Adams v. Roman Catholic Church
The Bankruptcy Code dropped ‘person aggrieved’ as the standard for appellate standing. Did it survive nonetheless?
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 22-30539 (5th Circuit, May 13,2024) Published
- Tag(s):
- Ruling:
- Members of the Official Committee of Unsecured Creditors who were removed from the Committee by the bankruptcy court did not have standing to appeal the bankruptcy court's order that removed them from the Committee.
- Procedural context:
- The appellants, former members of the Official Committee of Unsecured Creditors, appealed the district court's order that affirmed the bankruptcy court's decision to remove the appellants from the Committee.
- Facts:
- On May 1, 2020, the Roman Catholic Archdiocese of New Orleans filed a chapter 11 petition in response to multiple sexual abuse lawsuits. The United States Trustee appointed an Official Committee of Unsecured Creditors. The Committee consisted of six of the more than 450 abuse claimants. The Committee obtained counsel, but the individual members retained their respective state court counsel. Richard C. Trahant served as state court counsel or co-counsel for four of the six members of the Committees until June 7, 2022. The Committee and the Archdiocese negotiated a protective order that the bankruptcy court adopted. In December 2021, the Archdiocese produced materials that were designated confidential. These materials included information about a priest who had not been included on the Archdiocese's "Credibly Accused List" nor identified in any abuse victim's proof of claim. Trahant, as counsel or co-counsel for four of the Committee members, received this information and sent a text message to his cousin, who was the principal of the high school where the priest worked. The text message identified the priest. Trahant subsequently talked to his cousin about the specific allegations against the priest. The day after Trahant first texted his cousin, Trahant emailed a journalist about the priest. Less than three weeks later, the journalist published an online article disclosing the priest's name and the allegations against him. The article also disclosed non-public information about the Archdiose's Internal Review Board and how it dealt with sexual abuse claims. The Archdiocese filed a sealed motion, asking the bankruptcy court to compel the Committee to investigate the source of the leak and asking for sanctions for violating the protective order. Discovery revealed that Trahant was the leaker. The bankruptcy court appointed the U.S. Trustee to perform an independent investigation into the wrongful disclosure of the protected material. The Trustee filed a statement of position under seal nearly six months later. The position statement was supported by 78 sworn declarations and 18 Rule 2004 transcripts. Four days later, the bankruptcy judge issued an order (the "June 7 Order") finding that Trahant was bound by, and had willfully violated, the protective order. The bankruptcy court concluded that Trahant should not receive any more confidential material or participate in confidential Committee proceedings. The bankruptcy court then considered the positions of the Committee members who Trahant represented. These Committee members did not terminate Trahant as their attorney. Because each member was entitled to counsel of his choice, the bankruptcy court imputed Trahant's bad acts to those Committee members and found cause to remove them from the Committee. Trahant and his clients appealed the June 7 Order but did not seek leave to appeal an interlocutory order. The Archdiocese moved to dismiss the Trahant appeal because the June 7 Order was interlocutory. On August 11, 2022, the district court dismissed the Trahant appeal because the appellants did not have standing to appeal an interlocutory order. The district court noted that Trahant's clients had not identified any direct and adverse impact on their pecuniary interests flowing from the June 7 Order. The district court also rejected the appellants' argument that the June 7 Order sanctioned the appellants. The bankruptcy court also entered a show-cause order against Trahant. Following the hearing, the bankruptcy court imposed a $400,000 sanction on Trahant for his knowing and willing violation of the protective order. The $400,000 was just over half of the amount the Committee spent investigating and dealing with the breach of the protective order. Trahant separately appealed the sanctions award to the Fifth Circuit. Trahant's clients appealed to the Fifth Circuit. Then, the district court judge recused himself to avoid the appearance of impropriety that could arise from his prior connections to Catholic charities, even though they were involved in the Archdiocese's bankruptcy case. The case was assigned to district court Judge Ashe, who ruled that he would not vacate the prior order affirming the removal of the Appellants from the Committee. Trahant's clients then moved to vacate the district court's order that dismissed their appeal from the bankruptcy court.
- Judge(s):
- King, Jones, and Oldham