Thomas W. Collins ran a bucket shop (a scam similar to a Ponzi scheme) for approximately ten years, along with a number of accomplices. After his fraud was detected, Collins disappeared, and both he and the principal corporate entity he had used for his bogus commodities business were forced into bankruptcy. (Collins later committed suicide after a botched bank robbery in San Diego.) This case presents the question whether claims that the defraudеd investors have against the accomplices and against the futures commission merchant through which they conducted much of their business may be stayed for the duration of the bankruptcy proceeding. The bankruptcy court held that the trustee had standing to pursue the individual investors’ claims and accordingly stayed their action in district court. See Apostolou v. Fisher,
I
In 1984, Collins established Lake States as a corporation that would trade in commodities futures on its own account. That promise, however, was never fulfilled in any legitimate way. Neither Collins nor any of his collеagues — Daniel J. Collins, Edward M. Collins, James J. Collins, Patricia Collins, John Matthews, Bernard Miraglia, James Spentzos, and John R. Wade — ever registered with the Commodities Futures Trading Commission (“CFTC”) as required by law. 7 U.S.C. §§ la, 6d, 6f, 6k, 6n. Instead, some time between 1984 and 1986, Collins and his accomplices began soliciting and accepting investments, which they converted to their own use through accounts at Gelderman, Inc., a registered futures commission merchant. (We shall occasionally refer to the accomplices, together with Gelderman, as the “Apostolou Defendants.”) As with all such schemes, Lake States maintained the illusion of legitimacy and success by using funds from newer investors to pay “returns” to earlier investors. The CFTC smelled a rat in October 1989, which caused it to begin investigating the trading on Lake States’ behalf at Gelderman. It learned that unusually large deposits and withdrawals had been taking place in the Lake States accounts at Gelderman: one account in Collins’ name showеd more than $3,148,000 in deposits and $3,574,000 in withdrawals from January to September 1989. At that point, however, the CFTC apparently took no action, and the scheme continued. In addition to the basic fraud, Collins and his accomplices gave their investor-victims “promissory notes” as receipts for their invested funds. The victims were told that the notes were a “legitimate way to structure investments to save on commissions” charged by Gelderman.
Everything unraveled in June 1994: Lake States became insolvent, Collins disappeared, the investors learned that they had been bilked, and the proceedings giving rise to the present appeal began. Some of the unfortunate investors filed involuntary bankruptcy petitions against Collins and Lake States, which by then had only some $2 million left of the $100 million they had taken in — hardly enough to satisfy the outstanding investor debt of about $64 million, not to mention any other obligations the two may have had. Another group, known as the “Apostolou Plaintiffs” (after Louis Apostolou, one of the defrauded investors), filed securities, commodities, and common law fraud suits against the Apostolou Defendants in federal district court. The ranks of the Apostolou Plaintiffs have now swollen to 244 named individuals and entities (according to the certificate of interest attached to their brief), who are suing individually, not as a class. The entire group of similarly situated investors numbers about 450. See generally Apostolou,
The Apostolou Plaintiffs initially sued both the Apostolou Defendants and the two debtors in bankruptcy, Thomas Collins and Lake States. Before matters moved very far, however, and undoubtedly in recognition of the problems the automatic stay rule of § 362 posed for their claims against the two debtors, they voluntarily dismissed Collins and Lake States from their action. This move did not satisfy the trustee, who filed a “Complaint to Enforce the Automatic Stay, or in the Alternative, to Obtain Injunctive Relief’ in the bankruptcy court. In his complaint, the trustee arguеd (a) that the Apostolou Plaintiffs’ claims, including those against the Apostolou Defendants, were the property of the debtors’ estates and subject to the § 362 automatic stay, and, in the alternative, (b) that the Apostolou Plaintiffs’ claims were
The Apostolou Defendants disagreed, but Bankruptcy Judge Susan Sonderby was not convinced that their remaining claims were sufficiently distinct from the bankruptcy proceedings that they should be allowed to go forward. Instead, in an order dated October 21, 1994, she concluded that the trustee had satisfied the requirements for an injunction under § 105, finding that both parties were pursuing the same dollars from the same defendants to redress the same harms, that the trustee was substantially likely to prevail on the merits, that there was no adequate remedy at lаw to protect the debtors’ estates from the Apostolou Plaintiffs’ actions, that the debtors’ estates would suffer irreparable harm in the absence of a preliminary injunction, that the Apostolou Plaintiffs would suffer no harm from such an injunction (except perhaps loss of any benefits of being in the running in a race to the courthouse), and that an injunction would not harm any public interest.
The bankruptcy judge also decided, however, that the claims filed by the Apostolou Plаintiffs were the property of the debtors’ estates under § 541, and thus that they were under the control of the trustee for purposes of § 544 and covered by the automatic stay of § 362. She announced that the request for a § 105 injunction was moot, but then enjoined the Apostolou Plaintiffs under § 105 from pursuing their claims against the two debtors’ estates “until an order is entered in the ... jointly administered bankruptcy cases terminating, modifying or annulling said stay.” Record 34, at 2; see also Aposto-lou,
II
If the Apostolou Plaintiffs were trying to sue the two debtors, it is beyond dispute that the action would fall within the terms of the § 362 automatic stay. The catch here is that they are suing third parties who are not in bankruptcy, and who allegedly committed various acts of fraud against them—nondebt- or tortfeasors, as the Apostolou Plaintiffs label them. Even if the third parties—the Apostolou Defendants—injured Collins or the Lake States сorporation, the Apostolou Plaintiffs argue that they too were injured independently by the same defendants, and they are therefore entitled to pursue their own actions outside of the umbrella of the bankruptcy proceeding.
We begin with a review of the kinds of claims that may be brought only by the trustee once a bankruptcy proceeding has begun. First, the trustee has the sole responsibility to represent the estate, by bringing actions on its behalf to marshal assets for the benefit of the estate’s creditors. 11 U.S.C. § 323; In re Perkins,
[Allegations that could be asserted by any creditor could be brought by the trustee as a representative of all creditors. If the liability is to all creditors of the corporation without regard to the personal dealings between such officers and such creditors, it is a general claim....
A trustee may maintain only a general claim. His right to bring a claim depends on whether the action vests in the trustee as an assignee for the benefit of creditors*880 or, on the other hand, accrues to specific creditors.
Id. at 1348-49 (internal citations and punctuation omitted); see also Ashland Oil, Inc. v. Arnett,
The trustee, acting on behalf of the estate or the creditors as a whole, obviously may not roam around collecting whatever property suits her fancy. Her task instead is to recover and manage the “property of the estate,” which is defined in § 541. The nature of a debtor’s interest in property is determined by state law, In re A-1 Paving and Contracting, Inc.,
We put to one side for the moment the question whether the trustee as representative of Collins’ estate could recover anything, because the analysis would be different from the one applicable to Lake States, a corporate body. With respect to the corporation, our starting point is this court’s deсision in Scholes v. Lehmann,
Although the trustee’s Scholes argument is convincing on the inapplicability of the in pari delicto doctrine here, he overlooks a crucial difference between Scholes and the present case. For purрoses of determining whether a suit must be brought by the trustee on behalf of the creditor class as a whole or may be brought by an individual creditor, the claims available to the trustee are not the same as those the Apostolou Plaintiffs are trying to bring under the Commodities Exchange Act, the Securities Act of 1933, the Securities Exchange Act of 1934, and RICO, and for common-law fraud. The Second Circuit’s decision in Bankers Trust Co., supra, illustrates this point well. In that case, the debtor corporation, Braten Apparel Corporation (“BAC”), was engaged in the apparel business. Its largest creditor was Bankers Trust Company (“Bankers”). BAC fell on hard times in August 1974, and a Chapter 11 filing followed shortly thereafter. Around the same time, two of BAC’s owners agreed fraudulently to conceal from BAC’s creditors one of the company’s major assets, a subsidiary corporation. Relying on their misrepresentations, Bankers agreed to a reorganization plan under which it was to receive only 17.5% of its allowed claim. After further shenanigans, which included bribing a state court judge in proceedings affecting BAC’s and Bankers’ interests, Bankers moved to revoke BAC’s confirmation plan. It took almost six years for the bankruptcy court to
After the court at last revoked the confirmation plan, Bankers brought an independent action against BAC’s owners under RICO, alleging that their common-law fraud, bankruptcy fraud, bribery, and fraudulent conveyances amounted to a pattern of racketeering activity in violation of 18 U.S.C. § 1962(a)-(d). As in this case, the corporate debtor’s trustee claimed that Bankers did not have standing to sue the individual defendants. The trustee argued that if Bankers was permitted to pursue its RICO claim, there might be nothing left in the defendants’ coffers from which the bankrupt’s estate could recover. The Second Circuit acknowledged the problem, but it held that “if Bankers was injured by defendants’ acts, as its complaint adequately alleges in this case,... it has standing to bring a RICO claim, regardless of the fact that a bankrupt BAC might also have suffered an identical injury for which it has a similar right of recovery.”
Having recognized this fact, however, the court also acknowledged that there was an overlap between RICO and bankruptcy law on the facts before it. The overlap occurred both because Bankers was injured by the identical transactions that harmed BAC, and because, to the extent that BAC’s trustee could recover for BAC’s injury, the portion of Bankers’ injury stemming from its status as creditor of BAC would be correspondingly reduced. Id. at 1101, 1106. Because the trustee’s efforts had the potential to reduce Bankers’ injury, the court held that it wаs impossible to determine the measure of damages Bankers suffered on its own before the conclusion of the bankruptcy proceeding. It therefore ordered those claims dismissed without prejudice to refiling after the bankruptcy court resolved the trustee’s claims. Id. at 1106-07.
The Apostolou Plaintiffs stand in a position analogous to that of Bankers. Their claims arise from the misuse of their funds by Lake States and its agents to prop up or profit from the bucket shop schеme. To the extent they are suing the agents — both the individuals and Gelderman — for debts that arose out of these transactions, they stand in exactly the same position as the rest of the aggrieved investors, pursuing identical resources for redress of identical, if individual, harms. As creditors with claims so closely related to the Lake States estate, the Apostolou Plaintiffs must wait their turn behind the trustee, who has the responsibility to recover assets for the estate on behalf of the сreditors as a whole, Koch Refining,
Nonetheless, as in Bankers Trust, where Bankers’ RICO claims against BAC included the prospect of treble damages, their injuries may not be fully measured by the debts owed to Lake States. Some, but perhaps not all, of the individual investors may be able to show acts of fraud, cognizable under one or more of thе theories raised in the complaint, that imposed a separate and distinct injury on that person. While we make no suggestion about the merits of their claims, it may be possible, for example, for some of the Apostolou Plaintiffs to show separate and distinct injuries on their RICO claim, or on their claim for common law conspiracy to defraud — which could give them the opportunity to pursue punitive damages, see Kelsay v. Motorola, Inc.,
Ill
When it put BAC’s lawsuit on hold, the Bankers Trust court relied on the comment in Zenith Radio Corp. v. Hazeltine Research, Inc.,
In limited circumstances, the trustee may temporarily block adjudication of claims that are not property of the estate by petitioning the bankruptcy court to enjoin the other litigation, if it is sufficiently “related to” her own work on behalf of the estate. 28 U.S.C. § 1334(b). The jurisdiction of the bankruptcy court to stay actions in other courts extends beyond claims by and against the debtor, to include “suits to which the debtor need not be a party but which may affect the amount of property in the bankrupt estate,” Zerand-Bernal Group, Inc. v. Cox,
As described earlier, the bankruptcy court agreed with the trustee on the merits of the § 105 preliminary injunction, and found all four of the traditional elements required to support a preliminary injunction. (There were no relevant factual disputes. Apostolou,
While the Apostolou Plaintiffs’ claims are not “property of’ the Lake States estate, it is difficult to imagine how those claims could be more closely “related to” it. They are claims to the same limited pool of money, in the possession of the same defendants, as a result of the same acts, performed by the same individuals, as part of the same conspiracy. We can think of no hypothetical change to this case which would bring it closer to a “property of’ case without converting it into one. Even if the “related to” jurisdiction is not as broad in Chapter 7 cases as it is in Chapter 11 cases, see Celotex Corp. v. Edwards,
Unlike the more common case in which a creditor of a bankrupt files a claim against an insurer or guarantor of the bankrupt and is allowed to proceed, see In re Hendrix,
Rather than dismiss the Apostolou Plaintiffs’ action, even without prejudice,. as the Second Circuit did in Bankers Trust (an approach we approved in Barnett v. Stern,
The district court’s holding that the Apos-tolou Plaintiffs’ claims are not property of the Lakes States estate is affirmed, but the decision of the district court is Reversed and the preliminary injunction entered by the bankruptcy court is reinstated. Each party will bear its own costs on appeal.