest as a
    hypothetical lien creditor under 11 U.S.C.S 544). We believe
    that such a "minute control" analysis is equally appropriate
    in assessing whether a debtor's interest in a grant
    relationship with HUD qualifies as pr operty of the debtor's
    estate under the terms of the Bankruptcy Code.
    We hold then that a federal agency's inter est in ensuring
    the efficient administration of program funds can result in
    the exclusion of the debtor grantee's interest in the grant
    relationship from S 541's pr operty definition if the agency's
    supervisory controls over the identity of the grantee and the
    manner of the grantee's performance ar e sufficiently
    pervasive and rigorous. The District Court, however,
    neglected entirely to take account of HUD's str ong interest
    in the Supportive Housing Program. This omission
    manifested itself in two related ways. First, the court
    mistakenly viewed the provisions of the Grant Agreement
    itself as the exclusive calipers for measuring the rights and
    obligations that LSS and HUD incurred by virtue of their
    grantor/grantee relationship, failing to consider the
    18
    restrictions placed on those rights by the other major
    components of the Supportive Housing Program, both
    statutory and regulatory. Second, the court construed the
    scope of the contractual rights it identified as arising out of
    the Grant Agreement too expansively, omitting
    consideration of the limitations imposed on those rights by
    the full Supportive Housing Program scheme. W e now turn
    to the facts of the case sub judice and to the details of the
    Supportive Housing Program, and explain why the District
    Court's conclusion that LSS's interest in the Program
    qualified as bankruptcy property was err oneous.
    2.
    The District Court conducted its "property of the estate"
    inquiry by focusing solely on the Grant Agreement executed
    between LSS and HUD in 1995, concluding that "LSS'
    rights under the Grant Agreement became property of the
    bankruptcy estate once the bankruptcy petition wasfiled."
    By confining its examination to the Grant Agr eement,
    however, the court failed to take into account the fact that
    the Grant Agreement represents only one component of a
    broader federal grant scheme. To be sur e, the grant
    agreement into which the government and a grantee enter
    is an important element of the Supportive Housing
    Program's framework for the disbursement and
    administration of federal housing assistance funds. See 24
    C.F.R. S 583.400(a) (2000) ("The duty to provide supportive
    housing or supportive services in accordance with the
    requirements of this part will be incorporated in a grant
    agreement executed by HUD and the recipient."). However,
    the grant agreement is by no means the exclusive source of
    those parties' rights and obligations under the federal
    Supportive Housing Program. The rights and obligations of
    grantor and grantee are also detailed in: (1) Subtitle C of
    the Stewart B. McKinney Homeless Assistance Act
    (Homeless Assistance Act or Act), 42 U.S.C. SS 11381-89;
    and (2) a set of regulations codified at 24 C.F.R. S 583
    (Supportive Housing Rule or Rule), see 42 U.S.C. S 11387
    (authorizing the HUD Secretary to issue final regulations
    implementing the Homeless Assistance Act). In fact, the
    Grant Agreement itself recognizes that the provisions of the
    19
    Homeless Assistance Act and the Supportive Housing Rule
    are integral elements of the grant relationship. For example,
    the Grant Agreement states that "[t]his grant agreement will
    be governed by the [Homeless Assistance] Act, [and] the
    Supportive Housing rule (24 CFR 583), a copy of which is
    attached hereto . . . and made a part her eof."
    Considering all of the components of the Supportive
    Housing Program as a coherent whole, it is evident that
    HUD's strong federal interest in safeguar ding the effective
    administration of Program funds, demonstrated by the
    rigorous controls imposed on the grant r elationship by the
    Act and the Rule, suffices to exclude LSS's inter est in the
    grant relationship from LSS's bankruptcy estate. The
    Supportive Housing Program scheme--embodied in the
    Homeless Assistance Act, Supportive Housing Rule, and the
    grant agreement executed between HUD and the grantee--
    places important limitations on and provides HUD with
    extensive oversight over both the identity of grant recipients
    and the manner of those recipients' per formances under
    the grant arrangement. Turning first to the restrictions
    imposed on the identity of grantees, the provisions of the
    Program limit eligibility for receipt of federal funding to
    certain statutorily-enumerated entities: only "a State,
    metropolitan city, urban county, governmental entity,
    private nonprofit organization, or community mental health
    association that is a public nonprofit or ganization" is
    eligible to serve as a grant recipient. See 42 U.S.C.
    S 11382(1).d
    Further, in order to secure the right to administer
    Program funds, even those entities within this limited pool
    of eligible applicants must participate in a nationwide
    competitive process, in which they are r equired to submit a
    comprehensive project proposal. Recipients are selected by
    HUD, and the Homeless Assistance Act expressly mandates
    that HUD use the seven statutorily-enumerated criteria
    listed in the margin in order to make its selection. See 42
    U.S.C. S 11386(b).6 On their face, these seven criteria
    _________________________________________________________________
    6. Section 11386(b), titled "Selection criteria," states in full:
    The Secretary [of Housing and Urban Development] shall select
    applicants approved by the Secretary as tofinancial responsibility
    to
    20
    demonstrate that HUD is to use these factors as a screen
    for ensuring that the grant recipient will implement its
    proposed project and administer Supportive Housing
    Program funds in an efficient and effective manner.
    In addition, and most importantly, the Supportive
    Housing Program preserves HUD's contr ol over the identity
    of the grant recipient by prohibiting changes in the grantee
    absent HUD's prior written approval. The Supportive
    Housing Rule states that "[a] recipient may not make any
    significant changes to an approved pr ogram without prior
    HUD approval," and expressly defines"significant changes"
    to include "a change in the recipient." 24 C.F.R.
    S 583.405(a)(1) (2000). This general r estraint on a grantee's
    ability to alienate or assign its interest in the grant
    arrangement with HUD is also reflected in a provision of the
    Grant Agreement executed between LSS and HUD:"No
    change may be made to the project nor any right, benefit,
    or advantage of the Recipient hereunder be assigned
    without prior written approval of HUD."
    _________________________________________________________________
    receive assistance under this part by a national competition based
    on criteria established by the Secretary, which shall include--
    (1) the ability of the applicant to develop an d operate a
    project;
    (2) the innovative quality of the proposa l in providing a
    project;
    (3) the need for the type of project pr oposed by the applicant in
    the area to be served;
    (4) the extent to which the amount of assistan ce to be provided
    under this part will be supplemented with resources from other
    public and private sources;
    (5) the cost-effectiveness of the pr oposed project;
    (6) the extent to which the applicant has demo nstrated
    coordination with other Federal, State, local, private and other
    entities serving homeless persons in the planning and operation of
    the project, to the extent practicable; and
    (7) such other factors as the Secretary d etermines to be
    appropriate to carry out this part in an ef fective and efficient
    manner.
    42 U.S.C. S 11386(b).
    21
    The Supportive Housing Program's limitations on the
    uses to which grantees can put federal funds ar e just as
    strict, if not more so, than the Program's controls over the
    identity of grant recipients. In general, a Supportive
    Housing Program grant is tied to a particular project
    location, detailed in the recipient's funding proposal and
    application. A recipient may not change the location of the
    project site without prior written HUD appr oval. See 24
    C.F.R. S 583.405(a)(1) (2000). Further more, the Supportive
    Housing Rule requires each recipient's project to comply
    with all applicable state and local housing codes, see 
    id. S 583.300(a),
    and to meet various habitability standards
    with respect to such matters as structur e and materials,
    interior air quality, and water supply, see 
    id. S 583.300(b).
    Most importantly, if the grant recipient r eceives Supportive
    Housing Program moneys for acquisition, r ehabilitation, or
    new construction purposes, the Supportive Housing
    Program requires that the recipient continue to use the
    property at that project site for the particular purposes
    specified in the funding application for at least 20 years.
    See 42 U.S.C. S 11383(b)(1); 24 C.F .R. S 583.305(a) (2000).
    Finally, the Supportive Housing Program fur nishes HUD
    with a series of remedial options exercisable in the event of
    a default on the part of the grant recipient. For example,
    should the grantee cease to use the project site for the
    agreed-upon project purposes befor e the expiration of the
    20-year period, the Supportive Housing Program mandates
    that the recipient be required to r epay to HUD some or all
    of the federal grant moneys it has received. If the property
    ceases to be used for listed project purposes within 10
    years of the project's start date, the Pr ogram requires that
    the recipient repay to HUD 100 per cent of the acquisition,
    rehabilitation, or new construction assistance received. And
    if the property ceases being used in the r equired manner
    some time after 10 years have passed, the repayment
    obligation is reduced by 10 percentage points for each year
    in excess of the 10 years that the property was used as
    supportive housing. See 42 U.S.C. S 11383(c)(1); 24 C.F.R.
    S 583.305(b) (2000). In addition, the Grant Agreement
    executed between LSS and HUD lists other remedial
    options available to HUD upon due notice to the grantee,
    including the issuance of a letter of warning requesting
    22
    corrective action, the reduction of grant amounts, and the
    substitution of an alternate recipient of HUD's choosing.
    In the aggregate, these provisions demonstrate that the
    Supportive Housing Program contemplates a str ong
    supervisory role for HUD, the agency char ged with
    implementing the Program and ensuring its efficient and
    effective administration. As we see it, HUD's interest was
    strong enough to materially affect theS 541 "property of the
    estate" calculus, excluding LSS's interest in the grant
    relationship with HUD from LSS's bankruptcy estate. In
    contrast, in its opinion, the District Court never mentioned
    either the Homeless Assistance Act or the Supportive
    Housing Rule, instead focusing exclusively on the Grant
    Agreement. The court's failure to account for HUD's strong
    supervisory interest in the administration of the Supportive
    Housing Program led to its incorrect conclusion that LSS's
    interest qualified as property of its bankruptcy estate.
    Furthermore, by omitting consideration of HUD's strong
    supervisory interest in the grant relationship, the District
    Court also appeared to give too much weight to LSS's
    contractual rights, because it failed to consider the
    limitations imposed on those rights by the substantive
    provisions of the Supportive Housing Pr ogram scheme. For
    example, in identifying the contractual rights yielded to LSS
    by virtue of its grant relationship with HUD, the District
    Court pointed to the fact that LSS had the power to assign
    its interest in the Supportive Housing Grant arrangement
    to another party. Although it recognized that this power of
    assignment was subject to HUD's prior written appr oval,
    the District Court did not take sufficient note of the extent
    of the restrictions that the other components of the
    Supportive Housing Program, i.e., the Homeless Assistance
    Act and the Supportive Housing Rule, placed on the
    grantee's power to assign.
    For instance, as discussed above, S 11382(1) of the
    Homeless Assistance Act restricts eligibility for Supportive
    Housing Program funding to a prescribed list of entities--
    essentially state and local government units and non-profit
    organizations--and S 11386(b) of the Act directs that
    grantees be selected by HUD according to expr ess
    statutorily-enumerated criteria. Under the ter ms of the
    23
    Supportive Housing Program, LSS would not have had the
    power to assign its interest to a party that fell outside of
    S 11382(1)'s list of eligible entities--e.g., a private for-profit
    corporation--or to a party that failed to meet the criteria set
    forth in S 11386(b). The District Court's analysis, however,
    implied that LSS's right to assign was limited solely by the
    necessity of HUD's formal approval, and not by the
    substantial restrictions on the grant r elationship imposed
    by the other components of the Supportive Housing
    Program. In short, by omitting consideration of HUD's
    strong supervisory interest, the court construed the scope
    of the grantee's power of assignment too broadly.7
    _________________________________________________________________
    7. Although not necessary to our conclusion that LSS's interest in the
    grant relationship fails to constitute part of the property of its
    bankruptcy estate, we note another way in which the District Court's
    assessment of the scope of LSS's interest was too expansive. As noted at
    the outset of Section II, the District Court, in concluding that LSS had
    a cognizable property interest for bankruptcy purposes, also pointed to
    two other contractual rights that it believed LSS possessed as a
    consequence of its grant relationship with HUD: (1) LSS's right to receive
    payment from HUD for authorized expenditur es incurred while
    administering its Supportive Housing Program pr oject; and (2) LSS's
    right to compel HUD to make payments in connection with LSS's
    administration of the Supportive Housing Program. In essence, these
    rights represent two sides of the same coin: both are concerned with
    LSS's ability to require HUD to pay moneys for expenses that LSS
    incurred in implementing and running its Supportive Housing Program
    project, and hence our discussion treats these two rights together.
    The Department of Justice (DOJ), as amicus curiae, argues that, just
    as the District Court construed LSS's power of assignment too robustly,
    so too it treated these contractual rights to compel payment as having
    too broad a scope. Specifically, DOJ contends that LSS did not have a
    general right to receive moneys for HUD. Rather , DOJ asserts, LSS's
    right to receive payment from HUD was cir cumscribed by the provisions
    of the Tucker Act, which authorizes actions seeking money damages
    against the federal government for breach of contract. See 28 U.S.C.
    S 1346(a)(2) ("Little Tucker Act" granting concurrent jurisdiction to the
    district courts and the United States Court of Federal Claims over
    claims, not in excess of $10,000, founded "upon any express or implied
    contract with the United States, or for liquidated or unliquidated
    damages in cases not sounding in tort"); 
    id. S 1491(a)(1)
    ("Big Tucker
    Act"
    granting exclusive jurisdiction to the United States Court of Federal
    Claims over identical claims in excess of $10,000); Dia Navigation Co. v.
    Pomeroy, 
    34 F.3d 1255
    , 1267 (3d Cir. 1994).
    24
    C.
    Considerations of bankruptcy policy also militate in favor
    of the conclusion detailed in the previous section. Cf.
    _________________________________________________________________
    According to DOJ, a claim against the federal government under the
    Tucker Act will lie only if the government, in administering the grant
    program, incurs a contractual obligation to the grantee, breaches that
    obligation (thereby injuring the grantee), and the grantee then uses the
    Tucker Act as a vehicle for obtaining "monetary compensation for [this]
    past injury." Cole County Reg'l Sewer Dist. v. United States, 
    22 Cl. Ct. 551
    , 556 (1991), aff 'd without opinion, 
    949 F.2d 402
    , 404 (Fed. Cir.
    1991); see also City of Wheeling v. United States, 
    20 Cl. Ct. 659
    , 664
    (1990) (holding that the Claims Court, the pr edecessor to the Court of
    Federal Claims, has jurisdiction under the Tucker Act to hear a city's
    challenge to the Environmental Protection Agency's refusal to disburse
    grant funds to cover the increased engineering fee the city was obligated
    to pay as a result of its renegotiation of an engineering contract, on the
    ground that the city's claim "seeks a r emedy which is retroactive in
    nature (monetary compensation for an injury to property)").
    With respect to the Supportive Housing Program, DOJ contends that
    a contractual obligation on the part of HUD would have been triggered
    only if LSS had expended its own moneys for authorized Program
    expenses, and then HUD had refused to r eimburse LSS out of the grant
    funds allocated to LSS's supportive housing pr oject. Thus, according to
    DOJ, LSS did not have the broad, generalized right to compel HUD to
    disburse Program moneys that the District Court appeared to assume
    that LSS possessed; rather, the argument continues, LSS had the much
    narrower right to receive grant funds fr om HUD to cover expenses
    incurred in furtherance of authorized grant purposes.
    DOJ's analysis of LSS's ability to compel payment of Program moneys
    glosses over significant unresolved issues, e.g., whether federal
    assistance agreements, such as the Grant Agr eement at issue on this
    appeal, constitute "express or implied contract[s]" within the meaning of
    the Tucker Act. The jurisprudence on this issue is inconclusive. Compare
    Trauma Serv. Group, Ltd. v. United States, 
    33 Fed. Cl. 426
    , 429-30
    (1995) (holding that a cooperative agreement, a species of federal
    assistance agreement identified in the Federal Grant and Cooperative
    Agreement Act, did not qualify as a contract within the coverage of the
    Tucker Act), aff 'd on other grounds, 
    104 F.3d 1321
    (Fed. Cir. 1997) with
    Thermalon Indus., Ltd. v. United States, 
    34 Fed. Cl. 411
    , 413, 414 (1995)
    (holding that a grant agreement "satisfies the criteria for an express or
    implied contract with the United States and, thus, falls within the scope
    25
    Kokoszka v. Belford, 
    417 U.S. 642
    , 645 (1974) (noting that
    because "it is impossible to give any categorical definition to
    the word `property' " as used inS 70a(5) of the Bankruptcy
    Act, the predecessor to the current definition of property
    contained in 11 U.S.C. S 541, "[i]n determining the term's
    scope--and its limitations--the purposes of the Bankruptcy
    Act must ultimately govern") (inter nal quotation marks and
    citations omitted). It is well-settled that two overarching
    purposes, one equitable and the other rehabilitative,
    undergird the Bankruptcy Code in general and the
    definition of property contained in S 541 in particular. See,
    e.g., In re Andrews, 
    80 F.3d 906
    , 909 (4th Cir. 1996). First,
    the Bankruptcy Code attempts to provide for the efficient
    and equitable distribution of an insolvent debtor's
    remaining assets to its creditors. See, e.g., City of New York
    v. Quanta Resources Corp., 
    739 F.2d 912
    , 915 (3d Cir.
    1984). Second, the Code seeks to provide debtors with a
    _________________________________________________________________
    of . . . Tucker Act jurisdiction" so long as it meets the general black
    letter
    requirements for a binding contract, i.e.,"a mutual intent to contract
    including an offer, an acceptance, and consideration passing between the
    parties"). See also Jeffrey C. Walker, Note, Enforcing Grants and
    Cooperative Agreements as Contracts Under the Tucker Act, 26 Pub.
    Cont. L.J. 683 (1997) (analyzing the disagreement between the Court of
    Federal Claim's decisions in Trauma Services and Thermalon, and
    reasoning that federal assistance agreements should constitute
    "contracts" for purposes of the Tucker Act).
    The case before us does not directly pr esent a claim by LSS seeking to
    compel HUD to pay over Supportive Housing Pr ogram funds, however,
    and we will therefore refrain fr om resolving such open issues.
    Nonetheless, we believe that DOJ's argument in regard to the scope of
    LSS's right to compel payment is not without for ce. If grant agreements
    do qualify as contracts for Tucker Act purposes, it appears that the
    District Court overemphasized the scope of LSS's right to receive
    Program moneys from HUD insofar as the court characterized it as a
    general right to compel payment from HUD. T o the contrary, under the
    Tucker Act regime advanced by the gover nment, LSS's right is much
    narrower, in that a claim against the federal government for money owed
    would lie only if LSS incurred expenses authorized by the terms of the
    Supportive Housing Program, and HUD refused to disburse federal
    moneys to cover such expenses. While the for egoing analysis does not
    inform our decision, it does inveigh against facile, expansive
    construction of LSS's rights under the Grant Agr eement.
    26
    "fresh start" by relieving them of the weight of their
    outstanding debts and permitting them to r eorganize their
    affairs. See, e.g., United States v. Whiting Pools, Inc., 
    462 U.S. 198
    , 203 (1983); Insurance Co. of North America v.
    Cohn, 
    54 F.3d 1108
    , 1113 (3d Cir. 1995). We do not believe
    that inclusion of intangible contractual rightsflowing from
    a HUD-type federal grant arrangement will further either of
    the dual purposes of the Bankruptcy Code.
    Under the scheme contemplated by the Bankruptcy
    Code, a debtor's creditors are typically compensated to the
    extent possible and in as equitable a fashion as possible
    pursuant to a court-approved plan, generally after the
    trustee marshals the debtor's bankruptcy property and
    liquidates it at a bankruptcy sale. As a practical matter, in
    order for such a procedure to generate a pool of funds from
    which creditors can be compensated, the items constituting
    the bankrupt's property must be readily alienable and
    assignable--i.e., they must be capable of being sold to a
    third party and of fetching some value as a consequence of
    that sale. Unlike a federal license, which fur nishes clear,
    quantifiable benefits to the licensee, it is difficult to see how
    LSS's tenuous interest in the Supportive Housing Program
    grant relationship with HUD would yield that value, given
    the fact that, as 
    discussed supra
    in Part II.B.2, any
    potential purchaser would surely have to fall within the list
    of eligible applicants contained in S 11382(1) of the
    Homeless Assistance Act, and would be requir ed to meet
    the criteria set forth in S 11386(b). Mor eover, it is unclear
    why an entity that qualifies as an eligible applicant under
    S 11382(1) would elect to bid on and pur chase the
    opportunity to administer Program funds fr om a previous
    grantee, rather than simply engaging in the or dinary
    grantee selection process. Put another way, even were LSS's
    Trustee to place the right to succeed to LSS's interest in the
    Grant Agreement with HUD up for auction, we ar e dubious,
    as a practical matter, that any potential buyers would
    actually bid for that right.
    Inclusion of a grantee's intangible contractual rights as
    part of the bankruptcy estate in furtherance of the
    Bankruptcy Code's rehabilitative goal seems equally
    problematic. It is true that a debtor's "r eorganization effort
    27
    would have small chance of success . . . if pr operty
    essential to running the business were excluded from the
    estate," Whiting 
    Pools, 462 U.S. at 203
    ; cf. Stewart v.
    Gurley, 
    745 F.2d 1194
    , 1196 (9th Cir . 1984) (per curiam)
    ("Unless the debtor can demonstrate that the pr operty is
    necessary to an effective reorganization, the property is of
    no value to him.").8 However , given the pervasive
    supervisory controls over the grant reserved to HUD under
    the terms of the Supportive Housing Pr ogram scheme, 
    see supra
    Part II.B.2., it is difficult to see how LSS's interest in
    the Supportive Housing Program grant could be considered
    essential to the continued operation of its community
    service operations.
    The Supportive Housing Program makes available to HUD
    an array of remedial options in the event of a default on the
    part of a grantee, such as the filing of a bankruptcy
    petition. For instance, under the terms of the Grant
    Agreement executed between LSS and HUD, once the
    grantee defaults, HUD can seek to preserve the integrity of
    the Supportive Housing Program grant by or dering the
    recipient to stop incurring costs chargeable to the grant
    program, by reducing the amount of grant moneys
    available, or by substituting another recipient of HUD's
    choosing. In fact, after LSS filed its Chapter 11 bankruptcy
    petition on January 14, 1997, HUD exercised one such
    remedial option by freezing LSS's ability to draw down
    grant moneys. Neither of the parties disputes that HUD's
    actions were authorized by the Supportive Housing
    Program. In light of this freeze on the disbursement of
    funds to LSS, it is difficult to see how LSS's contractual
    interest in the grant relationship would be of any
    assistance to its business reorganization.
    In short, we think, as a practical matter, that LSS's
    tenuous interest in the Supportive Housing grant
    _________________________________________________________________
    8. In fact, if an item of property in the hands of a third party is
    essential
    to the debtor's continuing business operations, the debtor's trustee,
    provided that the appropriate statutory conditions are met, will typically
    seek to have the property turned over the debtor's estate, see 11 U.S.C.
    SS 542-43, or to have the transfer set aside, see 
    id. S 544.
    Interestingly,
    in the instant case, LSS's Trustee never sought to have WHO's
    assumption of the Supportive Housing Grant voided.
    28
    arrangement, subject to HUD's pervasive supervisory
    controls, would yield no value even if put up for auction by
    LSS's Trustee. Given the apparent worthlessness of LSS's
    interest, we do not believe that inclusion of that interest
    within S 541's definition of property would serve either the
    Bankruptcy Code's equitable goal of protecting creditors by
    ensuring that they are fairly compensated fr om a tangible
    pool of funds, or the Code's rehabilitative goal of permitting
    the debtor to make a fresh start.
    D.
    In response to this S 541 property analysis, LSS's Trustee
    counters that even highly regulated items of pr operty, such
    as stock exchange seats and government-issued licenses,
    can constitute "property of the estate" for bankruptcy
    purposes, and argues, therefore, that the fact that federal
    law imposes significant restrictions on grantees such as
    LSS should not preclude the grantee's inter est from falling
    within the Bankruptcy Code's property definition. In
    support of this position, the Trustee points us to such
    decisions as In re Page, 107 F . 89 (3d Cir. 1901), involving
    the bankruptcy status of a member's seat on the
    Philadelphia Stock Exchange, see 
    id. at 89,
    and In re
    Central Arkansas Broadcasting Company, 
    68 F.3d 213
    (8th
    Cir. 1995) (per curiam), concerning the bankruptcy status
    of a radio station broadcasting license issued by the Federal
    Communications Commission (FCC), see 
    id. at 214.
    The
    Trustee is certainly correct in contending that the fact of
    significant regulatory control, by itself, will not keep a piece
    of property outside of S 541's expansive scope, and we do
    not mean to suggest that regulation qua regulation directs
    the outcome of the S 541 property inquiry. Rather, we
    conclude only that, under the appropriate set of
    circumstances, the supervisory controls imposed on a grant
    relationship by the substantive provisions of the grant
    program can be sufficiently pervasive, strict, and minute so
    as to make manifest the federal agency's str ong interest in
    overseeing the administration of that grant pr ogram. It is
    that weighty federal interest, and not the bar e fact of
    regulation itself, that can keep the debtor's interest in the
    grant relationship outside of S 541's pr operty definition.
    29
    Furthermore, the Trustee's r eliance on cases such as
    Page and Central Arkansas Broadcasting is unavailing. In
    Page, a decision that is now a century old, we held that a
    debtor's seat on the Philadelphia Stock Exchange qualified
    as property of the bankruptcy estate under the Bankruptcy
    Act of 1898, notwithstanding the fact that the Stock
    Exchange's constitution required any sale or transfer of the
    seat to be approved by the Exchange. See 
    Page, 107 F. at 92
    . We noted that this limitation "possibly affected the
    value of the seat for the purposes of sale, but, while
    restricting, did not destroy its transferability." 
    Id. However, our
    decision in Page has little bearing on our analysis in
    the instant case. Unlike Page, which examined the effect of
    a transfer restriction alone on the bankruptcy status of the
    subject property, our S 541 property analysis takes into
    account the full panoply of supervisory conditions and
    controls imposed by the Supportive Housing Pr ogram
    scheme on the grant relationship between LSS and HUD.
    More importantly, because the case befor e us involves a
    federal agency with a substantial interest in overseeing the
    grant program it is charged with administering, we must
    accord greater weight to that gover nmental interest than we
    ordinarily would provide, as in Page , to a private entity's
    supervisory interest over its relationship with its
    constituent members.
    The Trustee's reliance on Central Arkansas Broadcasting,
    in which the Court of Appeals for the Eighth Cir cuit held
    that a FCC-issued radio operating license fell within the
    ambit of the Bankruptcy Code's property definition, 
    see 68 F.3d at 214-15
    , does more to advance his case. After all,
    the fact that the FCC, a federal agency, designates a
    particular radio operator as licensee and retains the power
    to approve the transfer of an issued license does implicate
    a federal concern. Moreover, the Eighth Circuit's decision is
    consistent with a line of cases holding that state-issued
    licenses, commonly liquor licenses, are encompassed within
    S 541's property definition. See, e.g., In re Nejberger, 
    934 F.2d 1300
    , 1300-01 (3d Cir. 1991) (holding that a debtor
    licensee's interest in a license issued by the Pennsylvania
    Liquor Control Board constituted pr operty of the debtor's
    estate within the meaning of S 541). Nonetheless, we
    conclude that there are fundamental dif ferences in the
    30
    nature of a HUD-type grant relationship as compared to
    that of a licensing arrangement that excludes the former
    from S 541's property definition.
    First, an entity selected as a licensee plays a dif ferent
    role and faces a different set of incentives than does an
    entity chosen as a HUD-type grantee. Ordinarily, an entity's
    receipt of a license permits the entity to engage in federally
    regulated activities for its own profit. In other words, the
    benefits of the license accrue primarily to the licensee itself.
    In contrast, an entity chosen as a HUD-type grant r ecipient
    is not itself the beneficiary, but acts as an intermediary
    administering those moneys for the benefit of the ultimate
    recipients of the federal assistance. Put another way, unlike
    the licensee, the grantee's position is more akin to that of
    "a trustee, custodian, or other intermediary, who lacks
    beneficial title and is merely an agent for the disbursal of
    funds belonging to another." In r e Joliet-Will County Cmty.
    Action Agency, 
    847 F.2d 430
    , 432 (7th Cir . 1988). In this
    latter situation, as compared to a typical licensing
    arrangement, the federal government will likely possess a
    weightier supervisory interest in ensuring that the grantee
    administers the moneys it receives in an ef fective and
    efficient manner so that the ultimate beneficiaries receive
    the full measure of the federal assistance intended for
    them.
    Furthermore, as a practical matter , we do not believe that
    a grantee's interest in a HUD-type grant arrangement is as
    easily bought and sold--and thus as readily capable of
    serving as a source of funds from which the debtor's
    creditors can be paid--as is a debtor's inter est in a
    government-issued license. For example, in Central
    Arkansas Broadcasting, the FCC-issued radio license found
    to constitute property of the debtor's estate had been sold
    and transferred as part of a bankruptcy auction conducted
    by the trustee. 
    See 68 F.3d at 214
    . In fact, courts have
    generally acknowledged that the value of a gover nment-
    issued license can typically be realized thr ough sale,
    notwithstanding conditions requiring gover nment approval
    prior to transfer. See, e.g., Nejber 
    ger, 934 F.2d at 1302
    (noting that "in practice, a liquor license can be bought and
    sold in the market place"); In re T erwilliger's Catering Plus,
    31
    Inc., 
    911 F.2d 1168
    , 1171 (6th Cir . 1990) ("It is undeniable
    that a liquor license has pecuniary value to its holder since
    the license enables the holder to sell alcoholic beverages
    and can be sold for value."). In sharp contrast, our
    
    discussion supra
    at Part II.C. demonstrates the
    unlikelihood that a grantee's interest in a HUD-type grant
    relationship would be able to yield any type of value at a
    bankruptcy auction, especially given the strict r estrictions
    imposed by federal law over the identity of any potential
    grantee.
    E.
    In light of the numerous and varied scenarios under
    which federal agencies enter into contractual arrangements
    with private entities, we must be careful to delineate the
    scope of our holding. As we earlier observed, each time a
    federal agency executes a contractual agreement with a
    private party, a federal interest is ar guably implicated, and
    we certainly do not mean to suggest in our discussion that
    every right arising out of any such contractual arrangement
    should be automatically excluded from S 541's property
    definition. For example, as 
    discussed supra
    in Part II.D., a
    licensee's interest in a government-issued license is
    generally likely to fall within the ambit of the Bankruptcy
    Code's property definition, given the fact that licenses,
    unlike grants, typically inure to the dir ect benefit of the
    recipient (as opposed to other, ultimate beneficiaries), and
    are generally capable of being bought and sold in the public
    market.
    Moreover, we recognize that agencies of the federal
    government can and do routinely enter into contracts with
    private entities that share the features of ordinary
    commercial agreements. Federal procur ement contracts,
    typically entered into between government agency
    purchasers and private suppliers, are one such example.9
    _________________________________________________________________
    9. In fact, in our prior case law, we appear to have assumed that the
    Bankruptcy Code's definition of "property of the estate" would cover
    federal procurement contracts. For instance, in Matter of West
    Electronics, Inc., 
    852 F.2d 79
    (3d Cir. 1988), we considered a
    32
    Our holding is not meant to imply that the rights and
    interests yielded to private entities by those contracts
    automatically fall outside the scope of S 541's property
    definition. Although we need not decide today the question
    whether a contractual interest arising out of a federal
    procurement relationship qualifies as property of the
    debtor's estate within the meaning of 11 U.S.C.S 541, we
    observe that, in contrast to a grantor/grantee r elationship
    such as the one entered into between HUD and LSS in this
    case, a garden-variety federal procur ement contract (for
    goods or services) generally does not directly further a
    public-oriented purpose (such as the provision of
    transitional housing to homeless individuals). Thus, federal
    procurement contracts appear significantly less likely to
    implicate a federal concern akin to the weighty federal
    interests operating in the instant case--i.e., HUD's
    supervisory interest in ensuring the efficient administration
    of federal grant moneys by qualified inter mediaries to the
    ultimate beneficiaries of the grant.
    The absence of a significant, direct public-oriented
    objective undergirding a procur ement contract relationship
    is evident from the language of the Federal Grant and
    Cooperative Agreement Act of 1977 (FGCAA), curr ently
    codified at 31 U.S.C. SS 6301-08.10 The FGCAA's distinction
    _________________________________________________________________
    procurement contract executed between the United States and West
    Electronics, Inc., under which West obligated itself to furnish the Air
    Force with missile launcher power supply units. See 
    id. at 80.
    After
    suffering financial difficulties, W est filed for Chapter 11 bankruptcy
    relief, triggering an automatic stay under 11 U.S.C. S 362, and the
    United States petitioned the bankruptcy court to lift the stay to allow
    the
    government to terminate the contract. See 
    id. at 80-81.
    Although we
    reserved a final determination of the issue, we assumed that the
    automatic stay provision--which under S 362(a) of the Bankruptcy Code
    extends to "any act to obtain possession of property of the [debtor's]
    estate," 11 U.S.C. S 362(a)(3) (emphasis added)--would cover the
    procurement contract at issue in West. See West 
    Elecs., 852 F.2d at 82
    .
    10. Congress enacted the FGCAA in response to agencies' inconsistent
    and often interchangeable use of assistance instruments such as
    procurement contracts and grant agr eements. One of the FGCAA's
    principal stated goals is to
    33
    between procurement contracts and grant agreements is, in
    large part, based on the extent to which each contractual
    arrangement directly furthers a public purpose. The statute
    characterizes a procurement contract as"the legal
    instrument reflecting a relationship between the United
    States Government and . . . [an]other r ecipient when . . .
    the principal purpose of the instrument is to acquir e (by
    purchase, lease, or barter) property or services for the direct
    benefit or use of the United States Government." 31 U.S.C.
    S 6303 (emphasis added). In contrast, the FGCAA describes
    a grant agreement as
    the legal instrument reflecting a relationship between
    the United States Government and . . . [an]other
    recipient when--
    (1) the principal purpose of the relationship is to
    transfer a thing of value to . . . [the] other recipient to
    carry out a public purpose of support or stimulation
    authorized by a law of the United States instead of
    acquiring (by purchase, lease, or barter) pr operty or
    services for the direct benefit or use of the United
    States Government; . . . .
    
    Id. S 6304
    (emphasis added). As the FGCAA's provisions
    recognize, a private party's interest in a federal
    procurement contract is much less likely to serve a public-
    oriented purpose, such as the provision of federal
    assistance to third-party beneficiaries, and thus the federal
    _________________________________________________________________
    prescribe criteria for executive agencies in selecting appropriate
    legal
    instruments to achieve--
    (A) uniformity in their use by executive age ncies;
    (B) a clear definition of the relationships   they reflect; and
    (C) a better understanding of the responsibil ities of the parties
    to
    them . . . .
    31 U.S.C. S 6301(2). For an overview of the r elationship between the
    various federal assistance instruments, and an examination of the legal
    issues they raise, see generally Jeffrey C. Walker, Note, Enforcing Grants
    and Cooperative Agreements as Contracts Under the Tucker Act, 26 Pub.
    Cont. L.J. 683 (1997).
    34
    government's interest in the contractual arrangement
    appears substantially less likely to lead to the exclusion of
    LSS's interest from S 541's pr operty definition.
    F.
    In sum, we do not mean to suggest that every grantee's
    interest in a grant relationship with a federal agency will
    fall outside the scope of S 541's property definition, for we
    must be mindful of the fact that Congress intended the
    Bankruptcy Code's definition of property to sweep broadly.
    But the Code's property definition is not without
    limitations, and under certain concededly narr ow
    circumstances, a federal agency's weighty inter est in
    overseeing the administration of its grant pr ograms can
    suffice to keep a grantee's interest outside of the Code's
    property definition. In this regar d, the touchstone of our
    analysis is the strength of the federal agency's supervisory
    interest over the grant program, best measured by the level
    of agency oversight over the grant relationship preserved in
    the provisions of the federal grant program.
    Controls that are sufficiently extensive, i.e., federal
    agency retention of strict, pervasive and minute oversight
    over the identity of the grant recipient and the manner of
    that recipient's performance, can demonstrate the strength
    of an agency's federal interest in the ef fective
    administration of grant moneys, and can lead to the
    exclusion of the grantee's interest in the grant relationship
    from its bankruptcy estate. In the case befor e us, HUD's
    weighty interest, manifested in the extensive supervisory
    controls imposed by HUD through the pr ovisions of the
    Homeless Assistance Act, Supportive Housing Rule, and
    Grant Agreement itself, sufficed to keep LSS's interest in
    the grant relationship outside of S 541's property definition.
    III. Breach of Fiduciary Duty
    Our conclusion that LSS's interest in the Supportive
    Housing Grant relationship with HUD does not constitute
    property of LSS's bankruptcy estate does not fully dispose
    of the merits. There is an issue in this case that was not
    directly considered by either the Bankruptcy or the District
    35
    Court, and that remains open even in light of our holding
    that LSS's interest falls outside of S 541's property
    definition: whether WHO, by assuming LSS's inter est
    without notifying constituents of the Unsecur ed Creditors
    Committee of which WHO was a member at the time of the
    assumption, breached a fiduciary duty to its fellow
    Committee members.
    The Bankruptcy Code authorizes the appointment of a
    committee of creditors, see 11 U.S.C.S 1102, and grants to
    such committees the power to investigate debtors, to
    negotiate a bankruptcy reorganization plan, and to
    "perform such other services as ar e in the interest of those
    represented," 11 U.S.C. S 1103(c). We have construed
    S 1103(c) as implying a fiduciary duty on the part of
    members of a creditor's committee, such as the present
    Unsecured Creditors Committee, towar d their constituent
    members. See In re PWS Holding Corp., 
    228 F.3d 224
    , 246
    (3d Cir. 2000). A committee member violates its fiduciary
    duty by pursuing a course of action that furthers its self-
    interest to the potential detriment of fellow committee
    members.
    On May 28, 1997, about four months after LSS's January
    14, 1997 bankruptcy petition, WHO executed a Grant
    Agreement Amendment with HUD, pursuant to which WHO
    assumed LSS's interest in the Supportive Housing Program
    grant relationship. The Grant Agreement Amendment in
    fact identified WHO as "Successor to Life Service Systems,
    Inc." LSS had not identified the original Grant Agreement
    on its Schedule of Assets. At the time it assumed LSS's
    interest, WHO was serving on LSS's Unsecur ed Creditors
    Committee. WHO, however, did not disclose the fact that it
    had assumed LSS's interest in the Supportive Housing
    Program grant relationship to its fellow Committee
    members or to the Bankruptcy Court.
    By accepting an invitation to sit on the LSS's Unsecured
    Creditors Committee, WHO clearly incurr ed a fiduciary
    obligation to its fellow Committee members. The question
    remaining before us, therefor e, is whether WHO's actions in
    assuming LSS's interest violated such a duty. The
    Bankruptcy Court summarily concluded that WHO
    "breached the fiduciary duty it owed to general unsecured
    36
    creditors as a result of its membership on the committee of
    unsecured creditors in that its conduct was blatantly self-
    aggrandizing." The conduct to which the Bankruptcy Court
    referred was WHO's assumption of LSS's interest in the
    Grant Agreement with HUD, without notice to either fellow
    Committee members or to the Bankruptcy Court. The
    District Court never reviewed the Bankruptcy Court's
    fiduciary duty analysis, stating that WHO had not claimed
    "that the bankruptcy court erred in concluding that WHO
    breached its fiduciary duty by assuming the LSS' rights
    under the agreement."
    In light of our conclusion above, we are constrained to
    conclude that both the District and Bankruptcy Courts'
    analysis of the breach of fiduciary duty issue was
    incomplete, as neither court considered the important
    question whether a fiduciary obligation to Committee
    members can arise in connection with a transaction
    involving property that falls outside of the debtor's
    bankruptcy estate. This omission is of course explained by
    the fact that both the Bankruptcy and District Courts
    appeared to predicate their breach offiduciary duty
    analyses on the assumption that LSS's interest in the
    Grant Agreement with HUD constituted pr operty of the
    debtor's estate within the meaning of 11 U.S.C.S 541. As
    discussed extensively in Section II, this assumption was
    erroneous. Thus, neither court had occasion to consider
    whether this error would alter its analysis of the fiduciary
    duty issue.
    Moreover, in the initial briefing and at oral argument, the
    parties to this appeal never addressed this important
    question, framing the issue before us solely as whether
    LSS's interest in the Supportive Housing Grant Agreement
    constituted property within the meaning ofS 541. Both
    LSS's Trustee and WHO appear to have assumed that the
    Trustee's action for breach of fiduciary duty would not lie
    if LSS's interest fell outside of S 541's property definition. In
    its amicus curiae brief, the Department of Justice (DOJ)
    challenges this assumption. While arguing at length that
    LSS's interest in the grant relationship with HUD does not
    constitute property of its bankruptcy estate, DOJ also
    contends that WHO violated its fiduciary obligation to fellow
    37
    Committee members by not disclosing the existence of that
    interest. In response, WHO asserts that a breach of a
    fiduciary duty can never occur--in fact, that afiduciary
    duty can never arise--in connection with the transfer of an
    item that is not "property of the estate" within the meaning
    of S 541.
    We have problems with both DOJ's and WHO's positions
    in regard to the breach of fiduciary duty issue. DOJ's
    argument that a fiduciary obligation was violated
    notwithstanding the fact that LSS's interest did not
    constitute property of the estate is less than pellucid.
    Under the DOJ's theory, WHO's failure to disclose the
    existence of LSS's interest in the grant r elationship to either
    the Bankruptcy Court or LSS's creditors materially
    undermined the ability of the Bankruptcy Court to take the
    Supportive Housing Program grant into account in
    formulating a comprehensive Chapter 11 plan for LSS's
    reorganization. What the DOJ fails to explain, however, is
    why property that falls outside of S 541's definition, such as
    LSS's interest in the grant relationship with HUD, has any
    role in a debtor's reorganization.
    At the same time, we are unwilling at this stage, given
    the scanty briefing and argument on this issue, to adopt
    WHO's suggested bright-line rule, which would have us
    declare that a fiduciary obligation can never arise with
    respect to an item of property not included in S 541's
    definition. Perhaps situations (which we cannot anticipate
    here) could exist in which a creditor's active concealment of
    an item of property that does not qualify as pr operty of the
    estate for bankruptcy purposes would threaten to
    undermine the ability of other creditors to receive an
    equitable distribution of the debtor's remaining assets or
    the efforts of the bankruptcy trustee to r eorganize the
    debtor's affairs. In such a circumstance, imposition of a
    fiduciary obligation may very well further the purposes of
    the Bankruptcy Code and the general fiduciary pr ohibition
    against self-dealing.
    In light of the fact that both the Bankruptcy and District
    Courts did not consider these issues, and given the parties'
    failure to fairly present and addr ess these issues to us, we
    decline at this stage of the proceedings to r esolve the
    38
    question whether WHO breached a fiduciary duty it owed to
    fellow Committee members by failing to disclose the
    existence of an item of property--LSS's inter est in the
    Supportive Housing Grant program--that does not
    constitute property of the debtor's estate within the
    meaning of 11 U.S.C. S 541. Rather, we believe the proper
    course of action lies in remand for further pr oceedings
    designed to resolve this issue in the first instance. On
    remand, the court should consider whether afiduciary
    obligation to fellow unsecured creditors can arise out of a
    transaction involving an item of property that does not
    qualify as property of the estate for Bankruptcy Code
    purposes and, if so, whether, based on the specific facts of
    WHO's case, WHO breached such a fiduciary duty.
    IV. Conclusion
    For the foregoing reasons, the judgment of the District
    Court will be reversed, and the case remanded to the
    District Court for a determination as to whether WHO
    breached its fiduciary duty to fellow members of the
    Unsecured Creditors Committee, in light of the fact that
    LSS's interest in the Grant Agreement with HUD does not
    constitute property of LSS's bankruptcy estate. The District
    Court may of course remand the matter to the Bankruptcy
    Court for this determination. Parties to bear their own
    costs.
    A True Copy:
    Teste:
    Clerk of the United States Court of Appeals
    for the Third Circuit
    39