In Re J. David Dominelli, Debtors. Official Creditors' Committee v. Louis Metzger, Trustee

The primary issue presented on appeal is a narrow one. We are called upon to decide whether a bankruptcy court is authorized, in a Chapter 7 proceeding, to obligate debtor estates for the legal expenses incurred by a creditors’ committee. We affirm the district court’s order holding that such expenses are not authorized.

I.

Involuntary petitions were filed on February 13, 1984 against the above-captioned debtors. On May 8,1984, a creditors’ committee, generally known as the J. David Creditors’ Committee (“Creditors’ Commit tee”), was formed. On October 18, 1984, the Creditors’ Committee submitted its Application for Order Approving Employment of Richard Wildman as Attorney for the J. David Creditors’ Committee (“Application”). The bankruptcy court entered an order on October 30, 1984. The order reads, in its entirety, as follows:

(Emphasis added.) The phrase “if after noticed hearing that is deemed appropriate” was a handwritten insertion by the bankruptcy judge. The Trustee was not afforded an opportunity to submit his position with respect to the Application.

The Trustee appealed to the district court, which held that the bankruptcy court’s order authorizing the Creditors’…