A. Jay Cristol, Judge, United States Bankruptcy Court.
1. On April 27, 2011, Barbara Wortley, Richard I. Clark, as Trustee for Joseph M. Wortley Trust, d/b/a X Co. Factoring Corp., Liberty Properties at Trafford, LLC, Liberty Associates, LC and Advanced Vehicle Systems, LLC (collectively, "Plaintiffs") filed their Plaintiffs' Complaint ("Complaint") with the Broward County, Florida Circuit Court ("State Court"), Case No. 11-009808 ("State Action"). [ECF No. 1 (Notice of Removal)]. The defendants named in the Complaint were Michael R. Bakst and George Steven Fender (collectively, "Defendants"). The Complaint contains two Counts: "Conspiracy to Obstruct Due Operation of Law and Deprive Plaintiffs of Their Right to A Fair Trial" (Count I), and "Fraudulent Corruption of the Judicial Process" (Count II). [A copy of the Complaint is attached to ECF No. 1 (the Defendants' "Notice of Removal")].
2. The crux of the Complaint is that, in the context of related adversary proceedings that were transferred to this Court,
3. On May 18, 2011, Defendants filed their Notice of Removal and Removal of Action Under 28 U.S.C. § 1452 By Michael
4. On May 18, 2011, Defendants filed their Motion to Dismiss, arguing that (i) the Removed Action should be dismissed given that the Plaintiffs failed to seek leave of this Court pursuant to the Barton doctrine
5. On June 8, 2011, Plaintiffs filed their Initial Response, arguing that (i) this Court lacked subject matter jurisdiction, (ii) Plaintiffs did not need to seek leave of this Court before filing the Complaint because the complained of actions were beyond the scope of Mr. Bakst's duties as Trustee's counsel, (iii) the stated causes of action exist, and (iv) Florida's litigation privilege was inapplicable. [ECF No. 15].
6. Also on June 8, 2011, Plaintiffs filed their Plaintiffs' Motion for Remand and Abstention of State Court Action. [ECF No. 16].
7. On July 22, 2011, this Court entered is Order Denying Motion for Remand and Granting Motion for Enlargement of Time to Respond to Motion to Dismiss ("Order Denying Remand/Abstention") [ECF No. 24]. My Order Denying Remand/Abstention held, in part, as follows:
[ECF No. 24 (Order Denying Remand/Abstention) at 2 (Italics added)].
8. On August 4, 2011, Plaintiffs filed their Initial Supplement, raising the same arguments set forth in their Plaintiffs' Initial Response, and for the first time requesting, in the alternative, that if this Court were to assert jurisdiction over the Removed Action that the Plaintiffs be granted leave to pursue their claims against the Defendants in the State Court. [ECF No. 32, ¶¶ 41-48].
9. Also on August 4, 2011, Plaintiffs filed their Motion for Rehearing of Order Denying Motion for Remand and Abstention. [ECF No. 31].
10. On August 19, 2011, Defendants filed their Reply Memorandum, arguing that the Removed Action was not ripe for adjudication until there is an order reversing judgments the Trustee obtained in the Related Adversary Proceedings, (ii) Plaintiffs cannot state a claim for which relief can be granted, (iii) leave of this Court was required by the Barton doctrine, (iv) leave to prosecute the claims in the Complaint in the State Court should be denied, and (v)
11. On August 19, 2011, the Court entered its Order Denying Motion for Rehearing of Order Denying Motion for Remand and Abstention. [ECF No. 34].
12. On September 1, 2011, Plaintiffs filed their Plaintiffs' Motion for Leave to File Suit, Nunc Pro Tunc April 27, 2011 requesting that, to the extent necessary, they be granted leave to bring their State Action in State Court nunc pro tunc to April 27, 2011. [ECF No. 39].
13. On September 2, 2011, Plaintiffs filed their Motion for Leave to Appeal [ECF No. 40] and Notice of Appeal [ECF No. 41] in respect of the Order Denying Remand/Abstention [ECF No. 24] and Order Denying Motion for Rehearing of Order Denying Motion for Remand and Abstention [ECF No. 34].
14. On October 7, 2013, the District Court entered its Order on Appeal, Case No. 12- CV-21725-WILLIAMS (S.D.Fla.) [ECF No. 14], affirming this Court's Order Denying Remand/Abstention.
[ECF No. 54, Order on Appeal at 5-7 (Italics added)].
15. The District Court then addressed Plaintiffs' contention that this Court lacked subject matter jurisdiction over their claims. Specifically, the District Court explained that "Appellants' suit against Bakst and Fender was a `core proceeding' concerning the administration of the estate. Many courts have expressly held that a common-law tort action against a trustee or other court-appointed officer alleging misconduct in the administration of the bankruptcy estate constitutes a core proceeding. . . . Here, Appellants have filed an action in state court that challenges the conduct of the trustee's counsel and the integrity of the bankruptcy court itself. The Court cannot imagine any scenario in which such a claim could exist outside the context of bankruptcy, since the very subject of Appellants' state complaint is the court's legitimacy, and the rights Appellants seek to vindicate in the state action are derived from the underlying bankruptcy cases." Id. at 9-10.
16. On December 5, 2013, Plaintiffs filed their Notice of Appeal to United States Court of Appeals for the Eleventh Circuit. Case No. 12-CV-21725-WILLIAMS (S.D.Fla.) [ECF No. 18].
17. By Order dated June 17, 2014, the Eleventh Circuit dismissed Plaintiffs' appeal of the District Court's affirmance of the Order Denying Remand/Abstention. Case No. 13-15567-AA.
18. On September 22, 2014, this Court conducted a status conference in the Removed Action. See Order Setting Hearing on Motion to Dismiss [ECF No. 4]. [ECF No. 62]. At the status Conference, this Court approved an application to retain Mr. Bakst and the law firm of Greenspoon Marder, P.A. as counsel to the Trustee nunc pro tunc to December 1, 2011, in that, Mr. Bakst's prior employer, Ruden McClosky, P.A., had filed bankruptcy and no longer operated. See Order Approving Employment of Trustee's Attorney Nunc Pro Tunc to December 1, 2011. [ECF No. 233, Main Case, No. 11-23492-AJC].
19. On September 29, 2014, Defendants filed their Defendants' Initial Supplement in which they argue that the District Court's rulings that the Barton doctrine applied, and that this Court possessed subject matter jurisdiction constituted the law of the case in respect of these issues. [ECF No. 68 (citing DeLong Equip. Co. v. Washington Mills Elec. Minerals Corp., 990 F.2d 1186 (11th Cir.1993), for the proposition that, in the absence of the "most cogent of reasons," i.e., a change in controlling authority, new facts, or the need to avoid manifest injustice, the District Court's rulings should be followed by this Court for the balance of this Adversary Proceeding) ].
20. On October 6, 2014, prior to the 11:00 a.m. hearing on the Motion to Dismiss, Plaintiffs filed their Plaintiffs' Second Supplement in which they argued, among other things, that the Barton doctrine was no longer relevant, that is, it did not compel dismissal because the State
21. At the hearing on the Motion to Dismiss, Defendants argued four separate grounds for dismissal: (i) the Barton doctrine, relying on case law refuting the proposition in In re Harris, supra, that once an action is removed from state court to bankruptcy court the Barton doctrine is no longer applicable (ii) the claims asserted in the Complaint do not exist under Florida law, (iii) even if the claims exist they are barred by the Florida litigation privilege, and (iv) even if the claims exist the Defendants are immune from suit under derived or qualified judicial immunity. [ECF No. 73 (Transcript of Oct. 6, 2014 Hearing) at 4-29]. The Plaintiffs argue that (i) the Barton doctrine is inapplicable because the State Action was removed to this Court, (ii) the alleged causes of action exist, (iii) Defendants are not protected from suit under either the Florida litigation privilege or derived or qualified judicial immunity. [ECF No. 73 (Transcript of Oct. 6, 2014 Hearing) at 29-41]. Alternatively, Plaintiffs seek leave of this Court to prosecute their claims in State Court and, further in the alternative, leave to amend the Complaint to state a claim if the Court determines that they have failed to do so. [ECF No. 73 (Transcript of Oct. 6, 2014 Hearing) at 35:10-13, 36:7-10, 39:14-19, 40:13-19 and 41:17-20].
In reviewing a motion to dismiss under Rule 12(b)(6), Fed, R. Civ. P., made applicable here by Rule 7012, Fed. R. Bankr.P., a court must take all well-pleaded facts in a plaintiffs complaint and all reasonable inferences drawn from those facts as true. Jackson v. Okaloosa Cty., Fla., 21 F.3d 1531, 1534 (11th Cir.1994). "A pleading must contain `a short and plain statement of the claim showing that the pleader is entitled to relief'" Ashcroft v. Iqbal, 556 U.S. 662, 677-78, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Fed.R.Civ.P. 8(a)(2)). A complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. While detailed factual allegations are not always necessary to prevent dismissal of a complaint, the allegations must "`give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp., 550 U.S. at 555, 127 S.Ct. 1955 (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). While a court must accept as true a plaintiff's allegations, a court may dismiss a complaint on a dispositive issue of law. Marshall Cty. Bd. of Educ. v. Marshall Cty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir.1993) (citing Executive 100, Inc. v. Martin Cty., 922 F.2d 1536, 1539 (11th Cir.1991) ("the court may dismiss a complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) when, on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action.")).
Under the Barton doctrine, a litigant wishing to sue a bankruptcy trustee or his court-approved professionals, including counsel, for actions taken in their official capacity in a court other than the
Lawrence, 573 F.3d at 1269 (quoting Carter v. Rodgers, 220 F.3d 1249, 1252-53 (11th Cir. 2000)).
First, this Court concludes that the Barton doctrine applies based on the holding of the District Court in its Order on Appeal quoted above. This Court believes that the District Court's holding is the law of the case, and this Court agrees with the holding even if it were to conclude that the law of the case doctrine should not be applied here. The reasoning this Court employed in denying Plaintiff's motion for remand and abstention is consistent with the District Court's rationale: In the Order Denying Motion for Remand/Abstention, this Court explained, in relevant part, that "[t]he allegations in the removed action refer to acts taken by Mr. Bakst while he was attorney for the Trustee, representing the Trustee in the Trustee's efforts to recover, administer, and protect estate assets." [ECF No. 24 at 2]. This conclusion is consistent not only with the District Court's rationale, but the Eleventh Circuit's statement in Lawrence wherein that court recognized that "[w]hile Lawrence claims that the Trustee, through counsel, abused his official position, he concedes that the Trustee ostensibly undertook the challenged actions in his official capacity and for the purpose of enforcing the bankruptcy court's Turn Over Order." Lawrence, 573 F.3d at 1270.
Second, this Court is not obligated to and respectfully declines to follow the ruling in In re Harris, supra, where, in relevant part, the court explained that "[w]hen Harris' case was removed to the appointing bankruptcy court, all problems under the Barton doctrine vanished." 590 F.3d at 742.
Id. The instant action should not have been filed in New York state court without first seeking leave of this Court. The Barton doctrine is directly applicable to the matter before me; indeed, this situation is precisely what the doctrine seeks to prevent. While the Barton doctrine alone provides adequate grounds for dismissal, the Court holds, alternatively, that even if leave of court could apply retroactively, Richardson's
Id.
This Court adopts the reasoning of Judge Kevin Carey of the Delaware Bankruptcy Court, which is consistent with and serves to protect the principles underlying the Barton doctrine recognized by the Eleventh Circuit in Lawrence, 573 F.3d at 1269. The removal of the State Action to this Court does not retroactively cure the defect in Plaintiffs' failure to seek and obtain leave of this Court prior to filing the Complaint in State Court as required by the Barton doctrine. The Court also adopts the reasoning of the cases cited by Judge Carey for the proposition that cases filed in violation of the Barton doctrine are void ab initio. Accordingly, the Court concludes that the Removed Action should be dismissed with prejudice on the basis of the Barton doctrine.
As an independent ground for dismissal, this Court concludes that the stated causes of action do not exist under Florida law and the Complaint should be dismissed for failure to state a claim for which relief can be granted. The Complaint contains two Counts: "Conspiracy to Obstruct Due Operation of Law and Deprive Plaintiffs of Their Right to A Fair Trial" (Count I), and "Fraudulent Corruption of the Judicial Process" (Count II). [ECF No. 1 (Notice of Removal, attaching Complaint)]. The primary case cited by Plaintiffs in support of these claims is the Supreme Court's decision in Dennis v. Sparks, 449 U.S. 24, 101 S.Ct. 183, 66 L.Ed.2d 185 (1980), which concerned an alleged conspiracy between a Texas state court Judge and private litigants in whose favor the judge issued injunctive relief. The injunctive relief was reversed on appeal by a Texas appellate court after which the aggrieved litigants filed suit in U.S. District Court asserting a claim against the judge and the parties in whose favor the injunctive relief was granted under 42 U.S.C. § 1983. The judge was dismissed from the action (based on judicial immunity), but it was allowed to proceed against the parties in whose favor the injunctive relief was granted. Although Defendants argue that Dennis is inapposite because in that case there existed a "state actor," the Texas state court Judge, while here Judge Olson is a federal bankruptcy judge, nowhere in the opinion did the Dennis Court recognize the claims set forth in the Complaint.
Moreover, in none of the cited cases is the "Fraudulent Corruption of the Judicial Process" claim recognized; and, in only one case, Patten v. Daoud, 152 Fla. 448, 452, 12 So.2d 299, 301 (Fla.1943), is there a reference, in a dissenting opinion, to a claim asserting a "conspiracy to obstruct the due operation of law and thereby deprive the plaintiff of his right to do business." Id. The right of a person to conduct business is not at issue in the case before this Court. Accordingly, the Court concludes that the stated causes of action do not exist under Florida law and, therefore, Plaintiffs have failed to state a plausible claim for relief as contemplated by Rule 12(b)(6), Fed.R.Civ.P. As such, the Removed Action should be dismissed with prejudice.
Even if the Barton doctrine is inapplicable and the Complaint if determined to state recognized causes of action under Florida law, Plaintiffs' claims are nevertheless still barred by operation of
Even if the Barton doctrine is inapplicable and the Complaint if determined to state recognized causes of action under Florida law, Plaintiffs' claims are nevertheless still barred by operation of derived or qualified judicial immunity as recognized and applied by the Harris court. In the District Court opinion affirmed by the Eleventh Circuit in Lawrence, supra,
Accordingly, the claims against the Defendants are barred as a matter of law even if the Barton doctrine is inapplicable and stated claims recognized as causes of action under Florida law. See also Marshall Cty. Bd. of Educ., 992 F.2d at 1174;
In their Initial Supplement (and at oral argument) Plaintiffs requested, in the alternative, that if this Court were to assert jurisdiction over the Removed Action that Plaintiffs be granted leave to pursue their claims against Defendants in the State Court. [ECF No. 32, ¶¶ 41-48]. At the conclusion of the hearing, the Court stated that it would be a waste of time to grant this request given its ruling that the action was void ab initio pursuant to application of the Barton doctrine. [ECF No. 73 (Transcript of Oct. 6, 2014 Hearing) at 45:7-14].
During and at the close of their argument, Plaintiffs asked for leave to amend the Complaint to the extent the Court found that their claims did not exist. [ECF No. 73 (Transcript of Oct. 6, 2014 Hearing) at 36:7-10, 40:16-19 and 41:18-20]. Given this Court's rulings in respect of the Florida litigation privilege and immunity in favor of the Defendants, which work to bar any claims against them, any proposed amendment would be futile. See Cockrell v. Sparks, 510 F.3d 1307, 1310 (11th Cir.2007) ("Leave to amend a complaint is futile when the complaint as amended would still be properly dismissed or be immediately subject to summary judgment for the defendant.").
Based on the foregoing, it is
ORDERED AND ADJUDGED as follows:
1. The Motion to Dismiss is
2. This Adversary Proceeding is
3. This Court reserves jurisdiction to enter any order awarding costs, attorneys' fees and/or sanctions appropriately imposed or taxed against Plaintiffs arising from the filing and prosecution of the Removed Action.