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In re Sharon Steel Corp.

871 F.2d 1217 (1989)

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In re Sharon Steel Corp.

United States Court of Appeals for the Third Circuit
871 F.2d 1217 (1989)

Facts

Sharon Steel Corporation filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Sharon Steel’s management remained in control of operations as debtor-in-possession. The committee of unsecured creditors (the committee) (defendant) petitioned the bankruptcy court for the appointment of a trustee. The committee’s reasons included a series of prepetition transfers of Sharon Steel assets to companies that shared common management with Sharon Steel. The committee further alleged that mismanagement continued after the petition. This mismanagement included Sharon Steel’s failure to close out its prepetition books as well as its failure to negotiate the 30 percent interest rate on a much needed $30 million capital loan to a lower rate. The bankruptcy court granted the committee’s petition. Victor Posner (plaintiff), Sharon Steel’s CEO, and DWG Corporation (plaintiff), another Posner-controlled company, challenged the appointment of the trustee in federal district court, which affirmed the bankruptcy court. Posner and DWG appealed. The United States Court of Appeals for the Third Circuit granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Gibbons, C.J.)

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Bankruptcy

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