In late August, the Official Committee of Unsecured Creditors (the “Committee”) in the Pacific Energy Resources bankruptcy, began filing adversary actions against various creditors. The complaints filed by the Committee allege the defendants received preferential transfers and/or fraudulent transfers from the Debtor. Prior to filing the adversary actions, the Committee filed a motion with the Delaware Bankruptcy Court seeking standing to pursue the avoidance actions that would otherwise belong to the Debtor (the “Motion,” a copy of which is available here). The Court granted the Committee’s Motion on April 19, 2010 with the consent of the Debtor.
Pacific Energy filed for bankruptcy protection on March 9, 2009. Approximately three months later, on June 4, 2009, the Court entered an order approving Debtor’s postpetition financing. As stated in the order, “… [t]he Prepetition Lenders and the DIP Lenders shall subordinate their unsecured deficiency claims to the claims of the general unsecured creditors solely with respect to the Settlement Proceeds, if any, and the proceeds of the avoidance actions under chapter 5 of the Bankruptcy Code …” Under the DIP financing order, Debtor’s lenders agreed to allow the proceeds of the preference actions to go to the benefit of the unsecured creditors, instead of the secured creditors. Motion at *2.
In its Motion, the Committee concedes that the Bankruptcy Code does not provide express authority for the Committee to prosecute claims belonging to the estate. Motion at *4. Instead, the Committee cites to section 1103(c)(5) of the Bankruptcy Code that permits a committee to perform “such other services as are in the interests of those represented.” 11 U.S.C. Sec. 1103(c)(5). The Committee also cites section 1109(b) of the Bankruptcy Code that authorizes a creditors’ committee, as an interested party, to “appear and be heard on any issue” in a bankruptcy proceeding. 11 U.S.C. Sec. 1109(b). Motion at *4. Finally, the Committee cites the Third Circuit’s decision in Cybergenics for the idea that “sections 1109(b) and 1103(c)(5), taken together, evince a Congressional intent for committees to play a robust and flexible role representing the bankruptcy estate, even in adversarial proceedings.” Official Comm. of Unsecured Cred. of Cybergenics Corp. v. Chinery, 330 F.3d 548, 566 (3d Cir. 2003).
With the avoidance actions now filed, the Court has scheduled a pretrial conference on November 3, 2010 at 1:30 p.m. The Pacific Energy bankruptcy, as well as the avoidance actions filed by the Committee, are before the Honorable Kevin J. Carey, Chief Judge of the United States Bankruptcy Court for the District of Delaware.