[REDACTED], a member of the
chapter 7 panel for the United States Bankruptcy Court for the District
of [REDACTED],(1) seeks review of a decision
by the United States Trustee for Region [REDACTED] to suspend her receipt
of new case assignments while she works to improve the performance of her
trustee duties and the administration of her existing caseload.(2)
Based upon the record before me, I affirm the United States Trustee's decision.(3)
I. Course of this Proceeding
The trustee has been a member
of the panel of chapter 7 trustees for the United States Bankruptcy Court
for the District of [REDACTED] since July 15, 1996. Due to perceived inadequacies
in her administration of cases, the trustee was notified on March 25, 1998
that new case assignments would be suspended (the "Notice").(4)
By letter dated April 8, 1998, the trustee filed a timely request for review
with the Director of the Executive Office for United States Trustees (the
"Request for Review"). The Request for Review was brief and contained no
supporting materials. For this reason, the Office of the Director wrote
the trustee on April 15, 1998 to inform her of the requirements of 28 C.F.R.
58.6(i) and gave her until April 23, 1998 to augment her submission if
she chose to do so.(5) By letter dated April
22, 1998, the trustee wrote the Office of the Director stating that she
had no additional materials in her possession that supported her request
for review. On May 4, 1998, the United States Trustee filed her response
to the Request for Review (the "Response").
II. Standard of Review
In conducting this review, the Director must consider two factors:
1. Did the United States Trustee's decision constitute an appropriate
exercise of discretion; and,
2. Was the United States Trustee's decision supported by the record.
See 28 C.F.R. 58.6(i) (specifying the scope of the Director's
United States Trustees supervise
panel trustees. 28 U.S.C. 586(a)(1). They carefully "monitor the performance
of panel members . . . in order to determine whether they should be continued
in or removed from panel membership." H.R. Rep. No. 95-595, 95th
Cong., 1st Sess. at 102 (1977). Under the law, "[t]he United
States trustee is permitted to conduct his own investigation . . . to exercise
effective supervision and make an effective evaluation of the performance
of the private trustees on the panel." Id. at 110.
The United States Trustee
suspended the trustee for failing to (1) perform duties in a timely and
consistently satisfactory manner; (2) comply with the provisions of the
Bankruptcy Code, the Bankruptcy Rules, and the local rules of the court;
(3) cooperate and comply with orders, instructions and policies of the
court, the bankruptcy clerk and United States Trustee; and (4) perform
her general duties and case management comparably to that of other members
of the chapter 7 panel. See Notice (and documents attached thereto);
and Response at 2. The United States Trustee concluded the trustee should
be suspended from receiving new cases while she worked to improve her performance
in these areas. Notice; Response at 1.
Trustees are fiduciaries
with wide-ranging responsibilities to effectuate the goals of the particular
chapter under which a bankruptcy case is filed. Because they are fiduciaries,
trustees are held to very high standards of honesty and loyalty. See
generally Woods v. City National Bank & Trust Co., 312
U.S. 262, 278 (1941); Mosser v. Darrow, 341 U.S. 267 (1951). See
also Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545,
546 (1928) (Cardozo, C.J.).
The record in this case reveals
that the trustee has experienced significant problems in administering
her cases. One consistent problem has been her inability to file timely
and appropriate pleadings on behalf of the estates that she has been assigned
to protect. The following examples are illustrative.
On October 8, 1997, the trustee
filed a motion in the [REDACTED] bankruptcy case, [REDACTED] , which she
captioned "Amendment to Trustee's Objections to Disallow a Claim." By Order
dated October 20, 1997, the bankruptcy court denied the motion for several
reasons. The court held "[t]here is no pleading in the Court's file which
the Amendment appears to alter." The court also found the amendment to
be "unintelligible," and could not ascertain from it what type of relief,
if any, the trustee was seeking. This forced the court to advise the trustee
on an elementary point of procedure, noting that "[i]f what the Trustee
seeks to do is not object [to a claim], that is all she must do - NOT
OBJECT. If she seeks other relief, that is not discernable from the
pleading filed (emphasis in the original)."
The trustee has filed other
deficient pleadings. On October 27, 1997, for example, the trustee filed
an "Order Motion to reopen chapter 7 case" in the [REDACTED] bankruptcy
case, [REDACTED]. The Chief Judge ruled that the motion was "unintelligible"
and instructed the trustee to "read your motion and figure out a proper
order." On October 27, the court's Courtroom Deputy returned the motion
to the trustee with instructions to file a motion that complied with applicable
requirements. The trustee refiled her motion on November 5, but it contained
spelling errors, which the court had to correct. The trustee made the same
errors in a similar motion she filed on November 4, 1997 in the [REDACTED]
bankruptcy case, [REDACTED] . The court also had to correct those errors.
In the [REDACTED] W. bankruptcy
case, [REDACTED], the trustee filed a motion to dismiss the debtor's bankruptcy
case for twice failing to appear at the initial meeting of creditors required
by section 341 of the Bankruptcy Code. The trustee's motion was deficient
and unintelligible. In her prayer for relief, for example, the trustee
asked the "Court [to] enter an [sic] Motion to Dismiss this case." The
motion's various deficiencies caused the court to issue an order dated
September 5, 1997 denying the motion for failing to comply with the Federal
Rules of Bankruptcy Procedure and the district's local rules. The order
instructed the trustee to make an appropriate filing within ten days or
risk having the motion denied. The trustee failed to file a renewed motion.
The court, after noting the trustee's failure to timely file a competent
motion, denied the motion to dismiss the case by order dated September
After the trustee realized
her mistake in the [REDACTED] bankruptcy case, she filed a revised motion
to dismiss the case. In the interim, however, the court had issued an order
discharging the debtor. For this reason, the court issued an order on October
8 denying the trustee's belated motion to dismiss. The trustee's careless
practices thus prevented the trustee from pressing her contention that
the debtor's conduct warranted the dismissal of his bankruptcy case.
Several months later, the
trustee experienced a similar problem in the [REDACTED] bankruptcy case,
[REDACTED]. In that case, she also filed a motion seeking to dismiss the
debtor's case for failing to appear at a section 341 meeting of creditors.
The district's local procedures obliged the trustee to notify the court
whether her motion was contested so the court could thereafter act upon
it. She failed to do so. Consequently, on January 26, 1998, the court issued
an "Order to Show Cause to [the trustee] as to Why Sanctions Ought not
be imposed." The order noted that "in other cases . . . under precisely
the same facts, the Trustee has been advised by the Clerk's Office of the
importance of timely prosecuting such motions."
On January 29, 1998, the
trustee filed a response in which she attempted to justify her failure
to comply with applicable procedures. She claimed she had not done so because
she had to hold trustee sales in a number of cases; had to file reports
in other cases with the court and with state taxing authorities; had to
file a 180 day report with the United States Trustee; was in solo practice
and, "compared with the other priority cases and duties due this Trustee
needing my legal attention, the [Robert] D. dismissal did not appear to
be a priority."
This was not a satisfactory
response. In the [REDACTED] case, the trustee concluded that the debtor's
case should be dismissed because the debtor failed to appear at the meeting
of creditors. That meeting is important. At it, the United States Trustee
-- or the trustee acting as her designee, and all creditors, have the right
to question the debtor about his financial affairs. 11 U.S.C. 341; Fed.
R. Bankr. P. 2003. Dismissal can be an appropriate sanction for failing
to submit to an examination. The Handbook for Chapter 7 trustees,
which is provided to every trustee, expressly provides that it may be appropriate
for a trustee to seek dismissal of a debtor's case if the debtor does not
appear for examination. Handbook at 28. In this case, the trustee
failed to pursue dismissal simply because she was too busy to correct her
own procedural mistakes. That is not acceptable conduct.
The record reflects that
the trustee has other performance problems. She has filed erroneous reports
of no distribution. Notice at Attachment 1 (March 20, 1998 memorandum from
the Senior Bankruptcy Analyst to the United States Trustee); and Response
at 5-6. She has failed to provide notice of asset sales to appropriate
parties. Notice at Attachment 1; Response at 2-5. She has failed to administer
her cases in timely fashion and has failed to file trustee's final reports
with the court in timely fashion. 11 U.S.C. 704(9) (requiring trustee to
file final reports); Notice at Attachment 1; Response at 6. She also has
unreasonably delayed the deposit of estate funds in a number of bankruptcy
cases. Notice at Attachment 1; Response at 4-5.
The United States Trustee's
Notice and Response are supported by extensive documentation that establishes
this trustee has failed to adequately discharge her trustee duties in these
respects. The trustee's request for review disputes some, but by no means
all, of the problems identified by the United States Trustee, but her principal
contentions are that she has been singled out for sanction because she
is [REDACTED] (Request for Review at 1-2, 4), and her poor performance
arises from a failure by the United States Trustee to adequately train
her (id. at 4). The record does not support those contentions.
There is no evidence before
me that would, in any way, indicate that the trustee's ethnicity or race
played any role in her suspension. This trustee was appointed in 1996 with
four other trustees. Response at 10. The United States Trustee considers
this to be the trustee's "peer group." Id. The trustee contends
she has not "been treated the same as the other new Trustee's [sic] hired"
in 1996. Request for Review at 1-2. Specifically, the trustee asks that
her caseload be compared with other trustees to determine whether she has
been receiving a comparable number of cases. Request for Review at 4. The
United States Trustee notes, in her response, that cases are assigned to
trustees on a blind rotation system and not through any sort of direct
assignment by the United States Trustee (Response at 9), and submits data
establishing this trustee has received more total cases than the four other
trustees hired during the same period. Id. The data also reveals
that the trustee has administered roughly the same number of asset cases
as the other trustees. Id. This record simply provides no support
for the conclusion that this trustee has suffered any form of discrimination.
To the contrary, the United States Trustee has carefully documented a variety
of serious performance deficiencies.
Nor can I accept the trustee's
position that her performance failures should be excused because she did
not receive adequate training. Regardless of the cause, it is appropriate
to suspend trustees who cannot do their job. Trustees exist not for their
own benefit but to collect, protect, account for, and distribute these
revenues to creditors in accordance with the payment provisions set forth
in the Bankruptcy Code. 11 U.S.C. 704; 62 Fed. Reg. 51740, 51741 (Oct.
2, 1997). Given the large amounts of money they control and the many duties
they perform, trustees who cannot manage their estates properly diminish
the integrity of the bankruptcy system and jeopardize the interests of
debtors and creditors. Id. For this reason, it is crucial that trustees
be supervised; if necessary, those who cannot fulfill their duties must
stop receiving new cases. Id.
Thus, even if the United
States Trustee had given this trustee little or no training, it would still
be appropriate to suspend her if she were failing to perform her trustee
duties. In this case, however, the record establishes that the office of
the United States Trustee devoted considerable time and effort to training
this trustee. At the time of her appointment, the trustee, along with other
recently appointed trustees, received three full days of formal instruction.
Response at 7. That training was conducted at the office of the United
States Trustee. Response at Attachment I. Speakers included United States
Trustee Program personnel, officials of the Bankruptcy Court, and other
chapter 7 panel trustees. Id. During the trustee's tenure, the office
of the United States Trustee has conducted at least seven additional training
seminars specifically for trustees. Id. at 7 and Attachments J and
W. On two occasions the office of the United States Trustee provided on-site
assistance to the trustee. Id. at 7-8 and Exhibit L. Indeed, the
trustee admits that at least some of that "technical assistance" was "great."
Request for Review at 2. Moreover, the office regularly communicated with
the trustee about the performance of her trustee duties through written
correspondence.(6) Id. at 7.
The decision to suspend this
trustee was an appropriate exercise of the United States Trustee's discretion
and is supported by the record. The trustee has experienced a broad array
of performance problems including deficient and untimely pleadings, erroneous
distribution reports, failing to provide notice of asset sales to appropriate
parties, failing to administer her cases in timely fashion, failing to
file trustee's final reports in timely fashion, and delaying her deposit
of estate funds. This trustee clearly needs an opportunity to devote more
time to dealing with her pending cases and working to resolve her performance
deficiencies. A suspension from new case assignments will give her that
Accordingly, based upon my
review of the record, including the written submissions of the United States
Trustee and the trustee, I affirm the United States Trustee's decision
to suspend the trustee's eligibility for assignment to chapter 7 cases
while the trustee attempts to improve her performance.
The foregoing conclusions
and decisions constitute final agency action in this matter.
Dated: May 28, 1998
Executive Office for
United States Trustees
1. Hereinafter, for ease of reference, "the trustee."
2. United States Trustees are Justice Department officials appointed by, and who serve at the pleasure of, the Attorney General. 28 U.S.C. 581(a) and (c). The Director of the Executive Office for United States Trustees is a Justice Department official who acts under authority delegated by the Attorney General. Panel trustees, such as this trustee, generally serve under appointments that have a term not to exceed one year.
3. The record in this matter includes the United States Trustee's decision; the trustee's request for review; the United States Trustee's response; correspondence submitted by the trustee to the Director; and documents that accompanied those various submissions. In addition, I obtained a copy of the trustee's appointment papers from the Office of Review and Oversight of the Executive Office for United States Trustees.
4. The United States Trustee did not issue an Interim Directive. See 28 C.F.R. 58.6(d) (setting forth the bases for an Interim Directive). Accordingly, the trustee has continued to receive new case assignments while this review has been conducted. See 28 C.F.R. 58.6(c) (providing that a trustee shall continue to receive new case assignments during the review period unless the United States Trustee issues an Interim Directive).
5. As a result of the extra time given to the trustee, the United States Trustee's response to the Request for Review became due on May 8, 1998.
6. The record also reveals that the office's attempt to assist the trustee is ongoing. At the time the United States Trustee notified the trustee that she was being suspended, the trustee was asked to contact the Assistant United States Trustee in [REDACTED] "to set a date for a staff member to come to your offices for a field review." Notice at 1.