                                                          FILED
                                                           DEC 22 2011
 1                                                     SUSAN M SPRAUL, CLERK
                                                         U.S. BKCY. APP. PANEL
                                                         OF THE NINTH CIRCUIT
 2
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.    SC-11-1000-KiMkH
                                   )
 6   LOG & CONVENTIONAL HOMES,     )      Bk. No.    09-12365-JM
     INC.,                         )
 7                                 )
                    Debtor.        )
 8   ______________________________)
                                   )
 9   ROBERT DOAN,                  )
                                   )
10                  Appellant,     )
                                   )
11   v.                            )      M E M O R A N D U M1
                                   )
12   LESLIE GLADSTONE, Chapter 7   )
     Trustee,                      )
13                                 )
                    Appellee.      )
14   ______________________________)
15                  Argued and Submitted on October 20, 2011
                            at San Diego, California
16
                           Filed - December 22, 2011
17
              Appeal from the United States Bankruptcy Court
18                for the Southern District of California
19        Honorable James W. Meyers, Bankruptcy Judge, Presiding
                    _____________________________________
20
     Appearances:     Daniel Joseph Winfree, Esq. argued for appellant,
21                    Robert Doan; Christin Alene Batt, Esq. of the
                      Financial Law Group argued for appellee, Leslie
22                    Gladstone, Chapter 7 Trustee.
                      _____________________________________
23
     Before: KIRSCHER, MARKELL, and HOLLOWELL, Bankruptcy Judges.
24
25
26
          1
            This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8013-1.
 1           Appellant, creditor Robert Doan (“Doan”), appeals a
 2   bankruptcy court order denying his motion to remove chapter 7
 3   trustee, Leslie Gladstone (“Trustee”), from debtor’s bankruptcy
 4   case.       We AFFIRM.
 5                      I. FACTUAL AND PROCEDURAL BACKGROUND
 6           Prior to filing bankruptcy, debtor, Log & Conventional
 7   Homes, Inc. (“LCH”), had entered into a contract to build a log
 8   home for the Haddocks.      A dispute arose between the parties, and
 9   LCH sued the Haddocks in state court for breach of contract (the
10   “State Court Action”).      The Haddocks filed a counterclaim for
11   approximately $226,000 in damages due to LCH’s alleged failure to
12   complete the home.
13           Doan is the sole shareholder of LCH.   LCH filed a voluntary
14   chapter 72 petition on August 20, 2009.      Its assets consisted of
15   a $43,000 bond securing a mechanic’s lien, and a receivable of
16   $67,100, which is the amount Haddocks allegedly owed LCH on the
17   contract.      LCH has only two unsecured creditors: the Haddocks and
18   Doan.3
19           Between September and November 2009, Trustee conducted four4
20   § 341 creditor’s meetings with LCH and Doan.      Notably, Trustee’s
21   primary topic of discussion at all four meetings was the
22
23           2
            Unless otherwise indicated, all chapter, section and rule
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
24   to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
25           3
            Three proofs of claim were filed in LCH’s bankruptcy case:
     (1) a claim from Haddocks for $226,198; (2) a claim from Doan for
26   $265,898; and (3) a claim filed by Doan on behalf of LCH for
     $110,006.
27
             4
            Five meetings were held, but no testimony occurred at the
28   third meeting on October 29, 2009.
                                       - 2 -
 1   potential preferences and fraudulent transfers made by LCH to
 2   Doan.       Over the course of the four meetings, Trustee made only
 3   brief inquiries about the State Court Action.      At the first
 4   meeting, Trustee asked about the status of the matter.      Doan
 5   explained that LCH and Haddocks had been in litigation for two
 6   years, and that Haddocks’s title insurance company had posted a
 7   bond insuring LCH’s mechanic’s lien, which was payable to LCH.
 8   Doan told Trustee that he would provide her with the necessary
 9   state court documents regarding perfection of LCH’s mechanic’s
10   lien.       As a result of the mechanic’s lien and the receivable,
11   Doan contended that the Haddocks owed LCH approximately $110,000.
12           During the third meeting, Doan admitted that he had gambled
13   with some of the funds he received from LCH.      Trustee posed
14   several follow-up questions to Doan on that issue.      The only
15   other mention of the State Court Action was at the fourth meeting
16   on November 19, 2009.      Trustee noted that she had not yet been
17   provided with the mechanic’s lien documents, but stated that she
18   had been “talking to the party about resolving [the State Court
19   Action].”      Trustee further expressed her intention to pursue a
20   “slam-dunk preference [action]” against Doan to recover at least
21   $81,000 for LCH’s estate.      At the end of the fourth meeting, the
22   parties agreed to meet at Doan’s counsel’s office on December 4,
23   2009, to further discuss Trustee’s preference action and the
24   State Court Action.5
25
26           5
            Trustee filed her Complaint for Avoidance and Recovery of
27   Fraudulent Transfers and/or Insider Preferential Transfers
     against Doan on February 25, 2010. In her complaint, which is
28   still pending, Trustee is seeking to recover approximately
     $210,000 from Doan in alleged fraudulent and/or preferential
     transfers under §§ 547 and 548.
                                        - 3 -
 1   A.   The Settlement Motion.
 2        On April 7, 2010, Trustee filed a Notice of Intended Action
 3   to Approve Stipulation to Settle Claim, Release Mechanic’s Lien,
 4   and Dismiss State Court Action (the “Settlement Motion”).
 5   According to the Settlement Motion, Haddocks were entitled to an
 6   allowed unsecured claim in the amount of $100,000, and Trustee
 7   agreed to release LCH’s mechanic’s lien.   The parties further
 8   agreed to dismiss the State Court Action with prejudice.
 9        In his opposition to the Settlement Motion, Doan questioned
10   the objectivity and neutrality of the Trustee.   Specifically,
11   Doan contended that Trustee’s motion failed to set forth any
12   factual background about the mechanic’s lien or LCH’s claim
13   against Haddocks and the Haddocks’s counter-claim, or recite any
14   of the factors set forth in A & C Properties.6   In Doan’s
15   opinion, the settlement effectively purged LCH’s estate of its
16   only asset while receiving nothing in return.    Attached to Doan’s
17   declaration was a letter that LCH’s counsel in the State Court
18   Action had sent to Trustee.   In that letter, counsel stated that
19   he “[could not] fathom how [Trustee] could possibly reach a
20   conclusion that the Haddocks [were] entitled to any compensation
21   from [LCH]. . . .   The facts and evidence [were] strong and well
22   supported that the Haddocks’ claim was trumped up and was not
23   supported by any factual or legal basis.   The evidence was also
24
          6
            The fair and equitable settlement standard under Rule 9019
25   requires consideration of: (1) probability of success in the
     litigation; (2) collectability; (3) complexity, expense,
26   inconvenience, and delay attendant to continued litigation; and
     (4) the interests of creditors, which are said to be “paramount.”
27   Martin v. Kane (In re A & C Props.), 784 F.2d 1377, 1381 (9th
     Cir. 1986). These four factors are often referred to as the
28   “A & C factors.”
                                    - 4 -
 1   overwhelming that the Haddocks owed [LCH] at least $40,000.00 and
 2   possibly more.”
 3           Trustee asserted in her reply that in negotiating the
 4   settlement, she had “reviewed many documents regarding [the State
 5   Court Action] and interviewed the Debtor at length about [it].”
 6   In her investigation, Trustee had obtained a copy of an
 7   independent report prepared by Roel Consulting Services (the
 8   “Roel Report”), an expert retained by the insurance carrier for
 9   LCH’s contractor’s license bond.    The Roel Report concluded that
10   LCH had not completed the work on the Haddocks’s home and was
11   “‘guilty of Willful Disregard of Accepted Trade Standards in the
12   construction of the home for the claimant.’”    The Roel Report
13   also concluded that necessary repairs/reconstruction to complete
14   the work for which LCH was obligated amounted to $115,000.
15   Trustee further stated that LCH offered her no competing expert
16   opinion to contradict the Roel Report’s findings.
17           A hearing on the Settlement Motion was held on June 23,
18   2010.    There, the parties were ordered to file additional
19   briefing before a continued hearing on the matter on August 4,
20   2010.    In short, Doan’s supplemental declaration questioned the
21   thoroughness of Trustee’s investigation of the State Court Action
22   and disputed the findings in the Roel Report.    Doan noted that
23   the mechanic’s lien, with interest and court costs, was now worth
24   $110,006.
25           In her supplemental declaration, Trustee stated that she had
26   told Doan and his counsel that she welcomed any information
27   regarding the State Court Action, but they never provided her
28   with any.    In addition to the Roel Report, Trustee now stated

                                      - 5 -
 1   that she also interviewed counsel for the Haddocks and reviewed
 2   many of the State Court Action documents.7   Trustee also included
 3   a declaration from Mr. Haddock to counter Doan’s assertions about
 4   the Roel Report’s findings.
 5        After considering all of the pleadings and exhibits, the
 6   bankruptcy court approved Trustee’s Settlement Motion, finding
 7   specifically that Trustee had met her burden to support the
 8   settlement as fair and reasonable under A & C Properties.      The
 9   court entered an order consistent with its tentative ruling on
10   August 26, 2010.   Doan did not appeal the settlement order.
11   B.   The Removal Motion.
12        On November 9, 2010, Doan moved to remove Trustee from LCH’s
13   bankruptcy case (the “Removal Motion”).   The primary basis for
14   the motion was Doan’s displeasure with Trustee’s handling of the
15   Settlement Motion and her alleged favoritism of the Haddocks, the
16   only other creditor in the case.    According to Doan, Trustee made
17   false representations to the court about the thoroughness of her
18   investigation of the State Court Action; her inquiries about it
19   were cursory and not what she represented in the Settlement
20   Motion.
21        To support his Removal Motion, Doan included transcripts
22   from the four § 341 creditor’s meetings to show how little the
23   State Court Action was discussed.   Doan also included a
24   declaration from his bankruptcy counsel, in which counsel stated
25   that the State Court Action was never discussed at the December 4
26
27        7
            Trustee never mentioned that she spoke with state court
     counsel for LCH, who had expressed to her his disagreement with
28   the settlement.
                                    - 6 -
 1   meeting at his office as Trustee had represented.   In short, Doan
 2   argued that Trustee should be removed because: (1) her actions
 3   had harmed the estate by dissipating its only asset; (2) her
 4   preference of one creditor over another evidenced an apparent
 5   lack of disinterestedness and bias; (3) she had failed in her
 6   duties to conduct a complete investigation of the State Court
 7   Action and the Haddocks’s claim; and (4) she had used her
 8   position to personally attack, harass, and intimidate Doan.
 9        Trustee opposed the Removal Motion, contending that Doan
10   failed to establish “cause” under § 324(a); it was merely Doan’s
11   attempt to disrupt her motion for summary judgment in the pending
12   avoidance action against him.   Trustee denied Doan’s allegations
13   of bias and adverse interest to the estate, and defended her
14   investigation of the State Court Action and the validity of the
15   Settlement Motion.   Trustee further denied Doan’s allegations of
16   her improper dissipation of the estate’s assets.    To Trustee,
17   Doan was a disgruntled defendant who failed to recognize the
18   highly valuable asset of Trustee’s avoidance action against him,
19   and her obligation to pursue it.   Doan had also failed to
20   recognize Trustee’s duty to inquire further about his use of
21   LCH’s funds to pay some of his gambling expenses.
22        In his reply, Doan reiterated his allegations, contending
23   that Trustee’s conduct in this case showed not only a clear
24   appearance of impropriety, but also fell short of the fiduciary
25   standards applicable to bankruptcy trustees.
26        The bankruptcy court heard Doan’s Removal Motion on
27   December 15, 2010, and denied it for failing to establish “cause”
28   under § 324.   An order denying the Removal Motion was entered on

                                     - 7 -
 1   January 21, 2011.    Doan’s premature notice of appeal filed on
 2   December 27, 2010, was considered timely upon entry of the
 3   removal order.    Rule 8002(a).
 4                              II. JURISDICTION
 5        The bankruptcy court had jurisdiction under 28 U.S.C.
 6   §§ 1334 and 157(b)(2)(A).    An order denying a motion to remove a
 7   bankruptcy trustee is a final order.       Dye v. Brown (In re AFI
 8   Holding, Inc.), 530 F.3d 832, 837 (9th Cir. 2008)(collecting
 9   cases).   Therefore, we have jurisdiction under 28 U.S.C. § 158.
10                                 III. ISSUE
11        Did the bankruptcy court abuse its discretion in denying the
12   Removal Motion?
13                          IV. STANDARD OF REVIEW
14        Removal of a trustee under § 324(a) is left to the sound
15   discretion of the bankruptcy court.       In re AFI Holding, Inc.,
16   530 F.3d at 844.    To determine whether the bankruptcy court
17   abused its discretion, we conduct a two-step inquiry: (1) we
18   review de novo whether the bankruptcy court “identified the
19   correct legal rule to apply to the relief requested” and (2) if
20   it did, whether the bankruptcy court’s application of the legal
21   standard was illogical, implausible or “without support in
22   inferences that may be drawn from the facts in the record.”
23   United States v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir.
24   2009)(en banc).
25                                V. DISCUSSION
26   A.   Removal under § 324(a).
27        A bankruptcy trustee is the legal representative and
28   fiduciary of the estate.    In re AFI Holding, Inc., 530 F.3d at

                                       - 8 -
 1   844 (citing United States Trustee v. Joseph (In re Joseph),
 2   208 B.R. 55, 60 (9th Cir. BAP 1997)).     A trustee’s duties revolve
 3   around marshaling and distributing the assets of the debtor’s
 4   estate according to the distribution scheme prescribed by the
 5   Code, and then closing the estate.      Id. at 845.
 6        The court, after notice and a hearing, may remove a trustee
 7   for “cause.”   § 324(a).   Removal of a trustee is an extreme
 8   remedy.   Morgan v. Goldman (In re Morgan), 375 B.R. 838, 847
 9   (8th Cir. BAP 2007); United States Trustee v. Repp (In re
10   Sheehan), 185 B.R. 819, 822 (Bankr. D. Ariz. 1995).      If a trustee
11   is removed for cause, then that trustee is removed from all other
12   cases in which the trustee is then serving.       See § 324(b).
13        Although not defined in the Code, case law has established
14   that “cause” to remove a trustee may include incompetence,
15   violation of fiduciary duties, misconduct or failure to perform
16   the trustee’s duties, or lack of disinterestedness or holding an
17   interest adverse to the estate.   In re AFI Holding, Inc.,
18   530 F.3d at 845.   The party seeking removal has the burden to
19   show specific facts supporting “cause.”     Id.
20   B.   The bankruptcy court did not abuse its discretion in denying
          the Removal Motion.
21
22        Doan’s burden of establishing an abuse of discretion has not
23   been aided by his conduct of this appeal.     Doan’s opening brief
24   fails to include a table of cases, a statement of the basis of
25   appellate jurisdiction, a statement of the issues presented on
26   appeal, or to provide a proper conclusion.     See Rule 8010(a).     In
27   any event, Doan asserts the bankruptcy court abused its
28   discretion by overlooking the evidence supporting his Removal

                                     - 9 -
 1   Motion: Trustee lied about the thoroughness of her of
 2   investigation of the State Court Action and Haddocks’s claim;
 3   Trustee showed a lack of disinterestedness by preferring one
 4   creditor (the Haddocks) over another (Doan); and she harmed the
 5   estate by causing a complete dissipation of estate assets.
 6        After the bankruptcy court reviewed the pleadings and
 7   exhibits filed by the parties, and considered the same arguments
 8   Doan raises on appeal, it concluded that Doan was merely
 9   rehashing the arguments he raised to oppose the Settlement
10   Motion, and that his evidence failed to establish “cause” under
11   § 324(a) and In re AFI Holding, Inc.     Because the bankruptcy
12   court applied the correct legal standard, we now review whether
13   its factual findings are illogical, implausible, or without
14   support in the record.
15        A trustee “‘may not be the representative of any particular
16   creditor, but must represent all creditors without partiality.’”
17   In re AFI Holding, Inc., 530 F.3d at 844 (quoting Gross v. Russo
18   (In re Russo), 18 B.R. 257, 270-71 (Bankr. E.D. N.Y. 1982)).      In
19   reviewing the underlying documents for the Settlement Motion, we
20   agree that Trustee’s investigation of the State Court Action may
21   not have been as “extensive” as she had claimed.    She spent
22   little time questioning Doan about it.    She also apparently never
23   consulted with LCH’s state court counsel in the suit, who opposed
24   the settlement.   Nonetheless, Doan has not established that
25   Trustee’s conduct regarding the Settlement Motion constituted
26   “cause” to remove her from LCH’s case.    This conclusion is
27   particularly true since the bankruptcy court found the settlement
28   was fair and reasonable under A & C Properties, and Doan never

                                   - 10 -
 1   appealed the settlement order.
 2        For purposes here, a “disinterested person” is one that
 3   “does not have an interest materially adverse to the interest of
 4   the estate or of any class of creditors or equity security
 5   holders, by reason of any direct or indirect relationship to,
 6   connection with, or interest in, the debtor, or for any other
 7   reason.”   § 101(14)(C).   An “adverse interest” is the
 8   (1) possession or assertion of an economic interest that would
 9   tend to lessen the value of the bankruptcy estate; or
10   (2) possession or assertion of an economic interest that would
11   create either an actual or potential dispute in which the estate
12   is a rival claimant; or (3) possession of a predisposition under
13   circumstances that create a bias against the estate.      In re AFI
14   Holding, Inc., 530 F.3d at 845.    An adverse interest is
15   “material” if it exists “by reason of any direct or indirect
16   relationship to, connection with, or interest in, the debtor
17   . . ., or for any other reason.”   Id. at 845-46.
18        Doan failed to establish that Trustee held an economic, or
19   any other, interest materially adverse to the interest of the
20   estate or any class of creditors or equity security holders.     No
21   evidence established that Trustee had a prior direct or indirect
22   relationship to, connection with, or interest in, LCH, Doan, or
23   the Haddocks, or that Trustee had any actual or potential
24   conflict of interest with same.    Trustee’s exercise of her
25   business judgment to conclude that the Haddocks had a stronger
26   case than LCH in the State Court Action does not equate to her
27   holding an interest materially adverse to the estate.
28        As for Doan’s argument that Trustee’s settlement with the

                                    - 11 -
 1   Haddocks improperly dissipated the estate’s assets, Doan fails to
 2   recognize, and understandably so, that Trustee’s action against
 3   him is a valuable asset in LCH’s bankruptcy estate, potentially
 4   worth at least $210,000.   Doan’s displeasure with Trustee’s
 5   action against him does not provide a basis for “cause” under
 6   § 324(a).   Furthermore, if Doan had issues with the bankruptcy
 7   court’s findings on the Settlement Motion, he could have appealed
 8   the settlement order.
 9        Finally, Doan contends that Trustee should be removed
10   because she has used her position of authority to intimidate and
11   demean him.   We reviewed Doan’s evidence to support this
12   contention, including the transcripts from all of the § 341
13   creditor’s meetings, and we disagree.   We see no evidence that
14   Trustee’s interview of Doan was, as he suggests, “an abusive and
15   angry tirade intended to demean” him.   Trustee’s questions and
16   responses were proper, even if they may have seemed harsh or
17   intrusive to Doan.
18        Accordingly, because the bankruptcy court’s finding that
19   Doan had failed to present specific facts establishing removal is
20   not illogical, implausible or without support in the record, we
21   conclude that it did not abuse its discretion in denying the
22   Removal Motion.   Hinkson, 585 F.3d at 1261-62.
23                              VI. CONCLUSION
24        For the foregoing reasons, we AFFIRM.8
25
26        8
            At oral argument, Trustee moved for sanctions against Doan
27   for prosecuting a frivolous appeal. A request for sanctions must
     be made in a separately filed motion. Rule 8020; Highland Fed.
28   Bank v. Maynard (In re Maynard), 264 B.R. 209, 213 n.5 (9th Cir.
     BAP 2001). Accordingly, Trustee’s improper oral motion for
     sanctions is denied.
                                    - 12 -
