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Toby L. Gerber (SBT 07813700)

Michael Berthiaume (SBT 24066039) 

NORTON ROSE FULBRIGHT US LLP

2200 Ross Ave., Suite 3600 

Dallas, Texas 75201 

Telephone: (214) 855-8274 

Facsimile: (214) 855-8200 

Email: toby.gerber@nortonrosefulbright.com 

michael.berthiaume@nortonrosefulbright.com

Jason L. Boland (SBT 24040542) 

NORTON ROSE FULBRIGHT US LLP

1550 Lamar Street, Suite 2000 

Houston, Texas 77010 

Telephone: (713) 651-5151 

Facsimile: (713) 651-5246 

Email: jason.boland@nortonrosefulbright.com 

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION

IN RE:

TOMMY’S FORT WORTH, LLC, et al,

1

DEBTOR.

§

§ 

§ 

§ 

§ 

§

CHAPTER 11

CASE NO. 24-90000 

(JOINTLY ADMINISTERED)

BRIEF IN SUPPORT OF AGREED EMERGENCY MOTION TO APPOINT CHAPTER 

11 TRUSTEE

A hearing will be conducted on this matter on June 14, at 10:00 am in Room 204, U.S. Courthouse, 501 W. 

Tenth Street, Fort Worth, Texas 76102 

You may participate in the hearing either in person or by an audio and video connection. Audio 

communication will be by use of the Court’s dial-in facility. You may access the facility at 1.650.479.3207; 

Meeting ID: 2309 445 3213 . Video communication will be by use of the Cisco WebEx platform. Connect via 

the Cisco WebEx application or click the link on Judge Morris’s home page and access the link at Link: 

https://us-courts.webex.com/meet/morris; Meeting Number: 2309-445-3213. Click the settings icon in 

the upper right corner and enter your name under the personal information setting. 

Hearing appearances must be made electronically in advance of electronic hearings. To make your 

appearance, click the “Electronic Appearance” link on Judge Morris’s home page. Select the case name, 

complete the required fields and click “Submit” to complete your appearance.

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification 

number, are: Tommy’s Fort Worth, LLC (3473); Tommy’s Holding Company, LLC (2662); Tommy’s Grand 

Rapids, LLC (9224); Tommy’s Castaic, LLC (7501); Tommy’s Lewisville, LLC (4750); High Country Watersports, 

LLC (6160); Walloon Lake Village Marina, LLC (0277); MKB Florida Holdings, LLC (5698); Tommy’s Detroit, 

LLC (5242); Tommy’s California Fresno, LLC (8597); Tommy’s Phoenix, LLC (3036); Tommy’s Las Vegas, LLC 

(7721); Tommy’s Chattanooga, LLC (0839); Tommy’s California Ventura, LLC (5149); Tommy’s Rancho 

Cordova, LLC (1070); Tommy’s Stockton, LLC (1338); and Tommy’s Knoxville, LLC (8052).

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Table of Contents

Page

I. INTRODUCTION .................................................................................................................. 5

II. BACKGROUND .................................................................................................................... 5

A. Lending Relationship.................................................................................................. 5

B. Conversion of Collateral and Sales Out of Trust........................................................ 6

C. Appointment of a Receiver......................................................................................... 7

D. Bankruptcy Case ......................................................................................................... 8

III. ARGUMENT.................................................................................................................... 13

A. Section 1104(a)(1): Mandatory Appointment of a Chapter 11 Trustee for “Cause”, 

Including Fraud, Dishonesty, Incompetence, Or Gross Mismanagement ........................ 13

B. Section 1104(a)(2): Discretionary Grounds for Appointment of a Chapter 11 

Trustee: In the Interests of Creditors, Etc. ........................................................................ 18

IV. EMERGENCY RELIEF REQUESTED........................................................................... 20

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TABLE OF AUTHORITIES

 Page(s) 

Cases

In re Amerejuve, Inc., No. 14-35482, 2015 Bankr. LEXIS 1496 (Bankr. S.D. Tex. Apr. 29, 2015) ..........................18

In re Anchorage Boat Sales, Inc., 4 B.R. 635 (Bankr. E.D.N.Y. 1980) .........................................................................................17

In re Bibo, Inc., 76 F.3d 256 (9th Cir. 1996) .....................................................................................................17

In re Cajun Elec. Power Coop., 191 B.R. 659 (Bankr. D. La. 1995), aff’d 74 F.3d 599 (5th Cir.), cert denied, 519 U.S. 808 (1996). Cause ...................................................................................16, 20, 21, 22

Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. 343 (1985) .................................................................................................................16

In re Deena Packaging Industries, Inc., 29 B.R. 705 (Bankr. S.D.N.Y. 1983) .......................................................................................21

In re Euro-Am. Lodging, Corp., 365 B.R. 421 (Bankr. S.D.N.Y. 2007) .....................................................................................20

In re Hotel Assocs., Inc., 

3 B.R. 343 (Bankr. E.D. Pa. 1980) ..........................................................................................22

In re Ionosphere Clubs, Inc., 

113 B.R. (Bankr. S.D.N.Y. 1990) ......................................................................................20, 22

In re Marvel Entm’t Group, Inc. 

140 F.3d 463 (3d Cir. 1998)...................................................................................16, 17, 20, 21

In re McCorhill Pub., Inc., 

73 B.R. 1013 (Bankr. S.D.N.Y. 1987) .....................................................................................19

Mfrs. & Traders Tr. Co. v. Morningstar Marketplace, Ltd. (In re Morningstar 

Marketplace, Ltd.), 

544 B.R. 297 (Bankr. M.D. Pa. 2016) .....................................................................................22

In re Patman Drilling Int’l, Inc., No. 07-34622-SGJ, 2008 WL 724086 (Bankr. N.D. Tex. Mar. 14, 2008) ..................17, 19, 21

In re Professional Accountants Referral Svcs., Inc., 142 B.R. 424 (Bankr. D. Color. 1992) .....................................................................................17

In re PRS Insurance Group, Inc., 274 B.R. 381 (Bankr. D. Del. 2001) ........................................................................................17

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In re Sharon Steel Corp.,

871 F.2d 1217 (3rd Cir.1989) ............................................................................................18, 21

In re V. Savino Oil & Heating Co., 99 B.R. 518 (Bankr. E.D.N.Y. 1989)...........................................................................16, 17, 18

In re Westbank Holdings, LLC, No. 22-10082, 2022 WL 3052135 (Bankr. E.D. La. Aug. 1, 2022) ........................................19

Wolf v. Weinstein, 372 U.S. 633 (1963).................................................................................................................16

Rules and Statutes

11 U.S.C. § 1104(a) .......................................................................................................................18

11 U.S.C. § 1104(a)(2).............................................................................................................21, 22

11 U.S.C. § 1104(a)(1).................................................................................................16, 17, 18, 22

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M&T Bank (“M&T”), by and through its attorneys of record, files this Brief in Support

of Agreed Emergency Motion to Appoint Chapter 11 Trustee (the “Motion”). The Debtors have 

agreed to emergency consideration of and to the relief sought in the Motion. The United States 

does not oppose the emergency consideration of and the relief sought in the Motion. M&T 

respectfully states the following:

I. INTRODUCTION

1. The Debtors, who operate boat dealerships in Michigan and other states, filed 

these cases on May 20, 2024 (the “Petition Date”) without warning or consultation with M&T, 

their senior secured lender, or to the Michigan state court-appointed receiver who was in 

possession of M&T’s collateral. 

2. Since the Petition Date, the Debtors have, on a net basis depleted more than $1.4 

million of M&T’s collateral culminating in this Court’s denial on Debtors’ most recent request 

for use of cash collateral pursuant to a proposed 13-week Cash Forecast. See Order Denying 

Debtors’ Request for Entry of Fourth Interim Cash Collateral Order, Dkt. 149. 

3. Recognizing this reality, the Debtors have agreed to the relief sought in this 

Motion, including to the appointment of an independent fiduciary to oversee the administration 

and efficient wind-down of the Debtors’ estates. In addition, the United States Trustee does not 

oppose the relief sought herein.

II. BACKGROUND

A. Lending Relationship

4. The Debtors executed and delivered to M&T a Variable Rate Demand Note 

(Floor Plan) dated May 18, 2023 (the “Floor Plan Note”). The Debtors also executed and 

delivered to M&T a Revolving Line Note (New York) dated May 18, 2023 (the “Revolving 

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Note,” and collectively with the Floor Plan Note, the “Notes”), and a Loan Agreement (Floor 

Plan Financing) dated May 18, 2023 (the “Loan Agreement”). Pursuant to the Notes and Loan 

Agreement, M&T made two revolving credit loans to the Debtors for purposes of providing 

floor plan financing and working capital, in an aggregate maximum principal amount totaling 

over $115,000,000.00 (the “Loans”). On May 17, 2023, Debtors executed a General Security 

Agreement (New York) (the “Security Agreement”). The Notes, Loan Agreement, Security 

Agreement, and related documents are referred to collectively as the “Loan Documents.”2

5. Under the terms of the Security Agreement, M&T was granted a first priority 

lien on all of the Debtors’ accounts, inventory, equipment, general intangibles and all other 

business assets and personal property including, without limitation, all boats, trailers, and other 

marine inventory (whether acquired by the Debtors with Loan advances or otherwise), and all 

products, replacements, cash and non-cash proceeds thereof. See Security Agreement § 1.1. 

(“Collateral”).

B. Sales Out of Trust

6. Under the floor plan financing arrangement, M&T loaned funds to the Debtors to 

buy marine inventory for resale or rental. Upon the sale of a boat and or trailer, Debtors agreed 

to hold the proceeds in trust and remit to M&T for repayment of the amount advanced to 

Debtors by M&T to purchase the boat (the “Proceeds”). See Loan Agreement, § 9.1. The 

Debtors also agreed to provide M&T with accurate monthly dealership statements in order to

disclose which boats have been sold and which boats are still in inventory. Id., § 11.l (ii). Prebankruptcy, the Debtors, however, failed to remit substantial sale proceeds to repay the loans. In 

2 The Loan Documents are attached hereto as Exhibit 1; M&T Bank’s Appendix in Support of Emergency Motion to 

Appoint Chapter 11 Trustee (“Appx”) at M&T 00002.

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the months preceding bankruptcy the Debtors sold millions of dollars of M&T’s collateral 

proceeds out of trust. 

7. M&T also learned that Malibu Boats, Inc., the Debtors’ primary supplier of new 

boat inventory (“Malibu”) sent the Debtors a letter dated March 22, 2024 explaining that all 

dealer agreements between each Borrower and Malibu had either expired on June 30, 2023, or 

were terminated on March 11, 2024 (the “Malibu Termination Letter”).

3 The Malibu 

Termination Letter stated that Malibu would not sell any more Malibu or Axis boats to Debtors 

and that Malibu “does not anticipate entering into dealer agreements with any of the Tommy's 

Dealerships [the Debtors] for the reminder of model year 2024, model year 2025, and beyond.” 

The termination of the Malibu Dealer Agreements was a material adverse change and an Event 

of Default under Section 7.l(xiii) of the Security Agreement. In addition, since the Malibu 

Termination Letter, Malibu has entered into new dealership agreements with dealerships in all 

but one of the Debtors’ former geographic territories.

4 These events are Events of Default under 

the floor financing arrangement with M&T Bank. 

C. Appointment of a Receiver

8. Pursuant to the terms of the Loan Documents, upon an event of default, M&T 

may, at its option move for the appointment a receiver. Security Agreement, § 7.2.6. On April 

22, 2024, the Circuit Court for the County of Kent, Michigan (the “Michigan Court”) entered a 

Consent Order Appointing Receiver (“Receivership Order”).

5 Pursuant to the Receivership 

Order, the Michigan Court determined that the Loans were properly secured by all Collateral as 

defined under the Security Agreement (see Receivership Order, ¶ D), and found that the 

3 See Malibu Termination Letter attached hereto as Exhibit 2; Appx. M&T 00092. 

4 See Form 8-K attached hereto as Exhibit 3; Appx. M&T 00095. 

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Receivership Property (as defined therein) “is likely insufficient to satisfy [M&T]’s claims.” Id., 

¶ H. Further, the Receivership Order determined that it was appropriate to appoint a receiver to 

preserve the Receivership Property. In aid of the receiver, the Debtors were obligated to 

cooperate with the receiver and turnover to the receiver all Collateral. Id., ¶ 1.6. 

9. According to the Receiver’s Status Report (the “Receiver’s Report”),

6 the 

receiver reported to the Michigan Court that the Debtors had failed to provide the receiver with 

requested information in a timely and reliable basis. To the contrary, the Debtors actively 

stonewalled the receiver’s attempts to verify key financial information. 

10. The Receiver’s Report confirms that the Debtors’ funds were commingled with 

bank accounts in the name of non-debtor, MKB Holdings. Receiver’s Report, ¶ 9. These bank 

accounts were not maintained at M&T, in breach of the Loan Documents. 

D. Bankruptcy Case

11. Since the filing of the bankruptcy case, ongoing due diligence by M&T 

regarding the pre- and post-petition cash management of the Debtors have illuminated 

additional concerns in addition to those described above.

1. Lack of Adequate Protection 

12. On May 22, 2024, the Debtors filed their Emergency Motion of Debtors for 

Entry of Interim and Final Orders (I) Authorizing the Use of Cash Collateral, (II) Granting 

Adequate Protecting, (III) Modifying the Automatic Stay, (IV) Setting a Second Interim 

Hearing, (V) Setting a Final Hearing, and (V) Granting Related Relief [Docket No. 12] (the 

“Cash Collateral Motion”). M&T objected to the Cash Collateral Motion in its Omnibus 

5 See Receivership Order attached hereto at Exhibit 4; Appx. M&T 00100. 

6 See Receiver’s Report attached hereto as Exhibit 5; Appx. M&T 00125. 

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Objection of M&T Bank to Certain Emergency Motions [Dkt. 21] and its Supplemental 

Objection to Debtor’s Cash Collateral Motion [Dkt. 106] (together the “Cash Collateral 

Objection”).

13. Because the Debtors did not reach an agreement with M&T for the use of cash 

collateral, the Debtors proposed the use of M&T’s cash collateral in exchange for adequate 

protection liens, super-priority claims, and adequate protection payments. As described in 

M&T’s Cash Collateral Objection, the proposed adequate protection in the Cash Collateral 

Motion was insufficient to provide M&T with the requisite protection for the potential for 

diminution of its interests. Further, because Malibu has ended its relationship with the Debtors, 

the Debtors have no means of replacing M&T’s Collateral in the event they were to sell certain 

units of M&T’s Collateral. 

14. Ultimately, this Court agreed that the Debtors were unable to provide M&T 

adequate protection. In its ruling on the hearing held on June 7, 2024, this Court found that the 

Debtors were unable to carry their burden to demonstrate that M&T was adequately protected 

from the diminution of its interest and, therefore, denied further use of M&T’s cash collateral. 

[Dkt. 145]. 

2. The Debtors cash management system reflects large amounts of 

commingling between and among the Debtors and non-debtors. 

15. Since the Petition Date, ongoing due diligence and discovery propounded by 

M&T and its financial advisors have confirmed the Receiver’s Report and illuminated the lack 

of corporate form established between and among the debtor entities and several non-debtor 

entities that existed prior to the Petition Date. 

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16. It is apparent that, prior to the Petition Date, cash flowed between the Debtors’ 

bank accounts and bank accounts owned by non-debtor MKB Holdings7. The Debtors’ books 

and records historically did not properly account for these transfers.

8 Instead, it appears that the 

Debtors’ principal, Matt Borisch, had the authority use the Debtors’ bank accounts.9 This 

apparent lack of reporting has led to inadequate books and records that are inaccurate on their 

face.10

3. The Debtors sold marine inventory and failed to remit proceeds to M&T in 

violation of the Loan Documents. 

17. As described in the Cash Collateral Objection, the floor financing arrangement 

between the Debtors and M&T granted M&T a lien interest in all assets of the Debtors, 

including their marine inventory. This lien is only to be released when M&T receives payment 

for the inventory, which occurs after the Debtors effectuate a sale of the marine inventory (a 

boat and/or trailer). Despite that obligation, M&T has confirmed that the Debtors sold numerous 

boats and trailers and failed to remit those sale proceeds to M&T.

7 Deposition of Denielle Hoffman, attached hereto as Exhibit 6 Appx. M&T 00140 (“Hoffman Depo”), 15:7–10. 

Q. Tommy’s. How did the money get from MKB Holdings' bank account to Tommy's?

A. There have been times where payments for Tommy's operations would be made directly out of the 

MKB Holdings bank account.

8 Hoffman Depo. 30:9-12. 

Q. Well, I'm asking you the practical question. Were they reflected on books and records of either 

company?

A. In some cases I believe they were, in some cases they may not be.

9 Hoffman Depo. 17:24–18:1. 

Q. Okay. Once the funds got into MKB Holding, who was responsible for deciding how those funds would 

be used?

A. Matt Borisch.

10 Hoffman Depo. 30:16-19. 

Q. So what you’re saying is that whatever is reflected on the books and records would not be accurate, 

because not all the transactions were recorded?

A. That’s correct.

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18. Since the Petition Date, M&T’s ongoing due diligence has revealed the Debtors’ 

finance team was aware of these “sales out of trust”11 and alerted the Debtors’ principal, Matt 

Borisch, of the issue.12 Based on M&T’s post-petition due diligence, the total sales out of trust 

balance is currently in excess of $15 million plus additional amounts funded by M&Tin 

violation of the Loan Documents. 

4. The Debtors regularly collected sales tax and other governmental fees and 

failed to remit approximately $5 million to government authorities. 

19. In addition to the sales out of trust, prior to the Petition Date, the Debtors failed 

to account for and remit approximately $5 million in sales taxes and registration fees to relevant 

governmental authorities. 

11 Hoffman Depo. 13:17–14:3. 

Q. Okay. Were any cash proceeds of a sale contract of a boat, a contract between one of the Tommy's 

entities and the customer, were any of those proceeds sent anywhere other than to M&T Bank?

A. Ever?

Q. Yes.

A. Yes.

Q. Okay. What were those circumstances?

A. There were times when boat proceeds would be deposited directly into an MKB Holdings bank account.

12 Hoffman Depo. 22:17-23:1. 

A. My understanding is that when a boat is sold and we receive funds for it we have to remit the amount of 

cost on the loan for that boat to M&T.

Q. And you became aware at some point that that in fact was not being done by Tommy's or by MKB, 

correct?

A. Correct.

Q. I'm sorry, did you say yes?

A. Yes, that's correct.

Q. Okay. And did you ever report that to Mr. Borisch?

A.· Yes.

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5. The Debtors are locked out of 3 locations and cannot operate their 

business due to failure to pay rent at the premises. 

20. The Debtors are currently locked out and unable to operate at least three of their 

locations.13 Shuttered locations only exacerbate the Debtors’ financial woes, and further drains 

M&T’s cash collateral. 

6. The Debtors are experiencing critical losses of employees responsible for 

cash reporting and generation of revenue. 

21. According to the Debtors, they have received approximately sixty resignations 

since the Petition Date and immediately prior. These defections include back office staff, as 

well as sales staff, service staff, and location managers that are key in driving revenue for the 

Debtors. These material losses have made it more difficult for the Debtor to operate and for the 

Debtor to deliver the revenues required to not only pay M&T the balances owed but pay general 

administrative costs of managing the estate. 

7. The Debtors have inadequately disclosed funding of professional fees. 

22. On June 3, 2024, the Debtors filed their Disclosure of Compensation of Attorney 

for Debtor. Dkt. 110 (“Disclosure”). According to the Disclosure and other diligence conducted 

by M&T, the Debtors and their advisors received payment of their retainer from non-debtor 

Artemis Capital, LLC (“Artemis”). The Disclosure does not describe, and M&T has been 

unable to discern, the purpose for Artemis’s involvement in the Debtors’ bankruptcy case or the 

nature, extent or source of consideration provided to Artemis for apparently advancing 

$550,000 to Debtors’ professionals. 

13 For example, the Debtors are unable to operate their Phoenix and Las Vegas locations. Those locations were part 

of a pre-petition acquisition, wherein non-debtor MKB Holdings was both tenant of the locations and purchaser 

under an Asset Purchase Agreement. Prepetition, MKB Holdings breached the lease and the APA. Thus, contrary to 

Debtors’ intimations, any sale of such shuttered premises would require the cooperation of landlords and significant 

cash to cure rent delinquencies and related breaches of the relevant agreements. 

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8. The Debtors have failed to rationalize expenses.

23. Upon information and belief, the Debtors’ cash losses for the period of January 

1, 2024 through the Petition Date exceed $20 million. Those losses appear to be continuing 

during the post-petition period. 

24. M&T has been able to review the Debtors projected payroll, post-petition 

accounts payable, rent, unpaid trust fund tax liabilities, and the accumulation of sales out of 

trust and has determined the Debtors are administratively insolvent. 

III. ARGUMENT

25. The Bankruptcy Code generally permits a Chapter 11 debtor to remain in control 

of their assets and business operations provided that current management “can be depended 

upon to carry out the fiduciary responsibilities of a trustee.” See Commodity Futures Trading 

Comm’n v. Weintraub, 471 U.S. 343, 355 (1985) (quoting Wolf v. Weinstein, 372 U.S. 633, 651 

(1963)). But, when a debtor is incapable of performing these fiduciary duties, or when 

confidence in the debtor evaporates, a chapter 11 trustee may be appointed (a) for cause—

particularly where, as here, there is evidence of fraud, dishonesty, incompetence, or 

mismanagement by the debtor’s leadership; or (b) when it is shown that appointment of a 

trustee would be in the best interests of the Debtors’ creditors and the estate. See In re Marvel 

Entm’t Group, Inc. 140 F.3d 463, 473 (3d Cir. 1998). 

A. Section 1104(a)(1): Mandatory Appointment of a Chapter 11 Trustee for “Cause”, 

Including Fraud, Dishonesty, Incompetence, Or Gross Mismanagement

26. Section 1104(a)(1) of the Bankruptcy Code provides authority for the mandatory 

appointment of a chapter 11 trustee if “cause” exists. Marvel, 140 F.3d at 471–72; In re V. 

Savino Oil & Heating Co., 99 B.R. 518, 525 (Bankr. E.D.N.Y. 1989) (once the court has found 

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that cause exists under § 1104(a)(1) there is no discretion; an independent trustee must be 

appointed). Section 1104 (a)(1) provides: 

At any time after the commencement of the case but before confirmation of a 

plan, 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—(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, but not including the number of holders of securities of 

the debtor or the amount of assets or liabilities of the debtor. 

11 U.S.C. § 1104(a)(1); In re Cajun Elec. Power Coop., 191 B.R. 659, 661 (Bankr. D. La. 1995), 

aff’d 74 F.3d 599 (5th Cir.), cert denied, 519 U.S. 808 (1996). Cause for appointment of a trustee 

must be by current management, but it can relate to either pre-petition or post-petition acts or 

omissions. 11 U.S.C. § 1104(a)(1).

27. Under § 1104(a)(1), the words “including” and “or similar cause” indicate that 

the grounds for appointing a chapter 11 trustee are not limited to the derelictions specifically 

enumerated. Marvel, 140 F.3d at 472; Savino Oil, 99 B.R. at 525. In addition to fraud and gross 

mismanagement, courts have also found that conflicts of interest, continuing losses, and 

acrimonious relationships between management and creditors may justify cause to appoint a 

Chapter 11 trustee. See In re Patman Drilling Int’l, Inc., No. 07-34622-SGJ, 2008 WL 724086, 

at *6 (Bankr. N.D. Tex. Mar. 14, 2008). 

28. Here, the Debtors’ (1) prepetition gross mismanagement, (2) continuing losses to 

the estate, and (3) acrimonious relationships with creditors constitutes cause for appointment of 

a trustee. 

1. Gross Mismanagement of the estate constitutes cause to appoint a Chapter 

11 trustee. 

29. The Debtors’ prepetition commingling of assets between accounts of the Debtors 

and the Debtors’ sales out of trust constitute cause to appoint a Chapter 11 trustee. See In re 

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Anchorage Boat Sales, Inc., 4 B.R. 635, 645 (Bankr. E.D.N.Y. 1980) (finding that lack of 

accounting system and sales out of trust constituted cause to appoint a Chapter 11 trustee). 

“Diversion of funds and misuse of corporate assets constitutes fraud or dishonesty sufficient to 

warrant appointment of a trustee under section 1104(a)(1).” In re PRS Insurance Group, Inc., 

274 B.R. 381, 385 (Bankr. D. Del. 2001); see also In re Professional Accountants Referral 

Svcs., Inc., 142 B.R. 424, 428-29 (Bankr. D. Color. 1992) (diversion of corporate assets for 

personal use constitutes dishonesty or gross mismanagement which required the appointment of 

a trustee); In re Bibo, Inc., 76 F.3d 256, 257 (9th Cir. 1996) (court had “ample basis” for 

appointing a trustee where management had siphoned funds from the debtor through 

kickbacks); Sharon Steel, 871 F.2d at 1228 (systemic syphoning of debtor’s assets to other 

companies under shareholder’s common control constituted cause for appoint of trustee). 

30. Additionally, the Debtors’ prepetition misuse of funds held in trust—in violation 

of their duties to M&T and numerous state agencies—constitute cause of appoint a Chapter 11 

trustee. Additionally, the Debtors had a duty to ensure that taxes were timely paid to state 

regulatory agencies, and a duty to hold the proceeds of marine inventory in trust for M&T. The 

Debtors failed to do so and have provided no explanation. Rather, prepetition, the Debtors

wrongfully moved funds out of the Debtors’ accounts and into the account of non-debtor MKB 

Holdings. Courts have found that such actions constitute the dishonesty and mismanagement 

described in 11 U.S.C. § 1104(a). See e.g. In re Amerejuve, Inc., No. 14-35482, 2015 Bankr. 

LEXIS 1496, at *29 (Bankr. S.D. Tex. Apr. 29, 2015) (finding that use of payroll taxes out of 

trust was cause to appoint a chapter 11 trustee). 

31. Moreover, “[o]ne of the most fundamental and crucial duties of a debtor-inpossession upon the filing of a Chapter 11 petition is to keep the Court and creditors informed 

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about the nature, status and condition of the business undergoing reorganization.” Savino, 99 

B.R. at 526. Consequently, the Debtors’ inability to provide sufficient, accurate financial data 

constitutes cause to appoint a trustee. See In re Sharon Steel Corp., 871 F.2d 1217, 1228 n. 15 

(3rd Cir.1989) (noting that inaccurate, incomplete recordkeeping alone amounts to cause 

requiring appointment of a trustee under 11 U.S.C. § 1104(a)(1)) (collecting cases.).

2. The Debtors’ conflicts of interest constitute cause to appoint a Chapter 11 

trustee.

32. A debtor's fiduciary duties owed to the bankruptcy estate include the duty of 

loyalty, which precludes the debtor's directors and officers from engaging in self-dealing. In re 

Patman Drilling Int'l, Inc., 2008 WL 724086, at *2. Where transactions between the debtor and 

insiders warrant investigation and may result in litigation, the current management of the debtor 

is not the appropriate party to pursue that investigation because of conflicting loyalties with 

regard to those transactions. Id. (finding cause to appoint a chapter 11 trustee where, among 

other things, the debtor’s potential for investigation and pursuit of litigation constituted a 

conflict of interest). That is because “the debtor's ability to fulfill its duty of care to protect the 

assets, its duty of loyalty, and its duty of impartiality” is at the heart of the analysis. In re 

Westbank Holdings, LLC, No. 22-10082, 2022 WL 3052135, at *14 (Bankr. E.D. La. Aug. 1, 

2022) 

33. While the Debtors have not filed their statements of financial affairs, M&T’s 

post-petition discovery and analysis by M&T’s financial advisors have uncovered numerous 

instances of conveyances to non-debtor affiliates including MKB Holdings. The sheer volume 

of intercompany transfers forces the parties to presume that Borisch and the Debtors’ 

management will be unable to conduct the impartial investigations and make the decisions 

required to evaluate and pursue intercompany claims on behalf of the Debtors’ estate. See e.g. 

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Westbank, 2022 WL 3052135, at *15 (finding cause to appoint trustee where intercompany 

transfers presented conflict of interest); In re McCorhill Pub., Inc., 73 B.R. 1013, 1017 (Bankr. 

S.D.N.Y. 1987) (“[w]here there are questionable inter-company financial transfers and the 

principals of the debtor occupy conflicting positions in the transferee companies, a trustee 

should be appointed in the best interests of creditors and all parties in interest in order to 

investigate the financial affairs of the debtor.”).

34. Additionally, further investigation into the relationship between Artemis and the 

Debtors is necessary. The Debtors are an inappropriate party to conduct such an investigation, 

and an impartial Chapter 11 trustee better suited to do so. 

3. The Debtors’ continuing losses to the estate constitute cause to appoint a 

Chapter 11 trustee. 

35. The Debtors’ projected cash flow demonstrates that continued operation under 

the Debtors’ leadership will lead to substantial cash losses. Court have held that continued 

losses to the estate may constitute cause to appoint a Chapter 11 trustee. In re Ionosphere Clubs, 

Inc., 113 B.R. at 170 (Bankr. S.D.N.Y. 1990) (“The Debtors’ inability to formulate a business 

plan and make operating projections which have a longevity of more than several months, along 

with the continuing enormous operating losses being sustained by the estate, mandate that this

Court order the appointment of a trustee for cause . . . the magnitude of the Debtors’ losses 

together with the Debtors' inability to make reliable forecasts, even over a short period of time, 

supports a finding that [Debtors’] owner manager . . . is not competent to reorganize this 

estate.”).

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4. M&T’s lack of confidence in Debtor’s management constitutes cause. 

36. The Debtors’ business practices leave M&T without confidence in the Debtors’ 

management’s ability to oversee a successful liquidation and work effectively with key parties 

in interest. See In re Marvel Entertainment, Inc. 140 F.3d 463, 474 (3d Cir. 1998) (acrimony 

between debtor and creditor could rise to the level of cause to appoint a trustee) (citing Cajun 

Elec., 69 F.3d at 747). Here, a reorganization is not likely and the Debtors’ assets should be 

liquidated. Without the use of cash collateral, the Debtors are patently unable to oversee this 

process. In re Euro-Am. Lodging, Corp., 365 B.R. 421, 432 (Bankr. S.D.N.Y. 2007) (holding 

that lack of confidence in management and the greater likelihood that a planned sale will be 

consummated with a trustee justifies appointment).

37. Further, the Debtors’ management has demonstrated an inability to work in 

coordination with M&T, Malibu, and other key constituents in this case. Acrimony between the 

debtor and creditors, parties whose interests must be balanced and protected by the court, has 

consistently been held as cause to appoint a trustee. In re Marvel Entertainment, Inc. 140 F.3d 

at 474; Cajun Elec., 69 F.3d at 747; In re Patman Drilling Int'l, Inc., 2008 WL 724086, at *6 

(holding that trustee appointment was appropriate because of management's conflicts of interest, 

and creditors’ lack of confidence). 

38. Thus, and as further described above, cause exists to appoint a Chapter 11 trustee 

to ensure the highest recovery for the Debtors’ chapter 11 estate. 

B. Section 1104(a)(2): Discretionary Grounds for Appointment of a Chapter 11 

Trustee: In the Interests of Creditors, Etc.

39. Section 1104(a)(2) provides courts broad discretion to appoint a Chapter 11 

trustee even absent a finding of “cause,” when the discretionary appointment of a Chapter 11 

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trustee in the interest of creditors. In re Deena Packaging Industries, Inc., 29 B.R. 705, 706 

(Bankr. S.D.N.Y. 1983) (appointing a trustee to protect the interests of creditors, entails 

equitable considerations through which the court may exercise its discretionary powers). 

Section 1104 (a)(2) provides:

At any time after the commencement of the case but before confirmation of a

plan, 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-- . . . (2) if such 

appointment 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. § 1104 (a)(2).

40. Section 1104(a)(2) creates a flexible standard and allows the appointment of a 

trustee even when no “cause” exists. See In re Sharon Steel Corp., 871 F.2d 1217, 1228-29 (3d 

Cir. 1989) (Under the discretionary determination of cause required by 11 U.S.C. § 1104(a)(1) 

and the flexible standard embodied in (a)(2), the court acted within its discretion in concluding 

that the totality of the circumstances signaled the need for a trustee); In re Ionosphere Clubs, 

Inc., 113 B.R. 164, 168 (Bankr. S.D.N.Y. 1990). In general, in deciding motions brought 

pursuant to section 1104(a)(2), courts consider the following factors:

(i) the trustworthiness of the debtor; (ii) the debtor in possession’s past and 

present performance and prospects for the debtor’s rehabilitation; (iii) the 

confidence or lack thereof of the business community and of creditors in present 

management; and (iv) the benefits derived by the appointment of a trustee, 

balanced against the cost of the appointment.

In re Ionosphere Clubs, Inc., 113 B.R. at 169 (internal citations omitted); In re Cajun Elec. 

Power Coop., 191 B.R. 659, 661-662 (Bankr. D. La., 1995), aff’d 74 F.3d 599 (5th Cir.), cert 

denied, 519 U.S. 808 (1996).

41. In making its determination of whether to exercise its equitable powers to 

appoint a trustee under Section 1104(a)(2), courts “look to the practical realities and necessities 

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inescapably involved in reconciling competing interests.” See In re Hotel Assocs., Inc., 3 B.R. 

343, 345 (Bankr. E.D. Pa. 1980). A court should strongly consider appointment of a trustee 

when a reorganization is not possible and a debtor’s principal “may be motivated to protect his 

own interests rather than the interests of creditors.” Mfrs. & Traders Tr. Co. v. Morningstar 

Marketplace, Ltd. (In re Morningstar Marketplace, Ltd.), 544 B.R. 297, 305 (Bankr. M.D. Pa. 

2016).

42. For the reasons described above, this Court should exercise is discretionary 

powers to appoint s Chapter 11 trustee for the benefit of the Debtors’ estate. 

IV. EMERGENCY RELIEF REQUESTED

35. The facts and circumstances of this case require expedited consideration of 

M&T’s Motion. Without the use of cash collateral, the Debtors’ estate is in danger of incurring 

further liabilities without the ability to pay them, and the prompt appointment and installation of 

a Chapter 11 trustee is key to preserving value of the Debtors’ estate for the benefit of its 

creditors.

WHEREFORE, M&T, with the agreement of the Debtors, respectfully requests that the 

Court grant M&T’s Motion, which the United States Trustee does not oppose, and for such other 

relief to which M&T is entitled.

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Respectfully submitted,

June 12, 2024 

NORTON ROSE FULBRIGHT US LLP

 /s/ Toby L. Gerber 

Toby L. Gerber (SBT 07813700) 

Michael Berthiaume (SBT 24066039) 

NORTON ROSE FULBRIGHT US LLP

2200 Ross Ave., Suite 3600 

Dallas, TX 75201 

Telephone: (214) 855-8274 

Facsimile: (214) 855-8200 

Email: toby.gerber@nortonrosefulbright.com 

michael.berthiaume@nortonrosefulbright.com 

and

Jason L. Boland (SBT 24040542) 

NORTON ROSE FULBRIGHT US LLP

1550 Lamar Street, Suite 2000 

Houston, Texas 77010 

Telephone: (713) 651-5151 

Facsimile: (713) 651-5246

Email: jason.boland@nortonrosefulbright.com 

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CERTIFICATE OF CONFERENCE

In accordance with L.B.R. 9007-1(f), I hereby certify that on June 10, 2024 I conferred

via teleconference with the Debtors and the United States Trustee through their respective 

counsel to determine whether agreement on the Motion could be met. The Debtors have agreed 

to emergency consideration of and to the relief sought in the Motion. The United States Trustee 

has indicated it does not oppose emergency consideration or the relief sought in the Motion. 

___Toby L. Gerber

Toby L. Gerber

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CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing pleading was served by 

CM/ECF Notification on June 12, 2024 in accordance with Bankruptcy Rule 9036 and L.B.R. 

9036-1. Additionally, a true and correct copy of the foregoing pleading was served via first class 

mail on all parties listed on the Complex Service List.

 /s/ Toby Gerber 

Toby Gerber 

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