Surplus Management Systems LLC
2:25-cv-00049
N.D. Ind.May 29, 2025Background
- Andrew Young, the sole owner of Surplus Management Systems, LLC (SMS), appealed the bankruptcy court's denial of his objections to a trustee's motions concerning SMS property.
- SMS and other Young-owned entities filed for Chapter 11 bankruptcy in 2017; these cases were consolidated. In 2024, all were converted to individual Chapter 7 proceedings, ending joint administration.
- Young is not a creditor nor a debtor in SMS’s bankruptcy; he is the sole equity holder.
- Trustee Fisher sought court approval to employ a company to dispose of SMS's scrap assets and to approve the sale of certain assets.
- Young objected, claiming a personal stake as SMS’s owner, but the bankruptcy court overruled his objections and ruled he lacked standing.
- On appeal, the defendants (trustee and county treasurer) moved to dismiss for lack of standing and for appealing a non-final order; the court ultimately decided solely on lack of standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of sole LLC owner to appeal | Young argued as sole owner he was aggrieved by the orders | Young is neither debtor nor creditor, only a member, so lacks standing | Young lacks standing; not personally aggrieved |
| Pecuniary interest / Surplus exception | Asserted possible surplus gives him interest in the outcome | No evidence of surplus or direct impact on Young individually | No surplus shown, so no pecuniary interest |
| Applicability of surplus rule | Claimed debtors have standing if surplus is possible | Rule only for debtors, not non-debtors like Young | Surplus rule only for debtors, not applicable |
| Finality of the order | Argued for right to interlocutory appeal if ruling not final | Argued appeal from non-final, interlocutory order | Not reached; resolved on standing |
Key Cases Cited
- In re GT Automation Grp., Inc., 828 F.3d 602 (7th Cir. 2016) (appellant bears burden of demonstrating standing in bankruptcy appeals)
- In re Ray, 597 F.3d 871 (7th Cir. 2010) (explains bankruptcy appeal standing as a prudential limit)
- In re Cult Awareness Network, Inc., 151 F.3d 605 (7th Cir. 1998) (debtor may have standing if reasonable possibility of surplus exists)
- In re Carbide Cutoff, Inc., 703 F.2d 259 (7th Cir. 1983) (defines prudential bankruptcy standing and "person aggrieved" standard)
- In re Stinnett, 465 F.3d 309 (7th Cir. 2006) (must compare assets and liabilities for surplus argument in bankruptcy)