The trustee filed a motion⁽¹⁾ to reconsider the Clerk's order for the transfer of a proof of claim by Dale Magstadt to Argo Partners, Inc. (Argo).⁽²⁾ Argo has recently filed several other notices of claim transfers.⁽³⁾ The trustee also filed a standing objection to the transfer of other claims to Argo.⁽⁴⁾

        6 ABR 465          The trustee indicates that he is about to make an interim distribution of approximately 20¢ on the $1.00, and that Argo has recently inquired and been informed of this. The claims being transferred are apparently being transferred for 11¢ on the $1.00. The crux of the trustee's objection is that no disclosure of the imminent 20¢-on-the-$1.00 distribution has been made by Argo to the claims transferors. The trustee suggests that future distributions can also be anticipated.

        The trustee indicates he has no objection if a creditor wants to transfer his claim after adequate disclosure. The trustee has cited no authority for the court to inject itself into this matter, and there is authority that such an intrusion is generally unwarranted.

        The procedure for the transfer of a claim, other than for security, after it has been filed, is in Federal Bankruptcy Rule 3001(e)(2). It provides, in part, that:

The clerk shall immediately notify the alleged transferor by mail of the filing of the evidence of transfer and that objection thereto, if any, must be filed within 20 days of the mailing of the notice or within any additional time allowed by the court. If the alleged transferor files a timely objection and the court finds, after notice and a hearing, that the claim has been transferred other than for security, it shall enter an order substituting the transferee for the transferor. If a timely objection is not filed by the alleged transferor, the transferee shall be substituted for the transferor.

        There is no requirement that the trustee be given notice of the transfer.

        This rule was amended in 1991, after a substantial debate about the extent the court should become involved in overseeing the transfer of claims, to limit the bankruptcy court's role to adjudication of disputes regarding transfers of claims.⁽⁵⁾ "This rule is not intended to encourage or discourage postpetition transfers of claims or to affect any remedies otherwise available under nonbankruptcy law to a transferor or a transferee such as for misrepresentation in connection with the transfer of a claim."⁽⁶⁾

        The 8^th Circuit held in In re Olson that the bankruptcy court did not have the authority to deny the transfer of previously filed claims when there was no timely objection by the transferors.⁽⁷⁾

        6 ABR 466          The only significant asset of the Olsons' chapter 7 estate was a 38.8% interest in a partnership whose major asset was a shopping center. The Olsons' children and two unrelated individuals were the other 61.2% of the partners. Viking Associates, LLC, which was owned by the Olsons' children, managed the shopping center.

        Viking first tried to purchase the estate's interest in the shopping center, making offers starting at $175,000 and increasing to $277,000. The trustee refused to sell without a full financial disclosure for the partnership. After making disclosure, the trustee counter-offered to sell the estate's interest to Viking for $410,000, but Viking did not accept.

        Instead, Viking purchased all the unsecured claims filed against the estate, totaling $525,000, and all other unsecured claims, for a mere $67,000. Viking and Ms. Olson moved to dismiss (the trustee had abandoned Mr. Olson's estate for tax reasons, and he died shortly before the motion to dismiss). At the hearing on dismissal, the bankruptcy judge denied the motion to dismiss and ordered the clerk not to substitute Viking's name as transferee of the various claims it bought.

        Several months later, the trustee sold the partnership interest for $455,000, which would have yielded a $225,849 distribution to the $525,000 claims which had been bought for $67,000 (less the portion of the $67,000 paid to the claims which had not filed a proof of claim).

        The bankruptcy court issued an order in October 1995, that Viking had abused the bankruptcy process by buying all the unsecured claims at a fraction of what they were worth when it had "special knowledge of the value of the assets," using "false, misleading, and incomplete information" to procure many of them. The court allowed the transfer only up to the $67,000 paid, and subordinated that recovery to the allowed claims of unsecured         6 ABR 467  creditors. In practical effect, Viking stood to recover nothing for its $67,000 investment.⁽⁸⁾ The district court affirmed.

        In reversing, the 8^th Circuit panel said the 1991 amendment was intended to restrict a bankruptcy court's power to inspect the terms of claims transfer.⁽⁹⁾ Since no transferor - or for that matter, no creditor - had objected, transfer of the claim was mandatory. The court said that the bankruptcy court's powers under 11 USC § 105 could not be used to circumvent this requirement under the facts of the case.⁽¹⁰⁾

        Finally, the court noted the difference in the current rule and the prior rule. Under the prior rule, some bankruptcy courts took it upon themselves to oversee the manner in which claims were assigned to prevent certain perceived abuses and inequitable conduct. The current rule makes it clear that this is not the court's function.⁽¹¹⁾ Colliers suggests there might be situations where the conduct so directly effects the bankruptcy process that a bankruptcy court might be justified in intervening,⁽¹²⁾ but none are disclosed in the present case.

        There are no 9^th Circuit cases directly on point. Based on the reasoning in the Olson ruling, I determine that there is insufficient reason for the court to become involved, absent any timely objection by the transferors.

Dated:     June 7, 2000
______________________________
HERBERT A. ROSS
U.S. Bankruptcy Judge

N O T E S:

Serve:
	Cabot Christianson, Esq., for Trustee
	Larry D. Compton, Trustee
	Argo Partners, Inc.
	Dale Magstadt, POC 434 (see, Docket Entry 2504)
	Gerald Mattson, POCs 832, 833 (see, Docket Entries 2505, 2506)
	Cory A. Birnberg, POC 191 (see, Docket Entry 2507)
	Janet Stafford, Adversary Proceeding Manager
	Maia Weber, Deputy Clerk, Fairbanks

D4278               

        6 ABR 464  1. Motion for Reconsideration of "Order of Substitution of Creditor" [DE # 2504], Docket Entry 2508, filed June 5, 2000.
        6 ABR 464  2. Order of Substitution of Creditor, Docket Entry 2504, filed May 24, 2000.
        6 ABR 464  3. See, Docket Entries 2505, 2506, and 2507, filed May 30, 2000.
        6 ABR 464  4. Trustee's Standing Objection to Assignment of Claims to Argo Partners, Docket Entry 2509, filed June 5, 2000.
        6 ABR 465  5. Advisory Committee Notes to 1991 Amendments to FRBP 3001(e): see, W. Andrew P. Logan, III, Claims Trading: The Need for Future Amending Federal Rule of Bankruptcy Procedure 3001(e)(2), 2 Am. Bankr. Inst. L. Rev., 495 (Winter 1994); 9 Collier on Bankruptcy, ¶ 3001.08[1] at fn 1 (15^th ed rev 2000).
        6 ABR 465  6. Advisory Committee Notes to 1991 Amendments to FRBP 3001(e).
        6 ABR 465  7. Viking Associates, L.L.C. v Drewes (In re Olson), 120 F3d 98 (8^th Cir 1997).
        6 ABR 467  8. In re Olson, 120 F3d at 100-101.
        6 ABR 467  9. In re Olson, 120 F3d at 101, citing In re SPM Mfg. Corp., 984 F2d 1305, 1314 fn 9 (1^st Cir 1993).
        6 ABR 467  10. In re Olson, 120 F3d at 102.
        6 ABR 467  11. In re Olson, 120 F3d at 102.
        6 ABR 467  12. 9 Collier on Bankruptcy, ¶ 3001.08[1] at fn 1 (15^th ed rev 2000).