[Federal Register Volume 62, Number 100 (Friday, May 23, 1997)]
[Proposed Rules]
[Pages 28391-28393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13614]
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DEPARTMENT OF JUSTICE
28 CFR Part 58
RIN 1105-AA54
Procedures for Suspension and Removal of Panel Trustees and
Standing Trustees
AGENCY: Department of Justice.
ACTION: Proposed rule.
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SUMMARY: The United States Trustee Program (``Program'') is formalizing
procedures by which a chapter 7 panel trustee and a standing chapter 12
or chapter 13 trustee can seek review within the agency of a decision
by the United States Trustee to suspend or terminate the assignment of
cases to the trustee. The procedures are a mandatory prerequisite for
the trustee to seek judicial review. The proposed rule specifies the
manner in which the United States Trustee shall notify a trustee of the
decision to suspend or terminate the assignment of cases. It also
establishes the procedure by which a trustee may request further review
and decision by the Director.
DATES: Written comments must be submitted on or before July 22, 1997.
ADDRESSES: Please submit written comments to the Office of the General
Counsel, Executive Office for United States Trustees, 901 E Street,
N.W., Room 740, Washington, D.C. 20530.
FOR FURTHER INFORMATION CONTACT: Martha L. Davis, General Counsel, or
P. Matthew Sutko, Attorney, (202) 307-1399. This is not a toll-free
number.
SUPPLEMENTARY INFORMATION: The United States Trustee Program was first
enacted on a pilot basis by the Bankruptcy Reform Act of 1978, Pub. L.
No. 95-598, 92 Stat. 2549 (1978), which instituted massive reform in
the Federal bankruptcy system. The United States Trustee Program is a
component of the Department of Justice charged with the responsibility
of supervising the administration of bankruptcy cases and trustees. The
success of the pilot program led Congress to expand the Program
nationwide in 1986 as a permanent program in the Department of Justice.
Bankruptcy Judges, United States Trustees, and Family Farmers Act of
1986, Pub. L. No. 99-554, 100 Stat. 3088 (1986).
The Program consists of an Executive Office for United States
Trustees, which is headed by the Director, and 21 United States
Trustees. Among the administrative functions assumed by the Program is
the responsibility to appoint and supervise trustees who administer
cases under chapters 7, 12, and 13 of the Bankruptcy Code. 28 U.S.C.
Secs. 509, 510 and 586. The United States Trustee Program has enacted
standards that set minimum qualifications for appointment. 28 CFR part
58.
A trustee's performance is monitored by the United States Trustee
Program on an ongoing basis. When appropriate, the United States
Trustee will stop assigning cases to a trustee. In some instances, this
is temporary, as in the case of a suspension; in others it is
permanent. This occurs most often when a trustee engages in improper
conduct or fails to perform adequately. It also occurs when the
caseload within a district declines or when the United States Trustee
determines that cases could be more efficiently administered by other
trustees or by fewer trustees. Trustees are rarely, if ever, surprised
by such a decision. Trustees receive regular reviews and are in regular
contact with Program employees regarding problems or other issues
arising out of their administration of cases. In addition, the Program
has long had a policy of allowing trustees an opportunity to ask the
Director of the Executive Office of United States Trustees to determine
the propriety of a suspension or termination.
This rule will formalize those procedures. Under the rule, a
trustee will receive written notice from a United States Trustee when a
suspension or termination occurs; it shall set forth reasons why that
action is occurring and will refer to or be accompanied by copies of
relevant documentation. The United States Trustee's decision will be
final and unreviewable unless the trustee asks the Director to review
the suspension or termination. If the trustee seeks such a review, the
trustee will be able to provide written submissions to a reviewing
official within the organization, who will be a person who was not
involved in the United States Trustee's decision. After the reviewing
official makes a report and recommendation, the Director will determine
whether the United States Trustee's decision is supported by the record
and the action is an appropriate exercise of the United States
Trustee's discretion. The Director's decision will constitute final
agency action. If a trustee is dissatisfied with the final agency
action, the trustee may then seek judicial review under the relevant
provisions of the Administrative Procedure Act in a United States
district court. Judicial review may be sought only after the trustee
exhausts these remedies.
When published in final form, this rule will facilitate the
Program's fulfillment of its statutory duty to appoint trustees and
supervise their administration of bankruptcy cases. Although trustees
have no constitutional or statutory right to continue receiving
bankruptcy cases in the future, see Joelson v. United States, 86 F.3d
1413 (6th Cir. 1996) (holding that trustees have no statutory or
constitutionally protected interest in their positions as trustees);
Richman v. Straley, 48 F.3d 1139, 1143 (10th Cir. 1995) (trustees have
no constitutional right to continue acting as trustees); Shaltry v.
United States, 182 B.R. 836, 842 (D. Ariz.) (same), aff'd, 1995 WL
866862 (9th Cir. 1995), the proposed rule will ensure that trustees are
apprised of the bases for suspension or termination of case assignments
and will provide trustees with a mechanism to obtain further agency
review of the appropriateness of the suspension or termination.
[[Page 28392]]
Executive Order 12866
This proposed rule has been drafted and reviewed in accordance with
Executive Order 12866, section 1(b), The Principles of Regulation. The
Director has determined that this rule is not a ``significant
regulatory action'' under section 3(f) of Executive Order 12866,
Regulatory Planning and Review, and accordingly the rule has not been
reviewed by the Office of Management and Budget.
Regulatory Flexibility Act
The Director, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this proposed rule and by approving it
certifies that this rule will not have a significant impact on a
substantial number of small entities. This rule only affects
individuals who serve as panel and standing trustees, which is fewer
than 1,500 individuals.
Paperwork Reduction Act
This proposed rule contains no new information collection or
recordkeeping requirements under the Paperwork Reduction Act (44 U.S.C.
Secs. 3501, et seq.).
Unfunded Mandates Reform Act of 1995
This proposed rule will not result in the expenditure by State,
local and tribal governments, in the aggregate, or by the private
sector, of $100,000,000 or more in any one year, and it will not
significantly or uniquely affect small governments. Therefore, no
actions were deemed necessary under the provisions of the Unfunded
Mandates Reform Act of 1995.
Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule defined by Sec. 804 of the Small
Business Regulatory Enforcement Act of 1996. This rule will not result
in an annual effect on the economy of $100,000,000 or more; a major
increase in costs or prices; or significant adverse effects on
competition, employment, investment, productivity, innovation, or on
the ability of United States-based companies to compete with foreign-
based companies in domestic and export markets.
List of Subjects in 28 CFR Part 58
Bankruptcy, Trusts and trustees.
For the reasons set forth in the preamble, the Department of
Justice proposed to amend 28 CFR part 58 as follows:
PART 58--REGULATONS RELATING TO THE BANKRUPTCY REFORM ACTS OF 1978
AND 1994
1. The authority citation for Part 58 is revised to read as
follows:
Authority: 28 U.S.C. Secs. 509, 510, 586, 5 U.S.C. Sec. 301.
2. New section 58.6 is added to read as follows:
Sec. 58.6 Procedures for suspension and removal of Panel Trustees and
Standing Trustees.
(a) A United States Trustee shall notify a panel trustee or a
standing trustee in writing of any decision to suspend or terminate the
assignment of cases to the trustee including, where applicable, any
decision not to renew the trustee's term appointment. The notice shall
state the reason(s) for the decision and should refer to, or be
accompanied by copies of, pertinent materials upon which the United
States Trustee has relied and any prior communications in which the
United States Trustee has advised the trustee of the potential action.
The reasons may include, but are in no way limited to:
(1) Failure to safeguard or to account for estate funds and assets;
(2) Failure to perform duties in a timely and consistently
satisfactory manner;
(3) Failure to comply with the provisions of the Code, the
Bankruptcy Rules, and local rules of court;
(4) Failure to cooperate and to comply with instructions and
policies of the court, the bankruptcy clerk or the United States
Trustee;
(5) Substandard performance of general duties and case management
in comparison to other members of the chapter 7 panel or other standing
trustees;
(6) Failure to display proper temperament in dealing with judges,
clerks, attorneys, creditors, debtors, the United States Trustee and
the general public;
(7) Failure to adequately supervise professionals or employees;
(8) Failure to file timely, accurate reports, including interim
reports, final reports, and final accounts;
(9) Failure to meet the eligibility requirements of 11 U.S.C. 321
or the qualifications set forth in 28 CFR 58.3 and 58.4 and in 11
U.S.C. Sec. 322;
(10) Failure to attend in person or appropriately conduct the 11
U.S.C. Sec. 341(a) meeting of creditors;
(11) Action by or pending before a court or state licensing agency
which calls the trustee's competence, financial responsibility or
trustworthiness into question;
(12) Inability to accept assigned cases due to conflicts of
interest or to the trustee's unwillingness or incapacity to serve;
(13) Change in the composition of the chapter 7 panel pursuant to a
system established by the United States Trustee under 28 CFR 58.1;
(14) A determination by the United States Trustee that the
interests of effective case administration warrant a reduction in the
number of panel trustees or standing trustees. The notice shall advise
the trustee that the decision is final and unreviewable unless the
trustee files a timely, written request for administrative review with
the Director, Executive Office for United States Trustees, no later
than 20 calendar days from the date of the United States Trustee's
notice.
(b) The United States Trustee's decision shall be effective on the
date specified by the United States Trustee. If the trustee files a
request for administrative review, the trustee may seek a stay of the
decision from the United States Trustee. If the United States Trustee
declines to stay the decision, the trustee may seek a stay from the
Director.
(c) The trustee's written request for administrative review
(``request for review'') by the Director shall describe fully why the
trustee disagrees with the United States Trustee's decision, and shall
be accompanied by all material that the trustee wants the Director to
consider in reviewing the decision.
(d) Upon receiving a timely request for review, the Director shall
appoint a reviewing official. The reviewing official shall be a person
in the United States Trustees Program who was not involved in the
United States Trustee's decision nor located within the region of the
United States Trustee who has made the decision.
(e) The reviewing official shall transmit a copy of the trustee's
request for review and the accompanying materials to the appropriate
United States Trustee. The United States Trustee shall have 20 calendar
days from the date of the transmittal to respond to the matters raised
in the trustee's request for review and to provide any additional
materials that the United States Trustee wants the reviewing official
to consider, with a copy transmitted to the trustee. The trustee shall
have 10 calendar days from the date of the United States Trustee's
response to reply, with a copy to the United States Trustee. The
reviewing official has discretion to extend the United States Trustee's
or the trustee's time for response to a date certain.
[[Page 28393]]
(f) The reviewing official may seek additional information from any
party in the manner and to the extent the reviewing official deems
appropriate.
(g) The reviewing official shall review the record and issue a
written report and recommendation to the Director within 30 calendar
days of the last date fixed under paragraph (e) for submission of
materials.
(h) The Director thereafter shall determine whether the United
States Trustee's decision is supported by the record and the action is
an appropriate exercise of the United States Trustee's discretion, and
shall issue a written decision adopting, modifying or rejecting the
reviewing official's recommendation within 20 calendar days of the date
of the reviewing official's report and recommendation. The Director's
decision shall constitute final agency action.
(i) This section does not apply to any decision to increase the
size of the chapter 7 panel or to appoint additional standing trustees
in the district or region.
(j) A trustee who files a request for review shall bear his or her
own costs and expenses, including counsel fees.
Dated: May 20, 1997.
Joseph Patchan,
Director, Executive Office for United States Trustees.
[FR Doc. 97-13614 Filed 5-22-97; 8:45 am]
BILLING CODE 4410-40-M
