Corona Care Convalescent Corporation

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UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION
In re:
CORONA CARE CONVALESCENT
CORPORATION,
Debtor.
_________________________________
In re:
CORONA CARE RETIREMENT, INC.,
Debtor.
Case No. 2:13-bk-28497-RK
Jointly Administered with Case No. 2:13-
bk-28519-RK
Chapter 11
MEMORANDUM DECISION ON: (1)
MOTION OF UNITED STATES TRUSTEE
UNDER 11 U.S.C. § 1112(b)(1) TO
CONVERT, DISMISS OR APPOINT A
CHAPTER 11 TRUSTEE; AND (2)
MOTION OF CREDITORS’ COMMITTEE
TO APPOINT A CHAPTER 11 TRUSTEE
UNDER 11 U.S.C. § 1104(a)
Pending before the court in the jointly administered cases of bankruptcy debtors
Corona Care Convalescent Corporation and Corona Care Retirement, Inc. are: (1) the
Motion of the United States Trustee under 11 U.S.C. §1112(b)(1) to Convert, Dismiss, or
Appoint a Chapter 11 Trustee with an Order Directing Payment of Quarterly Fees (“UST
Motion”), ECF 35; and (2) the Emergency Motion of Official Committee of Unsecured
Creditors to Appoint a Chapter 11 Trustee (“Committee Motion”), 2:13-bk-28484, ECF
FILED & ENTERED
MAR 06 2015
CLERK U.S. BANKRUPTCY COURT
Central District of California
BY DEPUTY CLERK	bakchell
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132.1 These motions were filed in the jointly administered cases in the lead bankruptcy
case of bankruptcy debtor, Pasadena Adult Residential Care, Inc., which case has now
been dismissed. The hearings on these motions, originally filed in 2013, have been
continued from time to time, mostly by consent of the parties, to allow time for the parties
to negotiate a consensual resolution of their various disputes leading to a confirmable
plan of reorganization.
The parties had reached a settlement between the debtors, their insiders,
Felicidad and Renato Ferrer, the creditors’ committee, and creditor HCF Insurance
Agency, which was memorialized in a stipulation and order in the jointly administered
cases formally entered in the lead bankruptcy case of Pasadena Adult Residential Care,
Inc., which resulted in the dismissal of the four Pasadena facility bankruptcy cases and
the continuation of the two Corona facility cases. However, the parties are unable to
consummate the settlement, as the remaining debtors, Corona Care Convalescent
Corporation and Corona Care Retirement, Inc., have defaulted on settlement provisions
requiring them to file and obtain confirmation of reorganization plans by certain dates.
Although the parties have attempted to salvage their settlement in further negotiations,
the parties are unable to reconcile their differences, and the moving parties are pressing
the instant motions. The court conducted further hearings on the motions on March 3
and 5, 2015. Appearances were made as noted on the record.
In light of these subsequent developments, there have been some changes in the
litigation positions of the parties. In the UST Motion, the United States Trustee originally
recommended dismissal of the bankruptcy cases, but now recommends appointment of a
Chapter 11 trustee. The Creditors’ Committee has not changed its position in support of
its motion that a trustee should be appointed and concurs with the United States
Trustee’s current position recommending this. Debtors originally filed an opposition to
1 Because these cases were jointly administered, there is the possibility of some confusion over reference
to docket entries. Any reference to a docket entry in this decision refers to case number 2:13-bk-28497-RK,
as the lead case in the remaining bankruptcy cases, unless otherwise noted.
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the UST Motion, but now take the position that the motion to dismiss the cases should be
granted. Debtors’ Response to the United States Trustee’s Motion Under 11 U.S.C. §
1112(b)(1) to Convert, Dismiss, or Appoint a Chapter 11 Trustee, ECF 163. This position
is supported by the debtors’ shareholder insiders, the Ferrers, Vision West, LLC, and
Antony and Prema Thekkeks.2 Some creditors support the motions recommending
appointment of a trustee, including HCF and the United States of America on behalf of its
agency, the Internal Revenue Service (“IRS”). The IRS filed a proof of claim for
prepetition taxes totaling $2,788,325.95 (of which $1,927,172.34 is claimed as priority
unsecured), and the United States on behalf of the IRS filed a joinder in the UST motion
that the cases be dismissed, but stated at the hearing on March 5, 2015 that it concurred
in the United States Trustee’s recommendation that a trustee be appointed. Joinder of
the United States of America, on behalf of its agency, the Internal Revenue Service, in
the United States Trustee’s Motion to Convert or Dismiss. ECF 138. Representatives of
other creditors, including Clinishare Pharmacy, Inc., Shred Pro, LLC, Office Smart, LLC,
Intellex Enterprises, Vital Rehab Services, Inc., Verdugo Plaza Pharmacy, Inc.,
Respiratory Medical Services, Rodolfo E. Magsino, M.D., Inc., filed declarations stating
that these parties oppose appointment of a trustee and instead support the motions for
dismissal, as urged by debtors. ECF 163.
Other interested parties have also expressed their positions on the motions.
Corona-Cal Associates, LP, the landlord of the premises on which debtors conduct their
business operations, filed a declaration of its representative stating that the landlord
supports appointment of a trustee and will not execute further extensions for the debtors
to assume or reject debtors’ leases unless there is a Chapter 11 trustee in place. ECF
2 A dispute over ownership of 49% equity interests in debtors exists between Vision West, LLC, and its
principals, Bobby Singh and AJ Rana, on one hand, and the Thekkeks on the other. The court does not
resolve this particular dispute with respect to the pending motions, and need not resolve such dispute at
this time.
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157. Joseph Rodrigues, the Patient Care Ombudsman appointed in these cases, filed a
declaration stating that he supports the appointment of a trustee. ECF 158.
At the conclusion of the hearing on the motions on March 5, 2015, the court set a
further hearing for March 6, 2015 at 3:30 p.m. to announce a ruling on the motions. The
court now takes the motions under submission, issues this memorandum decision as its
ruling and vacates the further hearing as unnecessary in light of this written ruling. For
the reasons stated herein, the court grants the UST Motion under 11 U.S.C. § 1112(b)(1)
and authorizes and directs the United States Trustee to appoint a Chapter 11 trustee for
these cases. Because the Committee Motion seeks the same relief of trustee
appointment under a different statute, 11 U.S.C. § 1104(a), the court need not rule upon
such motion since the relief sought is granted on the other motion.
The UST Motion is based on 11 U.S.C. § 1112(b)(1), which provides in pertinent
part: “. . . after notice and a hearing, the court shall convert a case under this chapter to a
case under chapter 7 or dismiss a case under this chapter, whichever is in the best
interests of creditors and the estate, for cause unless the court determines that the
appointment under section 1104(a) of a trustee or an examiner is in the best interests of
creditors and the estate.” The party seeking dismissal under 11 U.S.C. § 1112(b)(1) has
the burden of proving cause by a preponderance of the evidence. See 7 Resnick and
Sommer, Collier on Bankruptcy, ¶ 1112.04[4] at 1112-22 (16th ed. 2014), citing In re
Woodbrook Assocs., 19 F.3d 312, 317 (7th Cir. 1994); In re Citi-Toledo Partners, 170
B.R. 602, 606 (Bankr. N.D. Ohio 1994) (citing Grogan v. Garner, 498 U.S. 279, 286
(1991).
Here, the court finds that the United States Trustee has demonstrated cause
under 11 U.S.C. § 1112(b)(1) as described in § 1112(b)(4)(A), specifically, substantial or
continuing loss to or diminution of the estate and the absence of a reasonable likelihood
of rehabilitation. At the hearing on March 5, 2015, the United States Trustee described
the dire financial straits that Debtors face currently in these cases. Debtors’ financial
condition has not improved, even though these cases have been pending since July 22,
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2013, over 19 months, which is documented in the debtors’ bankruptcy schedules filed in
August 2013 and their recent monthly operating reports submitted with the United States
Trustee’s requests for judicial notice. ECF 154. As shown by its January 2015 monthly
operating report, debtor Corona Convalescent Corporation has shown cumulative
postpetition losses of $161,870.47, and its general bank account and the payroll account
are overdrawn by $39,321.91 and $16,595.49 respectively. ECF 154 at 88 and 92. As
shown by its January 2015 monthly operating report, the finances of debtor Corona Care
Retirement, Inc., are, if anything, even bleaker; it has cumulative postpetition losses of
$698,100.18 and its general bank account is overdrawn $19,598.53. Id. at 225 and 229.
Debtors’ monthly operating reports also reflect numerous charges for fees assessed for
charges for their checks returned for insufficient funds. See, e.g., id. at 79 and 105.
Counsel for the United States indicated that debtors have postpetition employment tax
delinquencies of approximately $60,000, though debtors have tendered another check for
approximately $30,000 to replace a check returned for insufficient funds. None of these
facts are disputed by Debtors. Based on this evidence, the court finds that the United
States Trustee has shown by a preponderance of the evidence substantial or continuing
loss to or diminution of the estates as described in 11 U.S.C. § 1112(b)(4)(A).
The United States Trustee further argues that this evidence as well as other
evidence shows that debtors are unable to reorganize internally, and thus, the absence of
a reasonable likelihood of rehabilitation. The United States Trustee points to the
Declaration of Gary Kading, president of K&Y Corona, Inc., the General Partner of
Corona-Cal Associates LP (“Landlord”) describing the lack of confidence the landlord has
in debtors’ current management, stating “By early 2015, I had begun to seriously doubt
Ms. Ferrer’s ability or intentions to make good on her representations, and I was
becoming increasingly concerned about her ability to run the facility.” ECF 157,
Declaration of Gary Kading ¶ 3. The deadline for debtors to assume the lease under 11
U.S.C. § 365 has been extended on a month to month basis to allow time for debtors to
reorganize, but now Mr. Kading states that Landlord will not agree to further extensions
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after the expiration of the current extension on March 18, 2015, unless a trustee is
appointed because Landlord lacks confidence in debtors’ management. The landlord’s
position is significant because although debtors are current on their rent payments,
debtors may lose their lease if the landlord does not agree to allow them to assume the
lease, and cannot effectively reorganize without their business premises leased by the
landlord. Debtors offer no specific details on how they may operate without the landlord’s
cooperation to extend the lease, and argue merely that they will deal with the situation
outside of bankruptcy and that landlord’s declaration should not be taken seriously.
The United States Trustee also points out the proof of claim the IRS filed in the
Corona Care Convalescent Corporation case for prepetition taxes totaling $2.7 million,
including $1.9 million in priority unsecured taxes. See Claim 1-4. Providing for payment
of this claim is necessary for any reorganization under Chapter 11. 11 U.S.C. §
1129(a)(9)(C)(plan confirmation requires full payment of priority tax claims within 5 years
of the date of the order for relief (i.e., petition date)). As the United States Trustee
suggests, there is no reasonable likelihood of rehabilitation unless there are some means
to pay the priority tax claims in a plan of reorganization as required by the Bankruptcy
Code and no such means are offered or shown by debtors.
Based on the foregoing evidence, the court finds that the United States Trustee
has shown by a preponderance of the evidence the absence of a reasonable likelihood of
rehabilitation of debtors in these cases.3 Accordingly, the court determines that the
United States Trustee has made the requisite showing to establish cause to grant his
motion under 11 U.S.C. § 1112(b)(1) to convert, dismiss or appoint a trustee. Thus,
under 11 U.S.C. § 1112(b)(1), the court is to convert these cases to Chapter 7 or dismiss
the cases, whichever is in the best interests of creditors and the estates, for cause
3 The United States Trustee also argues that his motion under 11 U.S.C. § 1112(b)(1) may be granted on
grounds of gross mismanagement of the bankruptcy estates. While gross mismanagement constitutes
cause under 11 U.S.C. § 1112(b)(4)(B) to grant a motion under § 1112(b)(1), the court need not reach the
claim of gross mismanagement since it grants the motion under an alternative ground under §
1112(b)(4)(A) as discussed herein.
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unless it determines that the appointment of a trustee under § 1104(a) is in the best
interests of creditors and the estate. 11 U.S.C. § 1112(b)(1).
As previously noted, the United States Trustee, the Creditors’ Committee and
other parties urge the court to grant the motions and appoint a Chapter 11 trustee for
these cases under 11 U.S.C. § 1112(b)(1) and/or § 1104(a), which provides that on
request of a party in interest or the United States trustee, and after notice and a hearing,
the court shall order the appointment of a trustee under one of two conditions:
1. for cause, including fraud, dishonesty, incompetence, or gross mismanagement of
the affairs of the debtor by current management, either before or after the
commencement of the case, or similar cause . . .; or
2. if such appointment is in the interests of creditors, any equity security holders, and
other interests of the estate. . . .
The parties seeking appointment of a Chapter 11 trustee under 11 U.S.C. §
1112(b)(1) and/or 1104(a) have the burden of proving appropriate grounds exist for such
appointment by the preponderance of the evidence. 1 March, Ahart and Shapiro,
California Practice Guide – Bankruptcy ¶ 4:2001 at 4-144 (2014), citing In re William A.
Smith Const. Co., Inc., 77 B.R. 124, 126 (Bankr. N.D. Ohio 1987) and Grogan v. Garner,
498 U.S. 279, 286-291 (1991). Cause and best interest of creditors and other parties are
separate and independent bases for granting a motion to appoint a trustee under 11
U.S.C. § 1104(a). The United States Trustee argues that a trustee may be appointed
here under 11 U.S.C. § 1112(b)(1) and 1104(a) on both grounds, for cause based on
gross mismanagement and best interests of creditors. The Creditors’ Committee argues
that a trustee may be appointed under 11 U.S.C. § 1104(a) based on the best interests of
creditors.
As discussed herein, the court determines that it is in the best interest of creditors
to appoint a Chapter 11 trustee in these cases under the circumstances as requested by
the United States Trustee and the Creditors’ Committee under 11 U.S.C. § 1112(b)(1)
and therefore the court need not address the appointment of a trustee for cause under 11
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U.S.C. § 1104(a) based on gross mismanagement, as argued by the United States
Trustee.
The court notes that there is a slight difference in the statutory language between
11 U.S.C. § 1112(b) and § 1104(a) in that § 1112(b)(2) refers to whether appointment of
a trustee under § 1104(a) “is in the best interests of creditors and the estate” whereas §
1104(a) has more expansive language referring to additional parties, that is, whether the
appointment of a trustee “is in the interests of creditors, any equity security holders, and
other interests of the estate, without regard to the number of holders of securities of the
debtor or the amount of assets or liabilities of the debtor.” 11 U.S.C. § 1112(b)(1) and §
1104(a); 7 Resnick and Sommer, Collier on Bankruptcy, ¶ 1112.05[1] at 1112-4. Here,
regarding the difference in language, Collier on Bankruptcy suggests that the factors are
much the same between these statutes. Id. The court bases its ruling on the UST
Motion based on the narrower language of 11 U.S.C. § 1112(b)(1), limiting the inquiry to
the bests interests of creditors and the estate. Because the court should grant the UST
Motion and appoint a trustee under § 1112(b), it need not rule upon the Committee
Motion seeking the same relief of trustee appointment under § 1104(a).4
In determining which option is in the best interest of creditors, the court evaluates
the prospects for collection and payment of the claims of creditors. As argued by the
Creditors’ Committee and the United States Trustee, a sale of the debtors’ businesses
offers some prospect of payment of creditors because the assets will be monetized for
the payment of claims of creditors. This was reflected in the bargain reached by the
parties as set forth stipulation approved by the court in its “Order Granting Motion
Pursuant to Sections 305(A) and 1112(B) of the Bankruptcy Code for and Order
4 Assuming arguendo that the court would rule on the Committee Motion, the court would likely determine
that the factors to appoint a trustee would be much the same under § 1104(a) and that although the
positions of the creditors and equity are divergent, the best interest of the creditors, equity and interested
parties is to appoint a trustee to maximize value of the assets of the estate for these parties through an
asset sale now that debtors and their insiders have had a reasonable opportunity to propose reasonable
reorganization plans in these cases and have not succeeded.
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Dismissing Chapter 11 Cases,” entered in the jointly administered cases in the then lead
bankruptcy case of Pasadena Adult Residential Care, Inc., on August 28, 2014. 2:13-bk-
28484, ECF 382. That stipulation and order resolved the disputes between the parties to
allow the debtors some time to reorganize by proposing and confirming reorganization
plans by a certain deadline, and if the deadlines were not met, the assets would be sold
to raise funds to pay creditors. The parties to the settlement included debtors, their
insiders, the Ferrers, the Creditors’ Committee and HCF, a creditor with one of the largest
claims. 2:13-bk-28484, ECF 380. The settlement was negotiated with the assistance of
another judge of this court acting as a mediator and was formally approved by this court;
the approved settlement involved concessions by the settling parties, specifically
providing for payment of claims of certain creditors in the Pasadena entity cases in
certain fixed and limited amounts agreed to by the parties, dismissal of the Pasadena
entity cases, deferral of payment of administrative expense claims of the estate
professionals to the remaining cases of the Corona entities, and the commitment of the
remaining debtors, the Corona entities, to propose and confirm reorganization plans by
certain dates or to sell their assets to pay claims of creditors. The settlement returned
control of the more profitable Pasadena entities to the debtors’ insiders, the Ferrers,
based on the agreement of the parties to attempt to work out payment of creditors
through reorganization of the less profitable Corona entities based on an agreed
timetable. Paragraph 7 of the settlement stipulation approved by the court provided that
“failure to confirm a plan in the Corona estates consistent with the terms of the
Settlement on or before February 28, 2015, shall result in the immediate employment by
the Corona Debtors' estates of a broker for the purpose of selling the Corona facilities.”
2:13-bk-28484, ECF 380.
The settlement has been partially executed in that the cases of the Pasadena
entities have been dismissed, some claim payments under the settlement have been
made, and the debtors in the Corona entities have had time to devise, propose and
confirm reorganization plans. It is now evident that debtors are in default under the
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agreement because they have not and cannot propose reorganization plans based on the
deadlines agreed to in the settlement. Rather than complying with the default provisions
of the settlement, debtors and their insiders want to avoid the consequences of their
default and repudiate their settlement by supporting dismissal of the cases through the
motion of the United States Trustee to convert, dismiss or appoint trustee. It is evident
that they are no longer willing to abide by the settlement, and are now arguing that it was
a “corrupt deal,” even though they voluntarily and willingly negotiated and signed the
settlement with the advice and assistance of counsel, the settlement was reviewed by the
court and the order approving the settlement is now final and nonappealable. However,
debtors and their insiders, the Ferrers, offer no meaningful alternative to the settlement to
pay creditors. They say that they will restructure and pay creditors by continuing to
operate the businesses and by locating new financing or investors to provide the funds to
pay creditors and also argue that creditors have nonbankruptcy remedies to collect on
their claims. Debtors argue that appointing a trustee is not in the best interest of creditors
because additional administrative expenses will be incurred and the prospects for
payment of creditors through an asset sale are uncertain. They offer declarations of
representatives of some of the creditors expressing opposition to appointment of a
trustee and support for dismissal of the cases.
While there may be some merit to debtors’ argument, the United States Trustee
and the Creditors’ Committee make the better argument based on the record before the
court. Debtors and their insiders, in seeking dismissal, essentially propose more of the
same. Based on the evidence before the court, this has not, and will not work. As shown
by the evidence before the court, these debtors are continuing to rack up losses
postpetition, and their postpetition efforts to obtain new financing or investors have not
succeeded. ECF 154 at 88, 92, 225, 229. The creditors, as represented by the Creditors’
Committee and HCF, negotiated in good faith a deal with debtors and their insiders to
give them some time to obtain new financing and investors to propose and confirm
reorganization plans, and debtors and their insiders were unable to do this as agreed.
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While the parties did not agree to the appointment of a trustee as part of their settlement,
they did agree to commit to an asset sales process by agreeing to the employment of a
broker to sell the assets of the estates. Dismissing the cases now without enforcing the
settlement or providing for meaningful payment of creditor claims is not in the best
interests of creditors because this would undermine the settled expectations of interested
parties, including creditors and vendors, such as debtors’ landlord, which has granted
extensions of debtors’ right to assume or reject the lease under 11 U.S.C. § 365 based
on the settlement. Without the landlord’s cooperation, the court does not see how the
value of the assets of debtors now in the bankruptcy estates can be preserved for any
party because the nature of the debtors’ business in operating convalescent care facilities
for adult patients needs a physical facility, which is currently being leased because
debtors apparently cannot afford to purchase their own facility. Debtors have no answer
to the problem of not having the landlord’s confidence and cooperation in their
management, and debtors’ statement that they will “deal” with these issues outside of
bankruptcy does not show that it is in the best interest of creditors to expose the
bankruptcy estates to the risk of loss of cooperation with the landlord and termination of
the lease which is critical to maintenance of any value of the assets of the estates.
Moreover, an asset sale most likely will result in monetizing the assets of the estates for
payment of creditors. While debtors are correct in arguing that an asset sale may or may
not result in full payment of claims, their alternative of continuing business as usual offers
less prospect of recovery of value for payment of creditors. The evidence shows large
operating losses by debtors, which continue postpetition as shown on the monthly
operating reports, and hostility to current management by the landlord, which probably
foreshadows difficulties with lease extension and uncertain viability of debtors’
businesses. ECF 154 at 88, 92, 225, 229, and ECF 157. Understandably, debtors and
their insiders want to continue their efforts to operate the businesses and recover value
for themselves since they probably think an asset sale will leave equity holders with
nothing, but as shown by their record, they are continuing to rack up losses without
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meaningful progress in paying down debt. Thus, it appears that the appointment of a
trustee to conduct an asset sale process is in the best interest of creditors because
debtors and their insiders are not inclined to sell the assets, as indicated by their support
of dismissal of the cases. An asset sale at least offers some prospect of recovery of value
of the estates to pay creditors. The fact that an asset sale process may be conducted
does not necessarily mean that there are no protections for the interested parties,
because any sale would have to be reviewed under the standards of the Bankruptcy
Code, whether through a plan under 11 U.S.C. § 1129 or a non-plan sale under 11
U.S.C. § 363. Moreover, it would undermine the policy of enforcement of settlements to
dismiss the cases and allow the debtors and their insiders to escape the consequences
of their default on the settlement.
In terms of patient safety, the court is persuaded that, at the very least,
appointment of a Chapter 11 trustee will not harm the patients. The court takes note of
the declaration of Patient Care Ombudsman Joseph Rodrigues, which stated the
Ombudsman’s support of the appointment of a Chapter 11 trustee. ECF 158. Although
the Ombudsman’s declaration did not explain or give much reason for his support, the
court determines that, in the discharge of the duties of his office, the Ombudsman would
not support the appointment of a trustee if doing so would endanger patient safety. The
court discounts the self-serving declarations of AJ Rana and Felicidad Ferrer (ECF 163),
as insiders and equity holders of the debtors, and determines that a Chapter 11 trustee
chosen by the United States Trustee should be reasonably able to manage the facilities
without the services of the Ferrers and vendors of therapist services such as represented
by AJ Rana for the brief and limited period of time necessary to conduct and complete an
asset sale process.
The Creditors’ Committee also argued that it is not in the best interests of creditors
to dismiss the cases because this would restore the parties to the prepetition “race to the
courthouse” to collect on claims and seeks appointment of a Chapter 11 trustee for an
orderly liquidation of assets and payment of claims. The court agrees that the evidence
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supports this argument because debtors were given the opportunity in the bankruptcy
process through the automatic stay to see what they could do to restructure and
reorganize before creditors took action outside of bankruptcy. Debtors, their insiders,
and their creditors reached a bargain in the settlement to allow this to happen, but
unfortunately debtors were not able to succeed. Now that they have failed in their
restructuring efforts in the bankruptcy cases, it would be in the best interest of creditors to
go forward with an asset sale process based on the settlement of the parties rather than
returning the creditors to the prepetition status quo where they have to fend for
themselves after being delayed for over 19 months in these bankruptcy cases,
The Creditors’ Committee also pointed out that appointment of a Chapter 11
Trustee may make available to creditors other sources of potential recovery of value for
creditors if the bankruptcy cases continue. Specifically, Committee pointed to the
existence of a potential malpractice claim against debtors’ previous attorneys in a state
court action brought by creditor HCF Insurance Agency (“HCF”) in which HCF was
awarded almost $4 million, jointly and severally, against debtors based on an original
claim which was much less. See Claim 5-2. This potential malpractice claim was listed
as an asset on debtors’ bankruptcy schedules, but never pursued. ECF 154 at 10,
Schedule B. A Chapter 11 trustee may attempt to enforce this potential claim where
debtors’ current management has not so far, and this is further evidence that
appointment of a Chapter 11 trustee is in the best interest of creditors to pursue such
claim to recover value for creditors.
For the foregoing reasons, the court finds that the United States Trustee has met
his burden of proving cause by a preponderance of the evidence to grant his motion to
convert, dismiss or appoint a trustee under 11 U.S.C. § 1112(b)(1) and determines that it
is in the best interest of creditors and the estate to appoint a trustee under 11 U.S.C. §§
1112(b)(1) based on the preponderance of the evidence and that the motion of the United
States Trustee for trustee appointment under should be granted. For the reasons stated
herein, the court determines that pursuant to 11 U.S.C. §1112(b)(1) trustee appointment
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is in the best interest of creditors and the estate over the alternatives of dismissal or
conversion to Chapter 7. Regarding conversion, no party seeks that alternative, and the
court does not view that conversion would be more advantageous than appointment of a
Chapter 11 trustee to operate the businesses of the debtors for a short period of time and
to conduct and complete an asset sales process. Because the court should grant the
UST Motion and appoint a trustee under 11 U.S.C. § 1112(b)(1), it need not formally rule
on the merits of the Committee Motion to appoint a trustee under 11 U.S.C. § 1104(a),
which will be denied without prejudice as moot.
Final orders granting the UST Motion and appointing a Chapter 11 trustee in these
cases will be separately entered.
IT IS SO ORDERED.
###
Date: March 6, 2015
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