Harris v. Wittman ( 2009 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In the Matter of: JEAN LEONARD 
HARRIS,
Debtor,
JEAN LEONARD HARRIS,
Appellant, No. 07-56310
v.  D.C. No.
CV-06-01939-WQH
SANDRA WITTMAN, an individual;
JACK SWAIN, an individual; PYLE OPINION
SIMS DUNCAN & STEVENSON, a
Professional Corporation; GRANT
& ZEKO, a Professional
Corporation,
Appellees.

Appeal from the United States District Court
for the Southern District of California
William Q. Hayes, District Judge, Presiding
Argued and Submitted
November 3, 2009—Pasadena, California
Filed December 21, 2009
Before: Ronald M. Gould and Carlos T. Bea, Circuit Judges,
and Donald W. Molloy,* District Judge.
Opinion by Judge Bea
*The Honorable Donald W. Molloy, United States District Judge for the
District of Montana, sitting by designation.
16657
16660 IN THE MATTER OF HARRIS
COUNSEL
M. Lance Jasper, Munger, Tolles & Olson, LLP, Los Angeles,
California, for Jean Leonard Harris, the plaintiff-appellant.
IN THE MATTER OF HARRIS 16661
Eric R. Deitz, Wingert Grebing Brubaker & Goodwin, LLP,
San Diego, California, for Sandra Wittman, defendant-
appellee. Manuel Corrales, Jr., Law Office of Manuel Cor-
rales, Jr., San Diego, California, for Jack Swain, defendant-
appellee. Robert F. Semmer, Coughlan, Semmer & Lipman,
LLP, San Diego, California, for Pyle Sims Duncan & Steven-
son, APC, defendant-appellee. Daniel M. White, White, Oli-
ver & Amundson, APC, San Diego, California, for Grant &
Zeko, APC, the defendant-appellee.
OPINION
BEA, Circuit Judge:
Appellant Jean Leonard Harris (“Harris”) was the
petitioner-debtor in a now-closed Chapter 7 bankruptcy case.
Here, he sued the bankruptcy trustee and other estate repre-
sentatives for breach of contract. Harris alleges the bank-
ruptcy trustee and her agents breached a contract that was
entered into during the course of his underlying bankruptcy
case and was directly related to the administration of bank-
ruptcy estate assets.
This appeal requires us to answer whether the bankruptcy
court had subject matter jurisdiction over this state law breach
of contract claim, and whether the bankruptcy court’s
approval of the acts Harris now alleges breached the contract
entitle the defendants to derived quasi-judicial immunity. We
answer yes to both questions and so we affirm.
I. Factual and Procedural History
In July 1999, appellant Harris filed a voluntary petition for
bankruptcy relief under Chapter 7 of the United States Bank-
ruptcy Code in the United States Bankruptcy Court, Southern
District of California. The bankruptcy court appointed appel-
16662 IN THE MATTER OF HARRIS
lee Sandra Wittman (“Wittman”) as trustee of the bankruptcy
estate (the “estate”) shortly thereafter.
In March 2000, Wittman filed an adversary proceeding
against Harris and his wife, Mrs. Harris, for fraudulent con-
veyance. Wittman’s complaint alleged the transfer from Har-
ris to Mrs. Harris in June 1999—the month before he filed his
voluntary bankruptcy petition—of a 1957 Mercedes-Benz, as
well as a storage business and related property called Alpine
Personal Storage (the “Alpine property”), was voidable and
recoverable by the estate.
Trustee Wittman then entered into an Agreement for Use
and Assignment of Interests and Prosecution of Claims (the
“Assignment Agreement”) with appellee Jack Swain, an unse-
cured creditor of the estate, which assigned to Swain the right
to prosecute the adversary proceeding to set aside the alleged
fraudulent conveyance. In exchange, Swain was to be paid
68% of the net recovery he obtained, and to be reimbursed for
any of his costs. The Assignment Agreement also specified
that Swain’s counsel—the law firms of Pyle, Sims, Duncan &
Stevenson, APC; and Grant & Zeko, APC (the “Attorney
defendants”)—would be entitled to recover their attorneys’
fees from the estate. Wittman filed a motion for the bank-
ruptcy court to approve the Assignment Agreement and
appoint Swain as Special Representative of the estate. Harris
received notice of the time and place of the motion. The bank-
ruptcy court granted the motion, specifically approving all
aspects of the Assignment Agreement, including the Attorney
defendants’ attorneys’ fees.
In November 2002, Harris, Mrs. Harris, Sandra Wittman,
and Jack Swain executed a written agreement that settled all
the proceedings in the case (the “Settlement Agreement”).
The bankruptcy court approved the Settlement Agreement in
January 2003. According to the terms of that agreement, Har-
ris and Mrs. Harris were required to transfer title to the Alpine
property and the 1957 Mercedes-Benz to the bankruptcy
IN THE MATTER OF HARRIS 16663
estate. However, Mrs. Harris retained an allowed secured
claim for $218,000 as a lien against the Alpine property. Fur-
ther, Wittman was not to sell the Alpine property unless the
sale would yield sufficient funds to pay Mrs. Harris’s said
secured claim in full. As a final matter, the parties agreed to
execute written mutual releases of any and all claims each had
against the other that had arisen as of the date of the execution
of the Settlement Agreement. A written release between
Swain and Wittman, on the one hand, and Mr. and Mrs. Har-
ris, on the other, was executed on November 22, 2002. The
written release stated “the Parties agree this Agreement is a
complete release of all claims the Parties have against one
another arising from the . . . Bankruptcy.”
On May 2, 2003, Wittman filed a Notice of Motion and
Motion for Sale of Personal Property under 11 U.S.C.
§ 363(b), seeking an order permitting her to sell the Alpine
property and the 1957 Mercedes-Benz to Swain. In support of
her motion, Wittman filed a sworn declaration that stated the
sale would be in the best interest of the bankruptcy estate
because Swain would pay the estate $125,000; pay Mrs. Har-
ris’s $218,000 claim at the close of the sale of the Alpine
property to satisfy her secured claim against the Alpine prop-
erty, thereby relieving the estate of this liability; waive
Swain’s own claims against the estate for his costs and fees
from the fraudulent conveyance proceeding; and assume the
estate’s liability for the attorneys’ fees of the Attorney defen-
dants. Altogether, Swain’s waiver of claims and assumption
of liability totaled around $900,000. Wittman’s notice of sale
set out a detailed accounting of the source of the estate liabili-
ties that Swain was assuming. As in all noticed bankruptcy
motions, Harris received notice of this motion.
The bankruptcy court approved the sale after a hearing on
June 30, 2003. The court noted that the sale was free and clear
16664 IN THE MATTER OF HARRIS
of Mrs. Harris’s secured claim and that Jack Swain was to pay
her claim in full at the close of the sale of the Alpine property.1
Almost three years later, on May 2, 2006, Harris filed the
present suit in California state court in the Superior Court for
the County of San Diego. He alleged breach of contract,
breach of fiduciary duty, fraud, negligent misrepresentation,
and constructive fraud. Harris alleged that Wittman, Swain,
and the Attorney defendants breached the Settlement Agree-
ment in two ways: (1) by agreeing that Swain and the Attor-
ney defendants were entitled to approximately $1 million in
“contrived claims” against the estate stemming from the
fraudulent conveyance proceeding because those claims had
already been released by the Settlement Agreement, and (2)
by Wittman’s sale of the Mercedes-Benz and the Alpine prop-
erty to Swain in exchange for $125,000 and the release of the
one million in “contrived claims.”
On May 15, 2006, Wittman successfully removed the case
to the bankruptcy court that was administering Harris’s estate.
Harris filed a motion for remand, which was denied. All of
the defendants filed motions to dismiss the complaint under
Federal Rule of Civil Procedure 12(b)(6) on the grounds that:
(1) the complaint was barred under the Barton doctrine due to
Harris’s failure to obtain approval of the bankruptcy court
prior to filing suit in state court, and (2) each defendant was
entitled to derived quasi-judicial immunity as a result of the
entry of the June 30, 2003 order, which approved the sale of
the assets.
While the motions to dismiss were pending, Harris
amended his complaint and eliminated all claims for relief
except the breach of contract claim, which remained exactly
as it was in the original complaint.
1
The record does not establish whether Swain actually paid Mrs. Harris.
IN THE MATTER OF HARRIS 16665
The bankruptcy court dismissed the complaint with respect
to each defendant. The court held that (1) Harris’s breach of
contract claim was a core proceeding pursuant to 28 U.S.C.
§ 157(b)(2)(A), (N) and (O); (2) it had jurisdiction over the
core proceeding pursuant to 28 U.S.C. § 1334; (3) Harris’s
complaint had to be dismissed under the Barton doctrine
because Harris had not sought leave of the bankruptcy court
before suing in state court; and (4) Wittman, Swain and the
Attorney defendants were entitled to derived quasi-judicial
immunity because the bankruptcy court had originally
approved all aspects of the sale of the property.
Harris appealed this decision to the United States District
Court for the Southern District of California. The district
court affirmed on the same grounds. This timely appeal fol-
lowed.
II. Jurisdiction and Standard of Review
This is an appeal from a final order of the district court
affirming the bankruptcy court’s grant of defendants’ motions
to dismiss for failure to state a claim for relief. We have juris-
diction under 28 U.S.C. § 1291.
We review the district court’s acceptance of subject matter
jurisdiction de novo, while reviewing any factual findings for
clear error. In re Harris Pine Mills, 44 F.3d 1431, 1434 (9th
Cir. 1995). We review de novo the grant of a motion to dis-
miss for failure to state a claim for relief. Knievel v. ESPN,
393 F.3d 1068, 1072 (9th Cir. 2005).
III. Analysis
A. The bankruptcy court had subject matter jurisdic-
tion to adjudicate Harris’s state law contract claim.
A bankruptcy court’s jurisdiction is established by statute.
28 U.S.C. § 1334(b) gives federal district courts subject mat-
16666 IN THE MATTER OF HARRIS
ter jurisdiction over “all civil proceedings arising under title
11, or arising in or related to cases under title 11.”2 28 U.S.C.
§ 157(a) allows district courts to refer any of these proceed-
ings to bankruptcy courts.
[1] However, because bankruptcy judges are not Article III
judges, the Constitution limits their ability to adjudicate—i.e.,
to render a final judgment—to issues that are at the “core” of
the bankruptcy power.3 Because of this limitation, 28 U.S.C.
§ 157(b)(1) provides bankruptcy judges authority to make
binding decisions only in “core proceedings”4 that arise under
or arise in a case under Title 11. A bankruptcy judge may hear
a non-core proceeding that is otherwise related to a case under
Title 11, but there, the bankruptcy judge may make only pro-
posed findings of fact and conclusions of law to the district
judge, who reviews all non-core matters de novo. 28 U.S.C.
§ 157(c)(1).
2
Title 11 of the United States Code contains the entire bankruptcy code.
This includes Chapter 7, Chapter 11, and Chapter 13 bankruptcy cases.
3
See Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458
U.S. 50 (1982) (plurality opinion). Northern Pipeline filed bankruptcy, and
shortly thereafter filed in the bankruptcy court a suit against Marathon for
breach of contract relating to a pre-petition contract and pre-petition con-
duct of Marathon. Id. at 56. Marathon objected to the bankruptcy court’s
exercise of jurisdiction over the claim because the bankruptcy judges
lacked the constitutional protections of Article III—salary protection and
life tenure. Id. at 56-57. The Supreme Court, without majority opinion,
held that bankruptcy court jurisdiction over the claim was unconstitu-
tional. Id. at 87. Part of the rationale for the plurality was that Article III
required the federal judicial power to be exercised by Article III judges
with three exceptions: (1) territorial courts, (2) courts-martial for the mili-
tary, and (3) disputes involving public rights as opposed to private rights.
Id. at 65-70. However, Marathon has been interpreted narrowly. A major-
ity of the Court in a later case clarified the holding in Marathon was only
that “Congress may not vest in a non-Article III court the power to adjudi-
cate, render final judgment, and issue binding orders in a traditional con-
tract action arising under state law.” Thomas v. Union Carbide Agric.
Prods. Co., 473 U.S. 568, 584 (1985) (emphasis added).
4
The statute provides a non-exclusive list of core proceedings at 28
U.S.C. § 157(b)(2)(A)-(P).
IN THE MATTER OF HARRIS 16667
1. Harris’s claim arose in his Chapter 7 bankruptcy
case; therefore, the bankruptcy court could hear
it.
[2] “Arising under” and “arising in” jurisdiction are terms
of art. “Congress used the phrase ‘arising under title 11’ to
describe those proceedings that involve a cause of action cre-
ated or determined by a statutory provision of title 11.” Harris
Pine Mills, 44 F.3d at 1435. Harris’s breach of contract claim
is not created or determined by Title 11; it is a common law
action, therefore it does not qualify for “arising under” juris-
diction. The bankruptcy court, thus, had authority to hear Har-
ris’s claim only if the claim arose in his bankruptcy case. See
28 U.S.C. §§ 1334(b) & 157(a).
[3] A civil proceeding “arises in” a Title 11 case when it
is not created or determined by the bankruptcy code, but
where it would have no existence outside of a bankruptcy
case. Harris Pine Mills, 44 F.3d at 1435. A state law contract
claim could exist independent of a bankruptcy case, but “an
action against a bankruptcy trustee for the trustee’s adminis-
tration of the bankruptcy estate could not.” Id. at 1437.
In Harris Pine Mills, the plaintiff sued the bankruptcy
trustee and the trustee’s agents in Oregon state court. Id. at
1434. The plaintiff alleged state law tort claims consisting of
fraud, negligence, and negligent misrepresentation surround-
ing the trustee’s sale of one of the estate assets the plaintiff
unsuccessfully attempted to purchase. Id. The trustee removed
the case to federal district court, and sought to have the case
referred to the bankruptcy court. Id. Plaintiff objected and
moved to remand the case back to state court. Id. The district
court denied the motion to remand and determined that it had
jurisdiction under § 1334(b) because the state law claims
arose in the bankruptcy case. Id. We affirmed.5 Id. at 1438.
5
As discussed infra, the court also determined that the state law claims
were core bankruptcy proceedings. Harris Pine Mills, 44 F.3d at 1438.
16668 IN THE MATTER OF HARRIS
Because the plaintiff sued the bankruptcy trustee for the trust-
ee’s conduct in administering the bankruptcy estate, the state
law claims arose in the bankruptcy case and were subject to
federal jurisdiction. Id.[4] Here, although this is a state law cause of action, Har-
ris’s claim arose in his bankruptcy case because it could not
exist independently of his bankruptcy case. Harris alleged that
Wittman, the bankruptcy trustee, breached the Settlement
Agreement by selling bankruptcy estate assets that she had
agreed not to sell, in exchange for Swain’s release of his
claims against the estate and his assumption of other estate
liabilities that Harris alleges were already released by the Set-
tlement Agreement. Harris’s claim is similar to the state law
tort claims in Harris Pine Mills. Therefore, Harris’s state law
contract claim arose in his bankruptcy case, and it could be
referred to the bankruptcy court.
2. This is a “core” bankruptcy proceeding; there-
fore, the bankruptcy court could make binding
determinations.
[5] Core proceedings are listed in the statute at 28 U.S.C.
§ 157(b)(2). They include but are not limited to: matters con-
cerning the administration of the estate, Id. § 157(b)(2)(A);
orders approving the sale of property, Id. § 157(b)(2)(N); and
other proceedings affecting the liquidation of the assets of the
estate, Id. § 157(b)(2)(O). Subsections (A) and (O) are consid-
ered the “catchall” provisions, whereas subsections (B)-(N)
are considered the more specific provisions. In re Castlerock
Properties, 781 F.2d 159, 161 (9th Cir. 1986). “A determina-
tion that a proceeding is not a core proceeding shall not be
made solely on the basis that its resolution may be affected by
State law.” 28 U.S.C. § 157(b)(3). Here, the district court
found that Harris’s claim was a core bankruptcy proceeding
under subsections (A), (N), and (O). However, the district
court erred with respect to subsection (N)—orders approving
the sale of property—because Harris’s breach of contract
IN THE MATTER OF HARRIS 16669
claim does not challenge the bankruptcy court’s order approv-
ing the sale of estate assets. Rather, Harris alleges breaches of
contract on the basis of Wittman’s conduct in selling the
assets, and Swain’s and the Attorney defendants’ conduct in
claiming previously released claims. Thus, there is core juris-
diction only if either subsection (A) or (O) is satisfied.
As discussed above, we concluded in Harris Pine Mills that
the plaintiff’s state law tort claims against the trustee for the
trustee’s conduct surrounding the sale of estate assets arose in
the bankruptcy case. 44 F.3d at 1438. We also concluded that,
under subsections (A) and (O), plaintiff’s post-petition state
law claims asserted against the bankruptcy trustee for conduct
inextricably intertwined with the trustee’s sale of estate assets
were core proceedings. Id. We reasoned that the trustee’s sale
of the bankruptcy estate’s assets was a core proceeding
because it fell within the literal wording of § 157(b)(2)(A),
matters concerning the administration of the estate. Id. at
1437; see also In re Arnold Print Works, Inc., 815 F.2d 165(1st Cir. 1987) (holding that a post-petition contract claim
arising from the trustee’s sale of estate assets “falls within the
literal wording of 28 U.S.C. § 157(b)(2)(A) ‘matters concern-
ing the administration of the estate,’ because it involves a
claim that arose out of the administrative activities of [the trust-
ee]”).6
6
In Arnold Print Works, the debtor—Arnold Print Works—filed for
bankruptcy but continued to manage its property as a debtor-in-possession.
815 F.2d at 167. As part of an effort to administer the estate, Arnold Print
Works sold some of its assets—printing rollers—to Apkin. Id. Apkin
believed that Arnold Print Works had misrepresented the quality of the
rollers, and refused to pay $9,000 of the $20,000 purchase price. Id.Arnold Print Works sued Apkin in bankruptcy court for breach of contract.
Id. The First Circuit held that this post-petition state law contract claim
was a core proceeding under the literal wording of 28 U.S.C.
§ 157(b)(2)(A) because the claim arose out of Arnold Print Works’ actual
administration of the estate in selling assets. Id at 168. The court also con-
cluded that exercising jurisdiction over post-petition state law contract
claims about the administration of the estate posed no problem under Mar-
athon. Id. at 170-71.
16670 IN THE MATTER OF HARRIS
[6] The facts in Harris’s case are very similar to those in
Harris Pine Mills. There, the plaintiff alleged the trustee’s
sale of estate assets was fraudulent. Here, Harris alleges the
trustee’s sale of estate assets was a breach of contract. Both
causes of action arose from the trustee’s post-petition conduct
pursuant to the trustee’s duty to administer the bankruptcy
estate. Furthermore, because Swain paid for the assets in part
by releasing his claims against the estate, and assuming the
estate’s liability for the Attorney defendants’ attorneys’ fees,
Swain’s and the Attorney defendants’ alleged breach of con-
tract in “contriving” those claims was inextricably intertwined
with the sale of estate assets. Under Harris Pine Mills, there-
fore, Harris’s proceeding is a core proceeding under
§ 157(b)(2)(A) because the breach of the Settlement Agree-
ment was inextricably intertwined with the sale of estate
assets—the literal administration of the bankruptcy estate.
[7] Although Harris Pine Mills appears to be directly on
point and provides for core jurisdiction, Harris contends that
an older Ninth Circuit opinion, Castlerock, prevents the con-
clusion that core jurisdiction exists over a state contract claim
where that claim qualifies as a core proceeding only under
subsection (A) or (O). In Castlerock, the state law contract
action was already pending in state court when Castlerock
filed for bankruptcy; at that point, the claim was automatically
stayed. 791 F.2d at 160. The plaintiff filed for relief from the
stay, but the bankruptcy court elected to try the claim as well
as Castlerock’s counterclaims. Id. The plaintiff objected to the
bankruptcy court’s jurisdiction over the state law claims at the
pretrial conference, citing the Supreme Court’s decision in
Marathon for the proposition that bankruptcy jurisdiction
over the claims was unconstitutional. The bankruptcy court
nevertheless tried the state law claims and entered judgment
for Castlerock. On appeal, the district court held the bank-
ruptcy court did not have jurisdiction over the claims. Id. We
affirmed, stating: “we hold that state law contract claims that
do not specifically fall within the categories of core proceed-
ings enumerated in 28 U.S.C. § 157(b)(2)(B)-(N) are related
IN THE MATTER OF HARRIS 16671
proceedings under § 157(c) even if they arguably fit within
the literal wording of the two catch-all provisions, sections
§ 157(b)(2)(A) and (O).” 781 F.2d at 162 (emphasis added).
Harris contends this precludes core proceeding jurisdiction
over his state law contract claim because the claim does not
fall within one of the specific provisions of
§ 157(b)(2)(B)-(N). Harris is correct that core proceeding
jurisdiction in his case exists only under the “catchall” provi-
sions (A) and (O), not the specific provision (N), as discussed
above. Thus, at first blush, it appears Harris’s state law con-
tract claim should not be considered a core proceeding under
Castlerock, despite the similarity to Harris Pine Mills.
[8] However, at second blush, our holding in Castlerock is
not as broad as Harris contends, and it certainly does not
entirely eliminate subsections (A) and (O) of the statute from
ever providing core proceeding jurisdiction to bankruptcy
courts over state law contract claims. Rather, our main con-
sideration to reach the holding in Castlerock was that “a court
should avoid characterizing a proceeding as ‘core’ if to do so
would raise constitutional problems.” Id. Thus, the court con-
cluded the “catchall” provisions should be interpreted nar-
rowly in light of the Supreme Court’s decision in Marathon.
Id. Because exercising jurisdiction over the contract claim in
Castlerock would have posed the same problem as the con-
tract claim in Marathon, the Castlerock court was “persuad-
ed” that the contract claim did not fall into either subsection
(A) or (O) of § 157(b)(2), even if it arguably fell within a
broad reading of those sections. Id. Thus, we held that state
law contract claims that only “arguably fit within the literal
wording of the two catchall provisions” should be considered
non-core. Id. (emphasis added). Essentially, Castlerock holds
that, under principles of constitutional avoidance, the other-
wise broad “catchall” provisions of bankruptcy court core
jurisdiction should be interpreted narrowly, not that there are
no circumstances under which the “catchall” provisions can
provide core jurisdiction. Id. at 162; see In re Mankin, 823
16672 IN THE MATTER OF HARRIS
F.2d 1296, 1301 n.3 (9th Cir. 1987) (stating that Castlerock
held only that a proceeding should not be characterized as
core if to do so would raise constitutional problems and if a
proceeding only “arguably” fell within one of the two catchall
provisions).
[9] Here, Castlerock does not apply. First, Harris’s state
law contract claim does not arguably fall within
§ 157(b)(2)(A). Rather, our precedent compels the conclusion
it literally falls within it. As the court in Harris Pine Mills
noted, the sale of bankruptcy estate assets is an administrative
activity of the bankruptcy trustee. 44 F.3d at 1437-38; see
also Arnold Print Works, 815 F.2d at 168 (holding the sale of
estate assets falls within the literal wording of subsection
(A)). Therefore, Harris’s claim does not just “relate” to the
administration of the estate, his suit necessarily involves how
the bankruptcy estate was administered. This is not like the
pre-petition contract suits in Castlerock and Marathon that
only arguably related to the administration of the estate
because one of the parties to the contract was in bankruptcy.
See Marathon, 458 U.S. at 90 (Rehnquist, J., concurring in the
judgment) (“The lawsuit is before the Bankruptcy Court only
because the plaintiff has previously filed a petition for reorga-
nization in that court.”). Harris’s breach of contract claim
arose from the administration of his bankruptcy estate.
Castlerock, like Marathon, involved breach of contract claims
that arose before and independent of the administration of
bankruptcy assets.
[10] Furthermore, unlike in Castlerock, there is no potential
Article III problem under the Supreme Court’s decision in
Marathon with the bankruptcy court’s exercise of jurisdiction
over Harris’s post-petition contract claim. There was no
majority opinion in Marathon. The plurality reasoned that pri-
vate right suits, as opposed to public right suits, must be adju-
dicated by Article III courts, and that “Northern’s right to
recover contract damages to augment its estate is one of pri-
vate right.” Marathon, 458 U.S. at 71 (internal quotation mark
IN THE MATTER OF HARRIS 16673
omitted). But a majority of the Court in a later case clarified
that the holding in Marathon was only that “Congress may
not vest in a non-Article III court the power to adjudicate, ren-
der final judgment, and issue binding orders in a traditional
contract action arising under state law.” Thomas v. Union
Carbide Agric. Prods. Co., 473 U.S. 568, 584 (1985) (empha-
sis added).
[11] Although the Ninth Circuit has not yet addressed
whether post-petition contract claims arising from the trust-
ee’s sale of assets pass constitutional muster under Marathon,
the First Circuit has held that they do. See Arnold Print
Works, 815 F.2d at 170-71. The Arnold Print Works court
held “[t]he Constitution permits a non-Article III bankruptcy
court to adjudicate post-petition claims related to administra-
tion or liquidation of a debtor’s estate because the claims are
. . . distinguishable from those at issue in Marathon.” Id. at
169. The First Circuit reasoned that the pre-petition “tradi-
tional” contract at issue in Marathon was distinguishable from
a contract entered into post-petition with the bankruptcy
trustee and made under the supervision of the bankruptcy
court because the latter are not traditional contracts under
state law Id. at 170. Rather, because the trustee is an officer
of the court, and because the contract was approved by the
bankruptcy court, such a post-petition contract is much more
like a public rights case than a private rights case. Id.[12] The First Circuit’s reasoning is equally applicable
here. Harris’s contract claim is not a “traditional” contract
action because the Settlement Agreement he claims was
breached only came into being post-petition and was made
with the trustee and Special Representative of the estate. Fur-
ther, its terms directly related only to the administration of the
bankruptcy estate. Harris’s claim is thus distinguishable from
the suit at issue in Marathon, and there is no problem with a
bankruptcy court exercising jurisdiction over it. Because there
is no constitutional problem under Marathon, and because
Harris’s contract suit more than “arguably” fits within subsec-
16674 IN THE MATTER OF HARRIS
tion (A), Castlerock does not apply and core proceeding juris-
diction existed under our holding in Harris Pine Mills.
B. The district court erred when it dismissed Harris’s
suit for lack of subject matter jurisdiction under
the Barton doctrine.
[13] The district court erred when it affirmed the bank-
ruptcy court’s dismissal of Harris’s suit for lack of subject
matter jurisdiction under the Barton doctrine, because the
Barton doctrine is not a ground to dismiss a suit that is pro-
ceeding in the appointing bankruptcy court. As applied in the
Ninth Circuit, the Barton doctrine requires “that a party must
first obtain leave of the bankruptcy court before it initiates an
action in another forum against a bankruptcy trustee or other
officer appointed by the bankruptcy court for acts done in the
officer’s official capacity.” In re Crown Vantage, Inc., 421
F.3d 963, 970 (9th Cir. 2005) (emphasis added). Without
leave of the court that appointed the trustee (the “appointing
court”), “the other forum lack[s] subject matter jurisdiction
over the suit.” Id. at 971 (emphasis added). That is to say, “[a]
court other than the appointing court has no jurisdiction to
entertain an action against the trustee for acts within the trust-
ee’s authority as an officer of the court without leave of the
appointing court.” Id. at 974 (emphasis added). The rationale
for this doctrine is that “[t]he requirement of uniform applica-
tion of bankruptcy law dictates that all legal proceedings that
affect the administration of the bankruptcy estate be brought
either in bankruptcy court or with leave of the bankruptcy
court.” Id. at 971 (emphasis added).
Here, it is undisputed that Harris did not seek leave of the
appointing court before filing his claim in state court. As a
result, when the case was removed to bankruptcy court, the
bankruptcy court held that, under the Barton doctrine, even as
the appointing court, it did not have subject matter jurisdiction
to hear Harris’s claim, and so dismissed the suit.
IN THE MATTER OF HARRIS 16675
This was error, however, because, absent leave of the
appointing court, the Barton doctrine denies subject matter
jurisdiction to all forums except the appointing court. The
Barton doctrine is a practical tool to ensure that all lawsuits
that could affect the administration of the bankruptcy estate
proceed either in the bankruptcy court, or with the knowledge
and approval of the bankruptcy court. The Barton doctrine is
not a tool to punish the unwary by denying any forum to hear
a claim when leave of the bankruptcy court is not sought.
When Harris’s case was removed to the appointing bank-
ruptcy court, all problems under the Barton doctrine vanished.
Therefore, the district court erred in affirming the bankruptcy
court’s dismissal of Harris’s suit for lack of subject matter
jurisdiction under the Barton doctrine.
[14] However, this error does not affect the result because
we affirm on the alternate ground given by both the district
court and the bankruptcy court, that is: All of the defendants
are entitled to derived quasi-judicial immunity; therefore,
Harris fails to state a claim upon which relief can be granted.
C. Appellees are entitled to derived quasi-judicial
immunity.
The district court did not err when it held that Wittman,
Swain, and the Attorney defendants were entitled to derived
quasi-judicial immunity. “Bankruptcy trustees are entitled to
broad immunity from suit when acting within the scope of
their authority and pursuant to court order.” Bennett v. Wil-
liams, 892 F.2d 822, 823 (9th Cir. 1989). Additionally, “court
appointed officers who represent the estate are the functional
equivalent of a trustee.” Crown Vantage, 421 F.3d at 973. The
doctrine of judicial immunity also applies to court approved
attorneys for the trustee. Smallwood v. United States, 358 F.
Supp. 398, 404 (E.D. Mo. 1973), aff’d mem., 486 F.2d 1407(8th Cir. 1973). Here, Wittman as trustee, Swain as the func-
tional equivalent of the trustee for the purpose of prosecuting
the fraudulent conveyance proceeding, and the Attorney
16676 IN THE MATTER OF HARRIS
defendants as the court-approved counsel for Swain all qual-
ify for derived quasi-judicial immunity.
For derived quasi-judicial immunity to apply, the defen-
dants must satisfy the following four elements: (1) their acts
were within the scope of their authority; (2) the debtor had
notice of their proposed acts; (3) they candidly disclosed their
proposed acts to the bankruptcy court; and (4) the bankruptcy
court approved their acts. Bennett, 892 F.2d at 823, 825; see
also In re Jacksen, 105 B.R. 542, 545 (9th. Cir. B.A.P. 1989)
(holding a trustee has immunity for actions “within the scope
of the authority conferred upon him by statute or the court”).
1. Wittman is entitled to derived quasi-judicial
immunity.
[15] Harris alleged Wittman breached the Settlement
Agreement when she agreed that Swain was entitled to be
paid from the estate approximately $1 million in “contrived
claims” that had already been released by the Settlement
Agreement, and when she sold the assets to Swain in
exchange for $125,000 cash and Swain’s release of those
claims. These acts of Wittman meet all four elements for
derived quasi-judicial immunity.
First, Wittman’s sale of the estate assets, as well as her
determination that the consideration Swain was to pay for
those assets was in the best interest of the estate, were within
the scope of her statutorily conferred authority as trustee. 11
U.S.C. § 704(a)(1). Second, Wittman filed notice of the pro-
posed sale, and served Harris with such notice, on May 2,
2003. Third, the notice fully set out the details of the proposed
sale of the Alpine property and 1957 Mercedes-Benz to Jack
Swain, including the consideration Swain was to pay. The
notice explained that Wittman believed the sale was in the
best interest of the estate, that Swain was releasing the estate
from liability for all the fees and costs associated with his
prosecution of the fraudulent conveyance proceeding in his
IN THE MATTER OF HARRIS 16677
role as Special Representative of the estate, including the
attorneys’ fees of the Attorney defendants. The notice also
provided a detailed accounting of the source of said fees and
costs. Fourth, and finally, the bankruptcy court, after a hear-
ing, approved the sale.
2. Swain and the Attorney Defendants are entitled to
derived quasi-judicial immunity.
[16] Harris alleged Swain and the Attorney defendants
breached the Settlement Agreement because the approxi-
mately $1 million of estate liability—including the Attorney
defendants’ attorneys’ fees from the fraudulent conveyance
proceeding, Swain’s fees and costs from that proceeding, and
Sandra Harris’s $218,000 lien against the Alpine property—
that Swain was releasing or assuming in exchange for the
estate assets had already been released by the terms of the set-
tlement. Thus, Swain and the Attorney defendants were
asserting rights to be paid from the estate, which Harris
alleges they had agreed to release. However, Swain and the
Attorney defendants, similarly to Wittman, satisfy all four ele-
ments for derived quasi-judicial immunity.
First, their acts of making claims against the estate for their
costs and fees associated with the fraudulent conveyance pro-
ceeding were within the scope of the authority conferred to
them by the bankruptcy court. Under the Assignment Agree-
ment, Swain was authorized to recover from the estate his
costs of prosecuting the estate’s fraudulent conveyance pro-
ceeding against Harris and Mrs. Harris and 68% of the net
recovery from that proceeding. The Attorney defendants were
also authorized, under the Assignment Agreement, to recover
their fees from the estate. The bankruptcy court specifically
approved the Assignment Agreement and therefore authorized
their recovery of fees and costs. Second, Harris had notice
that Swain and the Attorney defendants were making these
claims when Wittman served Harris with notice of the pro-
posed sale on May 2, 2003, which notice included a detailed
16678 IN THE MATTER OF HARRIS
account of these claims. Third, the notice fully set out the
claims Swain and the Attorney defendants had against the
estate and the source of all of their claims. Fourth and finally,
after a hearing, the bankruptcy court approved all of these
claims, and Swain’s release or assumption of those claims in
exchange for the Alpine property.
[17] Thus, all of the appellees are entitled to derived quasi-
judicial immunity.
AFFIRMED.