Carol and Michael Rothko created a limited liability company partnership named Rosewood Acres,
LLC to buy, renovate, and flip second and third generation homes in Sarasota, Florida. For the first four
years of operation, the LLC made a neat little profit on each house flipped. At first the Rothkos had
been cautious and had flipped one house at a time. Then when the market was at its peak, they purchased
two homes to work on simultaneously. Then the market collapsed. Up until that time, contractors
who worked for the Rothkos had been willing to let overdue payments slide because they knew
that the Rothkos did a very good business and the contractor did not want to jinx a good thing. Similarly,
the bankers who set up the mortgages in each case were willing to accept late payments because
they also knew that the Rothkos had an excellent track record in the “flipping” business. However,
when the market collapsed the contractors found themselves losing jobs left and right and so they all
pressed the Rothkos for more timely payments. The bank was also less forgiving about late payments.
Eventually, the Rothkos found that they could not pay the contractors, the bank, nor the utility companies.
Nor could they pay property taxes on the three houses. Consequently, the Rothkos decided to file
a voluntary petition for bankruptcy. The court appointed Arthur M. Dent as trustee to the debtor’s bankruptcy
estate. Dent decided to use his own real estate firm as a consultant to assist in the sale of the
debtors’ property. Consider each of the following ethical issues.

Question

1. First, was it ethical for the Rothkos to delay payments to the contractors?
2. Second, was it ethical for the contractors to suddenly demand earlier payments just because the market had shifted?
3. Third, was it ethical for the bank to demand on-time payments, after being so generous with the Rothkos?
4. Fourth, was it ethical for the court to appoint a trustee to oversee the bankruptcy process of an LLC when the court knew that the trustee was a realtor?
5. Finally, was it ethical for Dent to accept the position as trustee and to then use his own firm to assist in the sale of the debtors’ property? Explain each point using a consistent ethical standard.