While the bankruptcy world’s eyes are locked on the genetic code up for auction in 23andMe’s chapter 11 proceedings, we are also focused on a more old fashioned asset: New York City real estate.
19 East 75th Street (the “Property”) is a three-story, 4,000 square foot residence in New York’s Upper East Side, built in 1901. Its market value is approximately $10 million.
Since 2013, a company named CLST Enterprises, LLC (“CLST”) has owned the Property. CLST’s principals are husband and wife, Carl and Margaret Thomson, who each own a 50% share. The Thomsons reside on the top three floors of the Property and do not pay rent to CLST.
In April 2024, “a voluntary petition for relief pursuant to Chapter 11 of the Bankruptcy Code was filed on [CLST’s] behalf.” In re: In re CLST., No. 24-10596 (MG), 2025 WL 951298, at *1 (Bankr. S.D.N.Y. Mar. 27, 2025). Carl Thomson signed on behalf of CLST. Margeret did not.
In January, Chief Judge Martin Glenn of the United States Bankruptcy Court for the Southern District of New York appointed a chapter 11 trustee (the “Trustee”) over CLST. The Trustee, in turn, moved to sell the Property via a public auction.
As part of the Trustee’s motion, he sought an order directing the Thomsons to vacate the Property “to enable marketing and sale efforts.” The Trustee further sought an order “authorizing the Trustee (under the supervision of the United States Marshal) to effectuate the removal of the [Thomsons] if they do not voluntarily vacate the premises.” The Trustee argued that removal was necessary “to maximize value to the estate.”
Carl Thomson filed an objection to the Trustee’s motion. He argued that “as a 50% member of an LLC,” he “did not have adequate authority” to file the chapter 11 petition. He also argued that Margaret Thomson, the other 50% owner, “lacked the mental capacity to authorize the filing of the Petition” and that as proposed, the auction “overlooks Margaret Thomson’s interests” and the “uniqueness” of the Property.
The court overruled these objections. It conducted a straightforward application of General Order M-383, which is the Southern District of New York’s guidelines for asset sales under 11 U.S.C. § 363(b). The court found that the Trustee articulated a sound business reason to sell the Property—ensuring CLST’s “estate receives the maximum benefit from the sale of the Property on a reasonable timetable given the circumstances of the case.”
The Court determined not to “‘double guess’ the Trustee's judgment without specific justification, ‘as [the] business judgment of the estate representative is entitled to great deference.’” CLST, 2025 WL 951298 at *5 (quoting In re Borders Grp., Inc., 453 B.R. 477, 483 (Bankr. S.D.N.Y. 2011). Carl Thomson’s “observation that the [] Property is ‘unique’ and therefore deserving of adequate sale and marketing procedures does not suffice to undermine the legitimate business purpose . . . articulated by the Trustee.” Id.
As to removal of Carl and Margeret Thomson—including, if necessary, with the U.S. Marshall’s assistance—the Trustee included a declaration “setting forth the substantial history” of the Thomsons’ conduct. This declaration included allegations of “belligerent and non-cooperative behavior regarding the [] Property for over a decade, including as to sale and marketing efforts during the pendency” of the chapter 11 proceedings.
The court found that under such circumstances, “the Trustee will not be able to maximize the value of [CLST’s] estate if he is not able to market and deliver the [] Property vacant. . . . Accordingly, Removal of the [Thomsons] and their personal property from the premises of the [] Property is necessary and appropriate.” Id. at *6.
The court found Carl Thomson’s remaining objections unavailing. CLST’s operating agreement specifically provided him with authority to operate and manage CLST, including by filing a chapter 11 case. Therefore, his wife’s approval and mental capacity were of no moment.
The court therefore ordered Mr. and Mrs. Thomson to vacate the Property and remove their possessions.
