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Anderson v. Real Estate Partners

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION


October 5, 2009

IN RE REAL ESTATE PARTNERS, INC., AND ITS RELATED ENTITIES
PETER C. ANDERSON, UNITED STATES TRUSTEE APPELLANT,
v.
REAL ESTATE PARTNERS, INC., AND ITS RELATED ENTITIES. APPELLEES.

The opinion of the court was delivered by: Otis D. Wright II United States District Judge

ORDER

This appeal is taken by Peter C. Anderson in his capacity as United States Trustee ("Appellant") following the Bankruptcy Court's November 20, 2007 Order denying Appellant's 11 U.S.C. § 1104(a) motion for appointment of a Chapter 11 trustee and approving instead the appointment of Mr. Richard Kipperman ("Kipperman") as a "responsible person" for Appellees and debtors Real Estate Partners, Inc., and its seven related entities ("Appellees" or "Debtors"). Pursuant to 28 U.S.C. § 158(a), the District Court may review any final judgment, order, or decree of a bankruptcy court, including an order denying the appointment of a Chapter 11 trustee. See In re Marvel Entm't Group, Inc., 140 F.3d 436, 470 (3d. Cir. 1998). For the reasons briefly discussed below, the bankruptcy court's decision is AFFIRMED.

As a threshold issue, the parties appear to dispute the appropriate standard of review that governs this appeal. It is well-settled that a district court reviews the bankruptcy court's legal conclusions de novo and must accept the bankruptcy court's factual findings unless they are clearly erroneous. In re Tucson Estates, Inc., 912 F.2d 1162, 1166 (9th Cir.1990). More germane to the issue at hand, however, the Ninth Circuit has noted that the decision not to appoint a trustee in a Chapter 11 proceeding is a factual determination committed to the discretion of the bankruptcy judge. Consequently, the district court reviews the bankruptcy court's decision not to appoint a trustee for an abuse of discretion. In re Lowenschuss, 171 F.3d 673, 685 (9th Cir. 1999); see also In re Marvel, 140 F.3d at 470.

Generally speaking, the appointment of a trustee under Chapter 11 is an extraordinary remedy. In re Bayou Group, LLC, 564 F.3d 541, 546 (2d Cir. 2009) (citations omitted). In this case, after hearing all the evidence, the Bankruptcy Judge found that Appellant had not carried his burden of proving the requisite "cause" under 11 U.S.C. § 1104(a)(1). The court found that Appellant failed to prove, for example, fraud, dishonesty, incompetence or mismanagement of current management--i.e., Kipperman*fn1 --to such a degree so as to warrant the appointment of a trustee. The Bankruptcy Judge considered, inter alia, Mr. Kipperman's pre-petition engagement, his reputation for integrity, his extensive experience in the real estate finance field, that he had no prior involvement with any of the debtors, that he was appointed by the consent of all debtors, and that no expressed opposition had been voiced by any of the creditors who appeared. Moreover, a complete management restructuring occurred at the threshold of the bankruptcy case, when former management no longer had any control or ability to otherwise govern any of the debtors' affairs.

With all this, and more, the bankruptcy court decided it more prudent to approve the appointment of Mr. Kipperman as a responsible person in lieu of appointing a Chapter 11 trustee. It's factual findings in that regard were adequately supported by the record presented to it and are not clearly erroneous. This Court, therefore, cannot find that the bankruptcy court abused its discretion in denying Appellant's motion to appoint. Consequently, the appeal is DENIED and the bankruptcy court's ruling denying the motion for appointment of a Chapter 11 trustee is AFFIRMED.

IT IS SO ORDERED.


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