In re Eletson Holdings Inc.

659 B.R. 426

IN RE: ELETSON HOLDINGS INC., et al., Debtors.

Case No. 23-10322 (JPM) (Jointly Administered)

United States Bankruptcy Court, S.D. New York

Signed May 29, 2024

REED SMITH LLP, Counsel for the Debtors, 599 Lexington Avenue, New York, NY 10022, By: Louis M. Solomon, Esq.

REED SMITH LLP, Counsel for the Debtors, 10 South Wacker Drive, 40th Floor, Chicago, IL 60606, By: Anne E. Pille, Esq.

REED SMITH LLP, Counsel for the Debtors, 1717 Arch Street, Philadelphia, PA 19103, By: Derek J. Baker, Esq.

SIDLEY AUSTIN LLP, Counsel for the Shareholders, 787 Seventh Avenue, New York, NY 10019, By: William E. Curtin, Esq.

SIDLEY AUSTIN LLP, Counsel for the Shareholders, 1000 Louisiana Street, Suite 5900, Houston, TX 77002, By: Dustin K. McFaul, Esq.

DECHERT LLP, Counsel for the Official Committee of Unsecured Creditors, 1095 Avenue of the Americas, New York, NY 10036, By: David A. Herman, Esq. Stephen D. Zide, Esq.

TOGUT, SEGAL & SEGAL LLP, Counsel for the Petitioning Creditors, 1095 Avenue of the Americas, New York, NY 10036, By: Kyle J. Ortiz, Esq., Brian F. Shaughnessy, Esq.

PERKINS COIE LLP, Counsel for Wilmington Savings Fund Society, FSB, as Trustee, 1155 Avenue of the Americas, 22^nd Floor, New York, NY 10036, By: Tina M. Moss, Esq. CHALOS & CO, P.C., Counsel for Sunrise I NPL, 55 Hamilton Avenue, Oyster Bay, NY 11771, By: Briton P. Sparkman, Esq.

WILLIAM K. HARRINGTON, United States Trustee, Region 2, One Bowling Green, Room 534, New York, NY 10004, By: Daniel Rudewicz, Esq.

MEMORANDUM OPINION AND ORDER DENYING: (I) MOTION IN LIMINE; (II) MOTION TO EXCLUDE; AND (III) MOTIONS TO APPOINT A CHAPTER 11 TRUSTEE

JOHN P. MASTANDO III, UNITED STATES BANKRUPTCY JUDGE

I. INTRODUCTION

Section 1104(a) of the Bankruptcy Code provides that a Court shall appoint a Chapter 11 Trustee for cause, or when such appointment is in the best interest of creditors. See 11 U.S.C. § 1104(a). Though the standard under Section 1104(a) permits the Court to analyze a wide array of conduct in determining whether a Chapter 11 Trustee should be appointed, the appointment of a Chapter 11 Trustee is considered an extraordinary remedy and parties seeking such an appointment must prove by " 'clear and convincing evidence' that the appointment of a trustee is warranted." In re Bayou Grp., LLC, 564 F.3d 541, 546 (2d Cir. 2009) (citing In re Adelphia Commc'ns Corp., 336 B.R. 610, 655 (Bankr. S.D.N.Y.), aff'd, 342 B.R. 122 (S.D.N.Y. 2006)).

These cases began when certain petitioning creditors commenced involuntary bankruptcy proceedings against the Debtors. Though these cases have since been converted to voluntary Chapter 11 proceedings, the adversarial spirit inherent in an involuntary bankruptcy case remains, and has, most recently, resulted in the motions to appoint a Chapter 11 Trustee presently pending before the Court. While the Court understands many of the movants' concerns, the Court ultimately finds that the movants have not met the high burden necessary for such an extraordinary remedy.

Pending before the Court are three motions to appoint a Chapter 11 Trustee: (i) the Official Committee of Unsecured Creditors' (the "Committee") Motion for an Order Appointing a Chapter 11 Trustee (the "Committee Motion") (Docket No. 394)¹; (ii) the Office of the United States Trustee's (the "UST") Motion to Appoint a Chapter 11 Trustee (the "UST Motion") (Docket No. 424); and (iii) Pach Shemen LLC, VR Global Partners, L.P., Alpine Partners (BVI), L.P., Gene B. Goldstein, Gene B. Goldstein, In His Capacity as Trustee of the Gene B. Goldstein and Francine T. Goldstein Family Trust, Mark Millet, In His Capacity as Trustee of the Mark E. Millet Living Trust, Mark Millet, In His Capacity as Trustee of the Millet 2016 Irrevocable Trust, Robert Latter, Tracy Lee Gustafson, Jason Chamness, and Ron Pike's (collectively the "Petitioning Creditors," and collectively, with the Committee, the "Creditors") Emergency Motion to Appoint a Trustee (the "PC Motion," and together, with the Committee Motion and the UST Motion, the "Trustee Motions"). (Docket No. 468).

The Committee Motion is supported by the Declaration of Michael Cordasco in Support of Motion of the Official Committee of Unsecured Creditors for an Order Appointing a Chapter 11 Trustee (the "Cordasco Declaration"). (Docket No. 396).

The following joinders were filed to the Trustee Motions: (i) the Petitioning Creditors joined both the Committee Motion and the UST Motion (the "PC Joinder") (Docket No. 477); and (ii) Deutsche Bank Trust Company Americas in its Capacity as Indenture Trustee under the 2013 Notes Indenture ("Deutsche Bank"), Wilmington Savings Fund Society, FSB, as Trustee, ("Wilmington"), and Sunrise I NPL Finance ("Sunrise") joined the Committee Motion. (Docket Nos. 404, 420, and 476).

The PC Joinder is supported by the Declaration of Jared C. Borriello in Support of Joinder of Motions for an Order Appointing Chapter 11 Trustee (the "Boriello Declaration") (Docket No. 478).

In response to the Trustee Motions, Eletson Holdings Inc. ("Eletson Holdings"), Eletson Finance (US) LLC ("Eletson Finance") and Agathonissos Finance LLC ("Agathonissos Finance," and collectively with Eletson Holdings and Eletson Finance, the "Debtors") filed an objection to the UST Motion (the "Objection to the UST Motion") (Docket No. 512) and an omnibus objection to the Committee Motion and the PC Motion (the "Omnibus Objection"). (Docket No. 513).

The Omnibus Objection is supported by the Declaration of Louis M. Solomon in Support of Debtors' Omnibus Objection to (i) Motion of the Official Committee of Unsecured Creditors for an Order Appointing a Chapter 11 Trustee and Joinder of Petitioning Creditors and (ii) Petitioning Creditors' Emergency Motion to Appoint a Trustee (the "Solomon Declaration") (Docket No. 517).

Lassia Investment Company, Glafkos Trust Company, and Family Unity Trust Company, the majority shareholders of Eletson Holdings (together, the "Shareholders") also filed an Omnibus Objection of the Majority Shareholders of Eletson Holdings Inc. to the Trustee Motions (the "Shareholder Objection," and together with the Objection to the UST Motion and the Omnibus Objection, the "Objections") (Docket No. 518).

On April 2, 2024, the Court received the following replies to the Trustee Motions: (i) the Reply of the United State Trustee in Support of The United States Trustee's Motion to Appoint a Chapter 11 Trustee (the "UST Reply") (Docket No. 544); (ii) the Petitioning Creditors' Reply In Support of Motions for Entry of an Order Appointing a Chapter 11 Trustee (the "PC Reply") (Docket No. 547); and (iii) the Reply of the Official Committee of Unsecured Creditors in Support of Its Motion for an Order Appointing a Chapter 11 Trustee (the "Committee Reply," and together, with the UST Reply and the PC Reply, the "Replies") (Docket No. 549).

The PC Reply is supported by the Declaration of Jared C. Borriello in Support of Petitioning Creditors' Reply in Support of Motions for Entry of an Order Appointing a Chapter 11 Trustee (the "Second Borriello Declaration") (Docket No. 548).

The Court held evidentiary hearings on the Trustee Motions on April 9 (Docket No. 593, the "April 9 Transcript"), April 10 (Docket No. 601, the "April 10 Transcript"), and April 11, 2024 (Docket No. 602, the "April 11 Transcript") (collectively the "Hearings"). Consistent with the Court's scheduling order entered in connection with the Hearings, the parties submitted all direct testimony by declaration. (Docket No. 467 at ¶ 7). Accordingly, at the Hearings, the Court admitted the following direct testimony into the record for the Creditors: (i) the Witness Declaration of Michael Cordasco in Support of the Motion of the Official Committee of Unsecured Creditors for an Order Appointing a Chapter 11 Trustee (the "Cordasco Witness Declaration") (Docket No. 524); (ii) the Declaration of Jeff Drake in Support of the Motion of the Official Committee of Unsecured Creditors for an Order Appointing a Chapter 11 Trustee (the "Drake Declaration") (Docket No. 550); and (iii) the Declaration of Cynthia Romano in Support of the Motion of the Official Committee of Unsecured Creditors for an Order Appointing a Chapter 11 Trustee (the "Romano Declaration") (Docket No. 551).

The Court also admitted the following direct testimony for the Debtors: (i) the Declaration of Vasilis Hadjieleftheriadis in Support of Debtors' Opposition to the Motion to Appoint a Trustee (the "Hadjieleftheriadis Declaration") (Docket No. 514); (ii) the Declaration of Vassilis Kertsikoff in Support of the Debtors' Omnibus Objection to (i) Motion of the Official Committee of Unsecured Creditors for an Order Appointing a Chapter 11 Trustee and Joinder of Petitioning Creditors and (ii) Petitioning Creditors' Emergency Motion to Appoint a Trustee (the "Kertsikoff Declaration") (Docket No. 516); (iii) the Declaration of Laskarina Karastamati in Support of Debtors' Opposition to the Motion to Appoint a Trustee (the "Karastamati Declaration") (Docket No. 519); (iv) the Witness Declaration of Nikolaos Veraros (the "Veraros Declaration") (Docket No. 520); (v) the Witness Declaration of Marina Orfanoudaki (the "Ofanoudaki Declaration") (Docket No. 521); (vi) the and Declaration of CLLR. T. Negbalee Warner (the "Warner Declaration") (Docket No. 522).²

The UST, the Debtors, and the Creditors each submitted exhibit lists, and the exhibits contained within them were also admitted into the record. (Docket No. 554 ("UST Ex."); Docket No. 560 ("Debtor Ex."), Docket No. 569 ("Creditor Ex."), respectively).³ Finally, the Creditors and the Debtors each submitted deposition designations and counter designations, which the Court will also consider in connection with this ruling. (Docket Nos. 555 and 556, respectively).

Following the Hearings, the Court received post-trial briefs from the: (i) Committee (the "Committee Brief") (Docket No. 594); (ii) Debtors (the "Debtor Brief") (Docket No. 595); (iii) UST (the "UST...