In Re VistaCare Group, LLC
678 F.3d 218
| 3rd Cir. | 2012Background
- VistaCare's bankruptcy estate included Parkside Manor in Lancaster County, with 44 mobile-home lots and a 45th lot containing a care facility sharing common infrastructure.
- Restriction No. 1 in the subdivision plan stated title would stay with the developer, conditioning transfers away from residences built on the lots.
- Trustee sought authority to sell Parkside as one parcel or two, contingent on township modification of Restriction No. 1.
- The bankruptcy court approved the sale of Lot 45; the township later consented that sale to be free of Restriction No. 1, and Lot 45 sold in 2009.
- Trustee later liquidated the 44 other lots, selling many to residents who had affixed mobile homes, and the December 14, 2009 agreement between Trustee and the Township abrogated Restriction No. 1 as to those lots, CGL not a party.
- CGL sought leave to sue the Trustee in state court for alleged unlawful sales and deprivation of its rights; the bankruptcy court granted leave, and the district court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Barton applies to bankruptcy trustees. | CGL argues Barton governs leave requirements. | Schwab contends Barton is antiquated or displaced by Code provisions. | Barton doctrine remains valid; leave required unless §959(a) applies. |
| Whether the bankruptcy court properly granted leave to sue the trustee. | CGL presented non-frivolous, foundation-not-without; factual basis for state-law claims. | Trustee argued claims may be frivolous or immunized; balance of interests. | Bankruptcy court did not abuse discretion; claims were not without foundation. |
Key Cases Cited
- Barley v. Barton, 104 U.S. 126 (1881) ( Barton doctrine origin; leave required for actions against receivers/trustees)
- In re Crown Vantage, Inc., 421 F.3d 963 (9th Cir. 2005) (limits Barton; §959(a) as exception when operating the business)
- In re Linton, 136 F.3d 544 (7th Cir.1998) (abuse-of-discretion standard for leave to sue trustee)
- In re DeLorean Motor Co., 991 F.2d 1236 (6th Cir.1993) (Barton doctrine and equity receivership context)
- In re Nat'l Molding Co., 230 F.2d 69 (3d Cir.1956) (not-foundational standard for leave to sue trustee)