Urban Commons: U.S. trustee objects to CRO appointment motion

By Sarah Lizee

Olympia, Wash., Dec. 6 – Urban Commons 2 West LLC’s motion to appoint a chief restructuring officer and retain an independent manager drew an objection from Region 2 U.S. trustee William K. Harrington, according to documents filed with the U.S. Bankruptcy Court for the Southern District of New York.

Harrington said the CRO and independent manager would collectively perform the role of a Chapter 11 trustee, if the motion is approved.

But that arrangement isn’t provided for or authorized by the bankruptcy code, Harrington said.

The U.S. trustee said there are only two options when it comes to operating a debtor’s business and administering the estate: the debtor in possession, or a statutory trustee appointed by the U.S. trustee.

“The bankruptcy code does not authorize a quasi, private trustee to fulfill the sacrosanct role of a Chapter 11 trustee duly appointed under section 1104,” Harrington said in his objection.

The U.S. trustee also noted that the proposed CRO and independent manager were recommended by the debtor’s proposed counsel, which “tainted the selection process.”

“There is no place in the bankruptcy system to have attorneys (whether debtors’ or creditors’) select an entity that plays the role of a Chapter 11 trustee,” Harrington said.

Urban Commons is a Corona Del Mar, Calif.-based company that modernizes underperforming hotels. The company filed Chapter 11 bankruptcy under case number 22-11509.

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