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In Re: Usa Baby, Inc.,

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SUBMITTED MARCH 7, 2012

Before POSNER, WOOD, and TINDER, Circuit Judges.

Creditors forced USA Baby, which had been formed in 2003 to franchise stores that sell furniture and other products for children, into bank- ruptcy under Chapter 11 (reorganization). A trustee appointed by the bankruptcy court moved to convert the case to a Chapter 7 bankruptcy (liquidation). The bankruptcy judge granted his motion over the objection of Scott Wallis, a 5 percent shareholder who had been the company’s president when the trustee was ap- pointed and took over the debtor’s management. Wallis moved for reconsideration of the bankruptcy judge’s order, accusing the trustee and franchisees of committing fraud; and in a second motion, contending that the com- pany could regain solvency by collecting fees withheld by the franchisees, Wallis asked the bankruptcy court to grant “equitable relief” compelling the franchisees to pay USA Baby what he claimed they owed it. The bank- ruptcy judge denied both motions. He explained that Wallis had not offered a persuasive reason to doubt the trustee’s judgment that reorganization was infeasible, and that in a Chapter 7 case Wallis could not bring claims on behalf of USA Baby or litigate personal claims against the franchisees. Wallis appealed to the district court and having lost there appeals to us.

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