In re: East Coast Foods, Inc.

FILED
JUL 19 2023
NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

OF THE NINTH CIRCUIT

In re: BAP No. CC-23-1034-FLS
EAST COAST FOODS, INC.,
Debtor. Bk. No. 2:16-bk-13852-BB

EAST COAST FOODS, INC.,
Appellant,
v. MEMORANDUM*
DEVELOPMENT SPECIALISTS, INC.;
BRADLEY D. SHARP, Chapter 11
Trustee,
Appellees.

Appeal from the United States Bankruptcy Court
for the Central District of California
Sheri Bluebond, Bankruptcy Judge, Presiding

Before: FARIS, LAFFERTY, and SPRAKER, Bankruptcy Judges.

INTRODUCTION

East Coast Foods, Inc. (“ECF”) sought leave from the bankruptcy

court to sue its former chapter 111 trustee in another forum. The

bankruptcy court denied leave, stating (among other things) that it had

*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
Unless specified otherwise, all chapter and section references are to the
1

Bankruptcy Code, 11 U.S.C. §§ 101-1532.
exclusive jurisdiction of ECF’s claims against the trustee.

ECF appeals, arguing that the bankruptcy court erred in its exclusive

jurisdiction ruling and that 28 U.S.C. § 959(a) allows it to pursue its claims

against the former trustee without leave of the bankruptcy court. We

discern no reversible error and AFFIRM.

FACTS 2

A. Bankruptcy events

ECF operated four restaurants in Los Angeles, California. Herbert

Hudson is ECF’s owner and president.

In March 2016, ECF filed a chapter 11 petition. The court directed the

appointment of an examiner who was critical of ECF’s financial accounting

practices and internal controls. In response, the bankruptcy court approved

Bradley D. Sharp’s appointment as chapter 11 trustee (“Trustee”). The

Trustee is a senior managing director at his firm, Development Specialists,

Inc. (“DSI”).

Shortly thereafter, the Trustee sought to employ The Next Idea

(International), LLC (“TNI”) “to perform restaurant management services.”

Robert Ancill is the chief executive officer and managing partner of TNI.

Mr. Ancill asserted in the statement of disinterestedness attached to the

employment application that TNI did not hold any interest materially

2
We exercise our discretion to take judicial notice of documents electronically
filed in the underlying bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re
Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
2
adverse to the estate. The bankruptcy court approved TNI’s employment.

A few months later, the Trustee filed a supplemental application to

expand the scope of TNI’s employment to include marketing services.

Mr. Ancill again certified that TNI did not have any connection with ECF’s

creditors and did not hold interests materially adverse to the interests of

ECF’s estate. The bankruptcy court granted the supplemental application.

Between November 2017 and October 2018, the Trustee filed three

applications for payment of fees and expenses to TNI. The applications

sought tens of thousands of dollars in fees but did not report any

reimbursable expenses. The court approved the first two applications.

In the meantime, the Committee of Creditors Holding Unsecured

Claims and Mr. Hudson proposed a second amended joint plan of

reorganization (“Plan”). Pursuant to the Plan, Brian Weiss (“Plan Trustee”)

was appointed trustee of the post-confirmation plan trust.

The Plan provided that only the Plan Trustee may pursue “Estate

Claims.” 3 It stated that, “[o]n or after the Effective Date, the Plan Trustee

shall have sole authority and responsibility for investigating, analyzing,

commencing, prosecuting, litigating, compromising, collecting, and

otherwise administering . . . Estate Claims . . . .” Additionally, “[o]n the

Effective Date, all Estate Claims of the Debtor . . . shall be transferred to

3
The Plan defines “Estate Claims” as “any and all claims and causes of action
that constitute property of the Estate including, but not limited to . . . any causes of
action or claims for recovery of any amounts owing to the Debtor or the Estate . . . .”

3
and vest in the Plan Trust . . . .”

The bankruptcy court confirmed the Plan, and it became effective on

September 14, 2018. As of the effective date, the Trustee was discharged of

his duties and responsibilities.

In October 2018, the Plan Trustee began reviewing ECF’s vendors. He

became concerned with excessive sums of money paid to Hospitality

Merchandise (“Hospitality”) and Restaurant Extensions (“Extensions”).

Both companies were apparently formed postpetition and owned or

controlled by TNI’s president, Mr. Ancill.

The Plan Trustee found that TNI grossly overordered merchandise

from Hospitality, leading to excess inventory and overcharges amounting

to tens of thousands of dollars. The Plan Trustee also determined that

Extensions may have overcharged ECF by tens of thousands of dollars.

Additionally, the Plan Trustee determined that TNI had been paid

approximately $292,950 for restaurant management services and $83,600

for marketing, most of which was not disclosed on the fee applications.

Based on some of these concerns, the Plan Trustee objected to TNI’s

third and final fee application. Following a hearing, on November 19, 2018,

the bankruptcy court denied TNI’s third fee application, disallowed TNI’s

compensation, and ordered TNI to disgorge the sum of $376,550 in fees

previously paid for restaurant management services and marketing

services. However, it did not order Hospitality or Extensions to disgorge

any payments.

4
 Also on November 19, 2018, the bankruptcy court issued its omnibus

order on fees, which, among other things, granted the Trustee’s final fee

application and approved a final fee amount totaling $1,155,844.71 and

costs in the amount of $5,107.32.

ECF claims that, in December 2019, it first learned that the Trustee

knew or should have known about TNI’s wrongdoing.4

B. The state court complaint

On November 23, 2022, about four years after the bankruptcy court

ordered the disgorgement of TNI’s fees, ECF filed a complaint against the

Trustee and DSI in the Los Angeles County superior court (“State Court

Complaint”). It alleged that TNI overcharged ECF and overordered

merchandise and services and that the Trustee knew of the wrongdoing

and failed to disclose TNI’s wrongdoing to the bankruptcy court. It also

alleged that the Trustee’s statements on the fee applications were

knowingly false. It further claimed that the Trustee “was grossly negligent

in his management of the operations of Plaintiff ECF during the

bankruptcy proceeding.” It stated that the Trustee failed to review ECF’s

4
ECF claims that, on that date, it became aware of two e-mails that, according to
ECF, implicated the Trustee’s knowledge of TNI’s activities. First, an e-mail dated
December 6, 2018 was apparently in response to spam e-mail that the Trustee received
concerning the point-of-sale system; Mr. Ancill apologized and told the Trustee that
“they have me set up as some reseller[.]” Second, an e-mail dated November 2, 2017
was not provided to the court but was described by Mr. Ancill in a declaration. He said
the Trustee directed him not to use TNI to purchase products directly for ECF. These
emails are not the “smoking guns” that ECF wants them to be.
5
financial performance and report the results to the bankruptcy court, failed

to monitor ECF’s operations, allowed excessive expense and labor charges,

and did not exercise appropriate care when managing ECF.

The State Court Complaint raised five causes of action: (1) fraud -

intentional misrepresentation, (2) fraud - negligent misrepresentation,

(3) breach of fiduciary duty, (4) aiding and abetting breach of fiduciary

duty (against DSI), and (5) aiding and abetting fraud – intentional

misrepresentation (against DSI). 5

C. The motion for leave to sue the Trustee

About a month later, ECF filed in the bankruptcy court a motion for

leave to sue the Trustee and DSI6 (the “Motion”). The Motion essentially

repeated the facts and arguments from the State Court Complaint.

The Motion argued that, pursuant to the “Barton doctrine,” Barton v.

Barbour, 104 U.S. 126 (1881), the bankruptcy court should grant ECF leave

to sue the Trustee outside of the bankruptcy court for “fraudulent and

negligent breaches of [his] fiduciary duties, that resulted in significant

financial damages to ECF’s estate.”

The Plan Trustee filed a limited response to the Motion. He stated

that the Motion misrepresented the Plan Trustee’s findings and fabricated

5
ECF represents that it filed complaints in both the state court and the federal
district court. However, only the state court complaint is included in the excerpts of
record and specifically cited by the parties.
6
We will sometimes refer to both the Trustee and DSI as “Trustee.”
6
portions of quotations of the Plan Trustee’s findings. The Plan Trustee

stated that he “simply did not investigate and did not conclude whether or

not the Chapter 11 Trustee approved the orders at issue.”

ECF responded that neither ECF, Mr. Hudson, nor its current

bankruptcy counsel had reviewed the Motion before it was filed by former

counsel and that it did not condone the misrepresentations and phony

quotations. Nevertheless, ECF maintained that the bankruptcy court

should grant the Motion.

The Trustee opposed the Motion. He argued that ECF did not have

standing to sue him, because the actions complained of occurred pre-

confirmation. All claims were owned by the bankruptcy estate, and,

pursuant to the Plan, only the Plan Trustee could pursue those claims. The

Trustee also argued that ECF violated the Barton doctrine when it filed the

State Court Complaint without first seeking bankruptcy court approval,

that the three-year statute of limitations barred the State Court Complaint,

and that the Motion lacked factual foundation.

In its reply brief, ECF responded to the Trustee’s arguments and, for

the first time, cited 28 U.S.C. § 959(a).

The bankruptcy court issued a tentative ruling and indicated that it

was inclined to deny the Motion. The court stated that ECF lacked standing

to sue the Trustee and that its claims against the Trustee were collateral

attacks on the bankruptcy court’s fee order. ECF did not raise any objection

to the Trustee’s fee application or otherwise assert that the Trustee had any

7
knowledge of or participation in TNI’s wrongful conduct. The court

explained that it had “exclusive jurisdiction over the amount of

compensation to be paid to the trustee in this case or whether the trustee

engaged in misconduct during the course of his administration.”

The bankruptcy court also indicated that the State Court Complaint

was barred by the statute of limitations and that the Trustee’s e-mails did

not establish wrongdoing or toll the statute of limitations. It said that, after

ECF withdrew the quotations that it falsely attributed to the Plan Trustee, it

did not offer any other basis for liability, so the court had “no basis to

conclude that there is even a prima facie case of any kind against the

trustee.”

At the hearing on the Motion, the bankruptcy court read its tentative

ruling into the record and made additional comments. It said that it had

exclusive jurisdiction over the Trustee’s compensation and his alleged

misconduct during his administration of ECF’s estate.

During a colloquy with the court, counsel for ECF referenced 28

U.S.C. § 959 for the only time in the hearing, asking “why isn’t this a[n] . . .

action in 28 U.S.C. [§] 959, damages caused by . . . the former trustee in the

conduct of the operations of the business?” The court responded by

explaining that that section did not apply because the allegations “go[] to

the very heart of what compensation the Trustee ought to be paid. So

you’ve got to come here.”

The bankruptcy court denied the Motion. Its order did not explicitly

8
mention or incorporate the tentative ruling. Rather, the court stated that it

had “read its legal conclusions and factual findings . . . on the record” and

held that it “has the exclusive jurisdiction to hear all claims and actions

asserted against [the Trustee] and DSI, arising out of acts or omissions that

are alleged to have occurred during the course of the performance of his

duties as chapter 11 trustee in the Case.”

ECF withdrew the State Court Complaint pursuant to the bankruptcy

court’s order. It timely filed its notice of appeal.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.

ISSUE

Whether the bankruptcy court erred in denying ECF leave to sue the

Trustee in a non-bankruptcy forum.

STANDARDS OF REVIEW

We review for an abuse of discretion the bankruptcy court’s order

denying leave to file suit against the case trustee and others in another

forum. Blixseth v. Brown (In re Yellowstone Mountain Club, LLC), 841 F.3d

1090, 1094 (9th Cir. 2016) (“We review the bankruptcy court’s order

denying leave to sue for abuse of discretion.”); Kashani v. Fulton (In re

Kashani), 190 B.R. 875, 881 (9th Cir. BAP 1995) (“The granting of leave for a

party to sue the trustee is within the sound discretion of the appointing

court.”). To determine whether the bankruptcy court has abused its

9
discretion, we conduct a two-step inquiry: (1) we review de novo whether

the bankruptcy court “identified the correct legal rule to apply to the relief

requested[,]” and (2) if it did, we consider whether the bankruptcy court’s

application of the legal standard was illogical, implausible, or without

support in inferences that may be drawn from the facts in the record.

United States v. Hinkson, 585 F.3d 1247, 1263 (9th Cir. 2009) (en banc).

We review de novo the bankruptcy court’s conclusions of law,

including its statutory interpretations of 28 U.S.C. § 959. See Parks v.

Drummond (In re Parks), 475 B.R. 703, 706 (9th Cir. BAP 2012); see also

Phoenician Mediterranean Villa, LLC v. Swope, 554 B.R. 747, 756 (W.D. Pa.

2016) (“conduct[ing] a de novo review of the law” and concluding that 28

U.S.C. § 959 was inapplicable), aff’d sub nom. In re J & S Props., LLC, 872 F.3d

138 (3d Cir. 2017); In re Kashani, 190 B.R. at 881 (“The existence of subject

matter jurisdiction is a question of law and is reviewed de novo.”). “De

novo review requires that we consider a matter anew, as if no decision had

been made previously.” Francis v. Wallace (In re Francis), 505 B.R. 914, 917

(9th Cir. BAP 2014).

We may affirm on any basis supported by the record. Black v. Bonnie

Springs Family Ltd. P’ship (In re Black), 487 B.R. 202, 211 (9th Cir. BAP 2013).

DISCUSSION

A. The Panel is not limited to the rationale given by the bankruptcy
court.

As an initial matter, the parties dispute the scope of the bankruptcy

10
court’s ruling. ECF argues that the bankruptcy court ruled only that it had

exclusive jurisdiction over the State Court Complaint. Conversely, the

Trustee argues that the court adopted its tentative ruling in full and denied

the Motion for the many reasons discussed therein.

We need not pinpoint the exact reasons on which the bankruptcy

court relied. We may affirm on any basis fairly supported by the record,

whether or not the bankruptcy court considered or relied upon that basis.

Hall v. N. Am. Van Lines, Inc., 476 F.3d 683, 686 (9th Cir. 2007). For the

reasons discussed below, we agree that the bankruptcy court had sufficient

reasons to deny the Motion.

B. The bankruptcy court did not abuse its discretion in denying ECF
leave to sue the Trustee in another court.

The bankruptcy court denied the Motion because it thought that it

had exclusive jurisdiction over matters concerning the Trustee’s

compensation and whether the Trustee engaged in misconduct. ECF does

not squarely challenge the court’s jurisdictional analysis, but the question is

not free from doubt.

“The bankruptcy court has original and exclusive jurisdiction over all

cases under title 11, 28 U.S.C. § 1334(a), and original but not exclusive

jurisdiction over all civil proceedings arising under title 11, or arising in or

related to cases under title 11, 28 U.S.C. § 1334(b).” Krasnoff v. Marshack (In

re Gen. Carriers Corp.), 258 B.R. 181, 189 (9th Cir. BAP 2001). In addition, the

bankruptcy court has “exclusive jurisdiction . . . over all claims or causes of

11
action that involve construction of section 327 of title 11, United States

Code, or rules relating to disclosure requirements under section 327.” 28

U.S.C. § 1334(e)(2); see also In re Sundance Self Storage-El Dorado LP, 482 B.R.

613, 624 (Bankr. E.D. Cal. 2012) (The bankruptcy court “has original and

exclusive jurisdiction over the employment of counsel, their compensation,

and their disclosure obligations, pursuant to 28 U.S.C. § 1334(e)(2), and has

the authority to hear and determine this matter pursuant to 28 U.S.C.

§ 157(b)(1).”).

In other words, the bankruptcy court’s exclusive jurisdiction extends

only to the bankruptcy case itself and to claims related to § 327. In all other

respects, the court’s jurisdiction is nonexclusive.

Counsel for ECF conceded that many of the claims in ECF’s

complaint alleged violations of § 327 and that the fraud and

misrepresentation claims are premised on that section. The bankruptcy

court correctly ruled that it has exclusive jurisdiction over those claims.

As for the remainder of ECF’s claims, such as the claims for breach of

fiduciary duty, one could plausibly argue that those claims are integral to

the bankruptcy case and are therefore within the bankruptcy court’s

exclusive jurisdiction. The trustee is a central player in a bankruptcy case

and the trustee’s administration of the estate is an essential feature of the

case.

On the other hand, one could also plausibly argue that the

bankruptcy court’s jurisdiction over the remainder of ECF’s claims was

12
nonexclusive. All of those claims “arose in” ECF’s bankruptcy case.

We have no doubt, however, that the Barton doctrine justified the

court’s decision.7 Under that doctrine, “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.” Beck v. Fort James Corp. (In re

Crown Vantage, Inc.), 421 F.3d 963, 970 (9th Cir. 2005); see also In re Kashani,

190 B.R. at 884. As a starting point, “the prospective plaintiffs must set

forth a prima facie case against the trustee.” In re Kashani, 190 B.R. at 885.

7
Courts have frequently said that the Barton doctrine limits the court’s subject
matter jurisdiction. Carter v. Rodgers, 220 F.3d 1249, 1255 (11th Cir. 2000) (holding that,
because the plaintiff failed to obtain the bankruptcy court’s leave to sue the trustee in
another forum, “the district court lacked subject matter jurisdiction and properly
dismissed this civil action against these Defendants”); see also Harris v. Wittman (In re
Harris), 590 F.3d 730, 742 (9th Cir. 2009) (“[A]bsent leave of the appointing court, the
Barton doctrine denies subject matter jurisdiction to all forums except the appointing
court.”); In re Crown Vantage, Inc., 421 F.3d at 971 (“The Court held that if leave of court
were not obtained, then the other forum lacked subject matter jurisdiction over the
suit. . . . As the Supreme Court explained, allowing the unauthorized suit to proceed
‘would have been a usurpation of the powers and duties which belonged exclusively to
another court.’”). In other contexts, the Supreme Court has recently questioned whether
various rules and doctrines are truly “jurisdictional.” See Mission Product Holdings, Inc.
v. Tempnology, LLC, 139 S. Ct. 1652, 1661 (2019) (holding that a case was not moot, even
where there were no assets available for recovery); see also MOAC Mall Holdings LLC v.
Transform Holdco LLC, 143 S. Ct. 927, 936 (2023) (“In view of these consequences and our
past sometimes-loose use of the word ‘jurisdiction,’ we have endeavored to bring some
discipline to this area. We have clarified that jurisdictional rules pertain to the power of
the court rather than to the rights or obligations of the parties. And we only treat a
provision as jurisdictional if Congress clearly states as much.” (cleaned up)). We are
confident that the Court would continue to approve of the Barton doctrine even if it
decided that the doctrine did not limit courts’ jurisdiction.
13
Even then, the bankruptcy court’s discretion is broad: “the bankruptcy

court may conclude, even after the party seeking leave has met the

requirements of presenting a prima facie case against the trustee, that the

suit should more properly be maintained in the bankruptcy court.” Id. at

886 (citation omitted).

We laid out a five-part test to “determine whether the issues affect

solely the administration of the bankruptcy estate and should be heard by

the bankruptcy court.” Id. at 887. The court should consider:

1. Whether the acts or transactions relate to the carrying on of
the business connected with the property of the bankruptcy
estate. If the proceeding is under 28 U.S.C. § 959(a), then no
court approval is necessary. . . .

2. If approval from the appointing court appears necessary, do
the claims pertain to actions of the trustee while administering
the estate? By asking this question, the court may determine
whether the proceeding is a core proceeding or a proceeding
which is related to a case or proceeding under Title 11, United
States Code.

3. Do the claims involve the individual acting within the scope
of his or her authority under the statute or orders of the
bankruptcy court, so that the trustee is entitled to quasi-judicial
or derived judicial immunity?

4. Are the movants or proposed plaintiffs seeking to surcharge
the trustee; that is, seeking a judgment against the trustee
personally?

5. Do the claims involve the trustee’s breaching her fiduciary
duty either through negligent or willful misconduct?

14
Id. at 886-87 (citation omitted). We stated that “one or more of these factors

may be a basis for the bankruptcy court to retain jurisdiction over the

claims.” Id. at 887.

Under this test, denial of the Motion was warranted. The bankruptcy

court was unconvinced that ECF had laid out a prima facie case against the

Trustee (although it reserved final ruling on the matter). Kashani’s five-

prong analysis further confirms that the issues should be heard by the

bankruptcy court. ECF’s claims “pertain to actions of the trustee while

administering the estate . . . .” As we explain in the next section, 28 U.S.C.

§ 959 does not apply. The claims are “core proceedings” because they arise

out of estate administration. See Schultze v. Chandler, 765 F.3d 945, 948 (9th

Cir. 2014), as amended (Aug. 1, 2014) (“Where a post-petition claim was

brought against a court-appointed professional, we have held the suit to be

a core proceeding.”). Although the matter has not been briefed, the Trustee

might enjoy quasi-judicial immunity against some or all of the claims

because the Trustee was “acting within the scope of his or her authority

under the statute or orders of the bankruptcy court . . . .” ECF is “seeking a

judgment against the trustee personally[,]” which implicates his fee award,

and the claims involve the Trustee’s alleged breach of his fiduciary duties

imposed under the Bankruptcy Code. The bankruptcy court was within its

discretion to deny the Motion.

C. 28 U.S.C. § 959(a) is inapplicable.

ECF argues at length that 28 U.S.C. § 959(a) is an exception to the

15
Barton doctrine and allows it to sue the Trustee without leave of the

bankruptcy court, because its claims do not concern the administration of

the bankruptcy estate. We disagree.

The Trustee argues that ECF waived this argument, because it did not

raise it until it made a passing reference to the statute in its reply brief in

support of the Motion. Conversely, ECF contends that its references to 28

U.S.C. § 959(a) in its reply brief and at the hearing are sufficient.

As a general rule, “[a] litigant may waive an issue by failing to raise it

in a bankruptcy court.” Mano-Y & M, Ltd. v. Field (In re Mortg. Store, Inc.),

773 F.3d 990, 998 (9th Cir. 2014). “There is no bright-line rule to determine

whether a matter has been properly raised. A workable standard, however,

is that the argument must be raised sufficiently for the trial court to rule on

it.” O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957

(9th Cir. 1989) (citations omitted).

We agree that ECF did not waive its argument, but only barely. ECF

did indeed mention 28 U.S.C. § 959(a) in the bankruptcy court, even if at

the last minute and only in passing, so we think that ECF did just enough

to preserve its 28 U.S.C. § 959(a) argument on appeal.

Regardless, we are not persuaded that 28 U.S.C. § 959(a) supports

ECF’s position. That section provides that “[t]rustees, receivers or

managers of any property, including debtors in possession, may be sued,

without leave of the court appointing them, with respect to any of their acts

or transactions in carrying on business connected with such property.”

16
 This statute is inapplicable to the facts of this case. It is broadly

accepted that 28 U.S.C. § 959(a) does not apply to alleged wrongdoing

during the normal course of a trustee’s administration of the bankruptcy

estate. The Ninth Circuit has explained:

this limited exception applies only if the trustee or other officer
is actually operating the business, and only to acts or
transactions in conducting the debtor’s business in the ordinary
sense of the words or in pursuing that business as an operating
enterprise. Section 959(a) does not apply to suits against
trustees for administering or liquidating the bankruptcy estate.
Actions taken in the mere continuous administration of
property under order of the court do not constitute an “act” or
“transaction” in carrying on business connected with the estate.
The few examples of suits that have been allowed under [28
U.S.C.] § 959(a) include a wrongful death action filed against an
operating railroad trustee and suits for wrongful use of
another’s property.

In re Crown Vantage, Inc., 421 F.3d at 971-72 (cleaned up).

We considered a similar situation in Kashani. In that case, the chapter

11 trustee was appointed to manage the assets of the debtors’ bankruptcy

estate. The debtors sought leave to sue the trustee for breach of fiduciary

duty and negligence. 190 B.R. at 879. They enumerated some of the claims

they intended to assert against the trustee: failing to sell estate property

timely; engaging in a speculative real estate venture; concealing

information from the bankruptcy court; and failing to disclose to the

bankruptcy court that her attorney had previously represented a purchaser

of estate property. Id. The bankruptcy court held that the allegations
17
related only to the trustee’s administration of the estate and denied the

motion without prejudice. Id. at 879-80.

On appeal, we affirmed in relevant part. We considered 28 U.S.C.

§ 959(a) and held that the complaint implicated the trustee’s fiduciary

duties in carrying out the administration of the estate, but

[t]he breach of a fiduciary duty in the administration of the
estate does not fall within the exception provided by 28 U.S.C.
§ 959(a). Since the alleged breaches attributed to the Trustee are
not premised on an act or transaction of the fiduciary in
carrying on the Debtors’ business operation, . . . Section 959(a)
is not applicable to the issues before this Panel.

Id. at 884 (citations omitted). We concluded that “the Debtors must obtain

leave of the bankruptcy court in order to sue the Trustee in a forum other

than the appointing court.” Id. at 884-85. Other circuits have reached the

same conclusion. See Muratore v. Darr, 375 F.3d 140, 146 (1st Cir. 2004)

(holding that, because “[debtor] bases his complaint on the trustee’s

alleged misconduct in liquidating and administering the estate’s property,

and not on tortious acts committed in the furtherance of [debtor’s] leasing

or mortgage and real estate business, section 959(a) does not apply”).

Similarly, the claims raised in the State Court Complaint concern the

Trustee’s acts while administering ECF’s estate and his statutory duties

owed to the bankruptcy estate, not torts committed in the course of

running ECF’s business. Specifically, ECF alleged that the Trustee failed to

disclose information to the bankruptcy court; made false statements on fee

18
applications; failed to monitor ECF’s operations and allowed excessive

expense charges; approved and paid excess labor charges; and did not

exercise care in managing ECF’s business. The causes of action for

misrepresentation and breach of fiduciary duty assert wrongdoing during

the Trustee’s administration of ECF’s estate; they do not seek relief for

independent torts committed while operating ECF’s business.

ECF is not akin to a bystander to the bankruptcy case who was (for

example) run over by a railroad locomotive operated under a bankruptcy

trustee’s auspices, cf. Valdes v. Feliciano, 267 F.2d 91, 94-95 (1st Cir. 1959), or

injured by dangerous conditions on the rental property managed and

operated by the chapter 7 trustee, cf. Dell v. Chain (In re Chain), 614 B.R. 512,

519 (W.D. Pa. 2020). Rather, ECF was a participant in the bankruptcy case

who is disappointed with its recovery in the case. Cf. Muratore, 375 F.3d at

142-43. As such, 28 U.S.C. § 959(a)’s exception to the Barton doctrine is

inapplicable.

D. ECF lacked standing to sue the Trustee.

The bankruptcy court discussed other possible bases for its denial of

the Motion, but ECF does not address them on appeal.

In its tentative ruling, the bankruptcy court stated that ECF lacks

standing to sue the Trustee, because the Plan vested all estate claims in the

plan trust, and only the Plan Trustee could pursue those claims. We agree;

the Plan clearly provided that “Estate Claims,” including “any causes of

action or claims for recovery of any amounts owing to the Debtor or the
19
Estate,” were property of the estate, did not revest in ECF, and were under

the Plan Trustee’s exclusive control. This is an independently sufficient

reason to affirm the court’s decision.

CONCLUSION

The bankruptcy court did not err in denying the Motion. We

AFFIRM.

20