Motion to Appoint a Chapter 11 Trustee

Summary

This motion to appoint a Chapter 11 trustee template is for use in a Chapter 11 bankruptcy case. This template includes practical guidance, drafting notes, and optional clauses. If the facts and circumstances strongly indicate that management must be divested of control altogether, Section 1104 of the Bankruptcy Code empowers the court to appoint a trustee upon request of a party in interest or the U.S. trustee after notice and a hearing. The statute provides that a trustee may be appointed (1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement or (2) if such appointment is in the interest of creditors, any equity security holders, and other interests of the estate. Parties should note that the court has considerable discretion to appoint a trustee, and that a determination of cause rests within the court's discretion as well. Once appointed, the trustee operates in a fiduciary role in its management of the estate, owing duties of loyalty and care to the estate and all of the interested parties in the case. The most significant effects of a Chapter 11 trustee appointment are that the Chapter 11 trustee completely displaces the debtor in possession from control over business operations and terminates the debtor's plan exclusivity. Among other things, the Bankruptcy Code requires the trustee to investigate the acts and conduct of the debtor and the continued viability of the business, to provide a statement of the investigation to the court and the committees, and to either file a plan or file a report as to why the Chapter 11 trustee will not file a plan. For a full listing of key content when litigating disputes in bankruptcy cases, see Bankruptcy Litigation Resource Kit. For more information, see Chapter 11 Trustees and Chapter 11 Trustees versus Chapter 11 Examiners. For related templates, see Chapter 11 Trustee Appointment Order and Order Terminating Chapter 11 Trustee's Appointment. For information on typical corporate governance and management during a Chapter 11 case, see Fiduciary Obligations of Officers and Directors and Chapter 11 Key Players. For general information on changing control of a debtor in a Chapter 11 case, see Management in Chapter 11 — Change of Control Mechanisms.