August 15, 2018

Tenth Circuit: Barton Doctrine Prohibited Suit Against Bankruptcy Trustee By Debtor

The Tenth Circuit issued its opinion in Satterfield v. Malloy on Wednesday, November 28, 2012.

William Satterfield brought suit against Patrick J. Malloy III, the court-appointed trustee of Satterfield’s Chapter 7 bankruptcy estate. The district court concluded that the suit was barred by Barton v. Barbour, 104 U.S. 126 (1881), because Satterfield’s claims were based on actions Malloy took as trustee and Satterfield did not first obtain permission from the bankruptcy court. The Tenth Circuit agreed with the district court and its sister circuits and held that “Barton 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.”

Satterfield argued that Barton did not apply because the trustee’s actions fell within Barton’s exception for ultra vires acts. The court found that even if a trustee acted with improper motives, Barton applied. The ultra vires exception applies to a trustee wrongfully seizing an outside party’s assets, not acts involving the debtor’s estate. The court also rejected Satterfield’s arguments that the Barton doctrine was inapplicable because 1) he sued the trustee in his individual capacity for tort actions, and 2) his bankruptcy proceedings had concluded. Courts applying Barton look to the substantive allegations to see if the claim is related to the trustee’s duties, not to whether the trustee is sued in his or her individual capacity. Also, the Barton doctrine continues to apply after a bankruptcy case is closed.

The Tenth Circuit  also rejected Satterfield’s claim that he was permitted to bring suit against Malloy under 28 U.S.C. § 959 as its exception to the Barton doctrine applies only to actions taken while “carrying on business.”

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