Harris v. Wittman

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.