Plaintiffs Cannot Claim Creditor Status Retroactively

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The Fifth Circuit Court of Appeals reminded the plaintiff that standing is “determined as of the commencement of the suit” and post filing claims purchases will not suffice to establish standing. Here, the plaintiff, [also the debtor’s owner], sought to appeal appointment of special counsel. The Bankruptcy Court found that the plaintiff lacked standing to object because he was not a creditor and did not have a stake in the estate and then approved the Trustee’s application to employ SBPC over the improper objection. The plaintiff filed an appeal and then purchased a proof claim in order to obtain creditor status. The Fifth Circuit agreed with the Bankruptcy Court and noted that “[o]nly those directly, adversely and financially impacted by a bankruptcy order may appeal it.” Standing is “determined as of the commencement of the suit and a plaintiff cannot belatedly claim creditor status and establish standing retroactively.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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