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Case 09-33211-hdh11

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WILLIAM T. NEARY UNITED STATES TRUSTEE 1100 Commerce, Room 976 Dallas, TX 75242 (214) 767-8967; FAX (214) 767-8971 Lisa L. Lambert Trial Attorney, TX 11844250 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

IN RE:

§ § § § § §

SILVEROAK HOLDINGS, LTD. d/b/a Bob’s Steak and Chop House Debtor-in-Possession

CASE NO: 09-33211 Chapter 11 Hearing Date: Aug. 10, 2009 Hearing Time: 9:00 a.m.

UNITED STATES TRUSTEE’S MOTION TO APPOINT A CHAPTER 11 TRUSTEE TO THE HONORABLE H. DeWAYNE HALE, U.S. BANKRUPTCY JUDGE: The United States Trustee for Region 6 moves the Court to order the appointment of a chapter 11 trustee in the Silveroak Holdings, Ltd.’s bankruptcy case. In support, the United States Trustee respectfully represents: Overview Under the Bankruptcy Code a trustee must be appointed to administer a chapter 11 case if a debtor cannot properly fill the role of debtor in possession. In this case, Silveroak Holding, Ltd. (Silveroak) operated the Bob’s Steak and Chop House, and the management is an individual who is subject to indictment for a first degree felony, who has invoked the Fifth Amendment at the creditors’ meeting rather than testify about the use of $300,000, and who has inherent conflicts of interest arising from the potential purchase of the Debtor’s assets. “Cause” exists to direct the United States Trustee to appoint a chapter 11 trustee. Furthermore, directing the appointment of a chapter 11 trustee serves the “interests of creditors” by assuring that fiduciary duties are honored.

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Factual Statement Allegations Regarding Investment of $300,000: 1.

Robert (“Bob”) Sambol is one of the two original founders of Bob’s Steak and Chop

House, which is the assumed name for Silveroak Holdings. Silveroak Holdings filed a voluntary petition under chapter 11 of the Bankruptcy Code on May 26, 2009. 2.

On May 28, 2009, and on June 12, 2009, the Court held hearings on the Debtor’s

financing, use of cash collateral, payment of pre-petition claims, and banking requests. During these hearings, Sambol testified that he was now the only equity holder in Silveroak which was incorporated to hold and operate the Bob’s Steak and Chop House on Lemmon Avenue. 3.

Based on news articles and Sambol’s testimony at the first day hearings, Lee

Thompson contends he invested $300,000 for a wine or cigar bar and that he obtained an equity interest in exchange for that investment. Sambol disputes these allegations. 4.

According to the Dallas County Criminal Background Search Service, Sambol has

been indicted for a first degree felony of theft in excess of $200,000. http://www.dallascounty.org/criminalBackgroundSearch/defendant_detail.do?ln=03. 5.

As the Debtor’s management, Sambol selected his accountant to serve as chief

restructuring officer. The proposed chief restructuring officer’s employment application is pending.

6.

The Debtor is a limited partnership. Silveroak Management is a general partner

holding a ten percent in the Debtor, and Sandol is a limited partner with a ninety percent interest. Statement of Financial Affairs, Question 21.

U.S. Trustee’s Motion to Appoint a Chapter 11 Trustee – Page 2 of 6

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Allegations Regarding Conflicts of Interest: 7.

The other founder of Bob’s Steak and Chop House incorporated the Lenox

Restaurant Group, Inc. (“Lenox”), and Lenox now franchises Bob’s Steak and Chop Houses. 8.

With court approval, Lenox has provided funds to the Debtor during the post-

petition time period. 9.

Sambol and the Debtor’s counsel have indicated that they contemplate selling the

Debtor as a going concern. 10.

Lenox has indicated that it will participate in bidding on the Debtor. As Sambol and

Lenox have a lengthy history, it is likely that Sambol will negotiate a position for himself when the Debtor is sold. 11.

In addition, at the creditors’ meeting, Sambol testified that another bidder was

interested in acquiring the Debtor, using another name, and retaining Sambol. 12.

While one cannot predict who will bid, other Bob’s Steak and Chop House

franchisees or other restauranteurs may be interested in acquiring the Debtor but not in retaining Sambol.

Legal Analysis and Argument 13.

Under the Bankruptcy Code the court must direct the appointment of a chapter 11

trustee when “cause” exists or when “such appointment is in the interests of creditors.” 11 U.S.C. §1104(a)(1),(2). “Cause” exists for the appointment of a chapter 11 trustee. First, the indictment and inability to testify about the use of the $300,000 is “cause, including fraud, dishonesty, incompetence, or gross mismanagement.” 11 U.S.C. §1104(a)(1).1 Second, “cause” exists because

1

Because Sambol controls the Debtor, the U.S. Trustee’s filing of this motion is compelled by 11 U.S.C. § 1104(e). That subsection requires that the U.S. Trustee move for the appointment of a trustee under § 1104(a) if he has “reasonable grounds to suspect” that either U.S. Trustee’s Motion to Appoint a Chapter 11 Trustee – Page 3 of 6

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appointing a trustee is the only effective way to pursue a reorganization or liquidation. Third, appointing a trustee is in the “interests of creditors.” 11 U.S.C. §1104(a)(2). “Cause” Exists to Direct the Appointment of a Chapter 11 Trustee: 11.

At a minimum, an inability to explain the disposition of a $300,000 investment is

“incompetence” or “gross mismanagement.” Combined with the indictment, questions of fraud and dishonesty arise. 11 U.S.C. §1104(a)(1). 14.

The Fifth Circuit has held that “cause” exists when appointing a chapter 11 trustee

“is the only effective way to pursue reorganization.” Cajun Elec. Power Coop., Inc. v. Central La. Elec. Coop., Inc. (In re Cajun Elec. Power Coop., Inc.), 74 F.3d 599, 600 (5th Cir.) (adopting on rehearing the opinion of dissent in 69 F.3d 746, 751), cert. denied, 519 U.S. 808 (1996); see also In re Marvel Entertainment Group, Inc., 140 F.3d 463 (3d Cir. 1998) (adopting reasoning of Cajun Electric. and affirming appointment of trustee when acrimony between debtor’s management and creditors undermined any ability to prosecute bankruptcy case). 15.

In chapter 11, the debtor serves as the debtor-in-possession. 11 U.S.C. §1107. To

proceed to confirmation, the Debtor would have to file a disclosure statement with adequate information, 11 U.S.C. §1125, and establish feasibility at confirmation. 11 U.S.C. §1129(a)(7). To provide adequate disclosure, the Debtor would need to discuss the criminal proceedings and their impact on a repayment plan or liquidation. As evidenced by Sambol’s invoking the Fifth Amendment at the creditors’ meeting, Sambol cannot meaningfully make such a disclosure without waiving the Fifth Amendment.

the debtor’s top management or the members of the governing body that selected the debtor’s top management participated in “actual fraud, dishonesty, or criminal conduct in the management of the debtor.” 11 U.S.C. §1104(e). Where, as here, the membership of the board of directors continues to be controlled by a former manager who is suspected of having engaged in serious misconduct, it makes little sense to rely upon the existence of that board as a barrier between current management, including a chief restructuring officer, and the management. U.S. Trustee’s Motion to Appoint a Chapter 11 Trustee – Page 4 of 6

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Moreover, Sambol’s desire to preserve his own employment conflicts with his duty

to maximize value for the estate, and he has a prior relationship with potential purchasers. This situation presents a conflict of interest. Frost Bank, a pre-petition lender, has already expressed concerns about whether selling to Lenox would maximize value to the estate.

A chapter 11 trustee

is the only effective way to promote confidence in the transparency of the sale. The “Interest of Creditors” Would Be Served by Requiring Appointment of a Trustee: 17.

Alternatively, the Court must order the appointment of a chapter 11 trustee because

the appointment will insure that Bankruptcy Code duties and powers are performed by a properly empowered person. This resolution “is in the interests of creditors.” 11 U.S.C. § 1104(a)(2). The “interests of creditors” standard is flexible. In re Marvel Entertainment Group, Inc., 140 F.3d 463, 474 (3d Cir. 1998). 18.

As reflected by Frost Bank’s dispute regarding Lenox’s bidding on the Debtor, the

creditors’ confidence in the Debtor’s auction would be enhanced by appointing a trustee. Conclusion “This is a . . . messy bankruptcy that promises to get worse without a disinterested administrator at the helm.” Cajun Elec. Power Coop., Inc. v. Central La. Elec. Coop., Inc. (In re Cajun Elec. Power Coop., Inc.), 74 F.3d 599, 600 (5th Cir.) (adopting on rehearing the opinion of dissent in 69 F.3d 746, 751), cert. denied, 519 U.S. 808 (1996). Whether the Court orders the appointment “for cause” or for the “interests of creditors” and the public, the facts mandate the appointment of a chapter 11 trustee.

U.S. Trustee’s Motion to Appoint a Chapter 11 Trustee – Page 5 of 6

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WHEREFORE, the United States Trustee respectfully requests that the Court enter a final order granting this Motion, requiring the United States Trustee to appoint a chapter 11 trustee, and granting further proper relief. Respectfully submitted, WILLIAM T. NEARY, UNITED STATES TRUSTEE /s/ Lisa L. Lambert Lisa L. Lambert Trial Attorney, TX 11844250 and New York 1100 Commerce, Room 976 Dallas, TX 75242 (214) 767-8967, ext. 226 (214) 767-8971 (FAX)

Certificate of Service I, Lisa L. Lambert, certify that on July 14, 2009, I mailed a copy of the U.S. Trustee’s Motion to Appoint a Chapter 11 Trustee to the parties on the attached service list and on those requesting notice through ECF.

/s/ Lisa L. Lambert Lisa L. Lambert

U.S. Trustee’s Motion to Appoint a Chapter 11 Trustee – Page 6 of 6

Case Label Matrix for local09-33211-hdh11 noticing 0539-3 Case 09-33211-hdh11 Northern District of Texas Dallas Mon Jul 13 14:28:57 CDT 2009 The Frost National Bank c/o Teresa Woods 4200 S. Hulen Fort Worth, TX 76109-4995

Doc Freshpoint 62 Filed 07/14/09 Entered 07/14/09Recovery 11:44:14 Desc Main Dallas, Inc. dba American Foodser Management Systems Corporation Document Page 7 of 12 c/o Robert Yaquinto, Jr. 25 SE 2nd Ave. Ste. 1120 509 N. Montclair Avenue Dallas, TX 75208-5450

Miami, FL 33131-1605

1100 Commerce Street Room 1254 Dallas, TX 75242-1305

AFCO 4501 College Blvd. Suite 320 Leawood, KS 66211-2328

XAST Investments, Inc. c/o Paula Anderson Kelsoe, Anderson, Khoury & Clark, PC 5220 Spring Valley Road Suite 500 Dallas, TX 75254-2466 AT & T P.O. Box 5010 Carol Stream, IL 60197-5010

AT & T Mobility P.O. Box 6463 Carol Stream, IL 60197-6463

Ace Mart Restaurant Supply P.O. Box 18100 San Antonio, TX 78218-0100

Admiral Linen Service 2030 Kipling Houston, TX 77098-1599

Advance Restaurant Finance, LLC 1550 Sawgrass Corporate Pkwy, Suite 300 Sunrise, FL 33323-2820

Agave Environmental LLC 4815 Vicksburg St. Dallas, TX 75207-5211

Air Technology, Inc. 206 Trinity Street Forney, TX 75126-8545

All Points Capital - Limo P.O. Box 9066 Hicksville, NY 11802-9066

Ambiente Wine 2314 Rutland No. 205 Austin, TX 78758-5274

American Food Service 4721 Simonton Rd. Dallas, TX 75244-5399

Atmos Energy P.O. Box 650654 Dallas, TX 75265-0654

Attorney for William Lee DeSanders aka Lee D Arthur A. Stewart Thompson, Coe, Cousins & Irons, L.L.P. 700 North Pearl, 25th Floor Dallas, Texas 75201-2825

Auto-Chlor Services, LLC Dept 205 P.O. Box 4869 Houston, TX 77210-4869

Auto-Chlor System 3205 International Place Irving, TX 75062-4917

Avaya Financial Services P.O. Box 5125 Carol Stream, IL 60197-5125

Avaya, Inc. P.O. Box 73061 Chicago, IL 60673-0001

BJ Staten-Hambric Sports Management 2 Turtle Creek Ave. Suite 750 Dallas, TX 75204-1635

BSCH Management Company, LLC 420 Decker Drive Irving, TX 75062-3952

BSCH Management Company, LLC c/o Eli O. Columbus Winstead PC 1201 Elm Street, Suite 5400 Dallas, TX 75270-2199

Bassham Foods P.O. Box 6296 Fort Worth, TX 76115-0296

BevCo International LLC 11339 Todd St. Houston, TX 77055-1300

Beyond Gourmet 9211 Deplomacy Row Dallas, TX 75247-5307

AT & T Advertising & Publishing P.O. Box 630052 Dallas, TX 75263-0052

Case 09-33211-hdh11 Bobs Steak & Chop House - Grapevine 1301 Municipal Way, Suite 250 Grapevine, TX 76051-8522

Doc Bobs 62 Steak Filed 07/14/09 11:44:14 MainHotel & Chop House, Ltd. Entered 07/14/09Bobs Steak & ChopDesc House-Omni Document Page 8 of 12 1301 Municipal Way, Suite 250 1300 Houston Street Grapevine, TX 76051-8522

Fort Worth, TX 76102-6556

Bottled Poetry 4389 Westgrove Drive Addison, TX 75001-3246

CBS Inc. 12 Morgan Irvine, CA 92618-2003

Centennial Fine Wine & Spirits 10410 Finnell St. Dallas, TX 75220-2443

Cirro Energy P.O. Box 911504 Dallas, TX 75391-1504

Coca-Cola Enterprises P.O. Box 840232 Dallas, TX 75284-0232

Complete Restaurant Services, Inc. 2668 Myrtle Springs Ave. Dallas, TX 75220-2537

(p)CITY OF DALLAS C O CITY SECRETARYS OFFICE DALLAS CITY HALL 1500 MARILLA STREET ROOM 5D SOUTH DALLAS TX 75201-6390 Comptroller of Public Accounts P.O. Box 149348 Austin, TX 78714-9348

Cozzini Bros, Inc. 350 Howard Avenue Des Plaines, IL 60018-1908

Custom Business Solutions 12 Morgan Irvine, CA 92618-2003

DMX Music, Inc. 11496 Luna Rd. Suite H Farmers Branch, TX 75234-9425

Dallas Basketball Ltd. 2909 Taylor Street Dallas, TX 75226-1909

Dallas County c/o Laurie A. Spindler Linebarger Goggan Blair & Sampson, LLP 2323 Bryan Street, Suite 1600 Dallas, TX 75201-2644

Dallas Directory 1920 Abrams Parkway, Suite 382 Dallas, TX 75214-6218

Dallas Valet 10300 N. Central Expwy, No. 130 Dallas, TX 75231-8640

David Childs, Tax Assessor-Collector P.O. Box 620088 Dallas, TX 75262-0088

Direct Source P.O. Box 815988 Dallas, TX 75381-5988

Direct TV P.O. Box 78626 Phoenix, AZ 85062-8626

Duncan Disposal 1220 Dowdy Ferry Road Hutchins, TX 75141-4023

Euro Distribution 9106 Sovereign Row Dallas, TX 75247-4514

Fedex P.O. Box 1140 Memphis, TN 38101-1140

Fedex Kinkos P.O. Box 262682 Plano, TX 75026-2682

Frost Bank 4200 South Hulen, Suite 210 Fort Worth, TX 76109-4995

Gardere Wynne Sewell LLP 3000 Thanksgiving Tower, 1601 Elm St. Dallas, TX 75201-4761

Glazers P.O. Box 814450 Dallas, TX 75381-4450

Goody Goody Liquor, Inc. 10301 Harry Hines Blvd. Dallas, TX 75220-4411

Countdown, Inc. P.O. Box 803474 Dallas, TX 75380-3474

Case 09-33211-hdh11 Harold Hand Creative 4641 Production No. 49 Dallas, TX 75235-8000

Doc Harold 62 Mark Filed 07/14/09 Entered 07/14/09Home 11:44:14 Desc Main Createur Depot Document Page 9 of 12 157 Pittsburg Street P.O. Box 6029 Dallas, TX 75207-7207

The Lakes, NV 88901-6029

Horizon Wine 13091 South Freeway Houston, TX 77047-1925

II Paese 4721 Simonton Rd. Dallas, TX 75244-5316

Idearc Media Corp P.O. Box 61980 DFW Airport, TX 75261-9810

Imperial Beverage Group, LLC 1306 Motor Circle Dallas, TX 75207-5910

Instant Whip 1859 Momentum Place Chicago, IL 60689-5318

Intercool, Inc. 2426 Lacy Lane Carrollton, TX 75006-6513

Jordan, Donohoe & Company 16610 Dallas Parkway Suite 2100 Dallas, TX 75248-2690

Judson-Atkinson Candies, Inc. P.O. Box 200669 San Antonio, TX 78220-0669

KTCK-AM P.O. Box 643638 Cincinnati, OH 45264-3638

Koetter Fire Protection Service 9759 Brockbank Dallas, TX 75220-2926

Lee De Sanders-Wycliff Realty 3626 N. Hall, Suite 626 Dallas, TX 75219-5131

Lee Thompson 1314 Chadwick Crossing Southlake, TX 76092-9641

Legacy Restaurant Group, Ltd. 2632 Freewood Drive Dallas, TX 75220-2511

Legacy Restaurant Group, Ltd. 5760 Legacy Drive, Suite B-1 Plano, TX 75024-7103

Lenox Restaurant Group, Ltd. 1103 Slocum Street Dallas, TX 75207-4220

Lenox Restaurant Group, Ltd. c/o Deirdre B. Ruckman Gardere Wynne Sewell LLP 1601 Elm St., Ste. 3000 Dallas, TX 75201-4761

Lonestar-Rush Restaurant Supply Inc. 1122 E. 51st Street Austin, TX 78723-3008

MCI P.O. Box 371838 Pittsburg, PA 15250-7838

MCI Worldcom P.O. Box 856053 Louisville, KY 40285-6053

Martin Preferred Foods P.O. Box 4346, Dept. 170 Houston, TX 77210-4346

Mcbee Systems, Inc. P.O. Box 88042 Chicago, IL 60680-1042

Meats by Linz 414 State Street Calumet City, IL 60409-2618

Mell Company 8264 Lehigh Avenue Mortan Grove, IL 60053-2615

Meyers Pest Services, Inc. P.O. Box 210009 Bedford, TX 76095-7009

Mighty Leaf Tea 136 Mitchell Blvd. San Rafael, CA 94903-2044

Mozzarella Company 2944 Elm Street Dallas, TX 75226-1509

Nella Cutlery & Food Machinery 2225 Belt Line Road Suite 211 Carrollton, TX 75006-5600

Case 09-33211-hdh11 Ocean Beauty Seafoods, Inc. 1815 Trinity Valley Dr. Carrollton, TX 75006-6510

Doc Office 62 Depot FiledCredit 07/14/09 Entered 07/14/09Opentable, 11:44:14 Plan Inc. Desc Main Document Page 10 of 12 P.O. Box 9020 P.O. Box 49322 Des Moines, IA 50368-9020

San Jose, CA 95161-9322

Options LTD, Inc. 3009 Green Hill Dr. Plano, TX 75093-6343

PSC Recovery P.O. Box 3069 Houston, TX 77253-3069

Paychex, Inc. 8605 Freeport Pkwy, Suite 100 Irving, TX 75063-2588

Prestige Wine Cellars, Inc. P.O. Box 816089 Dallas, TX 75381-6089

Preston Pierce Construction Co. 2100 McKinney Ave. Suite 1750 Dallas, TX 75201-6984

Protection Networks 10840 Switzer Ave. No. 110 Dallas, TX 75238-1361

Public Storage 3540 Inwood Road Dallas, TX 75209-5826

RPV Printing, Inc. 5641 Ellsworth Avenue Dallas, TX 75206-5359

RSI Refrigeration 3040 East Meadows Mesquite, TX 75150-6639

Recovery Management Systems Corporation 25 S.E. 2nd Avenue, Suite 1120 Miami, FL 33131-1605

Republic Beverage Co. P.O. Box 536389 Grand Prairie, TX 75053-6389

Resource Flooring Group Dept. 41 P.O. Box 21228 Tulsa, OK 74121-1228

Rewards Network Two N. Riverside Plaza, Suite 950 Chicago, IL 60606-2614

Seafood Supply 1500 E. Griffin St. Dallas, TX 75215-1157

Sigels P.O. Box 542647 Dallas, TX 75354-2647

Silveroak Holdings, Ltd. 4300 Lemmon Avenue Dallas, TX 75219-2705

South Tex Wine Distributors, Inc. P.O. Box 695 Millican, TX 77866-0695

Sports Solutions, Inc. 2536 Manana Road Dallas, TX 75220-1206

St. Paul Medical Center P.O. Box 911400 Dallas, TX 75391-1400

Stockyards Packing, Inc. 72045 Eagle Way Chicago, IL 60678-0001

Susan Combs, State Comptroller-Mixed Bev 111 East 17th Street Austin, TX 78774-1440

Susan Combs, State Comptroller-Sales Tax 111 East 17th Street Austin, TX 78774-1440

Susan Combs, State Comptroller-Texas Fra 111 East 17th Street Austin, TX 78774-1440

(p)TXU ENERGY RETAIL COMPANY LP CO BANKRUPTCY DEPARTMENT PO BOX 650393 DALLAS TX 75265-0393

Tarrant County c/o Laurie A. Spindler Linebarger Goggan Blair & Sampson, LLP 2323 Bryan Street, Suite 1600 Dallas, TX 75201-2644

The Frost National Bank c/o Hudson M. Jobe, Esq. Quilling Selander Cummiskey & Lownds, PC 2001 Bryan Street, Suite 1800 Dallas, Texas 75201-3070

The Frost National Bank c/o Teresa Woods 4200 S. Hulen Fort Worth, Texas 76109-4995

The Pavilion onCase Lovers09-33211-hdh11 Lane-Corrigan Inv 4311 Oak Lawn Ave. Suite 400 Dallas, TX 75219-2363

Doc The 62 Works Filed 07/14/09 Entered 07/14/09Time 11:44:14 Service Co. Warner CableDesc Main Document Page 11 of 12 515 N. Interurban St. No. 103 P.O. Box 650063 Richardson, TX 75081-3363

Dallas, TX 75265-0063

Triple B Cleaning, Inc. P.O. Box 727 Mexia, TX 76667-0727

Unique Lawn Service 424 Roundabout Drive Midlothian, TX 76065-3628

Watkins & Co., Inc. P.O. Box 271-017 Houston, TX 77277-1017

William A. Frazell Assistant Attorney General Bankruptcy & Collections Division PO Box 12548 Austin, TX 78711 2548

William Lee DeSanders a-k-a Lee DeSanders Arthur A. Stewart, Esq. Thompson Coe Cousins & Irons LLP 700 North Pearl St. 25th Floor Dallas, TX 75201-2825 Xast Investments, Inc. P.O. Box 561527 Dallas, TX 75356-1527

XAST Investments, Inc. c/o Paula Anderson Kelsoe, Anderson, Khoury & Clark, PC 5220 Spring Valley Road, Suite 500 Dallas, Texas 75254-2466

XO Communications Services, Inc. 9201 N. Central Expressway Dallas, TX 75231-5916

Mark H. Ralston The Ralston Law Firm 2603 Oak Lawn AvenueSuite 230, LB 2 Suite 230, LB 2 Dallas, TX 75219-9109

iBroadband of Texas P.O. Box 1360 Athens, TX 75751-1360

UST U.S. Trustee 1100 Commerce Street Room 976 Dallas, TX 75242-1011

The preferred mailing address (p) above has been substituted for the following entity/entities as so specified by said entity/entities in a Notice of Address filed pursuant to 11 U.S.C. 342(f) and Fed.R.Bank.P. 2002 (g)(4).

City of Dallas City Hall 1AN Dallas, TX 75277

TXU Energy P.O. Box 100001 Dallas, TX 75310-0001

The following recipients may be/have been bypassed for notice due to an undeliverable (u) or duplicate (d) address.

(u)BSCH Management Company, LLC

(u)Dallas County

(u)Lenox Restaurant Group, Ltd.

(u)Tarrant County

(u)American Needle

(u)Dallas Mavericks

Case Company, 09-33211-hdh11 (u)Divots Sportswear Inc.

(u)Mark H. Ralston

Doc (du)Lenox 62 Filed 07/14/09 11:44:14 Desc Restaurant Group Entered 07/14/09(u)Texas Comptroller of Main Public Accounts Document Page 12 of 12

End of Label Matrix Mailable recipients Bypassed recipients Total

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