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Supreme Court, in a case dealing with whether a trustee could abandon estate property under 11 U.
§554(a), held that "a trustee may not abandon property in contravention of a state statute or regulation that is reasonably designed to protect the public health or safety from identified hazards." Midlantic Nat'l.
For example, liquidation trustees not only have duties to the liquidation trust itself—and therefore its beneficiaries—they also have potential government liability, and potential liability for the expenses of administering the liquidation trust. The fiduciary duty standard of care, however, is not clear, and the case law is split over the applicable standard. W.2d at 579 (discussing both willful and negligent breaches); Compton v.
Indeed, trustees can be exposed to personal liability for acting outside of their official capacity and for breaches of fiduciary duty.
As such, candidates for liquidation trustee positions must consider the exposure potential to liabilities for acts and omissions occurring while administering the liquidation trust. Other penalties may be imposed, such as reducing the liquidation trustee's compensation or imposing a surcharge on the liquidation trustee.
The potential liability for a liquidation trustee takes many forms. 2000) (discussing willful and deliberate, gross negligence and negligence standards); Better Brite, 483 N.
On the Petition Date, the Debtors submitted its initial proposed plan of liquidation (the “Liquidation Plan”) with the stated goal of the liquidation and conversion of all of the Debtors’ remaining assets to cash [Docket No. On September 17, 2014, the Bankruptcy Court entered an order (the “Confirmation Order”) [Docket No. The Plan became effective on September 26, 2014 (the “Effective Date”) [Docket No. Part of and in addition to the Liquidation Plan, the Debtors filed a motion seeking to commence rapid chain-wide store closing sales in order to quickly liquidate inventory, furniture, fixtures and equipment, and other assets [Docket No. In accordance with the Liquidation Plan and the Confirmation Order, the Liquidation Trust was established on the Effective Date of the Plan.
§1930(a)(6) had occurred before plan confirmation). One court addressing this issue held that because "Congress intend[ed] such fees be paid by chapter 11 debtors prior to conversion or dismissal...," and because the trust has "essentially stepped into the shoes of the original debtor," then the trust is "liable for any such fees which may be imposed." In re CSC Indus.