Chicago, Rock Island and Pacific R. Co., Matter of, 85-1503

• Decision Date: 03 June 1986
• Docket Number: No. 85-1503,85-1503
• Citation: 788 F.2d 1280
• Parties: , Bankr. L. Rep. P 71,105 In the Matter of CHICAGO, ROCK ISLAND AND PACIFIC RAILROAD COMPANY, Debtor. Appeal of Larry DYCHE.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1280

788 F.2d 1280

5 Fed.R.Serv.3d 911, Bankr. L. Rep. P 71,105

In the Matter of CHICAGO, ROCK ISLAND AND PACIFIC RAILROAD

COMPANY, Debtor.

Appeal of Larry DYCHE.

No. 85-1503.

United States Court of Appeals, Seventh Circuit.

Argued March 4, 1986.

Decided April 22, 1986.

Rehearing and Rehearing En Banc Denied June 3, 1986.

Fred Potter, Princeton, Ill., for appellant.

Michael T. Brody, Jenner & Block, Chicago, Ill., for appellee.

Before BAUER, POSNER, and EASTERBROOK, Circuit Judges.

POSNER, Circuit Judge.

In 1974, Larry Dyche, who was then nine years old, lost part of his foot in a railroad accident. A few months later, the railroad--Chicago, Rock Island and Pacific Railroad Company--entered reorganization under the bankruptcy act. The federal district judge who was sitting as the reorganization court set a deadline of December 31, 1975, for filing claims against the railroad. The setting of a deadline, in advance of approval of the plan of reorganization, for filing claims, and the barring of claims filed beyond the deadline, is a familiar and sensible measure in a reorganization proceeding and was expressly authorized by 11 U.S.C. Sec. 205(c)(7) (1975), in force at the time relevant to this case, and is currently authorized by Bankr.R. 3003(c)(3). It creates a mechanism by which the trustee in bankruptcy can estimate the potential liabilities of the bankrupt in advance of formulating a plan of reorganization. Since the size of those liabilities is highly material to the design of an intelligent plan, the benefits of the mechanism are undeniable.

On September 30, 1975, the trustee, who had learned about the accident, mailed a proof of claim form to Dyche's mother. No proof of claim was ever filed. In 1982 Dyche reached legal adulthood (18) and on January 16, 1984, Dyche's lawyer wrote the trustee that Dyche was asserting a claim against the railroad. The trustee replied on March 30 that such a claim would be denied as untimely. Dyche's lawyer neither filed a claim nor applied to the reorganization court for permission to file a late claim. On June 1, all creditors having been paid in full, the Rock Island emerged from the reorganization a solvent entity under the name of Chicago Pacific Corporation. On September 17 Dyche filed a personal injury suit against the new corporation in a federal district court in Illinois under the diversity jurisdiction. The corporation asked the reorganization court to enjoin the suit, the court issued the injunction, and Dyche appeals.

The order of June 1, 1984, which closed out the reorganization, discharged all claims against the Rock Island--provided that claimants had had a reasonable opportunity to file their claims, and Dyche argues that he had not. He says that it was not enough for the trustee in bankruptcy to send a proof of claim form to his mother; the trustee should have asked the reorganization court to appoint a guardian ad litem to represent Dyche, since he was a minor at the time. He relies primarily on Fed.R.Civ.P. 17(c) (at the time of the mailing, the Federal Rules of Civil Procedure applied to railroad reorganizations). It provides: "The court shall appoint a guardian ad litem for an infant or incompetent person not otherwise represented in an action or shall make such other order as it deems proper for the protection of the infant or incompetent person." The language is mandatory, but the mandate is limited to cases where a minor (or incompetent) is a party to a suit and is not represented. If he is a party and represented, the appointment of a guardian is not required, provided the representation is adequate, Roberts v. Ohio Casualty Ins. Co., 256 F.2d 35, 39 (5th Cir.1958), as it would normally be if the party was being represented by a parent as "next friend" and there was no conflict of interest between the party and his representative.

Dyche was never a party to the reorganization. He was a potential litigant. Rule 17(c) does not impose on the federal courts a duty to appoint guardians for all potential litigants who may be incompetent by reason of youth or mental condition to represent themselves. Such a duty, which would enormously enlarge the responsibilities of those courts, cannot be inferred from the word "shall" in Rule 17(c), which so far as appears is limited to cases in which incompetent persons are actually parties to federal litigation.

This is not to say that federal courts have no power to appoint guardians ad litem on behalf of potential parties; and in appropriate cases a power may become a duty. Thus we do not question the Third Circuit's recent decision in In re Amatex Corp., 755 F.2d 1034, 1041-44 (3d Cir.1985), holding that a guardian ad litem should be appointed to represent future (at present unknown) sufferers from asbestosis, in a proceeding to reorganize in bankruptcy one of the manufacturers of asbestos. See also In re UNR Industries, Inc., 725 F.2d 1111, 1118-20 (7th Cir.1984); Hatch v. Riggs Nat'l Bank, 361 F.2d 559, 565-66 (D.C.Cir.1966). If there were some reason to think that Dyche's mother would not represent his interests adequately, the district court would, we may assume, be required (and certainly would be empowered) to appoint a guardian ad litem to represent him. But no such reason is suggested.

There is no greater merit to Dyche's alternative argument that the reorganization court's refusal to toll the deadline for filing claims during the minority of any potential claimant is so unreasonable that it is a denial of due process. If we were writing on a clean slate, we would be inclined to take the view that Dyche's due process claim fails at the threshold, because he has not shown that he ever had a meritorious cause of action against the railroad. Not every accident gives rise to liability; Dyche has yet to present any evidence that this one did. If he has no cause of action, it is hard to see in what sense he was deprived of liberty or property by not being allowed to file a claim. But this approach seems foreclosed by Logan v. Zimmerman Brush Co., 455 U.S. 422, 428-31, 102 S.Ct. 1148, 1153-55, 71 L.Ed.2d 265 (1982), which treats the cause of action itself as property within the meaning of the Constitution's due process clauses, without inquiry into the validity of the cause of action.

Nevertheless Dyche's constitutional argument fails, because there was no denial of due process. Granted, for the government to create a right of action but then erect an insuperable barrier to its being vindicated by a particular class of claimants, such as minors, might in some circumstances be so unreasonable as to raise questions of due process--but not in the circumstances of this case. Dyche is content with a rule that requires the minor to sue during his minority, provided only that the court appoints a guardian ad litem; and we think the parent who has custody of the minor (Dyche's mother, in this case--she was either divorced from his father or widowed, the record does not show which, but in any event she had remarried and had custody of Dyche) is a constitutionally adequate substitute, so long as there is no showing of a conflict of interest. Furthermore, there is an escape hatch in the rule. The reorganization court has, as we shall see, the power to forgive a late claim, and this escape hatch, while not open here for reasons to be explained later, is sufficient in our...