Court Opinion

ID: 9696589
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:52:01.505433+00
Date Added: 2024-06-11T18:20:23.800649
License: Public Domain

MAHONEY, Bankruptcy Judge,
concurring in part and dissenting in part.
I concur in the decision of the majority to reverse the order in the Dedmon case, but not only for the reasons stated by the majority. I will explain further in my dissent.
I dissent from the reasoning and conclusion of the majority with regard to the Morgan order.
The standard of review with regard to findings of fact is clear error. I cannot say that the Morgan judge’s findings that Goldman’s testimony at the May hearing and November hearings was inconsistent and that she had a conflict of interest with the unsecured creditors when she attempted to settle the Morgan lawsuit by pursuing repayment from the unsecured creditors are clearly erroneous. However, I believe that under the circumstances of these cases the judges abused their discretion and I write in dissent because I believe the process was fatally flawed and totally unfair to Goldman.
The majority may be correct that 11 U.S.C. § 324(a) can be invoked by a bankruptcy judge without a third-party motion to create a contested matter, but I doubt it. The majority cites no cases in which the bankruptcy judge sua sponte removed a trustee under § 324 without a motion by the U.S. Trustee, a creditor or a debtor. See, e.g., Richman v. Straley, 48 F.3d 1139, 1144 (10th Cir.1995) (congressional intent in giving U.S. trustee, rather than court, authority to appoint and remove standing trustees was to free courts from administrative role in order to better perform judicial functions); Dye v. Brown (In re AFI Holding, Inc.), 355 B.R. 139 (9th Cir. BAP 2006) (debtors’ investors moved for removal of Ch. 7 trustee); Miller v. Miller (In re Miller), 302 B.R. 705 (10th Cir. BAP 2003) (debtor moved for removal of Ch. 7 trustee); U.S. Trustee v. Repp (In re Sheehan), 185 B.R. 819 (Bankr.D.Ariz.1995) (U.S. trustee moved for removal of Ch. 7 trustee); In re Drinkwater, 178 B.R. 590 (Bankr.D.Mass.1995) (U.S. trustee moved for removal of standing Ch. 13 trustee); In re Lundborg, 110 B.R. 106 (Bankr.D.Conn.1990) (debtor and creditor both moved for Ch. 7 trustee’s removal). The majority, on page 14, correctly states that “[W]hen a party moves for removal of a trustee, the movant bears the burden of establishing cause by setting forth specific facts which support such removal.” That language is taken directly from a decision of a panel of this very court, Alexander v. Jensen-Carter (In re Alexander), 289 B.R. 711, 714 (8th Cir. BAP 2003).
The word “movant”, as used in the law, means “one who makes a motion to the court.” The Dictionary of Modem Legal Usage 575 (2d ed.1995); Black’s Law Dictionary 1035 (7th ed.1999). The word itself contemplates a third party making a motion to the court. In these cases, the bankruptcy judges each made their own motion to the court, a procedure not recognized by rule or statute. Even so, each judge then shifted the burden of proof away from the movant and onto the trustee. In section IV.D., “Opportunity for Hearing,” of the majority opinion, it clearly states that the Morgan judge shifted the burden of proof to Ms. Goldman on the issue of her removal for cause. Slip op. at 19 (“Thus, the Morgan Judge did not act as prosecutor in his case; he simply determined that a basis existed for finding that Ms. Goldman had acted inappropriately in *858the case before it and gave her the opportunity to prove otherwise.”) (emphasis mine). That burden-shifting is also made clear by the language of the show-cause orders. In each order, the judge directed Ms. Goldman to show cause why she should not be removed. According to our own jurisprudence, as shown by the Alexander decision, such burden-shifting is impermissible.
Both judges were understandably concerned about the inconsistent testimony of Ms. Goldman. Because the inconsistent testimony was given under oath in the bankruptcy court in the Morgan case, the judge in the Morgan case had a legitimate basis for taking some action. However, rather than becoming the “movant” as well as the trier of fact, other, fair procedures could have been followed. For example, the Office of the United States trustee could have been requested to investigate the matter and make a report and recommendation to the court. After all, it is the statutory duty of the United States trustee to appoint and supervise Chapter 13 standing trustees. 28 U.S.C. § 586(b) and (d). Alternatively, because Ms. Goldman is an attorney, the state bar disciplinary proceedings or the local federal district court attorney disciplinary proceedings could have been instituted by a referral from the judge. There are probably many other procedures that a judge concerned about the activities or testimony of a trustee could take to assure fairness to the trustee and yet protect the integrity of the court and the legal process.
Because I firmly believe that the process itself was tainted in both the Morgan and Dedmon cases, I would reverse both orders.