Baron v. Sherman (In Re Ondova Ltd. Co.)
914 F.3d 990
5th Cir.2019Background
- Jeffrey Baron sued bankruptcy trustee Daniel J. Sherman (and Sherman's law firm) in an adversary proceeding alleging misconduct in the administration of the Ondova bankruptcy and in pursuit of a receivership that led to asset seizures.
- Bankruptcy Judge Jernigan issued a detailed report recommending dismissal; the district court adopted it and granted Sherman’s Rule 12(b)(6) motion to dismiss and denied Baron's motion for leave to amend as futile.
- The courts concluded Sherman acted largely under orders of the bankruptcy court (about 147 orders during his tenure), invoking absolute immunity for acts pursuant to court orders.
- For acts not pursuant to orders, the courts held trustees are entitled to qualified immunity for actions within the scope of trustee duties; only ultra vires acts fall outside immunity.
- Baron’s claims against Sherman's attorneys were dismissed based on derivative judicial immunity and independent attorney immunity; Baron also failed to plead gross negligence to support a breach of fiduciary duty claim.
- Baron appealed both the dismissal and denial to amend; the Fifth Circuit affirmed on the grounds of absolute and qualified immunity, attorney immunities, lack of plausible gross-negligence allegations, and waiver of certain arguments on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Trustee immunity | Sherman's acts (receivership petition, alleged misrepresentations, asset liquidation) are actionable | Sherman was acting under court supervision or within trustee duties, entitling him to immunity | Absolute immunity for acts pursuant to court orders; qualified immunity for acts within scope of duties; Baron failed to allege ultra vires acts |
| Attorney immunity | Firm aided wrongful conduct and should be liable | Firm protected by derivative judicial immunity and attorney immunity for legal services | Attorneys immune under both derivative and independent doctrines |
| Breach of fiduciary duty / gross negligence | Sherman breached fiduciary duty by misconduct in receivership and asset seizures | Baron did not plead gross negligence plausibly | Dismissed for failure to plausibly plead gross negligence |
| Denial of leave to amend | Amendment would cure defects | Proposed amendments were futile and some arguments not preserved on appeal | Denial affirmed; new claims not raised on appeal waived; amendment futile |
Key Cases Cited
- Boullion v. McClanahan, 639 F.2d 213 (5th Cir. 1981) (absolute immunity for court-appointed officers acting under court orders)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6) complaints)
- Papasan v. Allain, 478 U.S. 265 (courts need not accept legal conclusions as facts)
- Netsphere, Inc. v. Baron, 703 F.3d 296 (5th Cir. 2012) (prior appellate treatment of the receivership at issue)
- Troice v. Proskauer Rose, L.L.P., 816 F.3d 341 (5th Cir. 2016) (attorney immunity from non-client suits for legal services)
- Grant, Konvalinka & Harrison, PC v. Banks (In re McKenzie), 716 F.3d 404 (6th Cir. 2013) (trustees afforded qualified immunity for acts within official duties)
- In re DeLorean Motor Co., 991 F.2d 1236 (6th Cir. 1993) (derivative judicial immunity for officers acting under court authority)
- Sierra v. Seeber, 966 F.2d 1444 (4th Cir. 1992) (trustee immunity principles)
- City of Clinton v. Pilgrim's Pride Corp., 632 F.3d 148 (5th Cir. 2010) (de novo review when denial to amend is based solely on futility)
- United States v. Griffith, 522 F.3d 607 (5th Cir. 2008) (failure to raise an issue on appeal constitutes waiver)