788 F.3d 156
5th Cir.2015Background
- In 2005, BFG Investments filed for bankruptcy; Michael Schmidt became trustee and liquidated the estate.
- Bankruptcy case closed in November 2009 with Schmidt’s fees approved; no appeal from that fee order.
- In October 2013, Ville-gas and BFG sued Schmidt in district court under 28 U.S.C. § 1334(c) alleging gross negligence and fiduciary breach for not pursuing insurance coverage against Nationwide.
- Plaintiffs claimed Nationwide issued a $10 million policy for BFG, which would have covered many creditors’ claims; Nationwide denied issuance.
- District court dismissed for lack of leave from the bankruptcy court to sue the trustee; plaintiffs appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Barton requires leave to sue a trustee despite Stern | Barton does not apply under Stern claims. | Barton applies; Stern does not create an exception and Barton governs. | Barton applies; Stern does not create an exception. |
| Whether Stern limits Barton for Stem claims | Stem-like claims are exempt from Barton. | Barton governs regardless of Stem categorization. | Barton applies regardless of Stem claims. |
| Whether supervisory-court authority over the appointing court defeats Barton | Suit in a court with supervisory authority should bypass Barton. | Barton requires leave from the appointing bankruptcy court even when in a supervising court. | Barton requires leave; supervisory-court status does not negate Barton. |
Key Cases Cited
- Barton v. Barbour, 104 U.S. 126 (1881) (leave of court required before suit against receiver)
- Anderson v. United States, 520 F.2d 1027 (5th Cir.1975) (application to bankruptcy trustees)
- McDaniel v. Blust, 668 F.3d 153 (4th Cir.2012) (collecting Barton-related authority)
- Agostini v. Felton, 521 U.S. 203 (1997) (avoid implication-based limitations on precedents)
- Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014) (Stem claim guidance; limits of Stem's impact on Barton)
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (bankruptcy courts lack final authority over certain state-law claims)
- In re Harris, 590 F.3d 730 (9th Cir.2009) (district court supervisory status not sufficient to defeat Barton)
- In re Kashani, 190 B.R. 875 (9th Cir.BAP1995) (distinguishes Harris on appointing vs supervisory courts)
- Carter v. Rodgers, 220 F.3d 1249 (11th Cir.2000) (abstain and leave requirements across courts for trustee actions)