Should the Federal rules of bankruptcy procedure be amended to expressly authorize United States district and bankruptcy courts to appoint a special master in an appropriate...

University of Memphis Law Review, The, Winter 2001 by Clift, R Spencer III

I. INTRODUCTION

This article attempts to justify the utilization and appointment of special masters in appropriate and rare bankruptcy cases and proceedings by explaining the unique case management role special masters contribute in exceptional circumstances.1 Specifically, this article calls for an amendment to the Federal Rules of Bankruptcy Procedure to provide expressly that United States district and bankruptcy courts may appoint a special master in a highly complex and rare bankruptcy case or proceeding. Notwithstanding the appropriateness of the appointment of a special master, Federal Rule of Bankruptcy Procedure 9031, a procedural rule, currently prohibits the appointment of a special master by both the United States district and bankruptcy courts in any "case" under the Bankruptcy Code ("Code").

This article focuses on the distinctive need for special masters to be appointed and authorized to participate in appropriate and rare bankruptcy "cases" and "proceedings." The article does not address the overwhelmingly vast majority of cases and proceedings filed under the Code because it is not contemplated that special masters should be routinely appointed. Instead, this article is directed primarily toward highly complex, commercial, fact-intensive bankruptcy cases and proceedings warranting the unique expertise of a special master as a valuable case management tool to, inter alia, reduce costs and delays.

Concomitantly, this article respectfully suggests that the Federal Rules of Bankruptcy Procedure should be amended pursuant to the Rules Enabling Act2 to expressly authorize the appointment of a special master by United States district and bankruptcy courts in appropriate and rare bankruptcy cases and proceedings. This article also respectfully requests the current United States Judicial Conference Advisory Committee on Bankruptcy Rules to reconsider its two prior declinations and thereafter recommend and transmit to the United States Judicial Conference Standing Committee on Rules of Practice and Procedure a proposed amendment to the Federal Rules of Bankruptcy Procedure providing that United States bankruptcy and district courts have the express authority to appoint special masters in highly complex and rare bankruptcy cases and proceedings. For the reasons to be discussed hereinafter, the judicial officers (i.e., United States district and bankruptcy judges) administering the federal bankruptcy laws should have the unambiguous authority on a case-bycase and proceeding-by-proceeding basis to utilize this highly effective and valuable case management tool and exercise their inherent, equitable authority to appoint special masters where appropriate to do so.

More specifically, Part I of this article provides an historical development of the role of the special master. Part II analyzes the role and powers covering the appointment of special masters. Part III addresses whether Federal Rule of Bankruptcy Procedure 9031, which currently prohibits the appointment of special masters in any "case" under the Code, was an intended result. Part IV suggests why special masters should be authorized and appointed in appropriate and rare bankruptcy cases and proceedings. Part V addresses the earlier negative views of the 1995 Judicial Conference Advisory Committee on Bankruptcy Rules on the issue of special masters in bankruptcy cases and proceedings. Part VI addresses the reasons why the 1996 Advisory Committee on Bankruptcy Rules did not recommend the abrogation of Rule 9031. Part VII respectfully calls for the current Judicial Conference Advisory Committee on Bankruptcy Rules to reexamine and reconsider its prior position on the scope and impact of the existing procedural rule (i.e., Rule 9031) and the accompanying Advisory Committee note prohibiting the appointment of special masters in any bankruptcy case or proceeding by United States district and bankruptcy courts.

A. Historical Development of the Role of the Special Master

The British pioneered the role of the special master as a useful case management tool in chancery courts in order to more efficiently administer guardianships and probate estates.3 The first legislative authority ratifying the appointment of a special master can be traced to the British Parliament's passage of the Superior Courts Officers Act of 1837.(4)

Since the creation of our system of government, American courts have employed the services of special masters on a case-by-case basis deriving their authority from the English precedent.5 Prior to the promulgation of the Federal Rules of Civil Procedure in 1938, the appointment of special masters was expressly recognized in Equity Rules 52, 59, 62 and also as an inherent power of the court.6 Equity Rules 52 and 62, which were adopted in 1912, resemble current Federal Rules of Civil Procedure and contain the identical and important caveat that special masters are only authorized in exceptional circumstances.7

This caveat is simply that the appointment of a special master in any bankruptcy case, whether a bankruptcy case or proceeding, would be the rare "exception, not the rule," and will serve as an important and recurring underlying theme throughout this article.8 When such rare and exceptional circumstances exist, special masters, serving as valuable case management tools, can greatly contribute to the simplification and efficient advancement of speedier and less costly litigation.9