[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
AUGUST 2, 2000
THOMAS K. KAHN
No. 99-13703 CLERK
________________________
D. C. Docket No. 97-03063-CV-S-NE
CLYDE THOMAS CARTER,
Plaintiff-Appellant,
versus
BOB RODGERS, Individually and,
in his capacity as Trustee in the
Clyde Thomas Carter Bankruptcy,
CLEMENTS ANTIQUES OF
TENNESSEE, INC., et al.,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(August 2, 2000)
Before TJOFLAT and HULL, Circuit Judges, and PROPST*, District Judge.
HULL, Circuit Judge:
*
Honorable Robert B. Propst, District Judge for the Northern District of Alabama, sitting by
designation.
Plaintiff-Debtor Clyde Thomas Carter appeals the district court’s dismissal
of his civil action based on his failure to seek leave first from the bankruptcy court
to file this action. We affirm.
I. BACKGROUND
Plaintiff Clyde Thomas Carter was a debtor in a Chapter 7 bankruptcy
proceeding. Defendant Bob Rodgers was the initial Bankruptcy Trustee
(“Trustee”) in Carter’s bankruptcy proceeding. As Trustee, Rodgers appointed
Defendant Clements Antiques of Tennessee, Inc. (“Clements Antiques”), and its
principals, Defendants Charles W. Clements, Sr. and Charles W. Clements, Jr.
(“the Clements”) to conduct a sale of Carter’s personal property. The bankruptcy
court approved these appointments.
Clements Antiques conducted the sale by way of auction on August 5, 1995.
Trustee Rodgers and his wife attended the auction, and Rodgers’s wife successfully
bid on an item.1 Likewise, Clements Antiques, Clements Sr., and Clements Jr. (or
family members on their behalf) purchased items at the auction.
Upon learning of these purchases, the bankruptcy administrator for the Northern
District of Alabama complained that the purchases rendered all Defendants non-
1
Trustee Rodgers’ wife, Mary Rodgers, purchased an oak dresser for $300, which was the last
and highest bid for the dresser at the auction. Mrs. Rodgers offered to void the dresser’s sale and
return the item to the new trustee. This offer was denied by the new trustee who determined that
“voiding of the sale would not add value to the estate.”
2
disinterested parties in contravention of the Bankruptcy Code. See 11 U.S.C. §
701(a)(1) (“[T]he United States trustee shall appoint one disinterested person . . . to
serve as . . . trustee.”); 11 U.S.C. § 327(a) (“[T]he trustee . . . may employ . . .
auctioneers . . . that do not hold or represent an interest adverse to the estate.”). As
a result, Rodgers resigned as Trustee, and Clements Antiques returned all
commissions and buyer’s premiums received in connection with the auction.2
Carter filed this civil action in district court seeking compensatory and
punitive damages from Trustee Rodgers, Clements, and Clements Antiques based
on alleged breaches of fiduciary duties and duties of reasonable care with respect
to Carter’s bankruptcy estate. The district court found that Carter failed to obtain
leave of the bankruptcy court before filing this lawsuit and dismissed Carter’s
lawsuit pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject
matter jurisdiction.3 Carter timely appealed.
II. DISCUSSION
A. The Barton Doctrine
This case presents an issue of first impression in this circuit regarding
2
Clements Antiques and the successor Chapter 7 trustee entered into a settlement whereby
Clements Antiques agreed to return all commissions and fees it had received in connection with the
auction, which totaled approximately $8,600.
3
We review a dismissal for lack of subject matter jurisdiction de novo. See, e.g., Pillow v.
Bechtel Constr., Inc.,
201 F.3d 1348, 1351 (11th Cir. 2000).
3
whether a debtor first must obtain leave from the bankruptcy court before it can
initiate an action in the district court when that action is against the trustee or other
bankruptcy-court-appointed officer, for acts done in the actor’s official capacity.
Joining the other circuits that have considered this issue, we hold that a debtor
must obtain leave of the bankruptcy court before initiating an action in district
court when that action is against the trustee or other bankruptcy-court-appointed
officer,4 for acts done in the actor’s official capacity. See Springer v. Infinity
Group Co., No. 98-5182,
189 F.3d 478 (10th Cir. Aug. 26, 1999) (unpublished
table decision), cert. denied,
120 S. Ct. 1422 (2000); Gordon v. Nick, No. 96-1858,
162 F.3d 1155 (4th Cir. Sept. 2, 1998) (unpublished table decision); In re Linton,
136 F.3d 544, 546 (7th Cir. 1998); Lebovits v. Scheffel (In re Lehal Realty
Assocs.),
101 F.3d 272 (2d Cir. 1996); Allard v. Weitzman (In re DeLorean Motor
Co.),
991 F.2d 1236, 1240 (6th Cir. 1993); Vass v. Conron Bros. Co.,
59 F.2d 969,
970 (2d Cir. 1932); Kashani v. Fulton (In re Kashani),
190 B.R. 875, 885 (9th Cir.
B.A.P. 1995).
4
In this case, Defendants other than Rodgers were not court “appointed,” but rather court
“approved.” We find this distinction irrelevant, and hold that these court approved officers
functioned as the equivalent of court appointed officers for purposes of the Barton doctrine. See
Allard v. Weitzman (In re DeLorean Motor Co.),
991 F.2d 1236, 1240 (6th Cir. 1993) (“We hold
as a matter of law [that] . . . court appointed officers who represent the estate, are the functional
equivalent of a trustee, where as here, they act at the direction of the trustee and for the purpose of
administering the estate or protecting its assets.”).
4
“An unbroken line of cases . . . has imposed [this] requirement as a matter of
federal common law.”
Linton, 136 F.3d at 545. In so holding, these circuit courts
have applied the rule referred to as the “Barton doctrine.” See
id. The Supreme
Court in Barton v. Barbour,
104 U.S. 126, 127 (1881), stated that “[i]t is a general
rule that before suit is brought against a receiver[,] leave of the court by which he
was appointed must be obtained.” Barton involved a receiver in state court, but the
circuit courts have extended the Barton doctrine to lawsuits against a bankruptcy
trustee. In Linton, the Seventh Circuit explained the reasons behind its application
of the Barton doctrine to a bankruptcy trustee, as follows: “The trustee in
bankruptcy is a statutory successor to the equity receiver, and . . . [j]ust like an
equity receiver, a trustee in bankruptcy is working in effect for the court that
appointed or approved him, administering property that has come under the court’s
control by virtue of the Bankruptcy
Code.” 136 F.3d at 545.
In addition, the policy behind this leave of court requirement was well-stated
by the Seventh Circuit:
If [the trustee] is burdened with having to defend against suits by
litigants disappointed by his actions on the court’s behalf, his work for
the court will be impeded. . . . Without the requirement [of leave],
trusteeship will become a more irksome duty, and so it will be harder
for courts to find competent people to appoint as trustees. Trustees
will have to pay higher malpractice premiums, and this will make the
administration of the bankruptcy laws more expensive . . . .
5
Furthermore, requiring that leave to sue be sought enables bankruptcy
judges to monitor the work of the trustees more effectively.
Linton, 136 F.3d at 545.
Plaintiff’s suit is a run-of-the mill Barton case. Carter sued Defendants in
district court for breaches of fiduciary duties stemming from their official
bankruptcy duties. He needed leave of the bankruptcy court, and absent that leave,
the district court correctly found that it did not have subject matter jurisdiction over
his cause of action.
B. Federal vs. State Causes of Action
Carter argues that the Barton doctrine requires parties to obtain leave of the
bankruptcy court only when they wish to pursue a state court remedy. We
disagree, and hold that when leave is required, it is required before pursuing
remedies in either state or other federal courts. We find no reason to distinguish
between instances where the trustee is sued in state court and those in which the
trustee is sued in federal court. See Kashani v. Fulton (In re Kashani),
190 B.R.
875, 885 (B.A.P. 9th Cir. 1995) (“[L]eave to sue the trustee is required to sue in
those federal courts other than the bankruptcy court which actually approves the
trustee’s appointment.”); In re Krikava,
217 B.R. 275, 279 (Bankr. D. Neb. 1998)
(“Consent of the appointing bankruptcy court is required even when the plaintiff
seeks to sue in another federal court.”).
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C. Related-To Bankruptcy Requirement
There also is no merit to Carter’s assertion that his tort claims -- breach of
fiduciary duty and reasonable care -- are “unrelated to” and “outside the scope” of
the bankruptcy proceeding because they do not arise directly from substantive
provisions of the Bankruptcy Code. Carter posits the theory that because his
claims are unrelated to the bankruptcy proceeding, the bankruptcy court lacks
jurisdiction over his lawsuit and, therefore, he was not required to obtain leave of
the bankruptcy court before bringing his suit in district court.
We disagree. The bankruptcy court has jurisdiction over Carter’s claims
because his breach of fiduciary duty and reasonable care claims are “related to”
and “within the scope” of the bankruptcy proceeding. Because Carter’s claims are
related to the bankruptcy proceeding, we need not determine whether leave of the
bankruptcy court is required when a debtor sues a trustee for a tort completely
“unrelated to” and “outside the scope” of the bankruptcy proceeding.
A proceeding is within the bankruptcy jurisdiction, defined by 28 U.S.C. §
1334(b), if it “arises under” the Bankruptcy Code or “arises in” or is “related to” a
case under the Code. “‘Arising under’ proceedings are matters invoking a
substantive right created by the Bankruptcy Code. The ‘arising in a case under’
category is generally thought to involve administrative-type matters, or as the . . .
7
court put it, ‘matters that could arise only in bankruptcy.’” In re Toledo,
170 F.3d
1340, 1345 (11th Cir. 1999) (citations omitted). We have stated, “[t]he usual
articulation of the test for determining whether a civil proceeding is related to
bankruptcy is whether the outcome of the proceeding could conceivably have an
effect on the estate being administered in bankruptcy.” Miller v. Kemira, Inc. (In
re Lemco Gypsum, Inc.),
910 F.2d 784, 788 (11th Cir. 1990).
While Carter’s action against Defendants arose after the date of the
bankruptcy petition, his suit turns solely on allegations of wrongdoing in the sale
of property belonging to the bankruptcy estate.5 Any recovery would reduce the
administrative expenses of the sale of the estate property and would perforce
increase the amount of estate property available to satisfy creditors’ claims. See 11
U.S.C. § 541(a)(7); see, e.g., McGuirl v. White,
86 F.3d 1232 (D.C. Cir. 1996).
Thus, the outcome of this case will impact Carter’s bankruptcy estate.
Further, Carter sued the trustee and other court approved officers of his
bankruptcy estate for alleged breaches of their bankruptcy-related duties. The
5
The instant case is quite different from that in Boone v. Community Bank of Homestead (In
re Boone),
52 F.3d 958 (11th Cir. 1995), where we determined that the bankruptcy court lacked
jurisdiction over a lawsuit by Chapter 7 debtors against a creditor for tortious interference. In
Boone, the conduct giving rise to the claim occurred after the date of the bankruptcy petition, and
it was clear that the lawsuit “ha[d] no conceivable effect on the estate or the administration of the
estate,” and that the outcome of the tortious interference claim would not alter the “rights and duties
arising from the petition in bankruptcy.” See
Boone, 52 F.3d at 961. In the present case, while
Carter’s lawsuit against Defendants also arose after the date of the bankruptcy petition, his action
will have an effect on the estate and the administration of the estate.
8
Bankruptcy Code establishes the office of trustee and defines the trustees’ duties.
Moreover, an action against a bankruptcy trustee for breach of bankruptcy-related
fiduciary duty can only arise in a bankruptcy case. Thus, Carter’s “fiduciary
claims against [the fiduciaries] are within the bankruptcy jurisdiction defined by 28
U.S.C. § 1334(b) both as ‘arising under’ the Code and ‘arising in’ a bankruptcy
case.” Schechter v. Illinois (In re Markos Gurnee Partnerships),
182 B.R. 211,
222 (Bankr. N. D. Ill. 1995); see In re Toledo,
170 F.3d 1340, 1345 (11th Cir.
1999).
D. The § 959 Exception
Finally, Carter asserts that he should be permitted to file his lawsuit in the
district court without first obtaining leave from the bankruptcy court pursuant to
section 959's statutory exception to the Barton doctrine. Section 959 provides for a
limited exception to the Barton doctrine, permitting suits against “[t]rustees,
receivers or managers of any property . . . without leave of the court appointing
them, with respect to any of their acts or transactions in carrying on the business
connected with such property.” 28 U.S.C. § 959(a). However, we note that the
“carrying on business” exception in section 959 is limited and not applicable here.
The “carrying on business” exception in section 959(a) is intended to
“permit actions redressing torts committed in furtherance of the debtor’s business,
9
such as the common situation of a negligence claim in a slip and fall case where a
bankruptcy trustee, for example, conducted a retail store.” Lehal Realty
Assocs.,
101 F.3d at 276. Section 959(a) does not apply to suits against trustees for
administering or liquidating the bankruptcy estate. See
id. (“[Section] 959 does not
apply where, as here, a trustee . . . perform[s] administrative tasks necessarily
incident to the consolidation, preservation, and liquidation of assets in the debtor’s
estate.”); DeLorean Motor
Co., 991 F.2d at 1241 (“Merely collecting, taking steps
to preserve, and/or holding assets, as well as other aspects of administering and
liquidating the estate, do not constitute ‘carrying on business’ as that term has been
judicially interpreted.”) (citations omitted).
Carter’s action against the Defendants was for breach of fiduciary duty and
involves the Defendants’ duties as they relate to the administration and liquidation
of his estate. Because the alleged breaches attributed to Defendants are not
premised on an act or transaction of a fiduciary in carrying out Carter’s business
operations, section 959(a) is not applicable. Therefore, Carter must obtain leave of
the bankruptcy court in order to sue Defendants in a forum other than the
appointing court. See
Kashani, 190 B.R. at 884 (“[B]reach of a fiduciary duty in
the administration of the estate does not fall within the exception provided by 28
U.S.C. § 959(a).”); Mangren v. Bartlett (In re Balboa Improvements Ltd.),
99 B.R.
10
966, 970 (B.A.P. 9th Cir. 1989) (“[S]ection [989] was not intended to apply to a
breach of fiduciary duty in the administration of a bankruptcy estate.”).
III. CONCLUSION
Plaintiff Carter failed to obtain leave from the bankruptcy court when such
leave was a pre-requisite to filing this civil action against the Defendants outside of
that court. Therefore, the district court lacked subject matter jurisdiction and
properly dismissed this civil action against these Defendants.
AFFIRMED.
11
