The bankruptcy court granted the U.S. Trustee’s motion to appoint a Chapter 11 trustee for cause in this case. The court gave preclusive effect to a pre-petition state district court order finding the debtor had repeatedly breached fiduciary duties owed to his partners in a family trust. The bankruptcy court also noted the debtor’s post-petition failure to accurately account for assets of the bankruptcy estate, file accurate operating reports, keep separate the funds of the bankruptcy estate, and obtain court authorization before making payments.

While recognizing that appointment of a Chapter 11 trustee is an extraordinary remedy, the bankruptcy court ruled that such an appointment is mandated in this case. The debtor’s pre-petition failure to fulfill fiduciary duties, material misconduct, self-dealing, and squandering of partnership assets, combined with his post-petition unauthorized payments, commingling of funds, failure to account for estate assets and expenses, and unwillingness to comply with the duties of a debtor in possession demonstrate cause under §1104 to appoint a trustee.