Grant, Konvalinka & Harrison, P.C. v. Banks (In re McKenzie)
472 B.R. 455
Bankr. E.D. Tenn.2012Background
- GKH sues trustee Still as well as Banks, Banks P.C., and Debtor for malicious prosecution and abuse of process related to the Malpractice Lawsuit.
- The Malpractice Lawsuit was filed in Bradley County Chancery Court and removed/paired with a bankruptcy adversary proceeding.
- The underlying bankruptcy cases involve an involuntary petition (2008) followed by a Chapter 11/7 transition and postpetition transfers including the 50 acres transaction.
- The court previously ruled the 50 acres transfer was not property of the estate; tolling and statute issues were contested.
- The court concludes the trustee acted within statutory duties and is immune from suit; other defendants’ claims survive dismissal.
- The decision to dismiss the trustee but not others is part of a broader analysis of immunity and the merits of the underlying claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Trustee is immune from suit | GKH argues lack of immunity due to malice and outside-scope actions | Still asserts absolute immunity for trustee actions within duties | Trustee is immune; dismissal granted for trustee only |
| Whether Malpractice Lawsuit was within the Trustee’s duties | Actions pursued to extort settlement from GKH | Actions fell within collecting assets and investigating the estate | Yes, within the Trustee’s duties; immunity applies |
| Whether any exceptions to immunity apply (breach of fiduciary duty, ultra vires, balancing interests) | Exceptions apply; trustee acted ultra vires and with malice | No applicable exceptions present | No exceptions to immunity apply |
| Whether failure to obtain court leave to file affects immunity | Lack of leave waives immunity | Authority to act derives from statute and court approval; no waiver | No waiver; immunity stands |
| Whether GKH states a prima facie case for malicious prosecution or abuse of process | Probable cause lacking; malice evident | Probable cause exists; actions within scope | GKH fails to state a prima facie claim; dismissal appropriate as to trustee |
Key Cases Cited
- In re Heinsohn (Kirk v. Hendon), 231 B.R. 48 (Bankr. E.D.Tenn. 1999) (trustee immunity for reporting possible violations; judicial in nature)
- Lowenbraun v. Canary (In re Lowenbraun), 453 F.3d 314 (6th Cir. 2006) (trustee immunity; both judicial and extra-judicial statements protected)
- In re Bernard L. Madoff Investment Securities, LLC, 440 B.R. 282 (Bankr.S.D.N.Y. 2010) (trustee immunity for good-faith, duty-based actions; public policy favoring immunity)
- In re Lawrence, 219 B.R. 801 (E.D.Tenn. 1998) (trustee has exclusive standing to sue on estate claims; fundamental duties)
- In re Kashani, 190 B.R. 883 (9th Cir. BAP 1995) (trustee immunity—scope and need for court approval; Mosser lineage)