[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