Lankford v. Wagner , 853 F.3d 1119 ( 2017 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS April 7, 2017
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
DAVID LANKFORD;
LEE ANN LANKFORD,
Plaintiffs - Appellants,
v. No. 16-2221
JUDITH WAGNER, Chapter 11 Trustee of
the bankruptcy estate of the Vaughan
Company Realtors; ARLAND &
ASSOCIATES, LLC; JAMES A. ASKEW;
EDWARD A. MAZEL; DANIEL WHITE,
of Askew & Mazel, LLC,
Defendants - Appellees.
_________________________________
Appeal from the United States District Court
for the District of New Mexico
(D.C. No. 1:15-CV-01013-JCH-LF)
_________________________________
Submitted on the briefs:*
David Lankford and Lee Ann Lankford, Pro Se.
Briggs Cheney, Joshua A. Allison, Sheehan & Sheehan, P.A., Albuquerque,
New Mexico, for Judith Wagner, James A. Askew, Edward A. Mazel, and Daniel White,
Defendants-Appellees.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
Terry R. Guebert, Elizabeth M. Piazza, Guebert Bruckner P.C., Albuquerque,
New Mexico, for Arland & Associates, L.L.C., Defendant-Appellee.
_________________________________
Before KELLY, MATHESON, and McHUGH, Circuit Judges.
_________________________________
McHUGH, Circuit Judge.
_________________________________
David and Lee Ann Lankford filed this lawsuit against a bankruptcy trustee
and her counsel without first applying for and receiving permission under Barton v.
Barbour, 104 U.S. 126 (1881), and its progeny (the “Barton doctrine”). The district
court concluded that Barton barred the suit and dismissed for lack of subject matter
jurisdiction. We affirm.
I. Background
The Lankfords unwittingly invested in a Ponzi scheme operated by Vaughan
Company Realtors (VCR), wherein investors paid money to VCR in return for
interest-bearing promissory notes. After the Ponzi scheme collapsed, VCR filed for
bankruptcy under Chapter 11 of the Bankruptcy Code. Unlike many others, the
Lankfords actually profited from their investment. So the court-appointed trustee of
VCR’s bankruptcy estate, Judith Wagner, brought an adversary proceeding against
them in the United States Bankruptcy Court for the District of New Mexico (the
“adversary proceeding”). Through this and related “clawback” proceedings, the
trustee sought to avoid, or undo, pre-bankruptcy fraudulent transfers and thus recoup
fictitious profits from investors with net gains for the benefit of all of VCR’s
creditors.
2
The Lankfords agreed they owed some amount to the estate but disagreed
vehemently with the trustee’s calculations, alleging an overstatement of about
$4,000. They went so far as to accuse the trustee of extortion, incompetence, and
fraud, but the bankruptcy court twice denied formal requests under Barton to file
counterclaims on these grounds. Ultimately, the bankruptcy court accepted the
trustee’s figure of $45,939.32 for the Lankfords jointly and $21,465.07 for
Mr. Lankford individually—entering summary judgment in those amounts. The
Lankfords then moved to vacate summary judgment under Federal Rule of Civil
Procedure 60(b)(3) and (d)(3), repeating earlier allegations that the trustee engaged in
fraud by deliberately miscalculating the amount owed. The bankruptcy court denied
their motion.
The Lankfords appealed the order denying the motion to vacate, but not the
preceding rulings (i.e., the summary judgment order itself or the two denials of
requests to file counterclaims per Barton). The district court affirmed. The
Lankfords believed the court system was engaged in a conspiracy against them, such
that a further appeal would be fruitless; accordingly, they did not appeal the district
court’s decision in the adversary proceeding. Instead, the Lankfords filed the
underlying lawsuit against the trustee and her counsel, accusing them of committing
fraud and violating criminal statutes during the adversary proceeding. See Aplt.
Opening Br. at 54. The magistrate judge concluded that the Barton doctrine
precludes those claims and, in her Proposed Findings and Recommended Disposition
(PFRD), recommended dismissal under Federal Rule of Civil Procedure 12(b)(1) for
3
lack of subject matter jurisdiction. The Lankfords objected to the PFRD,
complaining generally of judicial bias, cronyism, corruption, and a conspiracy. The
district court noted the lack of specific objections, adopted the PFRD, and dismissed
the case.
Proceeding pro se, the Lankfords filed this appeal, raising ten issues relating to
the applicability of the Barton doctrine, the propriety of the bankruptcy court’s
summary judgment ruling in the adversary proceeding, purported judicial
misconduct, and alleged violations of criminal statutes.1 Most are not properly
before us. Having chosen not to appeal the summary judgment ruling in the
adversary proceeding, the Lankfords cannot circumvent appellate procedural rules
simply by filing a separate proceeding to collaterally attack that judgment. And the
district court aptly explained why judicial misconduct and alleged criminal violations
are not proper areas of inquiry for a civil lawsuit by a private citizen against the
trustee and her counsel. This leaves only one question: Does the Barton doctrine
preclude the Lankfords from filing this lawsuit against the bankruptcy trustee and her
attorneys, given the Lankfords’ failure to seek and receive permission from the
bankruptcy court? It does.
1
Absent from this extensive list is whether the district court properly struck
the Lankfords’ motion to file a second amended complaint. Still, the appellees
identify and address this issue, presumably out of an abundance of caution. Even if
the Lankfords had properly raised and briefed this issue in compliance with Federal
Rule of Appellate Procedure 28, the outcome of this appeal would be the same under
the Barton doctrine. Further, we discern no abuse of discretion in the district court’s
ruling given the futility of the proposed amendments. See Jefferson Cty. Sch. Dist.
No. R-1 v. Moody’s Inv’r’s Servs., Inc., 175 F.3d 848, 859 (10th Cir. 1999).
4
II. Analysis
Because the Lankfords are proceeding pro se, “we construe [their] pleadings
liberally.” Ledbetter v. City of Topeka, 318 F.3d 1183, 1187 (10th Cir. 2003). We
make some allowances for deficiencies, such as unfamiliarity with pleading
requirements, failure to cite appropriate legal authority, and confusion of legal
theories. See Garrett v. Selby Connor Maddux & Janer, 425 F.3d 836, 840 (10th Cir.
2005). But we “cannot take on the responsibility of serving as [their] attorney in
constructing arguments and searching the record.” Id.
The Supreme Court held in Barton that “before suit is brought against a
receiver leave of the court by which he was appointed must be obtained.” 104 U.S.
at 128. In Satterfield v. Malloy, 700 F.3d 1231, 1234-35 (10th Cir. 2012), we
followed the lead of our sibling circuits and extended the Barton doctrine beyond
receivers to encompass trustees. We held that the doctrine “precludes suit against a
bankruptcy trustee for claims based on alleged misconduct in the discharge of a
trustee’s official duties absent approval from the appointing bankruptcy court.” Id.
This is true even if the trustee allegedly acted “with improper motives.” Id. at 1236.
And although we have not previously addressed this issue, we now join our sibling
circuits in holding that the protections of the Barton doctrine also extend to the
trustee’s counsel, where counsel acts under the direction of, or as the functional
equivalent of, the trustee. See, e.g., McDaniel v. Blust, 668 F.3d 153, 156-57
(4th Cir. 2012); Lawrence v. Goldberg, 573 F.3d 1265, 1269-70 (11th Cir. 2009);
5
Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236, 1241 (6th Cir.
1993). The Sixth Circuit’s reasoning in DeLorean is especially persuasive:
In authorizing the [t]rustee to bring the [adversary proceeding], the
court authorized the [t]rustee’s attorneys to aid the [t]rustee in bringing
the suit. The protection that the leave requirement affords the [t]rustee
and the estate would be meaningless if it could be avoided by simply
suing the [t]rustee’s attorneys. Therefore, leave of the Bankruptcy
Court must be granted before a suit may be brought against counsel for
trustee, in their capacity as counsel for trustee, since such suit is
essentially a suit against the trustee.
991 F.2d at 1241.
Even so, the Barton doctrine is not without its limitations. Though we have
refused to recognize a general tort exception to the Barton doctrine, we have
acknowledged an “ultra vires exception” that allows suits by individuals whose
property is wrongfully seized. See Satterfield, 700 F.3d at 1235-36.
Against this backdrop, we conduct a de novo review of the district court’s
decision. See id. at 1234. We affirm for substantially the same reasons set forth in
the PFRD and the district court’s September 14, 2016, order adopting it. In essence,
the Barton doctrine applies here because (1) the actions underlying the claims were
related to the trustee’s and counsel’s duties and the administration of the bankruptcy
estate and (2) the Lankfords have not established an exception. Yet the Lankfords
filed suit without first receiving permission to file claims against the trustee or her
counsel. Indeed, the bankruptcy court twice denied their Barton-based request to file
counterclaims in the adversary proceeding—on February 14, 2014, and
November 26, 2014—and they did not even submit a request to file this lawsuit.
6
Consequently, the Lankfords failed to comply with the Barton doctrine, which is
“jurisdictional in nature.” See id. (citing Barton, 104 U.S. at 131).
III. Conclusion
The purposes behind the Barton doctrine are well served by a Rule 12(b)(1)
dismissal. See id. at 1236-37 (explaining that the doctrine prevents trusteeship from
“becom[ing] a more irksome duty” and ensures that competent people are available
for appointment; reduces the expenses of bankruptcy; “enables bankruptcy judges to
monitor the work of the trustees more effectively”; and “ensure[s] other courts do not
intervene in the bankruptcy court’s administration of an estate without permission”
(internal quotation marks omitted)). We affirm.
The Lankfords’ motion to supplement the record on appeal is granted.
7