California Court Discusses Requirements for Filing a State Court Action Against a Court Appointed Bankruptcy Officer

In many bankruptcy actions, the court will appoint officers to oversee certain aspects of the case. Any officer appointed by a court must remain neutral, and if a conflict is revealed, the officer usually must recuse his or her self from the case. When a party in a bankruptcy proceeding believes that a bankruptcy officer unjustly affected the outcome of the case due to a conflict, the party may be able to seek damages from the officer via a civil lawsuit. There are requirements the party must comply with, however, and if the party fails to file the lawsuit properly, his or her claims may be dismissed, as demonstrated in a recent case arising out of California. If you live in California and are in need of assistance with a bankruptcy matter, it is prudent to consult a skillful California bankruptcy attorney to discuss your case.

Factual and Procedural Background of the Case

It is reported that a debtor filed for bankruptcy, seeking in part to discharge a judgment from a defamation lawsuit. Creditors subsequently filed an adversary complaint, arguing that the debt was not dischargeable due to the debtor’s willful and malicious acts. Subsequently, the court-appointed a special discovery master to assist with the proceeding. After several months had passed, the creditor informed the master of a conflict of interest, namely that the master’s firm previously represented another party in a case against the creditor. The master recused herself but refused to refund the fees paid by the creditor. The creditor then filed a motion for a declaration that leave was not required to file a lawsuit against the master in State court, or alternatively, seeking leave to sue the master. The court denied the motion, and the creditor appealed.

Filing a Lawsuit Against an Officer Appointed by the Bankruptcy Court

Pursuant to the Barton doctrine, a plaintiff who wishes to institute a lawsuit against a bankruptcy officer in another forum, for actions taken by the officer in his or her official capacity, must first obtain the authorization of the bankruptcy court. The main criterion of an inquiry under the Barton doctrine is whether the suit the party seeks to file challenges the acts taken by an officer were within his or her authority as an officer of the court and were undertaken in his or her official capacity. The doctrine arose out of the fact that bankruptcy law requires that all matters that affect the administration of a bankruptcy estate must either be filed in bankruptcy court or with leave from the bankruptcy court.

In the subject case, the court was not persuaded by the creditor’s argument that the Barton doctrine did not apply because the acts out of which the creditor’s claims against the master arose occurred before the bankruptcy suit, finding that the creditor’s lawsuit could affect the bankruptcy matter regardless of when the alleged acts occurred. Thus, the court affirmed the lower court ruling.

Speak with a Trusted California Bankruptcy Attorney

Bankruptcy is a valuable tool that can allow people to manage oppressive debts and resume financial stability in their lives. If you are interested in filing for bankruptcy, it is in your best interest to speak with an attorney regarding your rights. Matthew D. Roy is a trusted California bankruptcy attorney who can advise you of your options and assist you in seeking debt relief. You can contact Mr. Roy via the form online or at (916) 361-6028 to set up a confidential and free consultation.