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While the appointment of a creditors’ committee is required in every chapter 11 case, equity committees are not.[FOOTNOTE 1] In fact, they “should be the rare exception.”[FOOTNOTE 2] Yet, recently, in In re Delphi Corp., et al.,[FOOTNOTE 3] the court directed the appointment of an equity committee — the expense of which will be borne by the Delphi estate — despite the rigorous objections of Delphi Corp., the U.S. Trustee, the Creditors’ Committee and General Motors. Interestingly, the request was made by Appaloosa Management L.P., a 9 percent shareholder of Delphi that had acquired its interest after the commencement of the case. Delphi joins Adelphia, Mirant and Kmart as recent cases with equity committees.[FOOTNOTE 4] In contrast, courts declined to direct the appointment of equity committees in Conseco, UAL, Worldcom, Global Crossing, Enron, and Pacific Gas & Electric.[FOOTNOTE 5] Factors courts consider in determining whether to appoint an equity committee include: (i) whether the interest of shareholders are otherwise adequately represented, (ii) the debtor’s solvency and the prospects for a meaningful distribution to equity, (iii) the complexity of the case, (iv) whether the stock was widely held and actively traded, (v) timeliness, and (vi) the balance between concerns for adequate representation and the cost to the estate.

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