Opinion
CASE NO.:92-30385-EPK.
April 20, 2010
ORDER DENYING MOTION FOR SANCTIONS [DE 53] AND CLOSING CASE
This matter comes before the Court on Elaine M. Bakst, As Surviving Spouse Of Former Trustee Daniel L. Bakst's (Deceased) Motion For Sanctions Against Linda Chelvam, Esquire And Law Offices Of Marshall C. Watson, P.A. [DE 53] (the "Motion for Sanctions"). Elaine M. Bakst ("Ms. Bakst") asks this Court to award sanctions against Linda Chelvam and the Law Offices of Marshall C. Watson, P.A. (together, "Respondents") on the ground that Respondents initiated state court litigation against Ms. Bakst without obtaining permission from this Court, allegedly in violation of the Barton doctrine. The Court rules that the Barton doctrine does not apply in the circumstances of this case, denies the Motion for Sanctions, and closes this chapter 7 case.
JURISDICTION AND CORE DETERMINATION
The Court has jurisdiction over the Motion for Sanctions under 28 U.S.C. §§ 1334(b) and 157(a), and the standing order of reference in this district. The Motion for Sanctions requires the Court to determine whether Respondents should have sought permission to file a complaint against Ms. Bakst commencing a state court proceeding implicating the official actions of a chapter 7 trustee. This is a matter concerning the administration of the estate and thus a core proceeding under 28 U.S.C. § 157(b)(2)(A).
BACKGROUND AND FACTS
Daniel L. Bakst, now deceased, acted as chapter 7 trustee (the "Former Trustee") in the above captioned bankruptcy case of Jeffrey P. Longo and Arlene M. Longo (the "Debtors") filed in 1992. During the chapter 7 case, acting in his official capacity the Former Trustee sold a parcel of real property owned by the Debtors located in Palm Beach County, Florida (the "Property"). This Court entered a final decree in the Debtors' case on June 29, 1995 and the case was closed.
In December, 2009, Respondents filed a complaint in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida, seeking, among other relief, to foreclose a mortgage lien on the Property. The state court complaint named the "UNKNOWN SPOUSE OF DANIEL L. BAKST" as a defendant and alleged that such unknown spouse "may claim some interest in or lien upon the subject property by virtue of ANY POSSIBLE INTEREST PURSUANT TO TRUSTEE'S DEED DUE TO DUE TO (sic) LACK OF MARITAL STATUS, JOINDER OF SPOUSE, NON HOMESTEAD LANGUAGE." In January, 2010, the Respondents served Ms. Bakst with the state court complaint and related summons. Ms. Bakst was the Former Trustee's spouse.
With the Motion for Sanctions, Ms. Bakst filed a motion to reopen this case. [DE 51] Respondents filed a reply. [DE 72] After a hearing on March 18, 2010, the Court reopened this case solely to allow the parties to file briefs addressing the application of the Barton doctrine and this Court's jurisdiction to hear the Motion for Sanctions. [DE 75] Ms. Bakst and Respondents filed memoranda as requested by the Court. [DE 80 and DE 79, respectively]
ANALYSIS
The Barton doctrine arises from an 1881 decision of the United States Supreme Court, Barton v. Barbour. In Barton, the Supreme Court stated: "It 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 v. Barbour, 104 U.S. 126, 128 (1881). The Barton doctrine has been applied in the bankruptcy context, to protect bankruptcy trustees and other court appointed officers for acts done in their official capacity. Lawrence v. Goldberg, 573 F.3d 1265, 1269 (11th Cir. 2009); Carter v. Rodgers, 220 F.3d 1249, 1252-53 (11th Cir. 2000). When the Barton doctrine applies, absent authorization from the bankruptcy court the relevant state or federal court lacks jurisdiction over an action against a trustee or other protected person for actions taken in their official capacity. Carter, 220 F.3d at 1253.
Recently, the Eleventh Circuit Court of Appeals considered the application of the Barton doctrine to certain parties in a bankruptcy case other than the trustee. In Lawrence v. Goldberg, the debtor filed an action in the district court against his chapter 7 trustee, the trustee's counsel and special counsel, an investigative services firm retained by the trustee, certain creditors of the estate, and the creditors' counsel. Lawrence, 573 F.3d at 1268. The debtor alleged that the trustee, a group of creditors, and their professionals, conspired to enforce a bankruptcy court turnover order to gain a litigation advantage by "wrongfully obtaining orders authorizing the filing of sealed ex parte pleadings, hiring private investigators, holding in camera discovery hearings, and obtaining [the debtor's] tape-recorded telephone conversations from prison. [The debtor] alleged that such conduct violated [various federal statutes] and Florida state laws." Id. The district court dismissed the complaint in its entirety for lack of subject matter jurisdiction under the Barton doctrine. Id. at 1269.
Upholding the dismissal, the Eleventh Circuit Court of Appeals stated that "the Barton doctrine applies to actions against officers approved by the bankruptcy court when those officers function `as the equivalent of court appointed officers.'" Lawrence, 573 F.3d at 1269 (quoting Carter, 220 F.3d at 1252 n. 4). The Eleventh Circuit found that the trustee's counsel, special counsel, and investigators "functioned as the equivalent of court-appointed officers by helping the Trustee execute his official duties." Id. at 1270. Similarly, the Eleventh Circuit found that because the defendant creditors financed the trustee's efforts to recover property of the estate, "they likewise functioned as the equivalent of court appointed officers, as did their counsel." Id.
In Lawrence, the Eleventh Circuit defined the outer limits of the Barton doctrine in the bankruptcy context. The doctrine is intended to protect the bankruptcy process by insulating parties appointed or approved by the bankruptcy court and those who function in a similar manner for the benefit of the bankruptcy estate. The defendants in Lawrence each participated in the subject bankruptcy case. They assisted the chapter 7 trustee in his official actions and thus were imbued with the protection afforded to the trustee himself.
In her Motion for Sanctions, Ms. Bakst makes a compelling argument based primarily on the policy underlying the Barton doctrine. In Lawrence, the Eleventh Circuit stated that "the Barton doctrine helps to ensure the proper functioning of the bankruptcy process." Lawrence, 573 F.3d at 1269 (citing Carter, 220 F.3d at 1252-53). Ms. Bakst argues "the standard should be whether the proper functioning of the bankruptcy process urges an application of the Barton Doctrine to any particular case, regardless of whether a trustee is personally being sued, a trustee's court approved professionals are being sued, or anyone else having any connection to a trustee that (sic) is sued merely because of such relationship." Ms. Bakst states that the Respondents' complaint would require the state court to determine whether the Former Trustee properly executed a deed while acting in his official capacity. She argues that this is harmful to the bankruptcy process because it denies this Court control over claims that a trustee failed to properly discharge his duties. At the hearing on March 18, 2010, Ms. Bakst's counsel argued that failure to apply the Barton doctrine in this case would send a message to the legal community that it is acceptable to pursue a trustee's family members without seeking prior approval from this Court, and that this would prove distracting to trustees and thus impede the work of the Court.
The Court is not unsympathetic to Ms. Bakst's arguments. Ms. Bakst would not have been served with Respondents' state court complaint but for the fact that she was married to the Former Trustee. The official role of the Former Trustee in this case eventually led Ms. Bakst to be a defendant in the state court action. Ms. Bakst was otherwise a stranger to the Debtors and the Property. However, Ms. Bakst's interpretation of the Barton doctrine would expand it beyond the bounds established by the Eleventh Circuit. Ms. Bakst did not take part in the Debtors' chapter 7 case. She did not assist the Former Trustee in his official actions. She did not otherwise function as the equivalent of a court appointed officer.
Respondents concede that they had no reasonable basis for a claim against Ms. Bakst in the state court matter. Prior to the March 18, 2010 hearing on Ms. Bakst's motion to reopen this case, the Respondents dismissed Ms. Bakst from the state court action, without prejudice, apparently as a result of a formal notice tendered by Ms. Bakst under section 57.105 of the Florida Statutes (the functional equivalent of Fed.R.Bankr.P. 9011).
Respondents did not need to seek this Court's permission to file the state court complaint or serve it on Ms. Bakst, and thus the Motion for Sanctions should be denied. For the foregoing reasons, the Court ORDERS as follows:
1. The Motion for Sanctions is denied.
2. The Clerk shall close this case.ORDERED in the Southern District of Florida on April 20, 2010.