Court Opinion

ID: 4364544
Source: CourtListenerOpinion
Date Created: 2019-02-05 01:00:20.250412+00
Date Added: 2024-06-11T07:49:45.250006
License: Public Domain

Case: 18-10182          Document: 00514821265        Page: 1   Date Filed: 02/04/2019

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT

                                            No. 18-10182                  United States Court of Appeals
                                                                                   Fifth Circuit

                                                                                 FILED
                                                                          February 4, 2019
In the Matter of: ONDOVA LIMITED COMPANY
                                                                            Lyle W. Cayce
                 Debtor                                                          Clerk

-----------------------------------------------

JEFFREY BARON,

                 Appellant

v.

DANIEL J. SHERMAN; MUNSCH, HARDT, KOPF & HARR, P.C.; LIBERTY
MUTUAL INSURANCE COMPANY,

                 Appellees

                      Appeal from the United States District Court
                           for the Northern District of Texas

Before REAVLEY, ELROD, and WILLETT, Circuit Judges.
PER CURIAM:
        Jeffrey Baron appeals the district court’s dismissal under Federal Rule
of Civil Procedure 12(b)(6) of his bankruptcy “adversary proceeding” against
Daniel J. Sherman, the trustee responsible for administering the bankruptcy
     Case: 18-10182       Document: 00514821265          Page: 2     Date Filed: 02/04/2019

                                       No. 18-10182
estate of Ondova Limited Company. Baron also appeals the denial of his
motion for leave to amend. We review both de novo. 1
       To survive a motion to dismiss, a complaint must contain sufficient facts
to state a claim for relief that is plausible on its face. 2 And while we must accept
a plaintiff's factual allegations as true, we are not bound to accept as true “a
legal conclusion couched as a factual allegation.” 3
       The district court considered and adopted Bankruptcy Judge Jernigan’s
meticulous and well-reasoned 55-page Report and Recommendation. The
district court granted Trustee Sherman’s motion to dismiss because—as the
court-appointed trustee and an arm of the court—Sherman was entitled to
absolute immunity for all actions taken pursuant to a court order, and entitled
to qualified immunity for all other acts within the scope of his trustee duties.
Baron’s claims against Trustee Sherman’s attorneys (the law firm Munsch
Hardt Kopf & Harr, P.C.) also failed because the attorneys were covered by
both derivative trustee immunity and independent attorney immunity.
Baron’s claim that Trustee Sherman breached his fiduciary duty also failed
because he did not plausibly plead gross negligence. Finally, the district court
denied Baron’s motion to amend his complaint on futility grounds.
       We agree with the district court’s analysis of Trustee Sherman’s
immunity. Trustees are entitled to absolute immunity for all actions taken
pursuant to a court order. 4 And while this circuit does not have controlling
precedent on the issue, numerous sister circuits have held that trustees have

       1 While a denial of leave to amend is generally reviewed for abuse of discretion,
because the district court based its denial for leave to amend solely on futility, review is de
novo. City of Clinton v. Pilgrim’s Pride Corp., 632 F.3d 148, 152 (5th Cir. 2010) (“The “de novo
standard of review [is] identical, in practice, to the standard used for reviewing a dismissal
under Rule 12(b)(6).”).
       2 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
       3 Papasan v. Allain, 478 U.S. 265, 286 (1986).
       4 Boullion v. McClanahan, 639 F.2d 213, 214 (5th Cir. 1981).

                                               2
     Case: 18-10182       Document: 00514821265          Page: 3     Date Filed: 02/04/2019

                                       No. 18-10182
qualified immunity for personal harms caused by actions taken within the
scope of their official duties. 5 Only ultra vires actions—actions that fall outside
the scope of their duties as trustees—are not entitled to immunity. There is no
compelling reason to depart from our sister circuits’ sensible approach. We
thus hold that bankruptcy trustees in the Fifth Circuit are entitled to qualified
immunity for personal harms caused by actions that, while not pursuant to a
court order, fall within the scope of their official duties.
       Here, Baron has not plausibly alleged any actions not covered by
absolute or qualified immunity, either in his original complaint or in his
proposed amended complaint. His factual allegations on appeal are limited to
Sherman’s decision to seek a receivership over him, alleged falsehoods or
misrepresentations during the receivership process, and subsequent use of the
receivership to liquidate assets. However—as acknowledged by Bankruptcy
Judge Jernigan—all property seizures that Baron complains of were done
under the Receivership Order and were actions taken by the receiver rather
than the trustee. As Judge Jernigan also notes, between the date Sherman was
appointed trustee and the date Baron filed his adversary proceeding, the
bankruptcy court entered approximately 147 orders in the Ondova Bankruptcy
Case. Trustee Sherman was acting “under the supervision and subject to the
order of the bankruptcy judge”—and thus entitled to absolute immunity 6—for
virtually all of his tenure as trustee.

       5 See, e.g., Grant, Konvalinka & Harrison, PC v. Banks (In re McKenzie), 716 F.3d 404,
413 (6th Cir.), cert denied, 134 S. Ct. 444 (2013); Sierra v. Seeber, 966 F.2d 1444 (4th Cir.
1992); Phoenician Mediterranean Villa, LLC v. Swope (In re J & S Props., LLC), 545 B.R. 91,
104 (Bankr. W.D. Pa. 2015) (“When not acting pursuant to an order of court, a bankruptcy
trustee is generally afforded qualified immunity.”), aff’d, 554 B.R. 747 (W.D. Pa. 2016), aff’d,
872 F.3d 138 (3d Cir. 2017).
       6 Boullion, 639 F.2d at 213

                                               3
     Case: 18-10182        Document: 00514821265           Page: 4     Date Filed: 02/04/2019

                                        No. 18-10182
       Even when Trustee Sherman was not acting pursuant to a court order,
he was still entitled to qualified immunity for actions taken within the scope
of his official duties. Seeking a receivership is sometimes a necessary step in
administering the estate. And we have previously weighed in on this very
receivership. 7 While we found that the receivership was without jurisdiction,
we also held that it was pursued without malice. 8 And we have already
awarded a remedy. 9 Baron disagrees with Trustee Sherman’s decision to
pursue a receivership and alleges that Sherman made misleading statements
during the receivership process, but these allegations—even when assumed to
be true—cannot transform them into ultra vires actions that remove Trustee
Sherman’s qualified immunity.
       Second, we agree with the district court that this immunity extends to
Trustee Sherman’s attorneys under both a derivative theory of judicial
immunity 10 and under the separate doctrine of attorney immunity 11 for
essentially the same reasons articulated by the district court.
       Third, we agree with the district court’s analysis of Baron’s claims for
breach of fiduciary duty. Baron fails to plausibly allege facts sufficient to
support a finding of gross negligence, either in his original complaint or in his
proposed amended complaint.

       7  Netsphere, Inc. v. Baron, 703 F.3d 296 (5th Cir. 2012).
       8  Id. at 313 (“[W]e hold . . . that in creating the receivership ‘there was no malice nor
wrongful purpose, and only an effort to conserve property in which [the court] believed’ it was
interested in maintaining for unpaid attorney fees and to control Baron's vexatious litigation
tactics.” (alteration in original) (quoting W.F. Potts Son & Co. v. Cochrane, 59 F.2d 375, 377–
78 (5th Cir. 1932))).
        9 Id. at 313–14.
        10 See In re DeLorean Motor Co., 991 F.2d 1236, 1241 (6th Cir. 1993).
        11 See Troice v. Proskauer Rose, L.L.P., 816 F.3d 341, 349 (5th Cir. 2016) (holding that

attorneys are entitled to immunity under Texas law from suit by non-clients, unless the
attorney’s conduct “d[oes] not involve the provision of legal services” or is “entirely foreign to
the duties of any attorney”).
                                                4
     Case: 18-10182       Document: 00514821265          Page: 5   Date Filed: 02/04/2019

                                      No. 18-10182
       Finally, while we review de novo the denial of a motion to amend, Baron
has failed to raise the new causes of action contained within his proposed
amended complaint in his briefs or argue that the district court erred in finding
these claims unsuccessful. “It is a well worn principle that the failure to raise
an issue on appeal constitutes waiver of that argument.” 12 Baron has thus
waived the issue, and we will not disturb the district court’s finding of futility.

                                      *      *       *
       We AFFIRM both the district court’s dismissal under Rule 12(b)(6) and
the denial of leave to file an amended complaint.

        United States v. Griffith, 522 F.3d 607, 610 (5th Cir. 2008) (citing United States v.
       12

Thibodeaux, 211 F.3d 910, 912 (5th Cir. 2000)).
                                             5