LGD successfully represented Amici Curiae bankruptcy professors, led by Prof. Jonathan Lipson at Temple University, in support of the United States Trustee before the Third Circuit Court of Appeals in the FTX bankruptcy case. The United States Bankruptcy Court for the District of Delaware had denied the U.S. Trustee’s motion to appoint an examiner, pursuant to section 1104(c) of the Bankruptcy Code. The Third Circuit Court of Appeals reversed the bankruptcy court, finding, as Amici argued, that the appointment of an examiner was mandatory in bankruptcies with debts greater than $5 million.
Through Amici’s brief and participation in oral argument they provided the Court of Appeals with a learned legislative and litigation history of the use of examiners in large, free fall bankruptcies of public importance to help address allegations of fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor. And Prof. Lipson, arguing on behalf of Amici, cogently brought to the Court’s attention the complex thicket of apparent conflicts of interest that made appointment of an examiner essential to FTX’s circumstances.
The Opinion, filed January 19, 2024, states:
The issue before us is whether 11 U.S.C. § 1104(c)(2) mandates the Bankruptcy Court to grant the U.S. Trustee’s motion to appoint an examiner to investigate FTX’s management. We hold that it does, given both the statute’s plain text and Congress’s expressed intent in enacting this portion of the Bankruptcy Code. Accordingly, we will reverse the Bankruptcy Court’s denial of the U.S. Trustee’s motion, and remand for the appointment of an examiner consistent with this opinion.