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ABSTRACT
Over the years, tort claimants have increasingly appeared in the bankruptcies of corporate debtors. More so than other participants in bankruptcy proceedings, tort claimants are brought into this forum involuntarily. Unlike shareholders, lenders, or even the corporate debtor's employees, tort claimants often do not choose to engage in commercial transactions with corporate debtors. Rather, their claims arise because the debtor has harmed them without their consent. To protect their interests, tort claimants often request that courts order the United States Trustee to appoint a creditors' committee to represent them. Courts have been authorized to do so under 11 U.S.C. § 1102(a)(2). While courts have the authority to form creditors' committees for tort claimants, courts do not uniformly grant tort claimants' requests.
Through the lens of the Montreal, Maine and Atlantic Railway, Ltd. bankruptcy case, this Comment argues that courts should form creditors' committees for tort claimants when corporate debtors with tort liability file for bankruptcy. Four arguments support this proposition. First, there are strong policy reasons for forming creditors' committees for tort claimants. Second, courts need to form creditors' committees for tort claimants to ensure that tort claimants are guaranteed due process of the law. Third, forming creditors' committees for tort claimants is consistent with the case law interpreting 11 U.S.C. § 1102(a)(2), the Bankruptcy Code section authorizing the formation of creditors' committees. Finally, forming creditors' committees for tort claimants can have practical significance.
INTRODUCTION
This Comment argues that courts should form a creditors' committee of tort claimants when a corporation with tort liability files for relief under chapter 11 of the Bankruptcy Code (the "Code").1 The Code currently authorizes courts to form one or more creditors' committees to represent unsecured creditors.2 The Code gives these committees significant powers, including the ability to negotiate a plan of reorganization with the debtor3 and the ability to hire lawyers, accountants, and other professionals to represent the committee's interests.4
Although forming a creditors' committee of tort victims is currently not commonplace, such committees need to be the norm, not the exception, in chapter 11 bankruptcy cases. The reasons why tort claimants need their own creditors' committee can be shown through the use of the following hypothetical. Imagine losing a relative or suffering a serious injury...