Court: District Court, S.D. New York; January 22, 2003; Federal District Court
Oaktree Capital Management, LLC, sought to intervene in a bankruptcy appeal concerning Sunbeam Corporation, where the Official Committee of Unsecured Creditors (Committee) had already settled with defendants and moved to dismiss the appeal. Oaktree holds approximately $600 million in bonds and is a member of the Committee, which appealed the bankruptcy court’s dismissal of various claims against pre- and post-petition lenders. After the Committee reached a settlement granting them 1.5% of the reorganized debtor’s stock, Oaktree attempted to intervene to pursue the appeal, citing the Second Circuit’s ruling in *Term Loan Holder Comm. v. Ozer Group, L.L.C.* that allows parties in interest to intervene in adversary proceedings under 11 U.S.C. § 1109(b). However, the court denied Oaktree's motion, stating that Oaktree was essentially seeking to assume ownership of the Committee’s claims, which originate from the estate and can only be pursued with bankruptcy court authority. The court emphasized the need for orderly resolution in bankruptcy cases and noted that the Committee was the only party authorized to act on behalf of the estate against the lenders. Oaktree’s argument that it sought to challenge the bankruptcy court's dismissal of claims rather than prosecute them directly was insufficient, as it did not overcome the requirements established by prior Second Circuit precedent, which allows committees to act only if the debtor-in-possession unjustifiably refuses to bring suit—a condition Oaktree did not demonstrate.
Oaktree's argument lacks merit since the Committee has settled with the lenders and does not intend to pursue the current appeal or challenge the Bankruptcy Court’s approval of its settlement. Oaktree's position clarifies two points: it seeks a review of the bankruptcy court’s dismissal of the underlying adversary proceeding, and its objections are aimed at the confirmation order, which governs the Committee’s settlement. Oaktree may argue that the settlement lacked proper notice or was manifestly unfair, but these issues are not currently before the Court. Oaktree also seeks to replace the Committee in this appeal, but the Court notes that while parties in interest have standing to raise issues, this does not grant them ownership of the causes of action. A formal order is required for such ownership, and the Court retains control over proceedings to maintain order. The estate and the Committee have already released their claims, meaning Oaktree is attempting to intervene in a non-existent dispute. Although Oaktree has the right to participate in the bankruptcy case and appeal issues, it lacks standing to appeal the dismissal of the current claim without bankruptcy court approval. If such approval had been denied, Oaktree could have appealed, but that is not the case here. Thus, Oaktree has no right to appeal this dismissal.
