Opinion ID: 869684
Heading Depth: 4
Heading Rank: 1

Heading: Prior Court Approval

Text: Taking the latter contention first, GKH relies almost entirely on the highlighted language from the following discussion in Kashani: As an officer of the court, the trustee is entitled to a form of derivative judicial immunity from liability for actions carried out within the scope of the trustee’s official duties. A trustee is entitled to such immunity only if the trustee is acting within the scope of authority conferred upon Nos. 12-5874/5875/5876 Grant, Konvalinka & Harrison v. Banks, et al. Page 10 the trustee by the appropriate statute(s) or the court. While a trustee is allowed to make reasonable mistakes where discretion is allowed, a trustee may be sued for intentional or negligent actions which amount to violations of the duties imposed upon the trustee by law. The trustee has a duty to preserve assets of the estate while exercising the care and diligence of an ordinarily prudent person under similar circumstances. Although there appears to be a conflict between the concept of judicial immunity and the ability to sue the trustee, the courts have established certain standards and instructions whereby the trustees can protect themselves by complying with these standards and, thus, gain judicial immunity. Those instructions include: the trustee should give notice to the debtor and obtain prior court approval of the proposed act; the disclosure by the trustee to the court in furtherance of the requested approval must be candid; and the act must be within the trustee’s official duties. Kashani, 190 B.R. at 883-84 (citations omitted) (emphasis added). Reading this passage as a whole, it explains that a trustee may shield himself from personal liability for breach of his fiduciary duties by obtaining prior approval for acts within the scope of his official duties. It does not support GKH’s assertion that prior court approval is always required. Indeed, nothing in Kashani, or any other case, can be understood to require prior court approval for his actions in order for a bankruptcy trustee to invoke quasi-judicial immunity for claims other than for breach of fiduciary duty. See, e.g., In re Heinsohn, 231 B.R. at 65 (suggesting that trustee is immune from suit for breach of fiduciary duty by beneficiaries of the estate only when “acting pursuant to specific instructions from the court”); Schechter, 182 B.R. at 219-20 (describing the judicial immunity a trustee might secure by obtaining prior court approval as protection against claims for breach of bankruptcy-related fiduciary duties). As the bankruptcy court in Schechter explained: The general personal immunity of bankruptcy trustees—which applies to claims other than for breach of bankruptcy-related fiduciary duties, arising out of the operation of the estate—renders the estate rather than the trustee liable without the need for notice or a court order of any kind. 182 B.R. at 220. As one court explained, although the trustee has “immunity vis-a-vis third parties for actions within the scope of his official duties, that immunity neither extends to ultra vires acts, nor protects the trustee against claims for breach of fiduciary Nos. 12-5874/5875/5876 Grant, Konvalinka & Harrison v. Banks, et al. Page 11 duty.” LeBanc v. Salem (In re Mailman Steam Carpet Cleaning Corp.), 196 F.3d 1, 7 n.4 (1st Cir. 1999) (citations omitted). We conclude that a trustee is not required to obtain prior court approval in order to invoke quasi-judicial immunity from suit by a third party for actions taken by the trustee on behalf of the estate and within the scope of his authority. That brings us to GKH’s contention that the Trustee acted outside the scope of his authority so as to defeat quasi-judicial immunity.