FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

RICHARD K. SCHULTZE; LORENZO V.

ZUNINO; ROBERT BECCHETTI;

RICHARD QUESTONI,

Appellants,

v.

DAVID N. CHANDLER, SR.; DAVID N.

CHANDLER, P.C.,

Appellees.

No. 12-15186

D.C. No.

3:11-cv-04940-

WHA

ORDER AND

AMENDED

OPINION

Appeal from the United States District Court

for the Northern District of California

William Alsup, District Judge, Presiding

Argued and Submitted

December 4, 2013—San Francisco, California

Filed July 18, 2014

Amended August 1, 2014

Before: Stephen S. Trott, Sidney R. Thomas,

and Mary H. Murguia, Circuit Judges.

Order;

Opinion by Judge Thomas
2 SCHULTZE V. CHANDLER

SUMMARY*

Bankruptcy

The panel filed (1) an order amending its opinion filed

July 18, 2014, and (2) an amended opinion affirming the

district court’s affirmance of the bankruptcycourt’s dismissal

of a malpractice action against an attorney for an unsecured

creditors’ committee.

The panel held that the bankruptcy court properly

exercised jurisdiction over the legal malpractice action after

its removal from state court because the action was a core

proceeding. Agreeing with other circuits, the panel held that

a post-petition claim brought against a court-appointed

professional is a core proceeding. The panel held that this

lawsuit fell easily within the definition of a core proceeding

because the attorney’s employment by the committee and

compensation were approved by the bankruptcy court, his

duties pertained solely to the administration of the bankruptcy

estate, and the claim asserted by committee members was

based solely on acts that occurred in the administration of the

estate. 

The panel stated that it need not decide whether the

bankruptcy court’s entry of final judgment was invalid under

Stern v. Marshall, 131 S. Ct. 2594 (2011), because the

bankruptcy court dismissed the complaint for failure to state

a claim, and the district court reviewed this dismissal de

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
SCHULTZE V. CHANDLER 3

novo. As such, plaintiffs received all the review Article III

requires.

The panel held that the bankruptcy court correctly

dismissed the action on the basis that the attorney represented

only the committee and did not owe an individual duty of

care to the committee members.

COUNSEL

Paul A. Frassetto (argued), Frassetto Law Offices, San

Francisco, California, for Appellants.

James A. Murphy (argued) and Arthur J. Harris, Murphy,

Pearson, Bradley & Feeney, San Francisco, California, for

Appellees.

ORDER

The opinion filed July 18, 2014, is amended as follows: 

Footnote 1 is deleted in its entirety and the following

language inserted in lieu thereof:

We need not decide whether the bankruptcy

court’s entry of final judgment was invalid

under Stern v. Marshall, 131 S. Ct. 2594

(2011), because in this case, the bankruptcy

court dismissed Chandler’s complaint for

failure to state a claim, and the district court

reviewed this dismissal de novo. See Schultze

v. Chandler, No. C 11-4940 WHA, 2011 WL

6778823, at *2–3 (N.D. Cal. Dec. 27, 2011). 
4 SCHULTZE V. CHANDLER

As such, Plaintiffs received all the review

Article III requires. Exec. Benefits Ins.

Agency v. Arkison (In re Bellingham Ins.

Agency, Inc.), 134 S. Ct. 2165, 2175 (2014).

IT IS SO ORDERED.

OPINION

THOMAS, Circuit Judge:

In this appeal, we consider whether the bankruptcy court

properly exercised jurisdiction over a malpractice action

against an attorney for the unsecured creditors’ committee

and correctly dismissed the claim. We affirm.

I

Plaintiffs Richard Schultze, Lorenzo Zunino, Robert

Becchetti, and Richard Questoni were investors in Colusa

Mushroom, Inc. (“Colusa”), a California company that grew

mushrooms for commercial sale. The business did not

flourish, and the company filed a voluntary petition in

bankruptcy under Chapter 11. The bankruptcy court

appointed an unsecured creditors’ committee (“Committee”)

pursuant to 11 U.S.C. § 1102, consisting of Plaintiffs, two

other individuals, and one business entity. Pursuant to 11

U.S.C. § 1103(a), the Committee filed an application for

permission to employ David Chandler as counsel for the

Committee, and the court issued an order authorizing his

employment.
SCHULTZE V. CHANDLER 5

Eventually, the court approved a plan of reorganization

under which Colusa would sell its business and assets to a

third party, Premier Mushroom, LP (“Premier”). All

unsecured creditors, including Plaintiffs, were to receive pro

rata shares of the sale proceeds. Under the terms of the sale,

Premier paid a down payment and executed a promissory

note for payment of the remainder of the sales price. Premier

was to make three annual payments of $100,000 and a final

balloon payment of $1,022,453.

The note was to be secured by a deed of trust on real

property and a secured interest on personal property, junior to

three other liens. Attorneys for Colusa and Premier, not

Chandler, conducted the closing. Following the closing of

the sale, the court entered a final decree and administratively

closed the bankruptcy.

Premier paid the initial installments as provided by the

terms of the note but defaulted four years later. Plaintiffs

then learned that Colusa’s counsel had failed to file the

financing statements necessary to perfect the estate’s junior

security interest in the personal property. Because the

security interest was not perfected, Premier was able to take

out additional loans on and over-encumber Colusa’s assets. 

Thus, the net recovery from the assets as a result of Premier’s

default was significantly less than it would have been had the

security interest been perfected.

Subsequently, Plaintiffs commenced this action against

Chandler and his law firm in state court for legal malpractice,

alleging that Chandler was negligent in the performance of

his duties as counsel to the Committee because he failed to

ensure that Colusa’s attorney properly perfected the security

interest.
6 SCHULTZE V. CHANDLER

The Colusa bankruptcywas reopened on March 31, 2011,

and converted to Chapter 7, which dissolved the Committee. 

Chandler then removed the malpractice action to federal

bankruptcy court. Plaintiffs moved to remand the action to

state court, but the bankruptcy court found that it had federal

jurisdiction for the malpractice action and denied the motion. 

Chandler filed a 12(b)(6) motion to dismiss on the basis that,

inter alia, he owed no duty to Plaintiffs individually because

he represented the committee as a whole, not its individual

members. The bankruptcy court granted Chandler’s motion,

concluding that Chandler did not owe a duty to Plaintiffs

individually. The bankruptcycourt issued an order approving

a settlement on Premier’s obligations and negating any future

payments on Plaintiffs’ claims.

Plaintiffs appealed the bankruptcycourt’s dismissal to the

district court. The district court affirmed. This timely appeal

followed.

II

The district court properly concluded that the bankruptcy

court had jurisdiction over the removed legal malpractice

action because it was a core proceeding.

1 A bankruptcy court

has jurisdiction over “all civil proceedings arising under title

1 We need not decide whether the bankruptcy court’s entry of final

judgment was invalid under Stern v. Marshall, 131 S. Ct. 2594 (2011),

because in this case, the bankruptcy court dismissed Chandler’s complaint

for failure to state a claim, and the district court reviewed this dismissal

de novo. See Schultze v. Chandler, No. C 11-4940 WHA, 2011 WL

6778823, at *2–3 (N.D. Cal. Dec. 27, 2011). As such, Plaintiffs received

all the review Article III requires. Exec. Benefits Ins. Agency v. Arkison

(In re Bellingham Ins. Agency, Inc.), 134 S. Ct. 2165, 2175 (2014).
SCHULTZE V. CHANDLER 7

11, or arising in or related to cases under title 11.” 28 U.S.C.

§ 1334(b); see also id. at § 157(b)(1).

“[C]laims that arise under or in Title 11 are deemed to be

‘core’ proceedings, while claims that are related to Title 11

are ‘noncore’ proceedings.” Maitland v. Mitchell (In re

Harris Pine Mills), 44 F.3d 1431, 1435 (9th Cir. 1995). A

nonexhaustive list of core proceedings is set out in 28 U.S.C.

§ 157, which includes “matters concerning the administration

of the estate.” Id. at § 157(b)(2)(A). The list also includes

“other proceedings affecting the liquidation of the assets of

the estate or the adjustment of the debtor-creditor or the

equity securityholder relationship, except personal injury tort

or wrongful death claims.” Id. at § 157(b)(2)(O).

Core proceedings arising in title 11 are matters “that are

not based on any right expressly created by title 11, but

nevertheless, would have no existence outside of the

bankruptcy.” Harris Pine Mills, 44 F.3d at 1435 (quoting

Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir. 1987)). 

In Harris Pine Mills, we held that a post-petition state-law

claim against a bankruptcy trustee arising out of the sale of

estate propertywas a core proceeding. Id. at 1438. Similarly,

in Walsh v. Northwestern National Insurance Co. of

Milwaukee, Wisconsin (In re Ferrante), 51 F.3d 1473, 1476

(9th Cir. 1995), we held that a post-petition breach of

fiduciary claim against a trustee was a core proceeding.

In contrast, where the post-petition proceeding involves

rights unconnected to the bankruptcy, we have declared the

proceeding noncore. See, e.g., Eastport Assocs. v. City of

L.A. (In re Eastport Assocs.), 935 F.2d 1071, 1076 (9th Cir.

1991) (noncore proceeding where developer debtor brought

post-petition claim for declaratory relief against city
8 SCHULTZE V. CHANDLER

concerning the effect of state law on subdivision proposal);

Christensen v. Tucson Estates, Inc. (In re Tucson Estates,

Inc.), 912 F.2d 1162, 1168 (9th Cir. 1990) (noncore

proceeding where mobile home park residents brought prepetition class action suit against debtor).

Where a post-petition claim was brought against a courtappointed professional, we have held the suit to be a core

proceeding. Ferrante, 51 F.3d at 1476 (core proceeding

where successor trustee brought breach of fiduciary duty

claim against predecessor trustee); Harris Pine Mills, 44 F.3d

at 1438 (core proceeding where state-law claim was brought

against trustee). All of our sister circuits are in accord. 

Baker v. Simpson, 613 F.3d 346, 350 (2d Cir. 2010) (core

proceeding where debtor brought malpractice claim against

bankruptcycounsel); Grausz v. Englander, 321 F.3d 467, 471

(4th Cir. 2003) (same); Southmark Corp. v. Coopers &

Lybrand (In re Southmark Corp.), 163 F.3d 925, 932 (5th Cir.

1999) (core proceeding where debtor brought state-law claim

against court-appointed accountant for its examiner); Billing

v. Ravin, Greenberg & Zackin, P.A., 22 F.3d 1242, 1244 (3d

Cir. 1994) (core proceedingwhere debtor brought malpractice

claim against bankruptcy counsel); Sanders Confectionery

Prods., Inc. v. Heller Fin., Inc., 973 F.2d 474, 483 n.4 (6th

Cir. 1992) (where debtor brought claim against trustee and

lender, core proceeding against trustee but not against lender).

Southmark Corp. explained the rationale:

A sine qua non in restructuring the

debtor-creditor relationship is the court’s

ability to police the fiduciaries, whether

trustees or debtors-in-possession and other

court-appointed professionals, who are
SCHULTZE V. CHANDLER 9

responsible for managing the debtor’s estate

in the best interest of creditors. The

bankruptcy court must be able to assure itself

and the creditors who rely on the process that

court-approved managers of the debtor’s

estate are performing their work,

conscientiously and cost-effectively. 

Bankruptcy Code provisions describe the

basis for compensation, appointment and

removal of court-appointed professionals,

their conflict-of-interest standards, and the

duties they must perform. See generally

11 U.S.C. §§ 321, 322, 324, 326–331.

163 F.3d at 931.

In this case, the employment of Chandler by the

Committee was approved by the bankruptcy court and

governed by11 U.S.C. § 1103. Chandler’s compensation was

also approved by the court and governed by 11 U.S.C.

§§ 328, 330, 331. His duties pertained solely to the

administration of the bankruptcy estate. The claim asserted

by Plaintiffs was based solely on acts that occurred in the

administration of the estate. Therefore, the lawsuit falls

easily within the definition of a core proceeding.

Plaintiffs argue that their action cannot be a core

proceeding because it is predicated on state law. However,

the governing statute clearly states that “[a] determination

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).
10 SCHULTZE V. CHANDLER

Plaintiffs also argue that their claim does not invoke any

right created by federal bankruptcy law and it does not affect,

or even involve, the administration of Colusa’s estate. 

However, “arising in” jurisdiction does not require that the

matter be “based on any right expressly created by title 11.” 

Marshall v. Stern (In re Marshall), 600 F.3d 1037, 1055 (9th

Cir. 2010) (internal quotation marks omitted). Instead, the

matter must “have no existence outside of the bankruptcy”

case. Id. (internal quotation marks omitted). That is the case

here. The basis for the claim occurred within the

administration of the estate. Any alleged duties arose from

obligations created under bankruptcy law. The claims have

effectively called into question the administration of the

estate. Thus, this particular legal malpractice claim is

inseparable from the bankruptcy case.

Plaintiffs argue that the claim will not affect estate

administration. But the key inquiry is not whether the claim

will affect the administration of the bankruptcy, but instead

whether the claim arose in a case under title 11. Baker,

613 F.3d at 350. Additionally, courts have been less

concerned with the identity of the party bringing the claim

and more concerned with the identity and function of the

party against whom the claim is brought. Southmark Corp.,

163 F.3d at 931.

For these reasons, we conclude that the district court

correctly determined that the bankruptcy court had

jurisdiction over the lawsuit as a core proceeding and that the

bankruptcy court did not err in denying the remand motion.2

2 Plaintiffs argue in the alternative that the bankruptcy court should have

abstained from hearing the case under the permissive abstention statute,

28 U.S.C. § 1334(c)(1). However, we lack jurisdiction to review that
SCHULTZE V. CHANDLER 11

III

The district court correctly concluded that the bankruptcy

court did not err in dismissing the complaint because

Chandler did not owe an individual duty of care.

In bankruptcy, “[a] professional retained by a committee

represents the committee and only the committee, and the

professional’s fiduciary duty runs solely to the committee.” 

7 Collier on Bankruptcy 1103.03[7] (16th ed.). Here, 

Chandler was appointed by the bankruptcy court to represent

the Committee, the written agreement was between Chandler

and the Committee, and he was paid for his role as counsel

for the Committee. In short, Chandler was not acting as

attorney for Plaintiffs. Moreover, the Committee was not

involved in the negotiated sale. In his capacity as counsel for

the Committee, Chandler was not charged with the duty of

recording the financing statement, nor was it his right to do

so; that duty fell to Colusa’s attorney.

It is true that in California, privity of contract is not

required to maintain a legal malpractice action. Donald v.

Garry, 97 Cal. Rptr. 191, 192 (Ct. App. 1971). The

determination of liability involves the balancing of various

factors. Biakanja v. Irving, 320 P.2d 16, 19 (Cal. 1958). The

bankruptcy court balanced those factors, and we find no error

in the bankruptcy court’s analysis.

decision. Id. at § 1334(d) (“Any decision to abstain or not to abstain made

under subsection (c) (other than a decision not to abstain in a proceeding

described in subsection (c)(2)) is not reviewable by appeal or otherwise by

the court of appeals under section 158(d), 1291, or 1292 of this title

. . . .”); Baker, 613 F.3d at 352.
12 SCHULTZE V. CHANDLER

IV

The district court properly concluded that the bankruptcy

court properly exercised jurisdiction over the malpractice

claim and correctly dismissed the case on the merits.

AFFIRMED.