[Federal Register Volume 74, Number 156 (Friday, August 14, 2009)]
[Proposed Rules]
[Pages 41101-41104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19456]


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DEPARTMENT OF JUSTICE

28 CFR Part 58

[Docket No: EOUST 103]
RIN 1105-AB16


Procedures Governing Administrative Review of a United States 
Trustee's Decision To Deny a Chapter 12 or Chapter 13 Standing 
Trustee's Claim of Actual, Necessary Expenses

AGENCY: Executive Office for United States Trustees (``EOUST''), 
Justice.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This notice of proposed rulemaking (``rule'') sets forth the 
procedures for a chapter 12 or chapter 13 standing trustee 
(``trustee'') to obtain administrative review of a United States 
Trustee's decision to deny a trustee's claim that certain expenses are 
actual and necessary for the administration of bankruptcy cases. 
Section 1231(b) of the Bankruptcy Abuse Prevention and Consumer 
Protection Act of 2005 (``BAPCPA''), codified at 28 U.S.C. 586(e), 
requires that: Trustees exhaust all administrative remedies pertaining 
to a denial of a claim of actual, necessary expenses before seeking 
judicial review; and the Attorney General prescribe procedures for 
administrative review of such denials. This rule ensures that the 
process for administratively reviewing a United States Trustee's denial 
of a trustee's request for expenses is fair and effective.

DATES: Submit comments on or before October 13, 2009.

ADDRESSES: Comments on the rule may be submitted via http://www.regulations.gov, by telefax to (202) 307-2397, or by postal mail to 
EOUST, 20 Massachusetts Ave., NW., 8th Floor, Washington, DC 20530. To 
ensure proper handling of comments, please reference ``Docket No. EOUST 
103--Trustee Expenses'' on all written and electronic correspondence.

FOR FURTHER INFORMATION CONTACT: Ramona D. Elliott, General Counsel, or 
Larry Wahlquist, Office of General Counsel, at (202) 307-1399 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Posting of Public Comments

    Please note that all comments received are considered part of the 
public record and made available for public inspection online at http://www.regulations.gov. Such information includes personal identifying 
information (such as your name, address, etc.) voluntarily submitted by 
the commenter. If you want to submit

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personal identifying information (such as your name, address, etc.) as 
part of your comment, but do not want it to be posted online, you must 
include the phrase ``PERSONAL IDENTIFYING INFORMATION'' in the first 
paragraph of your comment. You must also locate all the personal 
identifying information you do not want posted online in the first 
paragraph of your comment and identify what information you want 
redacted.
    If you want to submit confidential business information as part of 
your comment but do not want it to be posted online, you must include 
the phrase ``CONFIDENTIAL BUSINESS INFORMATION'' in the first paragraph 
of your comment. You must also prominently identify confidential 
business information to be redacted within the comment. If a comment 
has so much confidential business information that it cannot be 
effectively redacted, all or part of that comment may not be posted on 
http://www.regulations.gov.
    Personal identifying information and confidential business 
information identified and located as set forth above will be placed in 
the agency's public docket file, but not posted online. If you wish to 
inspect the agency's public docket file in person by appointment, 
please see the FOR FURTHER INFORMATION CONTACT paragraph. Comments 
filed after the end of the comment period may be considered to the 
extent feasible.

Discussion of Rule

    The administration of all chapter 12 and 13 bankruptcy cases is 
entrusted to private persons who are case or standing trustees under 
the supervision and oversight of a regional United States Trustee. As 
distinguished from case or standing trustees, United States Trustees 
are employees of the Department of Justice. A standing trustee is 
appointed by the United States Trustee under 28 U.S.C. 586 and 
administers more than one chapter 13 or chapter 12 case, as opposed to 
a case trustee who is appointed under 11 U.S.C. 1302 or 11 U.S.C. 1202 
and who administers only the case to which the trustee is appointed. 
This rule addresses the right, conferred by the Bankruptcy Abuse 
Prevention and Consumer Protection Act of 2005 (``BAPCPA''), of a 
standing trustee to obtain administrative review when the trustee's 
request for projected expenses, referred to as a ``claim of actual, 
necessary expenses'' in 28 U.S.C. 586(e)(3), is denied by the United 
States Trustee.
    When a debtor files for bankruptcy relief under chapter 12 or 
chapter 13, the debtor proposes a plan to pay his or her creditors a 
percentage of the amounts owed to creditors over a specified period of 
time and obtains court approval of this plan. This process is termed 
confirming a chapter 12 or chapter 13 plan. Once the bankruptcy court 
confirms the plan, the trustee will oversee the payment of creditors 
pursuant to the plan. The debtor pays plan payments to the trustee and 
the trustee then disburses the appropriate amounts to creditors.
    As part of the process of administering debtors' cases, a trustee 
incurs expenses. A trustee is authorized to collect a specified 
percentage of disbursed funds from debtors' plan payments to pay for 
these expenses. However, before incurring expenses, a trustee obtains 
approval from the United States Trustee. As the first step in obtaining 
United States Trustee approval for expenses, the United States Trustee 
requires that the trustee submit a budget for the anticipated expenses 
for the fiscal year ending each September 30th. Next, these projected 
expenses are evaluated by the United States Trustee who will either 
approve the expenses or require modifications to the proposed budget. 
Once the United States Trustee approves the trustee's budget, the 
trustee is notified of this approval, and pursuant to 28 U.S.C. 586(e), 
the trustee's compensation, and a specified percentage fee that the 
trustee may collect from debtors' plan payments, is authorized. This 
fee is to be used for payment of the approved expenses incurred during 
the fiscal year.
    When a trustee realizes that expenses for the current year might 
exceed the approved amount, a trustee must submit a request to the 
United States Trustee, and obtain approval, before incurring expenses 
above the approved amount. This request must be submitted when the 
increase to an individual expense line item is greater than both 10% of 
the budgeted amount and $5,000.00. Expenses for certain items require 
prior United States Trustee approval regardless of amount. These 
expenses currently are increases in the amount budgeted for employee 
expenses, increases in office lease obligations, payments to the 
standing trustee or relative of the standing trustee, and expenses for 
any item not originally contained in the approved budget. These 
expenses are set forth in the Chapter 13 Trustee Handbook, which is 
posted on the EOUST web site. If any other expenses are added to this 
list, the United States Trustee will notify trustees via email or 
regular mail at least 30 days before including the new expenses in a 
revision to the Handbook.
    If a trustee disagrees with the United States Trustee's denial of 
the trustee's request for expenses, the trustee may seek administrative 
review of the denial under the procedures identified in this rule. The 
Director of the EOUST will conduct a de novo review of the United 
States Trustee's decision to determine whether the record supports the 
United States Trustee's decision and whether the decision was an 
appropriate exercise of the United States Trustee's discretion or 
contrary to law.
    With the passage of BAPCPA, Congress directed the Attorney General 
to prescribe procedures implementing administrative review for trustees 
when a claim of actual, necessary expenses is denied. The Attorney 
General delegated this authority to the Director, Executive Office for 
United States Trustees. In response to this congressional mandate, the 
Director publishes this rule, which establishes such procedures. This 
rule imposes requirements only upon standing trustees who are 
supervised by United States Trustees. In addition, this rule addresses 
only the United States Trustee's denial of a trustee's claim of actual, 
necessary expenses. This rule does not address the suspension or 
termination of trustees. EOUST will publish another notice of proposed 
rulemaking that addresses the suspension or termination of trustees 
with a RIN number of 1105-AB12.

Executive Order 12866

    This rule has been drafted and reviewed in accordance with 
Executive Order 12866, ``Regulatory Planning and Review'' section 1(b), 
The Principles of Regulation. This rule is not a ``significant 
regulatory action'' as defined by Executive Order 12866 and, 
accordingly, this rule has not been reviewed by the Office of 
Management and Budget.
    The Department has also assessed both the costs and benefits of 
this rule as required by section 1(b)(6) and has made a reasoned 
determination that the benefits of this regulation justify its costs. 
The costs considered in this regulation include the costs for 
prosecuting an administrative appeal of the United States Trustee's 
denial of a trustee's claim of actual, necessary expenses. The 
anticipated costs are the compiling, photocopying and mailing of the 
requested records. However, none of these costs are new. This rule 
simply codifies the current practice for obtaining administrative 
review of the United States Trustee's decision.
    The benefits of this rule include the codification of the process 
for a trustee to obtain administrative review of the United States 
Trustee's denial of a

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trustee's claim of actual, necessary expenses. These benefits justify 
its costs in complying with Congress' mandate to prescribe procedures 
to implement 28 U.S.C. 586(e).

Executive Order 13132

    This rule will not have a substantial direct effect on the States, 
on the relationship between the national government and the States, or 
on the distribution of power and responsibilities among the various 
levels of government. Therefore, in accordance with Executive Order 
13132, it is determined that this rule does not have sufficient 
federalism implications to warrant the preparation of a Federalism 
Assessment.

Paperwork Reduction Act

    This rule does not contain an information collection under the 
Paperwork Reduction Act (44 U.S.C. 3501, et seq.). If a trustee wishes 
to appeal a United States Trustee's decision, the trustee submits a 
request for review to the Director detailing the specific factual 
circumstances supporting the trustee's argument.

Regulatory Flexibility Act

    In accordancewith the Regulatory Flexibility Act (5 U.S.C. 605(b)), 
the Director has reviewed this rule and by approving it certifies that 
it will not have a significant economic impact on a substantial number 
of small entities. This certification is based upon the fact that this 
rule does not impose any new costs upon trustees that did not already 
exist under the current administrative review process. In addition, the 
costs of compiling, photocopying and mailing records are de minimis.

Unfunded Mandates Reform Act of 1995

    This rule does not require the preparation of an assessment 
statement in accordance with the Unfunded Mandates Reform Act of 1995, 
2 U.S.C. 1531. This rule does not include a federal mandate that may 
result in the annual expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector, of more than 
the annual threshold established by the Act ($100 million). 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 as defined by section 804 of the 
Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 
801 et seq. This rule will not result in an annual effect on the 
economy of $100 million or more; a major increase in costs or prices; 
or significant adverse effects on competition, employment, investment, 
productivity, and 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

    Administrative practice and procedure, Bankruptcy, Credit and 
debts.

    Accordingly, for the reasons set forth in the preamble, Part 58 of 
chapter I of title 28 of the Code of Federal Regulations is proposed to 
be amended as follows:

PART 58--[AMENDED]

    1. The authority citation for part 58 continues to read as follows:

    Authority:  5 U.S.C. 301, 552; 11 U.S.C. 109(h), 111, 521(b), 
727(a)(11), 1141(d)(3), 1202; 1302, 1328(g); 28 U.S.C. 509, 510, 
586, 589b.

    2. Add Sec.  58.11 to read as follows:


Sec.  58.11  Procedures Governing Administrative Review of a United 
States Trustee's Decision to Deny a Chapter 12 or Chapter 13 Standing 
Trustee's Claim of Actual, Necessary Expenses.

    (a) The following definitions apply to Sec.  58.11 of this Part. 
These terms shall have these meanings:
    (1) The term ``claim of actual, necessary expenses'' means the 
request by a chapter 12 or chapter 13 standing trustee for the United 
States Trustee's approval of the trustee's projected expenses for each 
fiscal year budget, or for an amendment to the current budget when an 
increase in an individual expense line item is greater than both 10% of 
the budgeted amount and $5,000.00. Expenses for certain items require 
prior United States Trustee approval regardless of amount;
    (2) The term ``Director'' means the person designated or acting as 
the Director of the Executive Office for United States Trustees;
    (3) The term ``final decision'' means the determination issued by 
the Director based upon the review of the United States Trustee's 
decision to deny all or part of a trustee's claim of actual, necessary 
expenses;
    (4) The term ``notice'' means the written communication from the 
United States Trustee to a trustee that the trustee's claim of actual, 
necessary expenses has been denied in whole or in part;
    (5) The term ``request for review'' means the written communication 
from a trustee to the Director seeking review of the United States 
Trustee's decision to deny, in whole or in part, the trustee's claim of 
actual, necessary expenses;
    (6) The term ``trustee'' means an individual appointed by the 
United States Trustee under 28 U.S.C. 586(b) to serve as the standing 
trustee for chapter 12 or chapter 13 cases in a particular region; and
    (7) The term ``United States Trustee'' means, alternatively:
    (i) The Executive Office for United States Trustees;
    (ii) A United States Trustee appointed under 28 U.S.C. 581;
    (iii) A person acting as a United States Trustee;
    (iv) An employee of a United States Trustee; or
    (v) Any other entity authorized by the Attorney General to act on 
behalf of the United States under this rule.
    (b) The United States Trustee may issue a decision to deny a 
trustee's claim of actual, necessary expenses. Reasons for denial 
include, but are not limited to, finding any of the following:
    (1) The trustee failed to provide to the United States Trustee 
sufficient justification for the expense;
    (2) The trustee failed to demonstrate to the United States Trustee 
that the expense is a cost effective use of funds;
    (3) The trustee failed to demonstrate to the United States Trustee 
that the expense is reasonably related to the duties of the trustee;
    (4) The trustee failed to obtain authorization from the United 
States Trustee prior to making an expenditure that was not provided for 
in the current budget;
    (5) The trustee failed to provide the United States Trustee with 
documents, materials, or other information pertaining to the expense;
    (6) The trustee failed to timely submit to the United States 
Trustee accurate budgets or requests for amendment of budgets to cover 
the additional expense; or
    (7) The trustee failed to demonstrate to the United States Trustee 
that the expense is directly related to office operations.
    (c) Before issuing a notice of denial, the United States Trustee 
shall communicate in writing with the trustee in an attempt to resolve 
any dispute over a claim of actual, necessary expenses:
    (1) For disputes involving the trustee's projected expenses for the 
upcoming fiscal year budget, the United States Trustee shall either 
resolve the dispute or issue a written notice of denial no later than 
October 31 of the

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current calendar year, or, if the United States Trustee has requested 
additional information, 30 days from the deadline for submission of the 
additional information if such deadline is after October 1, unless the 
trustee and United States Trustee agree to a longer period of time. Any 
projected expenses not specifically disputed shall be approved in the 
ordinary course and the trustee's fee shall be set on an interim basis;
    (2) For disputes over amendments to the current year budget, the 
United States Trustee shall either resolve the dispute or issue a 
written notice of denial within 30 days of the trustee's amendment 
request, or, if the United States Trustee has requested additional 
information, 30 days from the deadline for submission of the additional 
information, unless the trustee and United States Trustee agree to a 
longer period of time. Any portion of the amendment not specifically 
disputed shall be approved in the ordinary course;
    (3) If the United States Trustee does not resolve the dispute or 
issue a written notice of denial within the time-frames identified in 
(c)(1) or (c)(2) of this section, the trustee's claim of actual, 
necessary expenses shall be deemed denied.
    (d) The United States Trustee shall notify a trustee in writing of 
any decision denying a trustee's claim of actual, necessary expenses. 
The notice shall state the reason(s) for the decision and shall 
reference any documents or communications relied upon in reaching the 
decision. The United States Trustee shall provide to the trustee copies 
of any such non-privileged documents that were not supplied to the 
United States Trustee by the trustee. The notice shall be sent to the 
trustee by overnight courier, for delivery the next business day.
    (e) The notice shall advise the trustee that the decision is final 
and unreviewable unless the trustee requests in writing a review by the 
Director no later than 30 calendar days from the date of the notice to 
the trustee.
    (f) The decision to deny a trustee's claim of actual, necessary 
expenses shall take effect upon the expiration of a trustee's time to 
seek review from the Director or, if the trustee timely seeks such 
review, upon the issuance of a written final decision by the Director.
    (g) The trustee's request for review shall be in writing and shall 
fully describe why the trustee disagrees with the United States 
Trustee's decision, and shall be accompanied by all documents and 
materials the trustee wants the Director to consider in reviewing the 
United States Trustee's decision. The trustee shall send the original 
and one copy of the request for review, including all accompanying 
documents and materials, to the Office of the Director by overnight 
courier, for delivery the next business day. In order to be timely, a 
request for review shall be received at the Office of the Director no 
later than 30 calendar days from the date of the notice to the trustee. 
The trustee shall also send a copy of the request for review to the 
United States Trustee by overnight courier, for delivery the next 
business day.
    (h) The United States Trustee shall have 30 calendar days from the 
date of the trustee's request for review to submit to the Director a 
written response regarding the matters raised in the trustee's request 
for review. The United States Trustee shall provide a copy of this 
response to the trustee by overnight courier, for delivery the next 
business day.
    (i) The Director may seek additional information from any party, in 
the manner and to the extent the Director deems appropriate.
    (j) In reviewing the decision to deny a trustee's claim of actual, 
necessary expenses, the Director shall determine:
    (1) Whether the decision is supported by the record; and
    (2) Whether the decision constitutes an appropriate exercise of 
discretion.
    (k) The Director shall issue a written final decision no later than 
90 calendar days from the receipt of the trustee's request for review, 
or, if the Director has requested additional information, 30 days from 
the deadline for submission of the additional information, unless the 
trustee agrees to a longer period of time. The Director's final 
decision on the trustee's request for review shall constitute final 
agency action.
    (l) In reaching a final decision the Director may specify a person 
to act as a reviewing official. The reviewing official may not be under 
the supervision of the United States Trustee who denied the trustee's 
claim of actual, necessary expenses. The reviewing official's duties 
shall be specified by the Director on a case-by-case basis, and may 
include reviewing the record, obtaining additional information from the 
participants, providing the Director with written recommendations, and 
such other duties as the Director shall prescribe in a particular case.
    (m) This rule does not authorize a trustee to seek review of any 
decision to change maximum annual compensation, to decrease or increase 
appointments of trustees in a region or district, to change the 
trustee's percentage fee, or to suspend, terminate, or remove a 
trustee.
    (n) A trustee must exhaust all administrative remedies before 
seeking redress in any court of competent jurisdiction.

    Dated: August 6, 2009.
Clifford J. White III,
Director, Executive Office for United States Trustees.
[FR Doc. E9-19456 Filed 8-13-09; 8:45 am]
BILLING CODE 4410-40-P