In re Thomas

• Decision Date: 18 January 2019
• Docket Number: Case No. 16-27850-K
• Citation: 596 B.R. 350
• Parties: IN RE William H. THOMAS, Jr., aka Bill Thomas, Debtor. SSN: xxx – xx – xxxx
• Court: U.S. Bankruptcy Court — Western District of Tennessee

596 B.R. 350

IN RE William H. THOMAS, Jr., aka Bill Thomas, Debtor. SSN: xxx – xx – xxxx

Case No. 16-27850-K

United States Bankruptcy Court, W.D. Tennessee, Western Division.

Signed January 18, 2019

Jessica Lyn Indingaro, Shelby County Office of the Mayor, Adam M. Langley, Jonathan T. Skrmetti, Butler Snow LLP, William H. Thomas, Jr., William H. Thomas, Jr. Law, Memphis, TN, for Debtor.

Michael E. Collins, Robert Miller, Manier & Herod, P.C., Nashville, TN, for Trustee.

MEMORANDUM AND ORDER RE "CLEAR CHANNEL OUTDOOR, INC.'S RENEWED MOTION FOR APPOINTMENT OF CHAPTER 11 TRUSTEE" COMBINED WITH NOTICE OF THE ENTRY THEREOF

David S. Kennedy, UNITED STATES CHIEF BANKRUPTCY JUDGE

INTRODUCTION

Clear Channel Outdoor, Inc. ("Clear Channel"), a prepetition judicial lien creditor, filed the instant motion under 11 U.S.C. § 1104(a)(1)-(2) ("Motion") originally seeking the appointment of a Chapter 11 trustee with "limited powers."¹ Creditor, the Tennessee Department of Transportation ("TDOT"), and Tennison Brothers, Inc., also a prepetition judicial lien creditor ("Tennison Brothers"), each filed a notice of joinder regarding Clear Channel's Motion.² This Motion resulted in three written objections or responses thereto filed by Mrs. Lynn Schadt Thomas ("Mrs. Thomas"), William H. Thomas, Jr., aka Bill Thomas, the above-named debtor ("Mr. Thomas"), and the United States Trustee for Region 8 respectively. It is noted that the United States Trustee also filed a "Motion to Dismiss or, in the Alternative, Convert Chapter 11 Case to Case Under Chapter 7." The attorneys for all of the immediate parties in interest participated in the oral arguments for and against the Motion that were held and heard in open court on January 15, 2019.

The ultimate question for judicial determination here is whether "cause" exists as contemplated under 11 U.S.C. § 1104(a)(1), such that a Chapter 11 trustee should be appointed in lieu of Mr. Thomas continuing to serve as a debtor in possession, or whether such appointment of a trustee is in the interests of creditors as contemplated under 11 U.S.C. § 1104(a)(2).

This is a core proceeding under 28 U.S.C. § 157(b)(2)(A). Accordingly, the Court has both the statutory and constitutional authority to hear and determine these proceedings subject to the statutory appellate provisions of 28 U.S.C. § 158(a)(1) and Part VIII ("Bankruptcy Appeals") of the Federal Rules of Bankruptcy Procedure. The following shall constitute the Court's findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure.

DISCUSSION OF BACKGROUND FACTS AND INFORMATION AND PROCEDURAL HISTORY OF THIS CHAPTER 11 CASE

This Chapter 11 case arises out of more than a decade of litigation and legalistic bickering primarily between Mr. Thomas and the two judgment creditors, Clear Channel and Tennison Brothers. As such, a detailed discussion of the relevant pre- and postpetition background facts and procedural history of this Chapter 11 case may be helpful here and may be summarized as follows.

Mr. Thomas, who currently serves here as a Chapter 11 debtor in possession, is also a licensed attorney and businessman. He is a resident of the State of Tennessee and also a resident of the State of Florida, and has business ventures in Memphis, Tennessee. Clear Channel is a Delaware corporation with its principal address located in San Antonio, Texas; however, at all relevant times here, Clear Channel owned and/or operated billboard advertising structures in Shelby County, Tennessee. Tennison Brothers is a corporation with its principal office located in Memphis, Tennessee. Clear Channel and Tennison Brothers are pre-Chapter 11 Tennessee judicial lien creditors of Mr. Thomas. TDOT is a Tennessee governmental agency with its headquarters located in Nashville, Tennessee, who also is a creditor in this case. Mrs. Thomas is the wife of Mr. Thomas and also an asserted creditor here.

On September 11, 2017, Clear Channel filed a motion seeking the appointment of a Chapter 11 trustee under 11 U.S.C. § 1104(a)(1) and (2) ("First Trustee Motion"). Dkt. No. 297. Thereafter, on September 18, 2017, Tennison Brothers filed a Notice of Joinder. Dkt. No. 303. An Objection thereto was filed by Mr. Thomas on September 25, 2017. Dkt. No. 308. The First Trustee Motion came to be heard by this Court on September 27, 2017, whereupon this Court at the early stages of this case denied the First Trustee Motion, but "without prejudice to a future motion being refiled for a change of circumstances not heretofore raised at this hearing." See Dkt. No. 311.

On October 26, 2018, Glankler Brown, PLLC ("Glankler Brown"), Memphis counsel for Mr. Thomas in this Chapter 11 case, filed an "Emergency Motion to Withdraw as the Attorney of Record." Dkt. No. 441. As reasons for seeking to withdraw, Glankler Brown asserted that numerous disagreements had arisen with Mr. Thomas and that Mr. Thomas "insisted on taking positions which are contrary to the advice of counsel and had on occasion taken positions which [they] consider repugnant or imprudent." See Dkt. No. 441, p. 2. After notice, that matter came to be heard before this Court on October 30, 2018; and an Order granting the withdrawal was entered on November 20, 2018, without opposition. Dkt. No. 461.

Ten days later, on November 30, 2018, Clear Channel filed a "Renewed Motion for Appointment of Chapter 11 Trustee," requesting the appointment of a Chapter 11 trustee with "limited powers." Dkt. No. 472, p. 2. On December 6, 2018, TDOT filed a Notice of Joinder to the Motion, Dkt. No. 480, and on December 7, 2018, Tennison Brothers filed the same, Dkt. No. 481 (collectively referred to as "Related Joinders"). An Objection to the Motion and Related Joinders was filed by Mrs. Thomas on December 11, 2018, putting forth three main arguments: (1) there is no cause for the appointment of a Chapter 11 trustee and Creditors have failed to demonstrate same; (2) Clear Channel and Tennison Brothers do not have a pecuniary interest in the bankruptcy estate and their interests should be disregarded for purposes of the analysis under § 1104(a)(2) ; and (3) Mrs. Thomas is preparing to file a confirmable Chapter 11 creditor plan. Dkt. No. 493. On December 13, 2018, the United States Trustee filed a Response to the Motion stating that it takes no position on the Motion, but that "[i]f the Court concludes to direct the appointment of a Chapter 11 trustee, the codified scheme in the Bankruptcy Code and Rules should not be altered with respect to the rights, powers and duties of a trustee appointed under 11 U.S.C. § 1104(a)." Dkt. No. 496, p. 3. It is important to note that the United States Trustee also filed a motion to dismiss this case or, in the alternative, to convert the Chapter 11 case to a liquidating case under Chapter 7. Dkt. No. 497. Mr. Thomas filed a "Response" to the Motion and Related Joinders on December 14, 2018, alleging three main issues: (1) objecting to the appointment of a Chapter 11 trustee "because creditors Clear Channel Outdoor and Tennison Brothers have failed to set forth any change in circumstances since their last Motions for the Appointment of a Trustee were denied"; (2) asserting that such creditors had a right to file their own plan of reorganization but have not done so; and (3) incorporating the objection of Mrs. Thomas by suggesting that the claims of Clear Channel and Tennison Brothers "should be subordinated or denied based upon their punitive nature to all claims of unsecured creditors." Dkt. No. 501.

All of these matters came before this Court on December 18, 2018, for a combined pre-trial conference, whereupon each interested party had the opportunity to, inter alia , provide a general overview of their positions and arguments. It should be noted that at the pre-trial conference Clear Channel orally amended its Motion by eliminating its request for the appointment of a Chapter 11 trustee with limited powers and agreeing with the United States Trustee's position that, if appointed, it should be a Chapter 11 trustee with full powers and duties. This oral amendment has now been reduced to writing and filed with the Court. See Dkt. No. 520 ("Clear Channel submits that the appointment of a Chapter 11 Trustee with all powers and authority allowed under the Federal Rules of Bankruptcy Procedure is the proper course of action to move this bankruptcy to conclusion."). Tennison Brothers and TDOT orally agreed with the United States Trustee's position as well. This Court held a hearing on the merits on the instant Motion, Related Joinders, objections, and responses thereto on January 15, 2019. All attorneys representing the interested parties were present at the hearing. After notice and opportunity for a hearing, all matters were taken under advisement. Before discussing the Motion, the Court felt it may be somewhat beneficial to provide a more detailed summary of the extensive background history including the legalistic bickering among Clear Channel, Tennison Brothers, TDOT, and Mr. Thomas to exhibit their relationships with one another.

Clear Channel, Tennison Brothers, and Mr. Thomas

Clear Channel and Tennison Brothers entered into a lease agreement ("Lease") on August 19, 2004, for the erection of a billboard on Tennison Brothers' property located at 450 North Bellevue, Memphis, Tennessee 38105 ("Tennison Brothers Site"). See Tennison Bros. v. Thomas, 556 S.W.3d 697, 704 (Tenn. Ct. App. 2017) (hereinafter " Tennison II ") ). Within days of the execution of the Lease between Clear Channel and Tennison Brothers, Mr. Thomas entered into a written lease with Southern Millwork and Lumber Company, the owner of the real property adjacent to the Tennison Brothers Site. Id. Mr. Thomas also intended to construct a billboard on said real property. Id. At the time, the Tennessee Billboard Regulation and Control Act ("the Billboard Act ") required permits to be obtained prior to constructing a...