The US Trustee Office ‘Withdrew’ an Appointed Trustee Without Reason

On the 5th of July, an accelerated hearing was held by Judge Manning in the U.S. Bankruptcy Court in Connecticut. The hearing was about the withdrawal of Mr. Whitley previously appointed as trustee, but a withdrawal process was not procedural, whereas a removal process was needed as stated by Judge Manning. The following is part of the dialog of the court conversation:

Judge Manning: (After entering the order) …And you did that? Now you’re saying this person is not qualified? Well, that, there should be a process what that you can’t withdraw it. How would anybody know that this person is no longer qualified? How is that transparent? And what’s the conflict? I mean, he signed an affidavit saying that he had no conflicts, and that he was a disinterested person. That’s what he said. The court has to be able to, and the creditors and the public have to be able to rely on that.

So, this should be a removal. There should be a motion to remove the trustee for being not being qualified under Section 324 of the code. I don’t think you can withdraw the application, you’ve already appointed him, subject to approval. So, it, maybe I don’t approve it. But you cannot tell everybody what the problem is. The problem is, there’s some conflict of interest that came up today, when the individual already signed a document that accepted the appointment and submitted an affidavit that said he had no conflict of interest and was a disinterested person.

So how does that, I mean, I don’t I don’t see how you can withdraw the appointment. I don’t see it. There’s nothing in the code that allows that to happen. The removal of a trustee or examiner is under Section 324.

Attorney Hawley: Your Honor, the appointment and the approval process is set forth, as we discussed today in 1104 D and section, sorry, rule 2007.1, and the process has not been finished and the appointment has not been approved, and the U.S. Trustee, based upon the information provided day determined that it was appropriate to withdraw the notice of appointment, which we have done. Judge Manning: But you didn’t say why.

If I didn’t have this hearing, nobody would know why. Attorney Holley: Your Honor, that’s correct. The withdrawal does not cite a reason, and due to the governmental privilege and the deliberative process that the U.S. Trustee engages in, I am not in a position to share that reasoning or that discussion with the court or with the party. But it was in the best interest of the estate and the creditors and the process to not pursue the selected candidate.