Teton Millwork Sales v. Schlossberg , 311 F. App'x 145 ( 2009 )

FILED
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
February 10, 2009
TENTH CIRCUIT
Elisabeth A. Shumaker
Clerk of Court
TETON MILLWORK SALES, a
Wyoming corporation,
Plaintiff - Appellant, No. 07-8091
(D.C. No. 07-CV-00014-ABJ)
v. (D. Wyo.)
ROGER SCHLOSSBERG,
Defendant - Appellee.
ORDER AND JUDGMENT *
Before KELLY, EBEL, and GORSUCH, Circuit Judges.
Plaintiff-Appellant, Teton Millwork Sales (“TMS”), appeals from the
district court’s order granting Defendant-Appellee Roger Schlossberg’s motion to
dismiss the action based upon absolute judicial immunity and lack of personal
jurisdiction. As Mr. Schlossberg now consents to personal jurisdiction, Aplee.
Br. at 1, the issue on appeal is whether the district court properly dismissed the
claim pursuant to Fed. R. Civ. P. 12(b)(6) by determining that Mr. Schlossberg
enjoys absolute judicial immunity as a court-appointed receiver for his actions in
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
collecting the assets of TMS. Our jurisdiction arises under 28 U.S.C. § 1291. We
reverse and remand.
Background
The present case arises from contentious divorce proceedings in a West
Virginia Family Court, in which Mary Palencar sought and secured a divorce
from her husband, Michael Palencar. During the divorce proceedings, the court
appointed Mr. Schlossberg as receiver to collect assets in which Mr. Palencar held
an ownership interest so that they would be available to satisfy the court’s orders.
In an order issued January 14, 2004, the court stated that Mr. Schlossberg was
vested with actual legal and equitable title to and the right to obtain
record title to and/or liens upon and/or actual physical custody and
possession of all of the assets of the Respondent Michael Palencar
(whether held by the said Respondent, either alone or jointly with
any other person or entity, in his own name or in the name of any
alias . . . or in the name of any other entity, including . . . Teton
Millwork Sales).
Aplt. App. 69. In order to give Mr. Schlossberg the powers necessary to carry out
his receivership, the West Virginia court expressly contemplated that he would
act outside the state of West Virginia. Therefore, the court “authorized and
directed” Mr. Schlossberg to “take such action as may appear necessary or
desirable to obtain ancillary jurisdiction of these proceedings in such other States
. . . as may appear appropriate.” Aplt. App. 70-71.
Apparently, Mr. Schlossberg then proceeded to use this authority to seize
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the assets of TMS, a corporation in which Mr. Palencar was a twenty-five percent
shareholder. Once TMS learned that its assets had been seized, it brought suit in
Wyoming state court, asserting that Mr. Schlossberg committed abuse of process
and fraud. Aplt. App. 1-10. TMS alleged that Mr. Schlossberg exceeded his
authority by seizing TMS’s assets in Wyoming, as well as its proprietary
information and mail, even though he knew that Mr. Palencar was only a twenty-
five percent shareholder in TMS and that there was no evidence to justify piercing
the corporate veil of TMS. Aplt. App. 2 ¶ 21; 4 ¶¶ 38, 40-41, 44. TMS’s
complaint also alleged that Mr. Schlossberg falsely represented to various third
parties that he had legal authority to seize TMS’s assets in Wyoming, while
intentionally failing to mention that he was required to but had not obtained
ancillary jurisdiction in Wyoming. Aplt. App. 8 ¶¶ 78, 84, 86. According to the
complaint, Mr. Schlossberg never obtained ancillary jurisdiction in Wyoming by
securing a Wyoming court order prior to making these seizures. Aplt. App. 5 ¶¶
47, 49, 51, 54. TMS also alleged that Mr. Schlossberg threatened TMS’s agents
with financial penalties if they accepted instructions from TMS and provided
them with incomplete and misleading documents relating to his legal authority to
seize TMS’s assets. Aplt. App. 8 ¶ 79; 9 ¶¶ 88-89.
After removing the case to federal district court, Mr. Schlossberg filed a
motion to dismiss under Fed. R. Civ. P. 12(b)(1), (2), (3), and (6). The district
court granted the motion under Fed. R. Civ. P. 12(b)(2) and (6), concluding that it
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lacked personal jurisdiction over Mr. Schlossberg and that TMS failed to state a
claim because Mr. Schlossberg enjoyed absolute immunity as a court-appointed
receiver. 1 Aplt. App. 166. TMS appeals this decision. However, Mr.
Schlossberg now consents to personal jurisdiction, see United States v. Vreeken,
803 F.2d 1085, 1089 (10th Cir. 1986), so we review only the Fed. R. Civ. P.
12(b)(6) grounds for dismissal.
Discussion
I. The Barton Doctrine
As an initial matter, we note that we have subject matter jurisdiction even
though this case was brought against a court-appointed receiver without the
appointing court’s permission because TMS alleges that the receiver wrongfully
took possession of property belonging to another. Under the Supreme Court’s
decision in Barton v. Barbour, “[i]t is a general rule that before suit is brought
against a receiver leave of the court by which [the receiver] was appointed must
be obtained.” 104 U.S. 126, 128 (1881). However, Barton also makes it clear that
“if, by mistake or wrongfully, the receiver takes possession of property belonging
to another, such person may bring suit therefor against him personally as a matter
1
The district court recited the standards of review for Fed. R. Civ. P.
12(b)(1) concerning subject matter jurisdiction and 12(b)(6) for failure to state a
claim. See Aplt. App. 154. Of course, if the complaint is dismissed for lack of
personal jurisdiction, it must be dismissed under Fed. R. Civ. P. 12(b)(2).
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of right; for in such case the receiver would be acting ultra vires.” Id. at 134.
This case falls squarely within this ultra vires exception to the Barton doctrine
because TMS is alleging that Mr. Schlossberg wrongfully seized its assets rather
than the assets of Mr. Palencar; accordingly, we have subject matter jurisdiction.
The dissent disagrees, pointing to the language in Barton distinguishing
“claims aris[ing] against the receiver as such, whilst acting under the powers
conferred on him, whether for labor performed . . . or for injury to persons or
property” from claims against the receiver for “tak[ing] possession of property
belonging to another” that are exempted under the ultra vires exception. Id. The
dissent argues that this case falls within the first of these two classes of
cases—and is therefore subject to the Barton doctrine—because Mr. Schlossberg
was acting within the scope of his authority. In reaching the conclusion that Mr.
Schlossberg acted within his authority, the dissent merely looks to the fact that
the West Virginia court had issued a valid order granting Mr. Schlossberg
extensive authority. However, simply looking at the facial validity of the order to
seize Mr. Palencar’s assets does not adequately deal with the fact, as fully
discussed below, that TMS “allege[d] at the outset facts demonstrating,” In re
Lowenbraun, 453 F.3d 314, 322 (6th Cir. 2006), that Mr. Schlossberg acted
beyond the scope of his authority by wrongfully seizing assets that did not belong
to Palencar. See In re Triple S Restaurants, Inc., 519 F.3d 575, 578 (6th Cir.
2008) (stating that Barton would not apply if the trustee acted “outside the scope
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of his authority”).
This case is distinguishable from the cases cited by the dissent because
none of them involved an outside party who claimed that their assets had
wrongfully been seized. See id. at 578 (involving a suit by the general counsel of
a debtor corporation against the trustee for outrage and intentional infliction of
emotional distress); In re Lowenbraun, 453 F.3d at 316 (involving a suit by one of
the parties to a divorce proceeding against the trustee for libel, slander, abuse of
process, wrongful use of civil proceedings, and outrage); In re Crown Vantage,
Inc., 421 F.3d 963, 967-70 (9th Cir. 2005) (involving a claim by a party to a
settlement agreement against the trustee for violation of the settlement
agreement); Muratore v. Darr, 375 F.3d 140, 142-43 (1st Cir. 2004) (involving a
suit by the owner of a debtor corporation against the trustee for, inter alia, abuse
of process and negligence); Carter v. Rodgers, 220 F.3d 1249, 1252 (11th Cir.
2000) (involving a suit by a debtor against the trustee for breach of fiduciary
duties). Construing the language in Barton regarding “claims aris[ing] against the
receiver as such, whilst acting under the powers conferred on him,” 104 U.S. at
134, as broadly as the dissent does—so that it reaches even the claim of an
independent third party whose assets were (allegedly) wrongfully seized—would
render Barton’s ultra vires exception null and void. We decline to read one
sentence in Barton so broadly as to make the prior sentence meaningless.
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II. Motion to Dismiss for Failure to State a Claim
We review de novo a district court’s dismissal pursuant to Fed. R. Civ. P.
12(b)(6). Howard v. Waide, 534 F.3d 1227, 1242-43 (10th Cir. 2008). We must
accept all well-pleaded factual allegations in the complaint as true and must
construe them in the light most favorable to the plaintiff. Kt & G Corp. v. Att’y
Gen. of Okla., 535 F.3d 1114, 1133-34 (10th Cir. 2008). In reviewing the
complaint to determine whether it “state[s] a claim upon which relief can be
granted,” Fed. R. Civ. P. 12(b)(6), we must determine whether there are “enough
facts to state a claim to relief that is plausible on its face,” Bell Atl. Corp. v.
Twombly, 127 S. Ct. 1955, 1974 (2007). The “[f]actual allegations must be
enough to raise a right to relief above the speculative level . . . .” Id. at 1965.
“In reviewing a Rule 12(b)(6) motion to dismiss, our first step is to review
the factual allegations that should have been considered by the district court.”
Alvarado v. KOB-TV, L.L.C., 493 F.3d 1210, 1215 (10th Cir. 2007). On a Rule
12(b)(6) motion, if “matters outside the pleading are presented to and not
excluded by the court, the motion must be treated as one for summary judgment
under Rule 56. All parties must be given a reasonable opportunity to present all
the material that is pertinent to the motion.” Fed. R. Civ. P. 12(d). Therefore, if
the court considers documents outside the pleadings, the motion to dismiss must
generally be converted to a summary judgment motion unless the documents
relied upon by the court are referred to in the complaint, are central to the
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plaintiff’s claim, and are not disputed as to their authenticity. Alvarado, 493 F.3d
at 1215; Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 (10th Cir. 2002). “The
failure to convert a 12(b)(6) motion to one for summary judgment where a court
does not exclude outside materials is reversible error unless the dismissal can be
justified without considering the outside materials.” GFF Corp. v. Associated
Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir. 1997).
Turning to the application of these standards, we note that the district court
could not consider certain materials beyond the complaint for purposes of the
Fed. R. Civ. P. 12(b)(6) motion. It could rely upon the undisputedly authentic
court orders issued by the West Virginia court which were referred to in and are
central to TMS’s complaint. See Aplt. App. 2 ¶ 16; 3 ¶ 30; 4 ¶ 42; 6 ¶¶ 58, 64.
However, it could not rely upon the affidavit of Mr. Schlossberg, see Aplt. App.
15-17, or any other extraneous documents in concluding that Mr. Schlossberg did
not act beyond the scope of his authority. Because those documents are not
central to TMS’s complaint and are not referred to therein, the district court could
not rely upon them without granting TMS the opportunity to support its complaint
with affidavits and the like. See Alvarado, 493 F.3d at 1215-16; GFF Corp., 130
F.3d at 1384; Fed. R. Civ. P. 12(d), 56(c), 56(e). Regardless of any such
reliance, 2 we must address de novo whether the dismissal was warranted solely in
2
The district court referenced not only the pleadings but also argument at
(continued...)
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light of the complaint and the West Virginia court orders.
It is well established that judges and judicial officials enjoy absolute
immunity from suit for acts performed in their official capacities. Stump v.
Sparkman, 435 U.S. 349, 355-56 (1978); T & W Invest. Co. v. Kurtz, 588 F.2d
801, 802 (10th Cir. 1978). As a derivative of this judicial immunity, non-judicial
“officials charged with the duty of executing a facially valid court order enjoy
absolute immunity.” Turney v. O’Toole, 898 F.2d 1470, 1472 (10th Cir. 1990)
(quoting Valdez v. City & County of Denver, 878 F.2d 1285, 1286 (10th Cir.
1989)) (brackets omitted). The Supreme Court and this court have clearly stated
that this immunity is extended on the basis of the function being performed.
Forrester v. White, 484 U.S. 219, 227 (1988); Valdez, 878 F.2d at 1287.
Accordingly, “quasi-judicial” immunity extends only to non-judicial officers
whose “acts [are] intertwined with the judicial process,” Valdez, 878 F.2d at
1287, and whose “duties ha[ve] an integral relationship with the judicial process,”
Whitesel v. Sengenberger, 222 F.3d 861, 867 (10th Cir. 2000). Thus, a court-
appointed receiver has absolute quasi-judicial immunity if he is faithfully
carrying out the appointing judge’s orders, T & W Inv. Co., 588 F.2d at 802,
because “[e]nforcing a court order . . . is intrinsically associated with a judicial
2
(...continued)
a hearing that is not part of the record in concluding that Mr. Schlossberg was
acting cooperatively, within his discretion, and within the terms of the pertinent
order. Aplt. App. 127, 161-162.
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proceeding,” Valdez, 878 F.2d at 1288.
The quasi-judicial immunity of a court-appointed receiver, however, is not
limitless. In order to be immune, the receiver must act within the scope of his
authority in carrying out a court order. Turney, 898 F.2d at 1474 (stating that
“absolute immunity extended only to acts prescribed” by the court order); T & W
Inv. Co., 588 F.2d at 802-03 (analyzing whether the receiver was in fact
following the orders of the court); see Davis v. Bayless, 70 F.3d 367, 373 (5th
Cir. 1995) (stating that court-appointed receivers share absolute immunity as long
as they act “in good faith and within the scope of the authority granted”); Roland
v. Phillips, 19 F.3d 552, 555 (11th Cir. 1994) (“Like judges, these officials must
be acting within the scope of their authority.”); Kermit Constr. Corp. v. Banco
Credito y Ahorro Ponceno, 547 F.2d 1, 3 (1st Cir. 1976) (stating that absolute
immunity extends to a court-appointed receiver who “faithfully and carefully
carries out” a court order); see also New Alaska Dev. Corp. v. Guetschow, 869
F.2d 1298, 1303 (9th Cir. 1989). Furthermore, because the “quasi-judicial”
immunity of individuals such as court-appointed receivers is a derivative of
judicial immunity, there is no immunity if the court or the receiver acts “in the
‘clear absence of all jurisdiction.’” Turney, 898 F.2d at 1474 (quoting Stump,
435 U.S. at 357); see Whitesel, 222 F.3d at 868-69 (concluding that non-judicial
officers did not act in clear absence of all jurisdiction); Davis, 70 F.3d at 373(stating that the judge must not be acting in clear absence of all jurisdiction);
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Guetschow, 869 F.2d at 1303-04 (inquiring as to whether the court and the
receiver acted beyond the scope of their jurisdiction); see also Cok v. Cosentino,
876 F.2d 1, 3 (1st Cir. 1989).
The issue in this case, then, is whether the complaint sets forth a claim,
plausible on its face, that Mr. Schlossberg is not entitled to absolute immunity.
As TMS reminds us, the district court was required to view the facts in its favor.
Aplt. Br. at 28; Kt & G Corp., 535 F.3d at 1133-34. Given that we also must
accept all well-pleaded facts alleged as true, we find that TMS has satisfied this
standard. The complaint alleges facts that, on their face, show that Mr.
Schlossberg does not enjoy absolute immunity.
First, the complaint alleges that Mr. Schlossberg exceeded the scope of his
authority by seizing all of TMS’s assets. According to the complaint, Mr.
Schlossberg seized TMS’s assets and mail even though he knew that Mr. Palencar
was only a twenty-five percent shareholder in TMS and that there were no
grounds to pierce the corporate veil. See Aplt. App. 2 ¶ 21; 4 ¶¶ 38, 41, 44.
Assuming the truth of these allegations, these facts would establish that Mr.
Schlossberg exceeded the scope of his authority, because the West Virginia court
order only vested him with the “actual legal and equitable title to and the right to
obtain record title to and/or liens upon and/or actual physical custody and
possession of all of the assets of . . . Michael Palencar.” Aplt. App. 69 (emphasis
added). While the court order permitted Mr. Schlossberg to collect Mr.
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Palencar’s assets even if they were held in the name of another entity, including
TMS, the court order did not grant Mr. Schlossberg authority to seize assets that
did not belong to Mr. Palencar. In fact, the court could not grant such authority if
the affected individuals or entities were not parties to the proceeding—and TMS
was not party to the Palencars’ divorce proceeding. Aplt. App. 2, ¶¶ 14, 18, 20;
see United States v. Bigford, 365 F.3d 859, 864-65 (10th Cir. 2004)
(“[J]udgments rendered by a court lacking jurisdiction are void.”); West v.
Capitol Fed. Sav. and Loan Ass’n, 558 F.2d 977, 980 (10th Cir. 1977) (“A
personal judgment entered without jurisdiction over the person violates due
process and is void.”). If Mr. Schlossberg did not simply seek to secure Mr.
Palencar’s assets but rather sought to take the assets of TMS absent any colorable
evidence to justify piercing the corporate veil of TMS in such a fashion, then he
exceeded the scope of his authority by not acting in accordance with the court
order and would not enjoy absolute immunity. 3 See Turney, 898 F.2d at 1474; T
& W Inv. Co., 588 F.2d at 802-03.
Second, the complaint alleges that Mr. Schlossberg exceeded the scope of
his authority by committing fraud. In order to adequately allege fraud, “a party
3
After all, unless there is some evidence that TMS was simply Mr.
Palencar’s alter ego, then Mr. Schlossberg must respect TMS’s status as a
separate entity. Eastridge Dev. Co. v. Halpert Assocs., Inc., 853 F.2d 772, 779
(10th Cir. 1988) (“‘Ordinarily, a corporation is a separate entity distinct from that
of individuals comprising it.’” (quoting Amfac Mech. Supply Co. v. Federer, 645
P.2d 73, 77 (Wyo. 1982))).
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must state with particularity the circumstances constituting fraud.” Fed R. Civ. P.
9(b). TMS did so here. In paragraph 78 of the complaint, TMS alleges that
“Schlossberg made the following specific false factual representations,” including
assertions that “Schlossberg was in a position of judicial authority over Teton”
and that he “was vested with title to all the assets, property, mail and confidential
business and corporate information of Teton.” Aplt. App. 8 ¶ 78. TMS also
alleges that Mr. Schlossberg told TMS’s agents that they were “forbidden from
accepting instructions from Teton, and that those agents would be subject to
financial penalties should they do so.” Aplt. App. 8 ¶ 79. Furthermore,
according to the complaint, Mr. Schlossberg made these statements knowing that
they were false and that he had no jurisdiction to exert judicial authority in
Wyoming. Aplt. App. 8 ¶ 80, 83. These allegations, accepted as true, are
sufficient to survive a motion to dismiss because perpetuating a fraud is not
“intrinsically associated with a judicial proceeding.” 4 Valdez, 878 F.2d at 1288.
The foregoing analysis certainly does not resolve the issue of whether Mr.
Schlossberg will ultimately enjoy absolute immunity. Because we are reviewing
4
We acknowledge that the Supreme Court has said that malice or corrupt
motive—at least on the part of judges—is insufficient to destroy absolute
immunity. See Stump, 435 U.S. at 356. Here, however, TMS does not merely
allege that a bad motive underlies an otherwise permissible act. Rather, TMS
alleges that the act itself—the making of fraudulent statements—is not pursuant to
a court order. See Guetschow, 869 F.3d at 1304-05 (finding a court-appointed
receiver to have no absolute immunity where the plaintiff alleged theft).
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the grant of a motion to dismiss, we need only decide whether the complaint
states sufficient facts such that it is plausible that Mr. Schlossberg does not enjoy
absolute immunity. While in many cases it may be clear on a motion to dismiss
whether absolute immunity applies, in this case that issue must be resolved in
further proceedings, once the parties have had the opportunity to develop the facts
through discovery. Here, looking solely to permissible materials at the motion to
dismiss stage, we conclude that TMS has adequately pleaded that Mr. Schlossberg
was not “acting in accordance with and under the protection of a court order.” T
& W Invest. Co., 588 F.2d at 802.
We REVERSE and REMAND for further proceedings consistent with this
order and judgment.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
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EBEL, Circuit Judge, Dissenting.
I respectfully dissent, because I believe that the Barton doctrine does apply
in this case, and thus that the district court lacked jurisdiction over TMS’s
lawsuit.
The Barton doctrine holds that before suit may be brought against a
receiver for acts performed in the receiver’s “official capacity,” “leave of the
court by which [the receiver] was appointed must be obtained.” 1 See Barton v.
Barbour, 104 U.S. 126, 128 (1881) (citing Davis v. Gray, 16 Wall. 203, 83 U.S.
203, 218 (1872) (explaining that an appointing court “will not allow [a receiver]
to be sued touching the property in his charge, nor for any malfeasance as to the
parties, or others, without its consent,” and citing cases)); see also Springer v.
Infinity Group Co., No. 98-5182, 1999 WL 651391, at *1 (10th Cir. Aug. 26,
1999) (unpublished). 2
The doctrine, which is a “jurisdictional fact” in federal court, see Barton,
104 U.S. at 131, applies to lawsuits arising from “acts done in the [receiver’s or]
trustee’s official capacity and within the [receiver’s or] trustee’s authority as an
officer of the court.” In re Triple S Restaurants, Inc., 519 F.3d 575, 578 (6th Cir.
1
The doctrine also applies to trustees in bankruptcy. See In re Crown
Vantage, 421 F.3d 963, 971 (9th Cir. 2005).
2
Springer apparently is the only case this Court has decided on the Barton
doctrine. Because that brief, unpublished Order and Judgment contains no
commentary on or interpretation of the doctrine, however, Barton’s application is
a matter of first impression in this circuit.
2008) (quotation omitted); see also Springer, 1999 WL 651391, at *1 (affirming
application of the doctrine to a lawsuit that sought relief “for acts [a bankruptcy
trustee] did in his official capacity as trustee”); In re Crown Vantage, 421 F.3d
963, 970-71 (9th Cir. 2005) (explaining that the doctrine applies when the lawsuit
is “for acts done in the [receiver’s] official capacity”); Muratore v. Darr, 375 F.3d
140, 145 (1st Cir. 2004) (applying the doctrine where “[t]he different counts in
[the plaintiff’s] complaint all allege [the trustee’s] misconduct in discharging his
trustee’s administrative responsibilities”); Carter v. Rodgers, 220 F.3d 1249, 1252
(11th Cir. 2000) (observing that the Barton rule is triggered by lawsuits “for acts
done in the actor’s official capacity”).
The majority rightly points out that under Barton, “if, by mistake or
wrongfully, the receiver takes possession of property belonging to another, such
person may bring suit therefor against him personally as a matter of right; for in
such case the receiver would be acting ultra vires.” (See O & J at 5-6 (quoting
Barton, 104 U.S. at 134).) Based on this exception to the doctrine, the majority
concludes that because “TMS is alleging that Mr. Schlossberg wrongfully seized
its assets rather than the assets of Mr. Palencar,” and because TMS is an
“independent third party,” Barton does not apply in this case.
Yet immediately after announcing the ultra vires exception to the rule, the
Barton Court distinguished, from that exception, cases in which “claims arise
against the receiver as such, while acting under the powers conferred on him,
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whether for labor performed, for supplies and materials furnished, or for injury to
persons or property.” Barton, 104 U.S. at 134 (emphasis added). What the
Supreme Court appears to be saying is that ordinarily an assignee who wrongfully
takes possession of property of another may be sued, but when the assignee is
acting pursuant to a receivership order of another court, either the claim of
wrongful taking must be brought in the receivership court or permission from the
receivership court must be obtained to bring the suit elsewhere.
Federal courts analyzing subject-matter jurisdiction under the doctrine thus
have looked to whether, in the conduct at issue, receivers or trustees acted “within
the context of” their court-appointed role to “recover[] assets for the estate,”
Triple S Restaurants, 519 F.3d at 578; “were acting within the scope of their
duties,” In re Lowenbraun, 453 F.3d 314, 322 (6th Cir. 2006); allegedly
committed torts “unrelated to and outside the scope of the bankruptcy
proceeding,” Muratore, 375 F.3d at 147 (quotation omitted); or allegedly engaged
in misfeasance “stemming from their official bankruptcy duties,” Carter, 220 F.3d
at 1253. See also Muratore, 375 F.3d at 147-48 (refusing to recognize a
“generalized tort exception to the Barton doctrine”); Lowenbraun, 453 F.3d at 322(adopting a presumption that “acts were part of the trustee’s [court-ordered]
duties unless Plaintiff initially alleges at the outset facts demonstrating
otherwise”).
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Our determination of whether the district court lacked subject-matter
jurisdiction over TMS’s lawsuit thus turns simply on the question of whether the
lawsuit arises from actions that Roger Schlossberg (“Schlossberg”) performed
within the authority of his court-appointed role as a receiver. The West Virginia
Family Court, which appointed Schlossberg during the Michael Palencar
(“Palencar”) divorce proceeding, explained that authority and role as follows.
Having in a February 2003 order “adjudged and ordered” that Schlossberg “shall
seize any assets that [Palencar] has an ownership interest therein” (Aplt. App. at
26 (emphasis added)), the court in January of 2004 issued an amended order that
recited and affirmed the terms of the February 2003 order and added,
It was and remains the intention of the Court by the aforesaid
appointment of Roger Schlossberg both as Trustee and as Special
Receiver that [Schlossberg] be vested with the broadest possible
powers of a Trustee or Receiver 1 acting within the equitable power of
this Court and the common law of this State to investigate the
financial and other affairs of [Palencar] and to be vested with actual
legal and equitable title to and the right to obtain record title to
and/or liens upon and/or actual physical custody and possession of
all of the assets of [Palencar] (whether held by [Palencar], either
alone or jointly with any other person or entity, in his own name or
in the name of any alias . . . or in the name of any other entity,
including, inter alia, . . . Teton Millwork Sales) as is required to
satisfy by sale, liquidation or other execution the aforesaid Judgment
and all of the other Orders heretofore entered in these proceedings
and as hereafter may be entered with respect to the existing and
prospective obligations of [Palencar].
1
Including the right to receive all mail addressed in any fashion to
[Palencar], either alone or jointly with any other person, in his own
name or in the name of any alias . . . or in the name of any other
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entity through which [Palencar] conducts his financial affairs
(including . . . Teton Millwork Sales).
(Id. at 69.)
The family court went on, in the amended order, to “take note” that certain
of Palencar’s assets were located outside of West Virginia and perhaps outside of
the United States. (Id. at 70.) The court explained, “[i]n order to give full force
and effect to the powers herein granted to the Trustee/Special Receiver, it is the
express contemplation of this Court that [Schlossberg] shall act outside the
territorial limitations of this State.” (Id. at 70.) The court then ordered that
Schlossberg’s appointment as Trustee and Special Receiver, “for those purposes
and with those powers above-explicated,” be “ratified and confirmed,” and further
“[o]rdered, that [Schlossberg] expressly is authorized and directed forthwith to
take such action as may appear necessary or desirable to obtain ancillary
jurisdiction of these proceedings in such other States of the United States . . . as
may appear appropriate.” (Id,)
The West Virginia Family Court clearly intended for Schlossberg to have
the broadest possible authority to act on its already broad orders, and for him to
act outside West Virginia–including in seizing the mail and the assets of TMS,
which the court named specifically in its order. Furthermore, the order directed
Schlossberg to seize not simply assets that Palencar held unilaterally and in his
own name, but also “any assets” in which he “ha[d] an ownership interest,”
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including assets held “jointly with any other person or entity, in his own name or
in the name of any alias . . . or in the name of any other entity, including, inter
alia, . . . Teton Millwork Sales.” (Id. at 26, 29.)
As the majority opinion makes clear, TMS’s complaint alleged not that
Schlossberg was acting outside the context of this expansive court-appointed role,
nor that he committed torts unrelated to and beyond the scope of that role, but
rather that he engaged in misfeasance stemming from his broad official duties.
See Triple S Restaurants, 519 F.3d at 578; Muratore, 375 F.3d at 147; Carter, 220
F.3d at 1253. Thus, TMS alleged that “Schlossberg seized TMS’s assets and mail
even though he knew that Mr. Palencar was only a twenty-five percent
shareholder in TMS and that there were no grounds to pierce the corporate veil”;
that Schlossberg misrepresented to TMS employees that he was “in a position of
judicial authority over Teton and . . . vested with title to all the assets, property,
mail, and confidential business and corporate information of Teton”; and that
Schlossberg misrepresented to TMS employees that they “were forbidden from
accepting instructions from Teton, and that [they] would be subject to financial
penalties if they should do so.” (O & J at 12-13 (quotations omitted).)
The majority concludes that these allegations demonstrate “that
Schlossberg acted beyond the scope of his authority by wrongfully seizing assets
that did not belong to Palencar.” (Id. at 5.) Yet that conclusion fails to account
for the plain language of the order, which authorized and directed Schlossberg to
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seize not only assets that “belong[ed] to Palencar” outright or even jointly with
others (id. at 5, 11), but also “any assets that [Palencar] has an ownership interest
therein” (Aplt. App. at 26) (emphasis added). An order to seize assets in which
Palencar has an ownership interest is patently not equivalent to a court order to
seize assets that Palencar owns outright. 3 As the Complaint alleged, Schlossberg
knew that Palencar had a 25% ownership interest in TMS. (O & J at 11.)
Therefore, by its explicit terms, the West Virginia Family Court Order authorized
Schlossberg to seize TMS assets, because Palencar “ha[d] an ownership interest
therein.”
The majority objects that a judicial order that would authorize such a
seizure would be illegal, because TMS was not a party to the divorce proceeding
that produced the order. (O & J at 12, citing cases.) Indeed, much–if not most–of
TMS’s complaint is similarly devoted simply to alleging that the West Virginia
Family Court did not have jurisdiction over TMS, and thus could not legitimately
order Schlossberg to seize TMS’s mail or assets (so that Schlossberg, in turn, was
not acting pursuant to a valid court order when he did seize that mail and those
assets). (See Compl. ¶¶ 17-20, 25-35, 38-40, 45-54, 62-70 (Aplt. App. 1-5).)
However, the Jefferson County, West Virginia, Circuit Court had already decided
3
Similarly, if Palencar had held a 25% ownership interest in a house, the
explicit terms of the court order would have directed Schlossberg to seize the
house itself–the asset in which Palencar had an ownership interest.
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in Palencar’s and TMS’s 2005 lawsuit against Judge Wertman, who appointed
Schlossberg, that the family court acted within its jurisdiction in issuing the
orders appointing Schlossberg and directing him to act as it did. (Aplt. App. at
102-107.) Having failed to appeal the West Virginia Circuit Court’s decision,
TMS may not now relitigate, on the ground that it is a putatively “independent
third party” (see O & J at 6), the issue of whether the family court had
jurisdiction to order Schlossberg to seize TMS’s assets. 4 See In re Scrivner, 535
F.3d 1258, 1266 (10th Cir. 2008) (summarizing the doctrine of issue preclusion).
For our purposes, the dispositive facts are simply that the family court
issued orders appointing Schlossberg Special Receiver and directing him to act;
those orders were adjudicated valid in a case to which TMS was a party and
which TMS did not appeal; and according to the allegations in the Complaint,
Schlossberg performed the expansive duties–including seizing “any assets that
[Palencar] has an ownership interest therein”–that the orders directed him to
perform. If, while thus “acting under the powers conferred on him,” Schlossberg
allegedly committed torts or other misfeasance resulting in “injury to persons or
4
If Schlossberg were alleged to have seized the assets of a true stranger to
the West Virginia Family Court orders–if he were alleged, for instance, to have
seized the assets of a corporation in which Palencar did not hold an ownership
interest–I would agree with the majority’s invocation of the ultra vires exception
to the Barton doctrine. The plain language of those orders, however–regardless of
this Court’s or TMS’s opinion as to their legality–makes clear both that TMS was
not such a stranger and that Schlossberg was acting as the court directed him to
act.
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property,” Barton, 104 U.S. at 134, the Barton doctrine dictates that TMS must
procure the permission of the West Virginia Family Court before it may sue
Schlossberg outside that forum.
At oral argument, counsel for TMS suggested that Barton should not apply
in this case because the res that Schlossberg held in his role as receiver has now
been fully distributed. Our sister circuits that have considered this argument have
rejected it, concluding that the Barton doctrine “serves additional purposes even
after the . . . case has been closed and the assets are no longer in the trustee’s
hands.” Muratore, 375 F.3d at 147.
Without the requirement [imposed by the Barton doctrine],
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 . . . .
Furthermore, requiring that leave to sue be sought enables
[appointing] judges to monitor the work of the trustees more
effectively. It does this by compelling suits growing out of that work
to be as it were prefiled before the [appointing] judge . . . ; this helps
the judge decide whether to approve this trustee in a subsequent case.
In re Linton, 136 F.3d 544, 545 (7th Cir. 1998); see also Crown Vantage, 421
F.3d at 972; Carter, 220 F.3d at 1252-53. I agree with this reasoning, and would
hold that if the doctrine otherwise applies, as it does in this case, it applies even
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when a “case has been closed and the assets are no longer in the trustee’s [or
receiver’s] hands.” 5 Muratore, 375 F.3d at 147.
I would vacate the district court’s order and remand with instructions for
the district court to dismiss TMS’s lawsuit for lack of subject-matter jurisdiction.
Therefore, I would not reach the Rule 12(b)(6) dismissal. 6
5
In this case, the West Virginia Family Court also indemnified Schlossberg
against expenses “suffered or incurred by him in connection with his defense of a
claim asserted against him . . . . arising from or related to his alleged performance
or nonperformance of his duties as Trustee or Special Receiver in this action.”
(Aplt. App. 73-74.) Therefore, although Schlossberg’s receivership has been
terminated, it appears that a judgment against him arising from his performance
of his receivership duties might, in fact, affect the res he once held, even though
it has already been distributed.
6
If I were to reach that issue, however, I would conclude that for
substantially the same reasons that inform my Barton analysis–i.e., that TMS has
not alleged sufficient facts to make a plausible claim that Schlossberg was not
acting pursuant to a valid judicial order–the district court correctly dismissed the
case on the ground that Schlossberg is entitled to absolute quasi-judicial
immunity.
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