On August 11, 2026, PJM Interconnection, L.L.C. and PJM Settlement, Inc. moved for entry of an order appointing a chapter 11 trustee in the jointly administered cases of American Efficient LLC under section 1104(a) of the Bankruptcy Code, or in the alternative an examiner under section 1104(c). The motion is set for hearing on August 26, 2026 before Judge Laura T. Beyer in Charlotte. PJM invokes sections 105(a) and 1104(a) through (c), together with Bankruptcy Rules 2007.1 and 9014, and is represented by Hunton Andrews Kurth LLP.

The timing matters. The debtors filed on July 18, 2026 and moved for debtor-in-possession financing four days later. That financing motion has now been continued twice and is set for special setting on August 21. PJM objected to it on August 5. Six days after that objection, and one day after the Bankruptcy Administrator filed its Notice to 20 Largest Unsecured Creditors, PJM escalated from opposing the financing to asking the court to replace the fiduciary proposing it.

The motion is short by the standards of contested trustee practice, running fifteen pages including the certificate of service. It is short because PJM does not need to build a factual record from scratch. It is asking the court to give weight to findings another federal tribunal has already made.

PJM Interconnection is the regional transmission organization that operates wholesale electricity markets across all or parts of thirteen states and the District of Columbia under FERC-approved tariffs. PJM Settlement is its wholly owned subsidiary and serves as the counterparty for transactions, performing credit, billing, and settlement functions under the tariff. When PJM appears as a creditor in these cases, it appears as the entity that paid the money at issue.

Beginning in 2009, PJM capacity auctions were open to energy efficiency resources on the premise that qualifying efficiency measures would offset future capacity needs. One of the debtors, Affirmed Energy LLC, participated as a provider of those resources starting in 2014, aggregating efficiency attributes associated with energy-efficient consumer products and offering the aggregated resources into the capacity markets.

On April 15, 2026, FERC issued the order the motion refers to as the Penalties Order. According to PJM's description of that order, FERC determined that Affirmed Energy sold PJM "fake capacity" of nearly two gigawatts per year, described in the motion as approximately the annual capacity of two nuclear reactors, in exchange for roughly $500 million in capacity payments it received. FERC found that Affirmed Energy purchased sales data concerning energy-efficient products sold by others and then collected capacity payments as though it had itself caused the qualifying reductions in demand. FERC further determined that Affirmed Energy made multiple false statements and misrepresentations about its operations over a period of years.

FERC ordered disgorgement of more than $407 million in capacity payments to PJM plus interest, and imposed approximately $772 million in civil penalties. The determination applies to each of the debtors. The debtors are contesting the FERC proceedings in the United States District Court for the Middle District of North Carolina, and nothing in the bankruptcy court's disposition of the trustee motion resolves that challenge.

The motion cites United States v. Utah Construction & Mining Co., 384 U.S. 394 (1966), for the proposition that courts may give preclusive effect to administrative findings when the agency acts in a judicial capacity and the parties had an adequate opportunity to litigate. That citation does the heavy lifting. If the court accepts it, the evidentiary contest over prepetition conduct largely collapses into a question of what follows from findings already entered.

The second pillar of the motion has nothing to do with misconduct. It concerns what these estates actually are.

In 2024, FERC approved a tariff amendment eliminating energy efficiency resource participation in PJM's capacity auctions, and the D.C. Circuit affirmed that determination in Affirmed Energy, LLC v. FERC, 166 F.4th 1070 (D.C. Cir. 2026). The debtors' former line of business cannot continue in PJM's capacity market in its prior form. That is not a projection or a contested forecast. It is the settled state of the regulatory regime.

The debtors' own thirteen-week budget, filed July 28, projects no income during the budget period other than proceeds of the proposed debtor-in-possession financing. The budget reflects expenditures for professional fees, insurance, payroll, and other administrative items. On that record, PJM argues, the debtors are operating chiefly to pursue litigation and to respond to the consequences of the Penalties Order.

That framing sets up the deference argument. Courts extend substantial latitude to a debtor in possession pursuing a traditional operating reorganization because management is presumed to be running a business that will support creditor recoveries. Where the projected revenue during the budget period is zero and the former business line has been eliminated by regulation, PJM contends the ordinary rationale for that deference thins considerably.

FERC exposure combines the disgorgement and civil penalty figures described in the motion, exclusive of interest. Assets at filing reflect Research Suite case data. The comparison is directional rather than precise, but it frames the practical question: whether this is a reorganization or a contest over how a shortfall gets allocated.

The third pillar is the proposed financing. The debtors seek approval of a facility from MIH LLC, an insider. As described in the DIP-related pleadings, the facility consists of an initial draw of up to $6,731,359, a delayed draw of up to $3,168,641, and a $1,600,000 bridge financing roll-up. The debtors propose to secure that financing with liens on currently unencumbered assets and on the proceeds of avoidance claims.

The conflict PJM identifies is structural rather than hypothetical. The debtors' schedules reflect more than $1.2 million in insider payments to MIH in the year before the petition date. The same schedules and statements of financial affairs reflect over $600,000 in salary allocated to the debtors' Managing Director and over $2.2 million paid to an affiliate, MEG Staffing, LLC, for management services during that year. Management is therefore asking the court to grant liens on avoidance proceeds to a party that received payments those avoidance actions might target.

The motion also points to the financing's dependence on arrangements outside these cases. The DIP-related pleadings reflect that the facility is tied to MIH's own financing, including a note purchase agreement, an April consent, and a transaction support agreement with MIH's secured parties, and that third-party lenders to MIH exercised substantial control over the structure of the financing, the use of proceeds, and the chapter 11 milestones the debtors must satisfy. The pleadings further reflect that the operative DIP documents were not filed with the court when objections were made, and that debtors' counsel advised the documents were not yet complete when requested.

Section 1104(a) supplies two independent bases for appointment. The court shall appoint a trustee for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management either before or after the commencement of the case, or similar cause, or if such appointment is in the interests of creditors, any equity security holders, and other interests of the estate.

PJM argues cause under the first prong on the theory that the question is not whether misconduct occurred in the past but whether current management can be trusted to serve as a fiduciary now. The Fourth Circuit's decision in Committee of Dalkon Shield Claimants v. A.H. Robins Co., 828 F.2d 239 (4th Cir. 1987), supplies the discretion framework. The motion then assembles a line of cases holding that appointment is warranted where management cannot be relied upon to fulfill duties of candor, loyalty, and preservation of estate property, where creditors have reasonably lost confidence, or where conflicts prevent impartial decisions on behalf of the estate.

The authorities PJM leans on are notable for how close to home they sit. In re Drew Transportation Services, Inc., 2016 WL 6892459 (Bankr. E.D.N.C. July 7, 2016), and In re Piedmont Center Investments, LLC, 2011 WL 5903398 (Bankr. E.D.N.C. Sept. 8, 2011), are Eastern District of North Carolina decisions. Gomez v. United States Trustee, 2010 WL 582706 (W.D. Va. Feb. 18, 2010), and In re El Rafaei, 2022 WL 2911429 (Bankr. E.D. Va. July 22, 2022), are Fourth Circuit district and bankruptcy decisions. In re Marvel Entertainment Group, Inc., 140 F.3d 463 (3d Cir. 1998), supplies the out-of-circuit anchor on both prongs.

PJM concedes the burden. The moving party must establish the need for a trustee by clear and convincing evidence, citing Marvel and In re Euro-American Lodging Corp., 365 B.R. 421 (Bankr. S.D.N.Y. 2007). That concession is why the Penalties Order does so much work in the motion. Clear and convincing evidence of prepetition dishonesty is a heavy lift on a record this young if it has to be built through discovery. It is a considerably lighter lift when a federal agency has already entered findings after an adjudicative proceeding.

PJM presents the second prong as genuinely independent rather than as a rhetorical fallback, and the distinction is the analytically interesting part of the motion. Section 1104(a)(2) does not require a finding of fault. It turns on the practical realities and necessities of the case and permits appointment whenever an independent fiduciary is needed in the interests of creditors and the estate.

Under the second prong the motion advances four points in sequence. Creditor confidence in management is impaired where management remains in possession after adverse regulatory findings and now seeks insider financing that would encumber unencumbered assets and avoidance proceeds. The absence of operating revenue narrows the deference ordinarily afforded a debtor pursuing a traditional reorganization. The insider proposal creates a conflict that management cannot resolve in its own favor. And the benefits of appointment would be substantial, because a trustee could independently evaluate the financing, investigate insider transactions, assess estate claims, and make a neutral recommendation on whether these cases should proceed toward reorganization, liquidation, settlement, or some combination.

PJM frames the cost-benefit conclusion carefully. A trustee would not be appointed to displace a functioning reorganization led by trusted management. A trustee would be appointed because these estates presently require credibility, neutrality, and independent judgment before further significant decisions are made. That framing is designed to answer the standard objection that a trustee is expensive and disruptive. The response is that there is little functioning reorganization to disrupt.

If the court declines to appoint a trustee, PJM asks for an examiner under section 1104(c). The statutory hook is straightforward. Where the court does not appoint a trustee, it shall order the appointment of an examiner if appointment is in the interests of creditors and the estate or if the debtor's fixed, liquidated, unsecured debts exceed $5 million. Given the disgorgement and penalty figures, the debt threshold is not a serious question in these cases.

The proposed mandate is specific, which distinguishes it from examiner requests that ask for an investigation without defining one. PJM proposes that the examiner investigate current management's role in the conduct described in the Penalties Order and whether that conduct bears on management's ability to continue serving as a fiduciary, the negotiation and structure and fairness of the proposed insider facility, prepetition insider payments and other affiliate transactions reflected in the schedules and statements, the nature and value of any estate claims against insiders or affiliates or third parties, and the debtors' actual restructuring prospects in light of the elimination of energy efficiency resource participation and the projected absence of operating revenue.

The examiner request also functions as a settlement of expectations for the court. A judge reluctant to displace management three weeks into a case on a paper record has an intermediate option that produces an independent report without transferring control of the estates. PJM's supporting citations, including In re First American Health Care of Georgia, Inc., 208 B.R. 992 (Bankr. S.D. Ga. 1996), and In re Residential Capital, LLC, 474 B.R. 112 (Bankr. S.D.N.Y. 2012), are aimed at that middle path.

The first footnote of the motion does more work than its placement suggests. Based on the Bankruptcy Administrator's Notice to 20 Largest Unsecured Creditors, filed August 10 at Docket No. 61, PJM states that it appears there will not be a committee in these cases who could undertake the review PJM is describing. That is PJM's reading of the notice rather than a determination by the Bankruptcy Administrator, though Research Suite case data likewise reflects no creditors' committee appointed to date.

That footnote closes the obvious response to a trustee motion. The usual answer to a creditor demanding an investigation of insider transactions and financing conflicts is that the official committee, funded by the estate and armed with standing and discovery, exists precisely to perform that function. In these cases that answer is unavailable. The Western District of North Carolina uses a Bankruptcy Administrator rather than a United States Trustee, and while the Bankruptcy Administrator filed a limited objection to the financing on July 27, that office does not perform the investigative role of an appointed committee.

The second footnote raises a separate issue and then declines to press it. PJM notes that the debtors' petitions identify Durham, North Carolina as their principal place of business, and that the resolutions filed with the petitions authorized bankruptcy filings in the Middle District of North Carolina rather than in the Western District where the cases were commenced. Durham sits in the Middle District. The motion suggests the court should consider whether transfer of venue is appropriate when any basis for the filings in this district is revealed.

PJM expressly does not ask the court to resolve venue through this motion. It uses the discrepancy for a narrower purpose, arguing that unresolved questions about authorization and venue underscore the need for an independent fiduciary to evaluate how these cases were commenced, for whose benefit, and under whose control.

Preserving the venue point rather than pressing it is a deliberate choice. A venue motion decided against PJM would resolve nothing about governance. A venue question left open contributes to the atmosphere of unresolved authorization that supports the section 1104(a)(2) argument, and it remains available later.

The sequencing of the two hearings is the first thing to watch. The financing motion is set for August 21 and the trustee motion for August 26. If the court approves the insider facility on final terms before reaching the governance question, the liens on unencumbered assets and avoidance proceeds are in place and a later-appointed trustee inherits a smaller field of action. If the court defers the financing again, the governance question gets decided first and on a fuller record. Continuances in this case have not been neutral scheduling events.

The preclusion question is the second. PJM is asking the bankruptcy court to accept FERC's findings as findings rather than as allegations, while the debtors are contesting those same proceedings in the Middle District of North Carolina. How Judge Beyer treats the Penalties Order will shape more than this motion. It will shape what the debtors have to prove, and where, for the remainder of the case.

The third is whether the examiner alternative becomes the actual outcome. Trustee motions filed within a month of the petition date, on a record built from another tribunal's findings rather than from discovery, are difficult to win outright. The clear and convincing standard is real. But PJM has structured the request so that the court can decline the trustee and still order the investigation, and the absence of a committee removes the most common reason to say no to both.

Watch also for the debtors' response. The motion recites that operative DIP documents were not filed when objections were made and that counsel advised the documents were not yet complete. Whether those documents are on file before August 21 will tell you a good deal about how the financing hearing goes, and by extension how the trustee hearing goes five days later.