In a decision that may be of great significance to indenture trustees serving on creditor committees, the Court of Appeals for the Third Circuit has ruled that the professional expenses incurred by members of official committees in the performance of the duties of the committee are reimbursable by the estate. The Court rejected arguments based on policy and legislative history in favor of a plain language interpretation of U.S.C. §§503(b)(3)(F) and 503(b)(4). As a result of this decision, the member seeking reimbursement of its own professional fees need not establish a substantial contribution in a case nor need it establish that the professional services involved "formal committee work". Under the test adopted by the Court, an expense qualifies for reimbursement if the same expense would be reimbursable had it been incurred by the Committee itself in the performance of its duties.

Nevertheless, to avoid chaos in the functioning of committees and a wholesale depletion of the estate, the Court of Appeals noted that a bankruptcy court has broad discretion to determine (i) whether the requested fees are reasonable; (ii) whether the services rendered were necessary; and (iii) whether the expense was in fact incurred in the performance of the duties of the committee.

While the decision does not address this issue, it seems reasonable that a committee might itself attempt to regulate the use of counsel by its members. A committee might take a restrictive approach in its by-laws to reimbursement of member's counsel without specific committee authorization, or it might take a more expansive approach, such as by assigning to specific committee members responsibility for discrete issues that require legal counsel. This could be particularly important in the case of committees representing creditors with different levels of priority. Committee members representing particular types of debt could be assigned the task of representing the interests of senior or subordinated creditors in intercreditor negotiations. One may also expect there will be litigation over fees where a majority of members representing one class of creditors attempt to restrict a minority class representative's ability to obtain the advice of counsel at the expense of the estate. An indenture trustee may frequently be in the best position to represent its class of debt and, therefore, this decision may make available an additional avenue for reimbursement, thereby encourage greater activism by trustees serving on committees.