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In Re Fruehauf Trailer, Debtors, Chriss Street v. Daniel Harrow

May 23, 2011

IN RE FRUEHAUF TRAILER, DEBTORS, CHRISS STREET, APPELLANT,
v.
DANIEL HARROW, AS SUCCESSOR TRUSTEE OF THE END OF THE ROAD TRUST AND AMERICAN TRAILER INDUSTRIES, INC., APPELLEES



The opinion of the court was delivered by: Dean D. Pregerson United States District Judge

ORDER AFFIRMING THE DECISION OF THE BANKRUPTCY COURT

This matter comes before the court on appeal from the bankruptcy court's judgment in favor of Plaintiffs-Appellees. After reviewing the materials submitted by both parties and considering the arguments therein, the court AFFIRMS the decision of the bankruptcy court and adopts the following order.

cc: US Bankruptcy Court

cc: US Trustee's Office

I. Background

Appellant in this matter is Chriss Street ("Street"), who formerly served as the trustee to the "End of the Road Trust." (Appellant's Brief 2.) Appellees in this matter include Daniel Harrow ("Harrow"), the new trustee for End of the Road Trust, and American Trailer Industries, Inc ("ATII"). Street appeals from a bankruptcy court's judgment against him for over $7 million dollars. (Appellant's Excerpts of Record ("ER") 530-32.)

The chapter 11 bankruptcy of Fruehauf Trailer Corporation resulted in a debtors's amended plan of joint organization (the "Plan") that was confirmed on September 17, 1998, pursuant to an order. (ER 536:1-4.) The Plan called for a Delaware liquidation trust, through which Street and the Debtors entered into a Liquidating Trust Agreement. (Appellant's Brief 6.) The Liquidating Trust Agreement created the End of the Road Trust. (EOR 536:4-9.)

Notably, the Liquidating Trust Agreement prohibited the Trustee, i.e. Street, from "engag[ing] in any trade or business, including, without limitation, the purchase or any asset or property, (other than such assets or property as are necessary to preserve, conserve and protect . . . [the End of the Road Trust])." (ER 538:24-26.) The Liquidating Trust Agreement also barred sizable financial transactions without first obtaining the Trust Advisory Committee's ("TAC") prior approval. (ER 539:3-15.)

Section 8.3.1 of the Trust Agreement expressly exculpated the End of the Road Trust's Trustee of any liability from his acts or omissions, unless those acts or omissions constituted gross negligence or willful misconduct:

No provision of the Agreement shall be construed to impart any liability upon the Trustee unless it shall be proved in a court of competent jurisdiction that the Trustee's actions or omissions constituted gross negligence or willful misconduct in the exercise of any right, power or duty vested in him under this Agreement. (Appellant's Brief 7 (emphasis added).)

Section 8.3.3 also concerned liability of the Trustee under the Agreement:

Within the limitations and restrictions expressed and imposed herein, the Trustee may act freely with respect to the exercise of any or all of the rights, powers and authority conferred hereby in all matters concerning the Trust Estate after forming his best judgment based upon the circumstances without the necessity of obtaining the consent or permission or authorization of the Beneficial Interestholders or of the Court, any other court, official, or officer. . . . Further, the Trustee shall not be liable for any act or omission in connection with the administration of this Liquidating Trust, or the exercise of any right, power, or authority conferred upon him hereunder, unless it shall be proved that such Trustee was grossly negligent or acted in a manner which constituted willful misconduct.

(Appellant's Brief 8 (emphasis added).)

Additionally, Section 8.5.1 provided the Plan's trustee with indemnification for any legal expenses incurred in connection with the End of the Road Trust, subject to the same exception for gross ...


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