Akhlaghpour v. Orantes ( 2022 )

Filed 12/13/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
MEHRI AKHLAGHPOUR, B308644
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. 19STCV46403)
v.
GIOVANNI ORANTES et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County. Rupert A. Byrdsong, Judge. Reversed, with
directions.
Law Offices of Farrah Mirabel and Farrah Mirabel for
Plaintiff and Appellant.
Lewis Brisbois Bisgaard & Smith, Raul L. Martinez and
Kenneth C. Feldman for Defendants and Respondents.
_______________________
INTRODUCTION
Mehri (Mary) Akhlaghpour filed for bankruptcy under
Chapter 11 of the United States Bankruptcy Code (Chapter 11)
amid multiple client claims against her for fraud, embezzlement
and misappropriation. After she settled the claims against her,
the bankruptcy court dismissed the bankruptcy case.
Akhlaghpour then, without seeking leave from the bankruptcy
court, sued her court-approved bankruptcy counsel for
malpractice in state court. The superior court sustained
bankruptcy counsel’s demurrer to Akhlaghpour’s first amended
complaint without leave to amend and entered a judgment
dismissing the lawsuit with prejudice.
On appeal, Akhlaghpour contends the superior court erred
in concluding that it lacked jurisdiction under the Barton
doctrine, derived from Barton v. Barbour (1881) 104 U.S. 126(Barton) and its progeny, which requires, before filing a lawsuit
against officers appointed or approved by the court, obtaining
leave from the bankruptcy court that appointed or approved
them. The Barton doctrine did require Akhlaghpour to obtain
leave from the bankruptcy court for claims arising out of
bankruptcy counsel’s court-approved representation of her as a
debtor in possession. However, the Barton doctrine did not
require Akhlaghpour to obtain leave to file claims arising out of
bankruptcy counsel’s representation after the bankruptcy court
appointed a Chapter 11 trustee and Akhlaghpour was no longer a
debtor in possession. Because Akhlaghpour has demonstrated a
reasonable possibility that she can amend her complaint to state
a cause of action, and because the trial court’s dismissal with
prejudice would preclude her even from later seeking leave from
the bankruptcy court to refile, we reverse the judgment, and
2
affirm in part and reverse in part the trial court’s rulings, with
directions to grant Akhlaghpour leave to file a second amended
complaint.
FACTUAL AND PROCEDURAL HISTORY
1. Akhlaghpour’s Chapter11 Bankruptcy Petition, Approval of
General Insolvency Counsel, Appointment of Trustee, and
Dismissal of Petition
Akhlaghpour, a tax preparer with two financial services
corporations, faced judgments and claims filed against her by
former clients alleging various forms of financial fraud. She owed
a $650,000 settlement from one lawsuit, and another court had
issued a tentative damages award for $1,164,780.28 in favor of
another client. Akhlaghpour owned some assets, including five
rental properties. Concerned about how she would handle the
judgments against her, Akhlaghpour consulted Giovanni Orantes
and Luis Solorzano of The Orantes Law Firm (collectively,
Orantes) about filing for bankruptcy. One week after her
consultation, on October 11, 2017, Orantes filed a Chapter 11
petition for Akhlaghpour.
Approximately one month after filing the petition, on
November 7, 2017, Orantes sought approval to serve as
Akhlaghpour’s general insolvency counsel. The bankruptcy court
granted the motion and approved Orantes on January 5, 2018.
Twenty days after the bankruptcy court approved Orantes
as counsel, on January 25, 2018, it granted a motion filed by the
Office of the United States Trustee to appoint a trustee. The
bankruptcy court made the trustee appointment because of the
suspicious timing of six questionable promissory notes, in the
total amount of $1,164,750, secured by Akhlaghpour’s real
3
properties, and executed by her in favor of a lender known as
“Emymac.” The Emymac liens were recorded on October 10,
2017, one day before Akhlaghpour filed the bankruptcy petition.
Appointment of the trustee took effect on or around February 2,
2018.
On April 13, 2018, Akhlaghpour filed a motion to dismiss
the bankruptcy petition, which the trustee opposed. The
bankruptcy court denied the motion to dismiss, concluding that
“prejudice to creditors . . . would result from the dismissal of this
case, when the debtor has not sufficiently explained how she can
and will pay the claims of her creditors following dismissal, in
accordance with the priority scheme set forth in the Bankruptcy
Code.”
In April and May 2018, the bankruptcy court approved the
trustee’s motions to sell Akhlaghpour’s real properties. By
October 2018, the trustee had sold Akhlaghpour’s five rental
properties to pay creditors. Akhlaghpour ultimately settled all of
her creditors’ claims, with the settlements approved by the
bankruptcy court on September 28, 2018.
On October 25, 2018, the trustee and Akhlaghpour filed a
joint motion to dismiss the bankruptcy case due to satisfactory
resolution of the claims. On December 4, 2018, the bankruptcy
court granted the motion to dismiss. Three days later it approved
Orantes’s unopposed fee application pursuant to 11 U.S.C.
section 330, for Orantes’s services rendered from October 11,
2017 to February 6, 2018.
4
2. Akhlaghpour’s Malpractice Action Against Orantes,
Orantes’s Demurrer, and the Superior Court’s Order
Sustaining the Demurrer
On December 27, 2019, nearly one year after the dismissal
of her bankruptcy case, Akhlaghpour sued Orantes for legal
malpractice and other claims in state court. Akhlaghpour’s first
amended complaint contained causes of action for professional
negligence, breach of written and oral contract, breach of
fiduciary duty, intentional and negligent misrepresentation,
conversion, unjust enrichment, and equitable indemnity.
Akhlaghpour alleged that Orantes’s conduct before and
during the bankruptcy proceeding fell below the standard of care:
filing her Chapter 11 petition without due diligence and without
providing “in-depth” credit consulting for her, misrepresenting or
omitting significant debts and claims in the petition, “throwing
[her] under the bus” in her opposition to the motion for
appointment of a trustee by declaring Orantes was not involved
in the Emymac transactions, failing to seek dismissal of her
petition before the motion for appointment of a trustee or prior to
the trustee incurring significant costs, and neglecting settlement
negotiations and documents. Certain of Akhlaghpour’s
allegations appear to concern Orantes’s conduct after the trustee
appointment on February 2, 2018: “Not filing a motion to dismiss
much sooner than April 2018,” jeopardizing settlement
negotiations (which occurred during the trustee’s appointment),
“[f]ailing to file a motion to dismiss prior to Trustee incurring
substantial costs,” failing to seek credit from the trustee for sales
of furniture, and filing an untimely and unhelpful joint motion
with the trustee noticed for November 15, 2018.
5
Orantes demurred to the first amended complaint on the
grounds that the Barton doctrine and res judicata barred
Akhlaghpour’s claims, and that Akhlaghpour lacked standing to
pursue her claims because claims arising before and during the
bankruptcy belong to the bankruptcy estate unless scheduled and
abandoned by the trustee. Akhlaghpour opposed, arguing the
Barton doctrine did not apply, that no statute required her to
obtain leave, that she had no knowledge of the claims for res
judicata purposes at the time the court considered the fee
application (due to Orantes’s fraud), and that a debtor in
possession has standing to sue, relying on an informal exchange
with the trustee to suggest the trustee had abandoned the
malpractice claims. Akhlaghpour requested leave to amend her
complaint to allege facts demonstrating that the Barton doctrine
did not apply.
The superior court sustained the demurrer without leave to
amend based on the Barton doctrine, finding it lacked jurisdiction
to adjudicate Akhlaghpour’s complaint. It did not reach the res
judicata or standing issues. The court entered a judgment of
dismissal with prejudice on September 17, 2020.
Akhlaghpour timely appealed.
DISCUSSION
1. Standard of Review
“‘In reviewing an order sustaining a demurrer, we examine
the operative complaint de novo to determine whether it alleges
facts sufficient to state a cause of action under any legal theory.’”
(Mathews v. Becerra (2019) 8 Cal.5th 756, 768; accord, T.H. v.
Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162.) “A
judgment of dismissal after a demurrer has been sustained
6
without leave to amend will be affirmed if proper on any grounds
stated in the demurrer, whether or not the court acted on that
ground.” (Carman v. Alvord (1982) 31 Cal.3d 318, 324.) We
accept as true all well-pleaded factual allegations but not
conclusions of fact or law. (Southern California Gas Leak Cases
(2019) 7 Cal.5th 391, 395; accord, Centinela Freeman Emergency
Medical Associates v. Health Net of California, Inc. (2016)
1 Cal.5th 994, 1010.) We review questions of law de novo. (See
Schrage v. Schrage (2021) 69 Cal.App.5th 126, 151 [standing is a
question of law]; Samara v. Matar (2017) 8 Cal.App.5th 796, 803,
affd. (2018) 5 Cal.5th 322 [the applicability of claim preclusion or
issue preclusion is a question of law]; McKell v. Washington
Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1478 [absent
conflicting evidence, the question of jurisdiction is a question of
law].)
When “‘there is a reasonable possibility that the defect can
be cured by amendment,’” a superior court abuses its discretion
by sustaining a demurrer without leave to amend. (Loeffler v.
Target Corp. (2014) 58 Cal.4th 1081, 1100; accord, City of
Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.) “The
burden of proving such reasonable probability is squarely on the
plaintiff.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; accord,
Sierra Palms Homeowners Assn. v. Metro Gold Line Foothill
Extension Construction Authority (2018) 19 Cal.App.5th 1127,
1132.)
2. The Superior Court Erred in Entering Judgment Against
Akhlaghpour Based on the Barton Doctrine
Akhlaghpour contends the Barton doctrine does not apply
to her malpractice action because state courts have jurisdiction to
adjudicate malpractice claims against bankruptcy attorneys and,
7
as a debtor in possession, she was not required to seek leave from
the bankruptcy court before prosecuting an action on behalf of
the estate. Akhlaghpour also argues the Barton doctrine does not
apply to her claims based on Orantes’s conduct pre-petition or
after the dismissal of her bankruptcy case. She further contends
that even if the Barton doctrine applies to court-approved
counsel, the prerequisites to apply the requirement are not
satisfied in this case. Orantes contends that the Barton doctrine
precludes all of Akhlaghpour’s claims regardless of the timing of
Orantes’s conduct. Orantes’s position is too broad.
a. The Barton doctrine applies to court-approved
counsel representing a debtor in possession in a
Chapter 11 bankruptcy proceeding
In Barton, supra, 104 U.S. 126, a train passenger asserted
personal injury claims against a court-appointed receiver of the
railroad company that operated her train. (Id. at p. 127.) The
plaintiff did not obtain leave of the bankruptcy court that
appointed the receiver before filing her lawsuit. (Ibid.) The
receiver filed a plea to the jurisdiction, to which plaintiff
demurred. (Ibid.) The trial court overruled the demurrer and
entered judgment for the receiver. (Ibid.) The Supreme Court
affirmed the judgment against the plaintiff, articulating “a
general rule that before suit is brought against a receiver[,] leave
of the court by which he was appointed must be obtained.” (Id. at
p. 128.)
Cases since Barton, supra, 104 U.S. 126, have explained
that the doctrine exists to ensure the “uniform application of
bankruptcy law” by requiring “all legal proceedings that affect
the administration of the bankruptcy estate be brought either in
8
bankruptcy court or with leave of the bankruptcy court.”1 (In re
Harris (9th Cir. 2009) 590 F.3d 730, 742.) The doctrine also
serves to protect receivers and trustees from the burden of
“having to defend against suits by litigants disappointed by his
actions on the court’s behalf,” which would impede their work for
the court. (In re Linton (7th Cir. 1998) 136 F.3d 544, 545
(Linton).)
Consistent with its purpose, the Barton doctrine has been
applied to lawsuits against trustees, counsel for trustees, and
other officers appointed or approved by the bankruptcy court.
(In re VistaCare Group, LLC (3d Cir. 2012) 678 F.3d 218, 224
[collecting federal cases]; Lawrence v. Goldberg (11th Cir. 2009)
573 F.3d 1265, 1269 [“officers approved by the bankruptcy court
when those officers function ‘as the equivalent of court appointed
officers’”]; In re Crown Vantage, Inc. (9th Cir. 2005) 421 F.3d 963,
971 (Crown Vantage) [Barton doctrine applies to trustees]; In re
Delorean Motor Co. (6th Cir. 1993) 991 F.2d 1236, 1241 [counsel
for trustees].)
In a Chapter 11 bankruptcy proceeding, a debtor in
possession generally has all the rights of a trustee. (11 U.S.C.
§ 1107, subd. (a).) It follows that a court-approved attorney for a
1 “While we are not bound by decisions of the lower federal
courts, even on federal questions, they are persuasive and
entitled to great weight. [Citation.] Where lower federal
precedents are divided or lacking, state courts must necessarily
make an independent determination of federal law [citation], but
where the decisions of the lower federal courts on a federal
question are ‘both numerous and consistent,’ we should hesitate
to reject their authority.” (Etcheverry v. Tri-Ag Service, Inc.
(2000) 22 Cal.4th 316, 320-321, disapproved on another ground in
Bates v. Dow Agrosciences LLC (2005) 544 U.S. 431, 436, fn. 5.)
9
debtor in possession is akin to counsel for a trustee, and the
Barton doctrine applies. (See In re Wilde Horse Enterprises, Inc.
(Bankr. C.D.Cal. 1991) 136 B.R. 830, 840 [“In a Chapter 11
proceeding, the attorney for debtor in possession, as an officer of
the court charged to perform duties in the administration of the
case, has a high fiduciary duty to the estate represented.”].)
Those obligations to the estate flow from the attorney’s “fiduciary
obligations . . . to the debtor in possession and [the attorney’s]
responsibilities as an officer of the court.” (In re Count Liberty,
LLC (Bankr. C.D.Cal. 2007) 370 B.R. 259, 280-281.) Thus,
counsel for a debtor in possession “has an independent
responsibility to determine whether a proposed course of action is
likely to benefit the estate,” not just the debtor individually.
(In re Perez (9th Cir. 1994) 30 F.3d 1209, 1219.)2
2 In Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc.
(2005) 131 Cal.App.4th 802, 830-831, footnote 14 (Berg & Berg),
the Sixth District Court of Appeal rejected the premise that
counsel for a bankruptcy trustee or debtor in possession owe a
duty of care directly to creditors of the estate, in the context of
declining to find an analogous duty in the state law assignment
for the benefit of creditors’ context. To the extent the discussion
in Berg & Berg endorses the minority view in federal decisions
that counsel for debtors in possession have little or no fiduciary
duty to the estate (e.g., Hansen, Jones & Leta, P.C. v. Segal
(D.Utah. 1998) 220 B.R. 434, 465; In re SIDCO, Inc. (E.D.Cal.
1994) 173 B.R. 194, 196) we are not persuaded by that discussion
of bankruptcy cases in the context of analogizing to a California
state law issue unrelated to the present case. (In re Count
Liberty, LLC, supra, 370 B.R. at p. 281 [collecting cases and
noting “majority of courts addressing this issue” are in
agreement]; In re Grabill Corp. (Bankr. N.D.Ill. 1990) 113 B.R.
966, 970 [“principle of fiduciary duties and obligations carries
10
Akhlaghpour misplaces reliance on Wisdom v. Gugino
(D.Idaho 2019) 610 B.R. 327, for the contrary position. In
Wisdom, a debtor’s malpractice claims against his private counsel
in a case under Chapter 7 of the Bankruptcy Code (Chapter 7)
did “not impact the handling and administration of his estate”
because the Chapter 7 counsel’s duties did not involve the
administration of the bankruptcy estate. (Id. at p. 337.)
Defendants merely “were private counsel for a chapter 7 debtor,
and they were neither court-appointed nor court-approved.”
(Ibid.) Wisdom stands for the rule, not applicable here, that the
Barton doctrine does not apply to Chapter 7 debtor’s counsel
because, unlike Chapter 11 counsel, the bankruptcy court does
not appoint or approve them (except in special circumstances).
b. Application of the Barton doctrine in this case
The Barton doctrine applies when three conditions are met:
(1) the plaintiff is attempting to “initiate[] an action in another
forum”; (2) the action is “against a bankruptcy trustee or other
officer appointed by the bankruptcy court”; and (3) the action is
“for acts done in the officer’s official capacity.”3 (Crown Vantage,
supra, 421 F.3d at p. 970.) All three conditions are met here.
over to the attorneys” retained for the debtor in possession], affd.
sub nom. Grabill Corp. v. Pelliccioni (N.D.Ill. 1991) 135 B.R. 835,
affd. sub nom. In re Grabill Corp. (7th Cir. 1993) 983 F.2d 773.)
3 28 U.S.C. section 959 codifies two limited exceptions to the
Barton doctrine: a business exception and when an officer’s
actions exceed the bounds of his or her authority. Akhlaghpour
suggests her claims of malpractice were based on ultra vires
conduct, specifically Orantes’s breaches of duties of loyalty and
care. She cites no authority for this contention, and the
allegations in her complaint—e.g., preparing schedules for a
11
First, Akhlaghpour initiated her malpractice action in state
court, and not in the bankruptcy court.
Second, the state court action was against an officer
approved by the bankruptcy court.4 The bankruptcy court
approved Orantes as general insolvency counsel to Akhlaghpour
as a debtor in possession pursuant to 11 U.S.C. section 327.
“Although [11 U.S.C.] § 327(a) directly applies only to trustees,
§ 1107(a) gives Chapter 11 debtors in possession the same
authority as trustees to retain § 327(a) professionals,” and
Ҥ 327(a) professionals are hired to serve the administrator of the
estate for the benefit of the estate.” (Baker Botts L.L.P. v.
ASARCO LLC (2015) 576 U.S. 121, 124, fn. 1, 127.)
Finally, most of the allegations in Akhlaghpour’s complaint
pertain to Orantes’s actions in its “official capacity” as court-
approved bankruptcy counsel. “To determine whether a
complained-of act falls under the Barton doctrine, courts consider
the nature of the function that the [court-appointed officer] was
bankruptcy petition and opposing motions filed by the trustee—
fall within the scope of counsel’s duties to a debtor in possession
and to the estate. (Cf. Leonard v. Vrooman (9th Cir. 1967)
383 F.2d 556, 560 [“[A] trustee wrongfully possessing property
which is not an asset of the estate may be sued for damages
arising out of his illegal occupation in a state court without leave
of his appointing court.”].)
4 Although “[t]he plain language of the Barton Doctrine
suggests that the Doctrine applies only to court ‘appointed’
officers,” we join with those courts that find the distinction
between court “appointed” and “approved” officers “irrelevant.”
(Blixseth v. Brown (D.Mont. 2012) 470 B.R. 562, 567 [court-
approved officers function “as the equivalent of court appointed
officers for purposes of the Barton Doctrine”].)
12
performing during commission of the actions for which liability is
sought”; actions presumably fall within the scope of their
authority unless alleged facts demonstrate otherwise.
(McDaniel v. Blust (4th Cir. 2012) 668 F.3d 153, 156-157; see
In re DeLorean, supra, 991 F.2d at p. 1241 [Barton doctrine
applies to all acts taken “for the purpose of administering the
estate or protecting its assets”]; In re Sedgwick (C.D.Cal. 2016)
560 B.R. 786, 793 [Barton doctrine applicable to claims of
“malpractice committed by Appellees in their official capacity as
Appellant’s bankruptcy attorneys”].)
The Barton doctrine also applies to Orantes’s pre-petition
and pre-approval conduct if that conduct “crossed the divide of
the Petition Date” as interconnected actions “‘taken by [Orantes]
in the bankruptcy case and/or in the course of administering the
bankruptcy estate.’” (In re National Century Financial
Enterprises, Inc. (Bankr. S.D.Ohio 2010) 426 B.R. 282, 293,
quoting In re Byrd (Bankr. D.Md. May 18, 2007,
No. 04-35620-TJC) 2007 Bankr. Lexis 1764, affd. 417 B.R. 320(D.Md. 2008), affd. 331 Fed.Appx. 212 (4th Cir. 2009).) Here, the
only alleged pre-petition activities directly relate to advising
Akhlaghpour (the presumptive debtor in possession) regarding,
and preparing, the Chapter 11 petition during the week before
Orantes filed it. These and the other alleged acts in
Akhlaghpour’s complaint before the trustee appointment “cross
the divide” of the petition. (Ibid.; see Cox v. Mariposa County
(E.D.Cal., Apr. 7, 2020, No. 19-CV-01105-AWI-BAM) 2020
WL 1689706, at *7 [wrongdoing “prior to commencement of the
Receivership is inextricably intertwined with wrongdoing that
took place after the Receivership took effect]; cf., In re
Yellowstone Mountain Club (9th Cir. 2016) 841 F.3d 1090, 1095-
13
96 [where plaintiff “clearly separated his pre-petition claims from
the post-petition claims that implicated” unsecured creditor
committee president’s conduct, and the pre-petition claims
involve conduct unrelated to role on committee, Barton doctrine
inapplicable].) It would be impractical, if not impossible, to
separate claims directed to the few days of advising about and
preparing the petition from claims relating to the petition itself.
Akhlaghpour herself makes no such distinction. Thus “the claims
fall squarely within the Barton Doctrine.” (In re National
Century Financial Enterprises, Inc., supra, 426 B.R. at p. 293.)
Akhlaghpour cites Federal Rules of Bankruptcy Procedure,
rule 6009 and California Aviation, Inc. v. Leeds (1991)
233 Cal.App.3d 724 (Leeds), for the proposition that she could sue
Orantes without leave from the bankruptcy court. However,
rule 6009 does not affect application of the Barton doctrine
because it does not address jurisdiction over court-appointed or
approved counsel outside of bankruptcy court, and it says nothing
about a debtor out of possession filing a claim in state court.
Rule 6009 provides: “[w]ith or without court approval, the
trustee or debtor in possession may prosecute or may enter an
appearance and defend any pending action or proceeding by or
against the debtor, or commence and prosecute any action or
proceeding in behalf of the estate before any tribunal.” (Accord,
Leeds, at p. 729 [quoting same].)5 Contrary to Akhlaghpour’s
5 Akhlaghpour relies heavily on Leeds, supra, 233 Cal.App.3d
724, but the facts and issues in Leeds materially differ from the
ones here. In Leeds, the debtor out of possession received
bankruptcy court approval to pursue a malpractice action. (Id. at
p. 728.) The malpractice claim involved misconduct unrelated
and prior to the bankruptcy. (Ibid.) As a debtor in possession
14
argument, “[t]his rule establishes only that a trustee [or debtor in
possession] may, with or without court approval, act as a
representative of the estate in litigation.” (In re VistaCare
Group, LLC (3d Cir. 2012) 678 F.3d 218, 232.) Accordingly,
pursuant to rule 6009 (and consistent with the Barton doctrine),
Akhlaghpour—while debtor in possession—could have brought
her claims against Orantes in bankruptcy court or against a non-
appointed or approved third party in state court. But rule 6009
says nothing about pursuing claims while debtor out of
possession against appointed or approved counsel.
Akhlaghpour makes much of the fact that she filed suit
after the bankruptcy court dismissed the bankruptcy case.
However, the timing of her suit does not affect our analysis. The
Barton doctrine applies not only while the bankruptcy case
remains open, but also “‘after the bankruptcy case has been
closed and the assets are no longer in the trustee’s hands.’”
(Crown Vantage, supra, 421 F.3d at p. 972, quoting Muratore v.
Darr (1st Cir. 2004) 375 F.3d 140, 147 (Muratore) [applying
Barton doctrine to claim of trustee misconduct filed after
bankruptcy case closed]; see Linton, supra, 136 F.3d at pp. 544-
545 [applying Barton to a state court lawsuit filed 11 months
after bankruptcy case closed].)
The Eleventh Circuit in Tufts v. Hay (11th Cir. 2020)
977 F.3d 1204, 1209-1210, recently held that “the Barton doctrine
has no application when jurisdiction over a matter no longer
with court approval pursuant to Federal Rules of Bankruptcy
Procedure, rule 6009, the plaintiff in Leeds had standing and
could pursue a state court malpractice action against her prior
attorney for non-bankruptcy misconduct. Thus, Leeds offers little
guidance here.
15
exists in the bankruptcy court” where the “parties agreed [the
action in a different forum] could have no conceivable effect on
the bankruptcy estate.” However, in so doing the Eleventh
Circuit “expressly note[d] that our holding here creates no
categorical rule that the Barton doctrine can never apply once a
bankruptcy case ends,” and stated “our decision today does not
conflict with the views of our sister circuits” in cases such as
Muratore, supra, 375 F.3d at p. 147, and Linton, supra, 136 F.3d
at p. 545. (Tufts, at pp. 1209-1210 & fn. 4.)
The Eleventh Circuit then departed from Muratore and
Linton in Chua v. Ekonomou (11th Cir. 2021) 1 F.4th 948, 954-
955. The Chua court characterized its own precedent and that of
its “sister circuits” as ignoring the underlying concern of Barton,
namely the importance of only one court at a time exercising
jurisdiction over a res. (Chua, at pp. 954-955.) Putting aside that
Chua involved a terminated receivership, and not a dismissed
Chapter 11 proceeding, the rationale for the prior Eleventh
Circuit holdings and the still-current holdings from other courts
apply here. Chua focused primarily on the liability of court-
appointed officers, finding that shielding them from liability
offered an unpersuasive basis to extend the Barton rule when
they already enjoyed judicial immunity. (Chua, at pp. 954-955.)
This case presents a different scenario. Orantes enjoys no
judicial immunity for malpractice while representing
Akhlaghpour as debtor out of possession; the parties here debate
only which court should decide those claims. In addition,
although the bankruptcy court did dismiss the case, it can also
reopen it. (In re Sedgwick, supra, 560 B.R. at p. 792.) Indeed,
nothing prevents Akhlaghpour from doing so. Finally, unlike in
Tufts where the parties agreed the claims could not affect the
16
bankruptcy estate, here the claims do involve the res of the estate
in the underlying bankruptcy. Had Akhlaghpour objected to
Orantes’s fee application and sought to litigate the malpractice
issue at that time, the estate would have a claim on any recovery.
A debtor out of possession should not be able to manipulate the
estate’s assets by the timing of when the debtor asserts its claims
against a court-approved officer, thereby altering what estate
assets the court has to distribute in the process.6
Thus, rather than depending on timing, application of the
Barton doctrine here depends on whether the suit involves
actions taken by a court-approved officer in his or her official
capacity to administer the estate or protect its assets (it did) and
whether the claims were part of the estate (they were).
Accordingly, the superior court lacks subject matter jurisdiction
6 At oral argument, Akhlaghpour asserted for the first time
the Barton doctrine should not apply because she fully paid all
creditors prior to dismissal of the bankruptcy case. Akhlaghpour
forfeited this argument by not raising it sooner. (People v.
Crow (1993) 6 Cal.4th 952, 960, fn. 7.) The argument also fails on
the merits. First, even if the facts were as Akhlaghpour
represented at oral argument, Akhlaghpour cites no authority,
and we know of none, that would extinguish the Barton doctrine
as a result. Second, in any event, the record does not support the
notion that Akhlaghpour fully paid her creditors. In her opening
brief, Akhlaghpour asserts only that she “settled all her debts,” a
very different concept than payment in full. Similarly, in her
reply brief, she claims she “reached settlements in all of the
litigation claims brought against her.” Finally, the bankruptcy
court’s dismissal order directs payment to the trustee, payment
in full of “allowed administrative claims,” and payment of “the
remaining balance of the funds in the Estate to creditor Vafi.”
The reference to payment of “remaining funds” does not suggest
payment in full, as Akhlaghpour claimed.
17
over Akhlaghpour’s claims against Orantes for actions taken as
debtor in possession counsel. The Barton doctrine required
Akhlaghpour to obtain leave of the bankruptcy court in order to
sue Orantes in a forum other than the bankruptcy court. Having
failed to do so, she cannot proceed with these malpractice claims
in state court.7
c. The Barton doctrine does not apply to counsel
representing a debtor out of possession in a
Chapter 11 bankruptcy proceeding
The appointment of a Chapter 11 trustee ended Orantes’s
court-approved official status and ended its fiduciary
responsibility to the estate as counsel for a debtor in possession.
Once a trustee is appointed, “the debtor-in-possession no longer
exists as such because he no longer serves in the management of
estate assets . . . . [¶] [J]ust as a trustee replaces the debtor-in-
possession for the purpose of administering the estate and
operating its business, so it is that the trustee’s attorney
displaces the debtor’s attorney in order that the trustee will have
counsel and assistance in performing his fiduciary duties.” (In re
7 The Barton doctrine does not deprive plaintiffs of a forum
for their claims against court-appointed officers. It merely grants
preliminary discretion to the bankruptcy court to determine
whether the plaintiff must prosecute those claims in bankruptcy
court or be permitted to litigate those claims in another
jurisdiction. (Crown Vantage, supra, 421 F.3d at p. 976.)
Accordingly, any dismissal entered based on the application of
the Barton doctrine should be without prejudice. (Ostrowski v.
Miller (1964) 226 Cal.App.2d 79, 87 [entering judgment with
prejudice for failing to obtain leave from the appointing court was
error; explaining the possibility of a future claim against the
receiver in another action consented to by the appointing court].)
18
NRG Resources, Inc. (W.D.La. 1986) 64 B.R. 643, 647; contrast
11 U.S.C. § 521 [“Debtor’s duties”] with 11 U.S.C. § 1107 [“Rights,
powers, and duties of debtor in possession”]; cf. Lamie v. United
States Trustee (2004) 540 U.S. 526, 532 [appointment of a
Chapter 7 trustee in proceedings initiated under Chapter 11
“terminated [the debtor’s] status as debtor-in-possession and so
terminated [the attorney’s] service under § 327 as an attorney for
the debtor-in-possession”].) Thus, similar to the situation of a
Chapter 7 debtor’s attorney who owes no fiduciary duty to the
estate, the Barton doctrine does not apply to counsel for a debtor
out of possession.8 (See, e.g., In re Holcomb (Bankr. 9th Cir.
April 25, 2018, No. CC-17-1268-KuTaS) 2018 Bankr. Lexis 1256;
Wisdom v. Gugino, supra, 610 B.R. at pp. 336-337.)
3. Res Judicata Does Not Bar Akhlaghpour’s Claims Based
on Orantes’s Actions After the Trustee Appointment
The trial court did not reach the res judicata issue because
it concluded the Barton doctrine barred Akhlaghpour’s entire
complaint. Having found that the Barton doctrine does not reach
that far, we must consider whether res judicata bars what
remains of Akhlaghpour’s claims.
Akhlaghpour contends claim preclusion and issue
preclusion do not require sustaining the demurrer because she
was unaware of her malpractice claims until after Orantes
“abandoned” her, and she was not in an adversarial proceeding
8 We express no opinion regarding the extent to which
allegations of malpractice occurring after a trustee appointment
could—similar to pre-petition conduct—“cross the divide” and
implicate the Barton doctrine. That issue may depend, in part,
on the nature of the allegations Akhlaghpour chooses to make in
any amended complaint.
19
with Orantes at the time her bankruptcy petition was pending.
Orantes argues that even if the Barton doctrine does not apply,
claim preclusion and issue preclusion bar Akhlaghpour’s
malpractice claims, based on the order approving Orantes’s fees
for services rendered in the Chapter 11 proceedings.
Actions under the Bankruptcy Code present a federal
question. “California follows the rule that the preclusive effect of
a prior judgment of a federal court is determined by federal law,
at least where the prior judgment was on the basis of federal
question jurisdiction.” (Butcher v. Truck Ins. Exchange (2000)
77 Cal.App.4th 1442, 1452.) Under federal law, claim preclusion
bars Akhlaghpour’s claims based on services addressed by the
order granting Orantes’s fee application. However, claim
preclusion does not bar any claims based on Orantes’s non-
bankruptcy-related conduct before October 11, 2017, or any
conduct after February 6, 2018. In other words, Orantes’s fee
application and order essentially only covered the period during
which Orantes was performing services in its role as
Akhlaghpour’s bankruptcy counsel, which ended upon the
trustee’s appointment in February 2018. (These are the same
claims barred by the Barton doctrine, in any event.)
“The preclusive effect of a judgment is defined by claim
preclusion and issue preclusion, which are collectively referred to
as ‘res judicata.’ Under the doctrine of claim preclusion, a final
judgment forecloses ‘successive litigation of the very same claim,
whether or not relitigation of the claim raises the same issues as
the earlier suit.’ [Citation.] Issue preclusion, in contrast, bars
‘successive litigation of an issue of fact or law actually litigated
and resolved in a valid court determination essential to the prior
judgment,’ even if the issue recurs in the context of a different
20
claim. [Citation.]” (Taylor v. Sturgell (2008) 553 U.S. 880, 892
[fn. omitted]; see Kopp v. Fair Pol. Practices Com. (1995)
11 Cal.4th 607, 682 (conc. opn. of Kennard, J.) [summarizing
federal claim preclusion and issue preclusion principles].)
“Unlike issue preclusion, which applies only to issues that were
actually litigated, claim preclusion applies not just to what was
litigated, but more broadly to what could have been litigated.”
(Guerrero v. Department of Corrections & Rehabilitation (2018)
28 Cal.App.5th 1091, 1098 [discussing and applying federal
preclusion law]; see Capitol Hill Group v. Pillsbury, Winthrop,
Shaw, Pittman, LLC (D.C. Cir. 2009) 569 F.3d 485, 491 (Capitol
Hill Group) [“‘[R]es judicata . . . bars relitigation not only of
matters determined in a previous litigation but also ones a party
could have raised[.]’”].)
Under federal claim preclusion law, the judgment of a
bankruptcy court bars a claim asserted in a later action when:
“the prior judgment was final and on the merits”; “rendered by a
court of competent jurisdiction in accordance with the
requirements of due process”; “the parties are identical, or in
privity, in the two actions;” and “the claims in the second matter
are based upon the same cause of action involved in the earlier
proceeding.” (In re Varat Enterprises, Inc. (4th Cir. 1996) 81 F.3d
1310, 1315; accord, Grausz v. Englander (4th Cir. 2003) 321 F.3d
467, 472 (Grausz); Capitol Hill Group, supra, 569 F.3d at p. 490.)
Here, Orantes submitted a final application for fees on
October 24, 2018, prior to the dismissal of the bankruptcy.
Orantes’s fee application sought compensation, in itemized detail,
for its work performed between October 11, 2017, and
February 6, 2018, on case administration, claims administration
and objections, fee and employment applications, financing,
21
creditor meetings, plan and statement disclosure, and relief from
stay proceedings. The fee application included a declaration from
Giovanni Orantes reiterating that Orantes played no role in the
Emymac transactions and was unaware that Emymac had
recorded the deeds of trust one day prior to Orantes filing the
petition, which ultimately led to appointment of the trustee.
Akhlaghpour submitted a declaration in support of the fee
application stating: “I have reviewed the Application filed by The
Orantes Law Firm, P.C. . . . I have no objection to the
Application.”9 On December 7, 2018, three days after dismissing
the bankruptcy case, the bankruptcy court held a hearing and
approved Orantes’s unopposed fee application pursuant to
11 U.S.C. section 330.
Numerous federal courts have concluded that claim
preclusion bars a Chapter 11 debtor’s malpractice claim against
the debtor’s bankruptcy counsel after the bankruptcy court issues
a final fee application order. (E.g., Grausz, supra, 321 F.3d at
p. 472; In re Iannochino (1st Cir. 2001) 242 F.3d 36, 47;
Weinberg v. Kaplan, LLC (3d Cir. 2017) 699 Fed.Appx. 118, 120
(Weinberg); In re Intelogic Trace, Inc. (5th Cir. 2000) 200 F.3d
382, 388-390; In re Robotic Vision Sys., Inc. (Bankr. D.N.H. 2006)
343 B.R. 393, 397; In re Blair (Bankr. D.Md. 2005) 319 B.R. 420,
9 Akhlaghpour submitted a contradictory declaration in
opposition to Orantes’s demurrer below, stating “On or about
October 24, 2018, Defendants sent me a document and asked me
to sign it. I noticed it was my declaration but there was no fee
application attached. I trusted Defendants so much that I signed
it and I had no reason to believe the fee application would contain
false information.” Thus, in one statement under oath
Akhlaghpour states she did review the fee application, and in
another she declares she did not.
22
434-435; D.A. Elia Constr. Corp. v. Damon & Morey, LLP
(W.D.N.Y. 2008) 389 B.R. 314.) In evaluating whether a debtor
was aware of its claim at the time of a bankruptcy court fee
order, “‘[w]e look at the date the final fee order was entered . . .
and ask whether by that time [the debtor] knew or should have
known there was a real likelihood that [it] had a malpractice
claim.’” (Capitol Hill Group, supra, 569 F.3d at p. 491; accord,
Grausz, supra, 321 F.3d at p. 474.) “[R]ather than considering
whether the [debtors] knew of the precise legal contours of their
malpractice claim at the time of the fee application, we must
instead determine whether they knew of the factual basis of that
claim.” (Iannochino, at pp. 48-49.)
Claim preclusion would apply here to any services covered
by the bankruptcy court fee order. First, the order approving
Orantes’s final fee application constitutes a “‘final judgment,
order, or decree.’” (In re Yermakov (9th Cir. 1983) 718 F.2d 1465,
1469.) Second, a Chapter 11 debtor is a “‘party in interest’” to a
fee application proceeding even if a trustee was appointed to
administer the estate. Thus, a sufficient identity of parties exists
between the fee application and the legal malpractice case to
support claim preclusion. (Grausz, supra, 321 F.3d at p. 472; see
Capitol Hill Group, supra, 569 F.3d at p. 491 [“the fee
applications and the malpractice claim arise out of the same
nucleus of facts and the identity element of res judicata is
satisfied”].)
Third, the malpractice claim, like the earlier claim for fees,
involves the acceptability of the legal services Orantes provided
to Akhlaghpour in connection with her bankruptcy proceedings
between October 11, 2017 and February 6, 2018. (Grausz, supra,321 F.3d at p. 473.) An award of fees for bankruptcy under
23
11 U.S.C. section 330, subdivision (a)(3), represents a
determination of “the nature, the extent, and the value of such
services.” (In re Intelogic Trace, Inc., supra, 200 F.3d at p. 387.)
“Award of the professionals’ fees and enforcement of the
appropriate standards of conduct are inseparably related
functions of bankruptcy courts.” (In re Southmark Corp. (5th Cir.
1999) 163 F.3d 925, 931.) “Section 330 of the Code specifically
obligated the Bankruptcy Court to inquire into the nature and
quality of these services, including whether ‘[Orantes]. . .
demonstrated skill and experience in the bankruptcy field.’”
(Weinberg, supra, 699 Fed.Appx. at p. 121; see 11 U.S.C.
§ 330(a)(3)(E).) “The instant malpractice claim similarly turns on
whether [Orantes] breached the duty of care [ ] owed to his client
in that situation, [citations], and requires consideration of
evidence demonstrating that [the defendant’s] conduct failed to
meet the appropriate standard of care,’ [citation]. Thus, these
proceedings involved the same issue, and by allowing
compensation under § 330, the Bankruptcy Court impliedly found
that [Orantes’s] services . . . were at least acceptable.” (Weinberg,
at p. 121; see In re Intelogic Trace, Inc., at p. 387 [claim
preclusion barred Chapter 7 trustee’s malpractice claims against
debtor’s accounting professionals in the preceding Chapter 11
proceedings because the malpractice claims “arise from [the
accounting firm’s] alleged omissions in rendering the very same
services considered by the bankruptcy court in the fee application
hearing”].)
At the time of the final fee order, Akhlaghpour knew all of
the facts underlying her first amended complaint. She “‘was
sufficiently aware of the real possibility of there being errors by
[the bankruptcy professional] such as now alleged and of their
24
likely consequences before the fee hearing.’” (Capitol Hill Group,
supra, 569 F.3d at p. 491; see In re Intelogic Trace, Inc., supra,
200 F.3d at p. 389 [at time of Chapter 11 fee hearing, debtor “had
sufficient general awareness of the real potential for claims
against [the debtor’s bankruptcy accounting firm] such as those
here asserted” and the opportunity to object and litigate those
claims at the fee hearing].) As evidenced by her declaration in
support, Akhlaghpour had ample opportunity to object to the fee
application but chose not to do so. “The fact that [Akhlaghpour]
did not take advantage of these procedures does not alter the fact
that [she] could have done so and thus tried the malpractice
claim at the time of the fee application.” (In re Iannochino,
supra, 242 F.3d at p. 48.)
The fee application order, however, overlaps only the period
Orantes represented Akhlaghpour as debtor in possession, before
the trustee was appointed on or around February 2, 2018 (the
same period already covered by the Barton doctrine). It covers a
few days after the trustee appointment date (which, if
substantively related to the wrapping up of debtor in possession
services, would also fall under the Barton doctrine), but does not
itemize any services performed by Orantes after February 6,
2018, in its continuing capacity as counsel for Akhlaghpour as
debtor out of possession. Therefore, the fee application order can
provide no preclusive effect for claims based on services rendered
after February 6, 2018. The parties did not have the opportunity
to litigate, and the court did not approve, services after that date.
4. Akhlaghpour Should Have Limited Leave To Amend
Akhlaghpour contends the trial court should have
sustained the demurrer with leave to amend so she could allege
additional facts to show the Barton doctrine should not apply,
25
including facts establishing that the trustee advised Akhlaghpour
she had the right to sue Orantes directly for malpractice, “the
lack of salience” of Orantes’s work to the administration of the
estate, “the lack of court appointment of her counsel,” and that
she had standing to sue as debtor in possession after the
bankruptcy was dismissed. We agree only as to standing.
a. Amendment would not affect application of the
Barton doctrine to claims based on Orantes’s
actions as debtor in possession counsel
In her declaration opposing Orantes’s demurrer,
Akhlaghpour sought leave to amend and attached a December
2019 email exchange with the bankruptcy trustee. In the email,
Akhlaghpour stated to the trustee that counsel had advised her
she could not sue Orantes without bankruptcy court permission
because the alleged malpractice occurred while the bankruptcy
petition was pending. She asked if the trustee could either sue
Orantes or ask the bankruptcy court to permit the trustee to
abandon the right to sue. The trustee responded that the trustee
did not believe the estate had any malpractice claims against
Orantes and that any remaining assets were abandoned to
Akhlaghpour as the debtor after dismissal. This informal email
exchange with the trustee does not contain any express
advisement from the trustee to Akhlaghpour that she could sue
Orantes without leave of the bankruptcy court. It also does not
serve as any formal or legal abandonment of claims.
(Bostanian v. Liberty Savings Bank (1997) 52 Cal.App.4th 1075,
1083 [“[u]ntil the debtor secures an abandonment of the claim,
the debtor lacks standing to pursue it”].)
26
Akhlaghpour does not dispute that she never sought formal
leave from the bankruptcy court to pursue her malpractice claim
against Orantes in state court. Since she cannot amend to state
she obtained such leave, there is no reasonable possibility that
any amendment would affect the trial court’s otherwise proper
Barton analysis as to claims based on Orantes’s actions as debtor
in possession counsel.
b. Akhlaghpour may amend to allege facts to support
standing
As discussed above, the Barton doctrine and Orantes’s fee
application order do not bar the limited subset of Akhlaghpour’s
potential claims based on Orantes’s actions as her counsel as a
debtor out of possession beyond February 6, 2018, after the
trustee appointment. However, she may only pursue those
claims in state court if she has standing to do so.
Orantes contends generally that Akhlaghpour lacks
standing to sue because her malpractice claims belong to the
bankruptcy estate, even after dismissal, and only the trustee
could prosecute them. Orantes cites no decisional authority
specific to the standing of a Chapter 11 debtor to sue the debtor’s
bankruptcy counsel for actions taken after a trustee was
appointed, perhaps because “there is a paucity of case law
anywhere addressing, in any context, the standing of a Chapter
11 debtor out of possession[.]” (In re Potter (B.A.P. 10th Cir.
2002) 292 B.R. 711, fn. 13 (diss. opn of Pusateri, J.) However,
“[f]or [Akhlaghpour] to have standing, [s]he, rather than the
bankruptcy estate, must own the claim upon which [s]he is
suing.” (Cusano v. Klein (9th Cir. 2001) 264 F.3d 936, 945; see
In re Smith (9th Cir. 2000) 235 F.3d 472, 477-478 [“The
Bankruptcy Code distinguishes between property of the estate in
27
bankruptcy and property of the debtor.”].) The Bankruptcy Code
defines the bankruptcy estate as “all legal and equitable interests
of debtors in property as of the commencement of cases.”
(11 U.S.C. § 541; see also 11 U.S.C. § 541(a)(7)) [bankruptcy
estate also includes “[a]ny interest in property that the estate
acquires after the commencement of the case”]; 11 U.S.C. § 554(d)
[“[P]roperty of the estate that is not abandoned under this section
and that is not administered in the case remains property of the
estate.”].)
Therefore, we must assess whether Akhlaghpour has any
legal malpractice claim not owned by the bankruptcy estate
(limited as previously established to the subset of potential
claims, if any, solely arising from Orantes’s acts and omissions as
debtor out of possession counsel after February 6, 2018).
“[F]ederal law determines whether an interest is property of the
bankruptcy estate” or whether it belongs to the debtor
individually. (In re Witko (11th Cir. 2004) 374 F.3d 1040, 1043.)
Generally “[p]re-petition causes of action are part of the
bankruptcy estate and post-petition causes of action are not.”
(Id. at p. 1042.) “[W]e look to state law to determine when a
claim arises, and if it arises on or before the commencement of
the bankruptcy case, it is part of the bankruptcy estate.” (In re
Bracewell (11th Cir. 2006) 454 F.3d 1234, 1242.)
Looking, then, to state law, the elements for a legal
malpractice cause of action in California are: “(1) the duty of the
attorney to use such skill, prudence, and diligence as members of
his or her profession commonly possess and exercise; (2) a breach
of that duty; (3) a proximate causal connection between the
breach and the resulting injury; and (4) actual loss or damage
resulting from the attorney’s negligence.” (Coscia v. McKenna &
28
Cuneo (2001) 25 Cal.4th 1194, 1199.) Under Code of Civil
Procedure section 340.6, “‘a cause of action for legal malpractice
accrues when the client discovers or should discover the facts
essential to the malpractice claim, and suffers appreciable and
actual harm from the malpractice.’” (Samuels v. Mix (1999)
22 Cal.4th 1, 11, quoting Laird v. Blacker (1992) 2 Cal.4th 606,
611.) Where actual fraud is alleged against an attorney in the
performance of his or her professional services, Code of Civil
Procedure section 338, subdivision (d), applies, setting out a
three-year statute of limitations for fraud actions. (Stueve Bros.
Farms, LLC v. Berger Kahn (2013) 222 Cal.App.4th 303, 321-
322.) A cause of action for fraud accrues upon discovery of the
fraud by the aggrieved party. (Id. at p. 321; Code Civ. Proc.,
§ 338, subd. (d).)
Akhlaghpour alleges that she did not know about Orantes’s
negligence until the trustee sought appointment and then took
control of her assets to satisfy her creditors. She also has alleged
several acts that took place after Orantes filed the bankruptcy
petition, specifically having to do with Orantes’s response to the
trustee appointment and various trustee actions.
In response, Orantes argues that Akhlaghpour’s
malpractice claims are “sufficiently rooted” in her pre-bankruptcy
past to be considered property of the estate. Orantes generally
relies on a line of cases tracing back to Segal v. Rochelle (1966)
382 U.S. 375 (Segal). (E.g., In re Strada Design Associates, Inc.
(Bankr. S.D.N.Y. 2005) 326 B.R. 229, 238 [Chapter 7 debtors’
malpractice claims against counsel based on pre-petition
consultation and alleged lack of due care in filing “had all of their
roots in the Debtors’ pre-bankruptcy past” and estate owns post-
petition causes of action for legal malpractice by debtor’s counsel
29
where the post-petition claim is impossible to sever from pre-
petition actions]; In re Alvarez (11th Cir. 2000) 224 F.3d 1273,
1279 [debtors’ legal malpractice cause of action based on
negligent filing of a Chapter 7 petition was an interest
“‘sufficiently rooted in the pre-bankruptcy past’” to constitute
property of the estate; debtor established an attorney-client
relationship with counsel prior to filing and his cause of action
arose from his interactions with the firm prior to filing, with
damages in the form of loss of control and ownership of assets
occurring at the moment of filing]; In re Tomaiolo (Bankr.
D.Mass. 1997) 205 B.R. 10, 14-16 [counsel’s alleged negligent
legal advice to file bankruptcy petition, failure to cure errors in
the petition and failure to adequately advise the debtor of his
rights, duties and obligations had pre-petition roots and were
property of the estate].)
However, this authority generally predates In re Bracewell,
which criticizes the cases relied on by Orantes for not recognizing
that Segal, supra, 382 U.S. 375 predates the substantial revisions
to the Bankruptcy Code in 1978. (In re Bracewell, supra, 454
F.3d at pp. 1241-1243 [specifically criticizing the “sufficiently
rooted” language as contrary to plain meaning of 11 U.S.C.
section 541(a)(1), “restricting property of the estate to that which
existed ‘as of the commencement of the case’”]; accord, In re
Glaser (9th Cir. 2020) 816 Fed.Appx. 103, 104 [upholding
bankruptcy panel decision observing that the Ninth Circuit
continues to rely on Segal in a limited way, but finding that
where state law requires damage as an element of a malpractice
action, and where that damage did not occur until after the
bankruptcy, the malpractice claim does not belong to the estate].)
30
Where the trial court has sustained a demurrer without
leave to amend, on appeal we must “determine whether or not
the plaintiff could amend the complaint to state a cause of
action.” (Das v. Bank of America, N.A. (2010) 186 Cal.App.4th
727, 734.) However, “the burden falls upon the plaintiff to show
what facts he or she could plead to cure the existing defects in the
complaint. [Citation.] ‘To meet this burden, a plaintiff must
submit a proposed amended complaint or, on appeal, enumerate
the facts and demonstrate how those facts establish a cause of
action.”’ (Ibid.; see Schifando v. City of Los Angeles (2003)
31 Cal.4th 1074, 1081 [“[t]he plaintiff has the burden of proving
that an amendment would cure the defect”].) Here, “we cannot
say that it is clear that the complaint could not be saved by any
amendment.” (Maya v. Centex Corp. (9th Cir. 2011) 658 F.3d
1060, 1073.) It appears reasonably possible that Akhlaghpour
could amend to state facts supporting the occurrence of “actual
loss or damage” resulting from Orantes’s acts and omissions as
debtor’s counsel after the trustee appointment. Indeed, as a
result of our other rulings above, she may proceed only with
claims arising from conduct after February 6, 2018, in any event.
Accordingly, Akhlaghpour should be permitted leave to amend
her complaint accordingly.
DISPOSITION
The judgment of the superior court is reversed. On
remand, the superior court is directed to grant Akhlaghpour
leave to amend her complaint to state any claims based solely on
Orantes’s conduct during the period she was a debtor out of
possession and, if she can, to allege facts sufficient to establish
31
standing for such claims. The parties shall bear their own costs
on appeal.
HOWARD, J.*
We concur:
PERLUSS, P.J.
FEUER, J.
* Judge of the Marin County Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
32