MARIAN F. HARRISON, Bankruptcy Appellate Panel Judge.
Aubrey Bruce Wring ("debtor") filed this pro se appeal from the bankruptcy court's denial of his expedited motion to remove the Chapter 11 Trustee and to reinstate him as debtor-in-possession and the denial of the Chapter 11 Trustee's motion for instructions, which affirmed the Chapter 11 Trustee's discretion as to whether compensation and/or distributions should be made to the debtor. For the reasons stated below, the Panel affirms the bankruptcy court's rulings.
The relevant issues on appeal are: (1) whether the order denying the debtor's motion to remove the Chapter 11 Trustee is a final, appealable order; (2) whether the bankruptcy court erred by denying the debtor's motion to remove the Chapter 11 Trustee and reinstate the debtor as debtor-in-possession; (3) whether the debtor has standing to appeal the order denying the Chapter 11 Trustee's motion for instructions; and (4) whether the bankruptcy court erred by denying the Chapter 11 Trustee's motion for instructions by finding that determinations of the debtor's entitlement to compensation or distributions from the estate was a matter for the business judgment of the Chapter 11 Trustee.
The United States District Court for the Western District of Tennessee has authorized appeals to the Panel, and no party has timely elected to have this appeal heard by the district court. 28 U.S.C. § 158(b)(6), (c)(1).
A final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, a final order "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497 (1989) (citations omitted). "[T]he concept of finality applied to appeals in bankruptcy is broader and more flexible than the concept applied in ordinary civil litigation."
The Chapter 11 Trustee asserts that the order denying the motion to remove is not a final, appealable order. In the Sixth Circuit, an order denying a motion to remove a trustee has been treated as an appealable final order. See Boyd v. Rabin (In re Boyd), 397 B.R. 544, 2008 WL 4372948 (B.A.P. 6th Cir. 2008) (unpublished table decision). In Boyd, this Court dealt with a motion to recuse a bankruptcy judge and a motion to remove a trustee. Both orders were treated as final orders with no analysis of finality. See also Miller v. Miller (In re Miller), 302 B.R. 705, 708 (B.A.P. 10th Cir. 2003) (citations omitted) (bankruptcy court's order denying motion to remove trustee is final order subject to appeal under 28 U.S.C. § 158(a)(1)); In re Schultz Mfg. Fabricating Co., 956 F.2d 686, 691-92 (7th Cir. 1992) (court affirmed order denying motion to remove Chapter 7 trustee without analysis of finality).
Whether the bankruptcy court erred in denying the debtor's motion to remove the Chapter 11 Trustee is a factual conclusion and is thus reviewed under a clearly erroneous standard. A finding of fact is deemed clearly erroneous "when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Riverview Trenton R.R. Co. v. DSC, Ltd. (In re DSC, Ltd.), 486 F.3d 940, 944 (6th Cir. 2007) (citations omitted). "`Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.'" Thurman v. Yellow Freight Sys., Inc., 90 F.3d 1160, 1166 (6th Cir. 1996) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 574, 105 S.Ct. 1504, 1511 (1985)).
The bankruptcy court's denial of the Chapter 11 Trustee's motion for instructions was based on a conclusion of law that determinations of the debtor's entitlement to compensation or distributions from the estate was a matter for the business judgment of the Chapter 11 Trustee. Conclusions of law are reviewed de novo. Dickson v. Countrywide Home Loans (In re Dickson), 655 F.3d 585, 590 (6th Cir. 2011) (citation omitted). "Under a de novo standard of review, the reviewing court decides an issue independently of, and without deference to, the trial court's determination."
The debtor and his wife filed a voluntary Chapter 11 petition on February 19, 2010. On May 18, 2011, after a hearing on the motion of the U.S. Trustee for the conversion of this case to Chapter 7, the bankruptcy court found that cause existed for the conversion. However, rather than allow the conversion, the bankruptcy court found that it was in the best interest of creditors and the estate to appoint a Chapter 11 Trustee. On June 2, 2011, the bankruptcy court entered an Order Approving Appointment of Michael P. Coury as the Chapter 11 Trustee. On June 13, 2011, the Chapter 11 Trustee filed an application to employ his law firm, Butler Snow O'Mara Stevens & Cannada, PLLC, to represent the Chapter 11 Trustee in this case. No objections were filed, and the Chapter 11 Trustee's application to employ was granted on July 8, 2011.
On July 22, 2014, the Chapter 11 Trustee filed an expedited Motion for Instructions and filed an amended Motion for Instructions on July 23, 2014. Prior to filing the motion for instructions, the Chapter 11 Trustee had suspended payments to the debtor after the debtor had been barred from the operation of the business and after it was disclosed that the debtor had made unauthorized withdrawals from estate accounts and refused to provide an accounting to the Chapter 11 Trustee. The debtor apparently made demands upon the Chapter 11 Trustee for payments, so the Chapter 11 Trustee sought guidance from the bankruptcy court as to whether he should reinstate the payments to the debtor. Shortly thereafter, on July 28, 2014, the debtor filed an expedited motion to remove the Chapter 11 Trustee and to reinstate him as debtor-in-possession. The debtor asserted that the Chapter 11 Trustee had a conflict of interest and did not request the debtor's waiver, the Chapter 11 Trustee had not pursued Fair Debt Collection Practices Act actions against the banks, and that the Chapter 11 Trustee stopped making monthly payments to the debtor. On August 12, 2014, the bankruptcy court held a hearing on both motions. At the hearing, the bankruptcy court gave the debtor the opportunity to present proof but he chose to rest on the pleadings because he did not have counsel. The bankruptcy court denied the motion to remove the Chapter 11 Trustee, making the following findings on the record:
Regarding the Chapter 11 Trustee's motion for instructions, the bankruptcy court stated that "[w]hat I will show is that a status conference was held on the motion and at this point the motion is moot. The court is really not in a position to give instructions to the trustee on the exercise of the trustee's sound business judgment." The bankruptcy court entered an order denying the motion to remove on August 21, 2014, and an order denying the motion for instructions on September 3, 2014. The debtor appeals both of these orders.
11 U.S.C. § 324(a) authorizes a bankruptcy court, "after notice and a hearing," to "remove a trustee . . . for cause." The Code does not define cause, so bankruptcy "courts are left to make the determination on a case-by-case basis." In re Boyd, 2008 WL 4372948, at *3 (citation omitted). "Typical cause for removal includes incompetence, misconduct in office, conflict of interest, or other violations of fiduciary duties the trustee owes to the estate and its creditors." Id. at *3 (internal quotation marks and citations omitted). See also In re AFI Holding, 530 F.3d at 845 (citation omitted) ("`cause' may include trustee incompetence, violation of the trustee's fiduciary duties, misconduct or failure to perform the trustee's duties, or lack of disinterestedness or holding an interest adverse to the estate"). The party seeking removal of the trustee has the "burden of establishing `cause' by setting forth specific facts that support removal," and "[c]onclusory contentions not supported by specific facts are insufficient grounds for removal of a trustee." In re Boyd, 2008 WL 4372948, at *3 (citations omitted). See also Reagan v. Wetzel (In re Reagan), 403 B.R. 614, 623 (B.A.P. 8th Cir. 2009) (affirming the denial of a debtor's motion to remove a trustee where the debtor offered only "conclusory contentions unsupported by specific facts" that amounted to nothing more than a "disagree[ment] with the trustee's business management"). The "`[r]emoval of a trustee under § 324 is left to the sound discretion of the bankruptcy court.'" Shapiro v. French (In re Connolly N. Am., LLC), Ch. 7 Case No. 09-14179, Adv. No. 01-57090, 2010 WL 4822605, at *2 (Bankr. E.D. Mich. Nov. 22, 2010) (citation omitted). An abuse of this discretion occurs only "where the reviewing court has `a definite and firm conviction that the court below committed a clear error of judgment.'" PCFS Fin. v. Spragin (In re Nowak), 586 F.3d 450, 454 (6th Cir. 2009) (citation omitted).
In the present case, the debtor failed to present any proof of undisclosed conflicts, incompetency, or wrong doing on the part of the Chapter 11 Trustee.
The Chapter 11 Trustee asserts that the debtor does not have standing to appeal the denial of the Chapter 11 Trustee's motion for instructions. Only a "person aggrieved" has standing to appeal a bankruptcy order. In re LTV Steel Co. Inc., 560 F.3d 449, 452. In order to be a "person aggrieved," the appellant must have "a financial stake in the bankruptcy court's order." Fid. Bank, Nat'l Ass'n v. M.M. Grp., Inc., 77 F.3d 880, 882 (6th Cir. 1996) (citations omitted). In other words, an appellant "must have been directly and adversely affected pecuniarily by the order." Id. Normally, "`[d]ebtors, particularly Chapter 7 debtors, rarely have such a pecuniary interest because no matter how the estate's assets are disbursed by the trustee, no assets will revert to the debtor.'" Lunan v. Jones (In re Lunan), 523 Fed. App'x 339, 340 (6th Cir. 2013) (unpublished table decision) (citation omitted).
While the debtor might have standing to appeal an order approving the Chapter 11 Trustee's decision not to pay funds to the debtor, this is not the issue being appealed. Instead, the bankruptcy court declined to give instructions to the Chapter 11 Trustee on how to manage the estate. Consequently, the debtor is no better or worse off than he would have been if the motion for instructions had not been filed, and thus, the debtor has no standing to appeal the bankruptcy court's ruling. Moreover, even if the debtor had standing, the appeal from the bankruptcy court's order denying the Chapter 11 Trustee's motion for instructions would be without merit.
Pursuant to 11 U.S.C. § 1108, a Chapter 11 trustee has the authority to operate the debtor's business "[u]nless the court, on request of a party in interest and after notice and a hearing, orders otherwise." Section 1108 contemplates that operation of the business is the rule, therefore, it is not necessary for the trustee to obtain an order authorizing operation. United States v. Deutcscher (In re H & S Transp. Co., Inc.), 115 B.R. 592, 597 (M.D. Tenn. 1990) (citing H.R. Rep. No. 95-595, 95th Cong., 1st Sess. 404; Sen. Rep. No. 95-989, 95th Cong., 2d Sess. 116, U.S. Cong. & Admin. News 1978, p. 5787).
In this vein, a Chapter 11 bankruptcy trustee typically "has the discretionary authority to exercise his business judgment in operating the debtor's business akin to the discretionary authority to exercise business judgment given to an officer or director of a corporation." See In re Holiday Isles, Ltd., 29 B.R. 827, 830 (Bankr. S.D. Fla. 1983) (citations omitted). Application of the business judgment rule "prevents courts from becoming entangled in complex corporate decisions by deferring to the judgment of skilled business persons provided that those persons comply with certain minimum standards." In re Dalen, 259 B.R. 586, 610 (Bankr. W.D. Mich. 2001).
A bankruptcy court is not to be involved in the day-to-day administration of the estate. Instead, the bankruptcy court's role is "limited to only those instances where the Bankruptcy Code actually authorizes such involvement." In re Shaffner, 320 B.R. 870, 878 (Bankr. W.D. Mich. 2005) (citation omitted). The operation of the debtor's business is clearly within the discretion of the Chapter 11 Trustee, and therefore, the bankruptcy court correctly determined that such decisions must be made by the Chapter 11 Trustee rather than by the bankruptcy court.
For the reasons stated, the bankruptcy court's order denying the debtor's motion to remove the Chapter 11 Trustee and the order denying the Chapter 11 Trustee's motion for instructions are AFFIRMED.