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Part II Officers and Administration; Notices; Meetings; Examinations; Elections; Attorneys and Accountants (FRBP 2001-2020)

In re Adilace Holdings, Inc. (March 28, 2016)
Intervention, Bankruptcy Rule 2018
The largest creditor in a chapter 7 case filed a motion to intervene in a contested matter between the chapter 7 Trustee and another creditor. The creditor sought intervention because (1) she disagreed that the Trustee’s litigation strategy would maximize the recovery of the estate and wanted to litigate a different theory and (2) she wanted to protect her rights in ongoing California state-court litigation involving that same contract at issue in the contested matter. The Court held that parties can seek intervention in contested matters in chapter 7 cases, either according to Bankruptcy Rule 2018 or, if the Court directs it apply, Rule 24 of the Federal Rules of Civil Procedure (“FRCP 24”). Applying the standards of Rule 2018 and FRCP 24, the Court found that the motion to intervene should be denied because the Trustee adequately represented the interest of the creditor seeking intervention in maximizing the estate, the rights of the creditor seeking intervention were not put at risk by the contested matter according to California collateral estoppel jurisprudence, and the intervention would cause extra expense and delay in resolving the contested matter.
WL Cite: In re Adilace Holdings, Inc., No. 14-11583-TMD, 2016 WL 1212442, at *1 (Bankr. W.D. Tex. Mar. 28, 2016)