Congress, the federal appellate courts and the U.S. Supreme Court all need to recognize this historical reality:

• bankruptcy is an efficient and effective tool for resolving mass tort cases, as demonstrated by cases with huge-majority approval votes from tort victims.

And all those institutions need to prevent anti-bankruptcy biases, legal technicalities, and hold-out groups from torpedoing the huge-majority votes.

Supreme Court moving in the right direction?

This is the fourth in a series of four articles on why Fed.R.Bankr.P. 9031, titled “Masters Not Authorized,” needs to be amended to authorize the utilization of special masters in complex bankruptcy cases.

The focus of this fourth article is on how federal courts have inherent authority to appoint special masters—and why that inherent authority should not be denied in bankruptcy cases.[Fn. 1]

Inherent Authority of Courts of Equity

Publicly, Diamond Finance Co. (“Diamond”) provided car loans to individuals with less-than-stellar credit. While Diamond did have “some actual business,” its purpose “quickly became a front to lure unsuspecting investors.”

This is the third in a series of four articles on why Fed.R.Bankr.P. 9031, titled “Masters Not Authorized,” needs to be amended to authorize the utilization of special masters in complex bankruptcy cases.

The focus of this third article is on how the evolution of the old bankruptcy referees into today’s bankruptcy courts shows why special masters are needed in complex bankruptcy cases—and should not have been prohibited.[Fn. 1]

The Evolution of Bankruptcy

This is the second in a series of four articles on why Fed.R.Bankr.P. 9031, titled “Masters Not Authorized,” needs to be amended to authorize the utilization of special masters in complex bankruptcy cases.

The focus of this second article is on how the exclusion of special masters from bankruptcy cases: (i) is without a sound reason, and (ii) is based on a history of haste and uncertainty.[Fn. 1]

Bankruptcy Rule 9031—The Prohibition

The Fifth Circuit recently ruled that a debtor can sell a preferential transfer action under Bankruptcy Code section 363 to a purchaser that is not a representative of the bankruptcy estate. Briar Cap. Working Fund Cap., L.L.C. v. Remmert (In re S. Coast Supply Co.), No. 22-20536, 2024 U.S. App. LEXIS 1417 (5th Cir. Jan. 22, 2024).

This is the first in a series of four articles on why Fed.R.Bankr.P. 9031, titled “Masters Not Authorized,” needs to be amended to authorize the utilization of special masters in complex bankruptcy cases.

The focus of this first article is on how special masters are already utilized, effectively, by federal district courts under Fed.R.Civ.P. 53 (titled, “Masters”).[Fn. 1]

Special Masters in Federal Courts

–A Brief History

Can the contempt remedy for a creditor’s violations of the discharge injunction in multiple bankruptcy cases throughout the land be imposed in a class action lawsuit?

Here’s a due process question that’s percolating before the U.S. Supreme Court and a related mediation issue:

Judge Jacqueline P. Cox recently found that three Illinois attorneys violated their ethical obligations by failing to return their client’s phone calls. She thus ordered the attorneys to return half of their already-court-approved, and paid, flat fee.

In In re: Dennis Molnar, 19-bk-09525, 2024 WL 190919 (Jan. 17, 2024 N.D, Ill.), the debtor filed a petition seeking relief under chapter 13. Originally, three attorneys from the same firm represented the debtor. The attorneys appeared pursuant to a “no look,” flat-fee program for chapter 13 debtors’ attorneys.