Legacy Cares: Judge says no to Chapter 11 trustee appointment, dismissal

By Sarah Lizee

Olympia, Wash., Aug. 10 – The judge overseeing Legacy Cares, Inc.’s bankruptcy case denied a motion from the U.S. trustee seeking appointment of a Chapter 11 trustee or, in the alternative, dismissing the case altogether, according to an order filed Thursday with the U.S. Bankruptcy Court for the District of Arizona.

As previously reported, region 20 U.S. trustee Ilene J. Lashinsky said there is evidence of dishonesty, incompetence or gross mismanagement of the affairs of the debtor by prepetition management before the start of the case, and evidence of incompetence or gross mismanagement by current management after the start of the case.

The largest creditor in the case, UMB Bank, NA, had expressed its opposition to the motion, urging the court to not derail the sales process pursued by the debtors’ current management.

Meanwhile, the official committee of unsecured creditors said appointment of a trustee at the point would be “catastrophic” to the sales process.

And, the debtors’ landlord, Pacific Proving LLC, asked the court not to interfere with the sales process by appointing a trustee.

“At oral argument, the committee’s counsel eloquently argued that creditors in this case are perfectly capable of determining what serves their best interests and have unanimously decided to oppose, or at least not support, appointment of a trustee,” judge Daniel P. Collins said in the order.

“Where creditors have spoken with one voice, or have chosen to remain silent, this court will not presume the [U.S. trustee] knows what is best for creditors in this case.”

Collins noted that in denying the motion, the court isn’t endorsing the pre- or post-petition date activities of the debtor or related parties.

“The court smells smoke and expects [MCA Financial Group, Ltd.], the committee, UMB and others to eventually determine whether there is fire,” Collins said.

“The court and the [U.S. trustee] intend to make sure any party engaged in wrongdoing before or after the petition date will be held to account.”

MCA Financial is acting as the company’s financial adviser.

Legacy Cares is a non-profit corporation that owns Legacy Park, formerly known as Bell Bank Park, a 320-acre sports and entertainment complex in Mesa, Ariz. The company filed bankruptcy on May 1 under Chapter 11 case number 23-02832.

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