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Is the Rule Preventing Bankruptcy Judges from Appointing Special Masters Outdated?
Rule 9031 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules) prevents all bankruptcy judges, and, if broadly interpreted, any federal judge hearing bankruptcy cases and proceedings, from appointing special masters. The rule has not been amended since its adoption in 1983. It is outdated and should be repealed or amended to accord with the reality of today's complex Chapter 11 cases and related proceedings.
Why are special masters barred in bankruptcy? The text of Bankruptcy Rule 9031 says little about the prohibition. It simply states that "Rule 53 Fed.R.Civ.P. does not apply in bankruptcy cases." The Advisory Committee Note to Rule 9031, which is also a single sentence, states in its entirety that "[t]his rule precludes the appointment of masters in cases and proceedings under the Code." Thus, by adding the word "proceedings" the committee note attempts to significantly broaden the scope of the rule. Neither the rule itself nor the advisory committee note provide any justification for this far-reaching prohibition on the use of special masters in bankruptcy.
Together, the rule and the committee note seem to suggest an unwarranted wariness of bankruptcy judges. While such concerns may have given pause to the use of special masters decades ago, they are no longer valid in light of the safeguards in place today and the sophistication, professionalism, and integrity of bankruptcy courts.
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