William A. Broscious, Esquire (VSB #27436) 

Kimberly A. Taylor, Esquire (VSB #29823) 

Kepley Broscious & Biggs, PLC 

2211 Pump Road 

Richmond, Virginia 23233 

804.741.0400 

 Counsel for the Trustee

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE EASTERN DISTRICT OF VIRGINIA 

Richmond Division 

In re: ) 

 ) 

DIGITIAL INK, INC., and ) Case No. 18-30056-KLP 

CHRISTOPHER DAVID MCGINNIS, ) Chapter 7 (Jointly Administered) 

 ) 

 Debtors. ) 

____________________________________)______________________________________ 

HARRY SHAIA, JR., TRUSTEE, ) 

 ) 

 Plaintiff, ) 

 ) 

v. ) APN: 18-03098 KLP 

 ) 

BMST, INC., ) 

 ) 

 Defendant. ) 

TRUSTEE’S MEMORANDUM IN RESPONSE TO 

DEFENDANT’S MOTION TO DISQUALIFY 

 Harry Shaia, Jr., Trustee (the “Trustee”), by counsel, opposes the motion [doc. no. 75] 

(the “Defendant’s Motion”) filed by BMST, Inc. (the “Defendant”), in which it seeks to 

“disqualify” pursuant to Bankruptcy Code §324: (1) the Trustee in the jointly administered 

bankruptcy cases (the “Jointly Administered Cases”) of Christopher David McGinnis 

(“McGinnis”) and Digital Ink, Inc. (“DII” and jointly with McGinnis, the “Debtors”), and (2) 

the law firm of Kepley Broscious & Biggs, PLC (the “Law Firm”), which represents the Trustee 

in the Jointly Administered Cases and this Adversary Proceeding (collectively, the 

“Proceedings”). This memorandum explains why the Court should summarily deny the 

Defendant’s Motion. 

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Introduction 

 The Court’s sua sponte decision to conduct a hearing affording the Trustee an 

opportunity to address the Court’s concern about a possible conflict of interest is entirely 

appropriate. The Defendant’s Motion, however, is not. 

In its stunningly ironic motion, the Defendant – which in concert with the Debtors has 

actually injured and defrauded the creditors of the Debtors’ bankruptcy estates – asks this Court 

to remove the Trustee and the Law Firm because they are diligently seeking to enlarge the estates 

of both Debtors by holding the Defendant accountable for its fraud. As so eloquently described 

by the Minnesota Bankruptcy Court, the Defendant is like other litigants who “do not come 

forward as neutral distanced friends of the abstract value in the administration of bankruptcy 

estates, as their rhetorical rectitude would suggest. Rather, they project a powerful self-interest 

onto the strategic plane.” In re Petters, 401 B.R. 391, 401 (Bankr. D. Minn. 2009). 

Having repeatedly tried to prevent the McGinnis estate claims from being asserted in the 

Adversary Proceeding, the Defendant now attempts to use the sledge hammer of Bankruptcy 

Code §324(a) to have Mr. Shaia removed from all cases in which he currently serves as Chapter 

7 trustee. Being neither a debtor nor creditor of either estate, the Defendant has no standing to 

seek removal of the Trustee. Its motive for doing so is both obvious and objectionable. Without 

question, the Defendant does not seek to benefit or protect the creditors of the estates. Actual 

creditors, on the other hand, support the Trustee and his prosecution of the Adversary 

Proceeding.1

 

 

1

 Wilson Paper Company, an unsecured creditor holding claims that appear to be the second largest in both the 

McGinnis estate and the DII estate, contacted the Law Firm after receiving the Defendant’s Motion to express its 

support for the Trustee’s continued prosecution of this Adversary Proceeding. Another creditor, Robert Sydnor, of 

both McGinnis and DII, also contacted the Law Firm, after receiving the Defendant’s Motion. That creditor, the 

former landlord of the premises at which the DII business was conducted both before and after the fraudulent 

transfer subject to this Adversary Proceeding, also supports the Trustee’s efforts in prosecuting this Adversary 

Proceeding. 

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The Trustee and the Law Firm welcome the Court’s review and inquiries. There is no 

“cause” to remove the Trustee and the Law Firm from the Proceedings under Bankruptcy Code 

§324(a) or under any other applicable law. As will be demonstrated more completely in a 

separate memorandum addressing the concerns raised by the Court, there is no actual conflict of 

interest at this time arising from the Trustee’s continued administration of the Jointly 

Administered Cases under counsel of the Law Firm. The Trustee is fulfilling his fiduciary duties 

as Chapter 7 trustee for both the bankruptcy estates by his ongoing and rigorous efforts to 

enlarge the estates through prosecution of this Adversary Proceeding. 

Background 

The core facts relevant to the Adversary Proceeding are as follows. McGinnis owned and 

operated a printing business with DII. DII was profitable, making substantial amounts of money 

during the general election years, especially the presidential election season every fourth year 

(including 2016). McGinnis, in active concert with DII and the Defendant, sought to shield those 

profits from creditors, including his spouse with whom he was engaged in bitter divorce and 

support proceedings. McGinnis and DII caused the profitable business to be transferred to the 

Defendant. McGinnis maintains an interest in the business as general manager and the holder of 

a right of first refusal to reclaim the printing business. 

In concert, McGinnis and the Defendant masked the true nature of the transfer, evidently 

to avoid precisely the current situation. The Defendant and McGinnis chose not to evidence the 

transfer by a single document - no purchase and sale agreement, no assignment, no bill of sale, 

not even a cocktail napkin with scribbled terms. The Defendant claims it merely purchased 

certain hard assets. That claim is belied by the extremely unusual employment agreement that 

BMST and McGinnis simultaneously entered into. McGinnis agreed to pay staggering 

liquidated damages ($750,000) should he walk away from the business before five years (and 

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two presidential cycles) had passed. McGinnis, not DII, would have to pay $750,000 even 

though McGinnis’ contractual salary was $150,000 per year. And after five years, he has a right 

of first refusal to reclaim his business. Obviously, the Defendant and McGinnis contemplated 

that McGinnis’ contribution to the business would be more than mere managerial expertise. The 

Defendant acquired more than merely DII’s hard assets in the transfer. 

Simply put, the reason the Trustee cannot at this time prove the precise nature of the 

assets transferred and identify the transferee(s) is that the Defendant and the Debtors 

intentionally covered their tracks. Further prosecution of the Adversary Proceeding should 

provide that evidence. 

The Defendant, not the Trustee, holds an “interest materially adverse” to creditors. Like 

a wolf adorned in the ill-fitting clothes of a lamb, the Defendant is attempting to derail the 

Trustee’s efforts to enlarge the estates and provide some relief to creditors. This Court should 

not allow the Defendant to exploit its own subterfuge in a fraud that substantially damaged the 

same creditors it purportedly is championing in its motion. 

Removal of the Trustee 

A Chapter 7 trustee who fails to perform his duties is subject to removal by the court on a 

finding of “cause.” Bankruptcy Code §324(a). “Cause,” which is not defined in the Bankruptcy 

Code, is examined on a case-by-case basis. In re EquiMed, Inc., 267 B.R. 530, 532 (D. Md. 

2001) (denying a removal motion filed by the petitioning creditors in an involuntary Chapter 7 

case); In re Modanlo, 413 B.R. 262, 267 (Bankr. Md. 2009) (denying a removal motion filed by 

the debtor); In re Tres-Ark, Inc., 483 B.R. 460, 466 (Bankr. W.D. Tex. 2012) (denying debtor’s 

motion to remove Chapter 7 trustee). 

“Cause” concerns matters of an extraordinary serious substance, generally “intentional 

misconduct or negligence by the trustee” EquiMed at 553, or “breach of fiduciary duty, unlawful 

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conduct, criminal conduct, conflict of interest or lack of due diligence,” In re Nettles, 354 B.R. 

90, 93 (Bankr. S.C. 2006) (denying a removal motion filed by a creditor who was the debtor’s 

brother). For example, one court removed a Chapter 7 trustee who “consistently acted to 

advance his law firm’s interests to the detriment of the Estate” by retaining his own law firm (of 

which his wife was a partner and designated “attorney-in-charge”), by shifting expenses (that 

were required to be borne under the engagement terms by the firm) to the estate, by filing a 

retaliatory lawsuit against a creditor who objected to the expense shifting that was designed to 

punish the creditor for acting against the trustee’s law firm, by thereafter charging the estate for 

the five days travel expenses in connection with an appellate argument that he attended 

accompanied by his wife and their two children, and by inconsistently attempting to justify the 

expenses charged to the estate. In re IFS Financial Corporation, et al., Case No. 02-39553, et 

al. (Bankr. S.D. Tex. May 13, 2013). 

If a court removes a trustee under that section then the trustee “shall thereby be removed 

in all other cases ... in which such trustee ... is then serving unless the court orders otherwise.” 

11 U.S.C. §324(b). Because removal of a trustee raises serious issues with significant stakes, 

standing under Bankruptcy Code §324(a) should be limited to proper parties who have some 

interest in the debtor’s estate, other than as a target of an avoidance action. The Defendant’s 

motives are suspect and it has no legitimate reason to seek removal of the Trustee. 

Removal of Counsel 

The Defendant furthers its attempts to derail the Trustee’s efforts by seeking to remove 

the Law Firm as counsel of record to the Trustee under Bankruptcy Code §324(a). That request 

should be summarily dismissed because (i) Bankruptcy Code §324(a) does not apply to the 

Trustee’s counsel, (ii) the Defendant does not proffer a single reason for dismissing the Law 

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Firm, and (iii) the Defendant’s objection to the manner in which the Law Firm records time is a 

red herring. 

The Defendant bases its request to remove the Law Firm as counsel of record upon 

Bankruptcy Code §324(a). By its plain terms, that section does not apply to professionals hired 

by the estate – it applies only to standing trustees and examiners. Bankruptcy Code §327 applies 

to the employment of professionals. The Defendant neither cites that section nor discusses any 

of the considerations set forth therein. 

In fact, the Defendant does not offer a single reason justifying disqualification of the Law 

Firm as counsel of record. Presumably, the Defendant is tying the removal of the Law Firm with 

the removal of the Trustee. However, as will be demonstrated in a separate memorandum 

addressing the concerns raised by the Court, there is no actual conflict of interest at this time 

arising from the Trustee’s continued administration of the Jointly Administered Cases. 

The Defendant does raise objections to the manner in which counsel is recording its time. 

But those objections lack any merit, and ignore the fact that the Trustee is no stranger to his 

obligations as a Chapter 7 trustee of jointly administered bankruptcy estates. 

The Trustee is fully aware of and experienced with the requirement under Bankruptcy 

Rule 2009(e) that he maintains separate accounts of the property of and distribution from the 

McGinnis estate and the DII estate. At the Trustee’s instructions, the Law Firm separately 

categorizes the time spent on this Adversary Proceeding from the time spent on the Ragland 

adversary proceeding and issues of general bankruptcy administration. As directed by the 

Trustee, the Law Firm splits time spent on this Adversary Proceeding evenly between the 

McGinnis estate and the DII estate. Based on his many years of experience and in the sound 

exercise of his business judgment, the Trustee believes that the “split reporting” of the Law 

Firm’s time concerning this Adversary Proceeding is the best practice until such time as there is 

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a determination concerning the identity of the debtor that transferred the DII business to the 

Defendant in fraud of creditors. 

 The Defendant conflates services “recorded” by a professional with services charged by a 

professional to an estate. Of course, there is a substantial difference, especially in Chapter 7 

bankruptcy cases, between a professional “recording” services and a professional charging an 

estate those services. The Defendant’s protest reveals a misapprehension of basic bankruptcy 

law governing the compensation and expenses reimbursement of professionals. An estate 

becomes obligated to pay for a professional’s services only after the professional has complied 

with the express requirements of the Bankruptcy Code §330(a) and Bankruptcy Rule 2016(a), 

including filing an application “setting forth a detailed statement of the services rendered, time 

expended and expenses incurred, and the amount requested.” And even then, the estate’s 

obligation to pay the professional arises only after notice is delivered to “parties in interest and 

the Office of the United States Trustee,” a hearing is held and the court determines whether the 

services rendered and the expenses incurred by the professional were both “actual” and 

“necessary” and the requested amounts “reasonable.” 

This Court is well-equipped to review any compensation and reimbursement applications 

that may be filed by the Law Firm in the Jointly Administered Cases. The Court hardly needs 

the assistance of the Defendant to review applications that have not been prepared, let alone 

filed, and which may not be filed unless the Trustee succeeds in avoiding the fraudulent transfer 

that the Defendant seeks to protect. 

Conclusion 

There is no cause to disqualify the Trustee and/or the Law Firm, and the Defendant lacks 

standing to seek removal under Bankruptcy Code §324(a) or otherwise. Accordingly, the 

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Trustee respectfully requests that the Court enter an Order denying the Defendant’s Motion and 

granting such other relief that is just and appropriate. 

HARRY SHAIA, JR., TRUSTEE 

 

 By: /s/ William A. Broscious 

 Counsel 

William A. Broscious, Esquire (VSB #27436) 

Kimberly Ann Taylor, Esquire (VSB #29823) 

Kepley Broscious & Biggs, PLC 

2211 Pump Road 

Richmond, VA 23233 

Phone: 804.741.0400 

Counsel for the Trustee

CERTIFICATE OF SERVICE 

I hereby certify that on August 2, 2019, the foregoing Trustee’s Memorandum was sent 

by first-class mail, postage prepaid, to the following; 

Robert Van Arsdale, Esquire 

Shannon F. Pecoraro, Esquire 

OFFICE OF THE UNITED STATES TRUSTEE 

701 East Broad Street - Suite 4304 

Richmond, Virginia 23219 

Robert S. Westermann, Esquire 

Franklin R. Cragle, III, Esquire 

HIRSCHLER FLEISCHER, P.C. 

The Edgeworth Building 

2100 East Cary Street 

Post Office Box 500 

Richmond, Virginia 23218-0500 

Hunter R. Wells, Esquire 

CANFIELD, WELLS & KRUCK LLP 

4124 E. Parham Road 

Henrico, Virginia 23228 

and to those additional persons set forth on the attached service list. 

/s/ William A. Broscious 

Counsel 

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 Christopher David McGinnis 

 P.O. Box 191 

 Petersburg, VA 23804

 Digital Ink., Inc. 

 P.O. Box 191 

 Petersburg, VA 23804

 Hunter R. Wells 

 Canfield, Wells & Kruck, LLP 

 4124 E. Parham Road 

 Henrico, VA 23228

 Harry Shaia, Jr 

 Spinella, Owings & Shaia, P.C. 

 8550 Mayland Drive 

 Richmond, VA 23294

W. Scott Dillard, II

Spinella, Owings & Shaia PC

8550 Mayland Drive

Richmond, VA 23294

 John P. Fitzgerald, III 

 Office of the US Trustee - Region 4 -R 

 701 E. Broad Street, Ste. 4304 

 Richmond, VA 23219-1849 

 Robert Van Arsdale 

 Shannon Pecoraro 

 Office of the U.S. Trustee 

 701 East Broad Street, Suite 4304 

 Richmond, VA 23219

 Richmond Ambulance Authority 

 2400 Hermitage Road 

 Richmond, VA 23220-1200 

 Elizabeth River Tunnels 

 700 Port Centre Pkwy 

 Suite 2B 

 Portsmouth, VA 23704-5901 

 MCV Hospital 

 PO Box 980462 

 Richmond, VA 23298-0462 

 Fox Bindary, Inc 

 c/o The Eliades Law Firm, PLLC 

 14000 N Enon Church Road 

 Chester, VA 23836-3312 

 MCV Associated Physicians 

 PO Box 91747 

 Richmond, VA 23291-1747 

 Internal Revenue Service 

 P.O. Box 7346 

 Philadelphia, PA 19101-7346 

 Rehabilitation Associates PC 

 c/o Gregory K. Pugh, P.C. 

 2404 Princess Anne Road 

 Virginia Beach, VA 23456-3409 

Wells Fargo Bank, N.A. 

 Wells Fargo Card Services 

 PO Box 10438, MAC F8235-02F 

 Des Moines, IA 50306-0438 

 Wilson Paper Comp 

 c/o Law Office of R. Bruce Fickley, PC 

 PO Box 4005 

 Roanoke, VA 24015-0005 

 Ally Financial 

 PO Box 130424 

 Roseville MN 55113-0004 

 Kevin Harrison 

 9460 Amerdale Dr., Ste C 

 Richmond, VA 23236 

 UVA Physician's Group 

 PO Box 744123 

 Atlanta, GA 30374-4123 

 Chesterfield Co Dept of Utilities 

 Attn: Laura Saxon 

 PO Box 608 

 Chesterfield VA 23832-0009 

 Sterling Jewelers Inc. 

 dba Jared Galleria of Jewelry 

 c/o Weltman, Weinberg & Reis Co. 

 323 W. Lakeside Avenue 

 Cleveland, OH 44113-1085 

 City of Richmond City Hall 

 Room 109 Delinquent Taxes 

 900 East Broad Street 

 Richmond VA 23219-1907 

 American Express Bank, FSB 

 c/o Becket and Lee LLP 

 PO Box 3001 

 Malvern, PA 19355-0701 

 Systems & Services Tech, Inc. 

 4315 Pickett Road, Bkcy. Dept. 

 St. Joseph, MO 64503-1600 

 CJW Medical Center

 Resurgent Capital Services 

 PO Box 1927 

 Greenville, SC 29602-1927 

 Chesapeake Bank 

 c/o Robert H. Chappell, Esq. 

 Spotts Fain 

 411 E. Franklin St., Ste 600 

 Richmond, VA 23219-2200 

 Commonwealth of Virginia 

 Department of Taxation 

 P.O. Box 2156 

 Richmond, VA 23218-2156 

 Mailing Services of Virginia 

 PO Box 7664 

 Charlottesville, VA 22906 

 Loc Pfeiffer, Esq. 

 Kutak Rock LLP 

 901 E. Byrd Street, Ste 1000 

 Richmond, VA 23219 

 Heidelburg USA, Inc. 

 c/o Greenberg Law Firm 

 P.O. Box 240 

 Roanoke, VA 24002 

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 Wells Fargo Vndr Fin Srvcs, LLC 

 Jason Harkness 

 1010 Thomas Edison Blvd., SW 

 Cedar Rapids, IA 52404-8247 

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