Turner v. Stuart (In re Stuart) - Nos. 05-95809-JB, 05-96715-JB, 2005 Bankr. LEXIS 2855 (Bankr. N.D. Ga. Dec. 16, 2005)

Rule:

Construing 11 U.S.C.S. § 307, the courts have repeatedly held that the United States Trustee has standing to appear and be heard on any issue in any case and that a lack of pecuniary interest in the outcome of a bankruptcy proceeding does not deny the United States Trustee's standing. The courts recognize that the United States Trustee represents a public interest, and the legislative history of 11 U.S.C.S. § 307 demonstrates Congressional intent to broaden the standing and powers of the United States Trustees to permit them to take an active role in the administration of bankruptcy cases. The requirements in the Federal Rules of Bankruptcy Procedure that a great number of notices and pleadings be sent to the United States Trustee further confirm the proposition that United States Trustees are to be involved and heard in bankruptcy cases on a wide variety of issues.

Facts:

The cases were debtor Curtis L. Stuart’s third and fourth bankruptcy cases filed since October 5, 2004. The United States Trustee filed motions to dismiss these cases with prejudice. The moving party in the instant motions to dismiss was Felicia S. Turner, the United States Trustee for Region 21 (U.S. Trustee), the Region serving the judicial districts in the State of Georgia. Counsel for the U.S. Trustee argued that debtor's lack of good faith was evidenced by his failure to appear at the initial debtor interview in either case and his failure to appear at the 11 U.S.C.S. § 341 meeting of creditors in either case. Debtor argued that the U.S. Trustee had no standing to bring a motion to dismiss, as the U.S. Trustee was not elected by the creditors. 

Issue:

Did the U.S. Trustee have standing to bring these motions to dismiss?

Answer:

Yes.

Conclusion:

Construing 11 U.S.C.S. § 307, the courts repeatedly held that the U.S. Trustee has standing to appear and be heard on any issue in any case and that a lack of pecuniary interest in the outcome of a bankruptcy proceeding does not deny the U.S. Trustee's standing. The courts recognized that the U.S. Trustee represented a public interest, and the legislative history of 11 U.S.C.S. § 307 demonstrated Congressional intent to broaden the standing and powers of the U.S. Trustees to permit them to take an active role in the administration of bankruptcy cases. The requirements in the Federal Rules of Bankruptcy Procedure that a great number of notices and pleadings be sent to the U.S. Trustee further confirm the proposition that they were to be involved and heard in bankruptcy cases on a wide variety of issues. The U.S. Trustee unquestionably had standing to file the motions to dismiss these cases for cause, including debtor's failure to comply with his obligations under 11 U.S.C.S. § 343. Next, 11 U.S.C.S. § 1112(b) provided for the filing of a motion to dismiss "for cause" by the U.S. Trustee. A Chapter 11 debtor's lack of good faith could constitute cause under § 1112(b). The totality of the circumstances supported the conclusion that these third and fourth Chapter 11 cases were not filed in good faith. It appeared that both cases were filed for the sole purpose of invoking the automatic stay. Finally, the court addressed a creditor's motion to annul the automatic stay in one of the cases.