497 B.R. 604
Bankr. S.D. Florida2013Background
- W.B. Care Center, LLC (the Debtor) filed Chapter 11 on Aug. 5, 2009; Timothy Reardon was the Debtor’s managing member and licensed administrator.
- Examiner appointed after concerns about the Debtor’s financial management; Marcum LLP and John L. Heller (accountant/Chief Restructuring Officer) were retained by court order.
- Reardon resigned as administrator under a November 2009 settlement that originally provided him $500,000; he later attempted to remove about $50,000 from estate accounts, was found to have attempted embezzlement, and the amended settlement omitted payment to him.
- The nursing home was sold (credit bid) and the Chapter 11 case converted to Chapter 7; Kenneth Welt was appointed Chapter 7 trustee.
- The bankruptcy court entered broad releases protecting Marcum and Heller and later enjoined Reardon from further litigation against them; Reardon sued Marcum, Heller, and Trustee Welt in district court without the bankruptcy court’s leave.
- The bankruptcy court denied Reardon’s motions seeking permission to proceed in the District Court Action and barred him from filing further proceedings against Marcum or Heller arising from the W.B. Care Center bankruptcy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Reardon may sue the Chapter 7 trustee (Welt) in district court without leave of the bankruptcy court | Reardon proceeded in district court against Welt (no leave sought) | Trustee contends Barton doctrine requires leave from appointing court before suit | Court: Barton bars suit against trustee without bankruptcy-court leave; Reardon must dismiss trustee from district action and was sanctioned |
| Whether Barton extends to professionals employed by the estate (Marcum/Heller) | Reardon sought permission to sue Marcum and Heller in district court | Marcum/Heller: as officers/employees and court‑appointed professionals, they are protected by Barton and prior court releases | Court: Barton (and its extensions) bars suits against Heller/Marcum for actions in estate administration absent leave; motion denied |
| Whether the district suit would relitigate final bankruptcy orders and settlements | Reardon argued merits warrant district adjudication | Defendants and Court argued final bankruptcy orders and broad releases resolve issues; allowing suit would be duplicative and abusive | Court: District suit would revisit matters finally decided; permission denied as pointless and contrary to releases |
| Whether additional relief (future filings) should be precluded | Reardon sought further litigation avenues | Court noted Reardon’s vexatious litigation history and prior injunctions | Court: Permanently prohibited Reardon from filing further proceedings against Marcum or Heller related to the bankruptcy case |
Key Cases Cited
- Barton v. Barbour, 104 U.S. 126 (supreme court) (establishes rule that receivers/trustees cannot be sued without leave of appointing court)
- Matter of Linton, 136 F.3d 544 (7th Cir.) (trustee is successor to receiver; Barton applies)
- In re Crown Vantage, 421 F.3d 963 (9th Cir.) (Barton extends broadly; bankruptcy court retains jurisdiction over related suits)
- In re VistaCare Group, 678 F.3d 218 (3d Cir.) (Barton bars suits that affect administration of estate; leave required)
- Lawrence v. Goldberg, 573 F.3d 1265 (11th Cir.) (bankruptcy jurisdiction covers proceedings related to the case where outcome could affect the estate)
- Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236 (6th Cir.) (Barton extended to attorneys/professionals appointed by bankruptcy court)
- Muratore v. Darr, 375 F.3d 140 (1st Cir.) (Barton applies to trustees; protects estate administration)
- In re Balboa Improvements, Ltd., 99 B.R. 966 (9th Cir. BAP) (extension of Barton to court‑appointed professionals)