Trustee challenges removal in Southern bankruptcy

Lee Freeman, the Trustee for Southern Montana Electric Generation and Transmission Cooperative, Inc. (Southern) filed a response to the Motion to Remove Trustee filed by Fergus Electric Cooperative, Inc. (Fergus), one of the four remaining co-ops. He objects to his removal as trustee. Fergus has now been joined in the argument by Mid-Yellowstone Electric Co-op and Beartooth Electric Cooperative, Inc. (BEC) as well as several unsecured creditors. The trustee argued against terminating his position and returning management of Southern to the remaining co-ops. Highlights of the trustee’s numerous arguments are summarized below: 1. No change in circumstance would warrant meeting the legal standards for change of trustee; 2. Fergus’ position that the co-ops are no longer “hopelessly deadlocked” is a change warranting termination is not true; 3. By filing its motion and plan to liquidate assets Fergus is not looking out for the best interests of the creditors and the estate; 4. The strong presumption that should be given to the debtor to control its own bankruptcy no longer exists once a trustee is appointed; 5. The debtor in possession is a fiduciary and is therefore refrained from acting in a manner that would endanger the estate or hinder its successful reorganization. In proposing a plan to liquidate Fergus goes against this proposition; 6. Since the debtor members are also creditors, they ignore any co-op concerns; 7. The cases cited by Fergus do not support its argument; 8. Liquidation cannot occur because it would cause loss of jobs and misuse of economic resources; 9. The fact that a co-op disagrees doesn’t rise to cause to remove trustee; 10. The plan threatens to bring down the reorganization efforts; and 11. The trustee’s removal and the plan is not in the best interest of creditors or the estate. The estate in this case, is everything-including, according to Boyd, the members who are obligated to pay whatever rates ultimately are disclosed as proposed in trustee’s plan.

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