Summer 2013 • Issue 48, page 16
Can a Defendant Sue the Property Management Company, or Are They Protected from a Lawsuit Like a Receiver?
By Davidson, Peter*
Q: I hired a property management company to
aid me in managing a receivership property. A defendant in the case has
threatened to sue the management company for action taken at my request.
Can the defendant sue the management company or is it protected from suit
as I would be?
A: While a receiver has derived judicial immunity for action taken
pursuant to or within the authority of his or her order of appointment,
and court approval to sue the receiver is required, I have always been
concerned whether those protections inure to the receiver’s employees and
agents. A recent case decided by the United States District Court in
Missouri held that the receiver’s agents and employees do have protection.
In Ariel Preferred Retail Group, LLC et al., v. CWCapital Asset
Management, et al., 883 F. Supp. 2d 797 (E.D. Mo. 2012), suit was
filed against a receiver and the property management company he employed
and others for trademark infringement, among other claims. The receiver
and the property manager moved to dismiss the complaint on the ground that
the court had no subject matter jurisdiction, because the plaintiffs had
not obtained permission from the receivership court to sue them. The court
agreed, relying in what is known as the “Barton Doctrine”, named
after the Supreme Court case of Barton v. Barbour, 104 U.S. 126, 26
L. Ed. 672 (1881). There, the Supreme Court held, absent statutory
authority, that a receiver cannot be sued without leave of the appointing
receivership court. The District Court noted that the Barton Doctrine has
consistently been upheld and that the necessity for leave from the
appointing court cannot be avoided by seeking relief in another court. As
to the contention that the Barton Doctrine did not protect the receiver’s
property manager, the court held the receiver’s order of appointment
contemplated the receiver hiring agents to help administer the
receivership estate. Citing to a number of bankruptcy cases, the court
stated: “The Barton rationale extends to agents who are the functional
equivalent of a trustee [or in this case, a receiver], where they act at
the direction of the trustee [or receiver] for the purpose of
administering the estate or protecting its assets.” 883 F. Supp. 3d at
817. It also pointed out that the Supreme Court in Barton actually said
leave of court was needed to file suit against the receiver for the
receiver’s actions “or that of his servants.” Barton, 104 U.S. at 137. See
also Lawrence v. Goldberg, 573 F.3d 1265, 1270 (11th Cir. 2009) (affirming
dismissal of lawsuit under the Barton Doctrine due to the plaintiff’s
failure to seek leave in the bankruptcy court to file an action against
the trustee and other parties assisting the trustee in carrying out his
official duties).
*Peter A. Davidson is a Partner of
Ervin Cohen &Jessup LLP a Beverly Hills Law Firm. His practice includes
representing Receivers and acting as a Receiver in State and Federal
Court. |
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