The Barton doctrine, established by the U.S. Supreme Court over a century ago, provides that “before a lawsuit is brought against a receiver[,] leave of the court by which he was appointed must be obtained.” Barton v. Barbour, 104 U.S. 126, 128 (1881). At least six federal circuits have recognized and ruled that the Barton doctrine is still valid in holding that leave of the bankruptcy court is required before instituting an action against a bankruptcy trustee in the trustee’s official capacity. The Third Circuit so ruled in In re VistaCare Group, 678 F.3d 218 (3d Cir. 2012). Likewise, in a series of recent holdings, other federal courts have decided that the Barton doctrine has continued validity.
Villegas v. Schmidt
In Villegas, et al. v. Schmidt, 788 F.3d 156 (5th Cir. 2015), cert. denied, No. 15-407, (U.S. Dec. 7, 2015), BFG Investments, through its president John Villegas, filed for bankruptcy and Schmidt was appointed as the trustee to liquidate BFG’s estate. The case was later closed and Schmidt’s fees were approved. Four years later, Villegas and BFG sued Schmidt under 28 U.S.C. §1334(c), which allows district courts to hear proceedings arising under Title 11. Villegas and BFG alleged that Schmidt committed gross negligence and breached his fiduciary duty while acting as BFG’s trustee. The district court dismissed the case, and the plaintiffs appealed.
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