IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 17, 2009
No. 08-30899
Charles R. Fulbruge III
Clerk
H S STANLEY, JR, In his capacity as Trustee of the Bankruptcy Estate of Gary
Eugene Hale
Plaintiff-Appellant
v.
CLARE W TRINCHARD, Esquire; TRINCHARD & TRINCHARD LLC;
CLARENDON NATIONAL INSURANCE CO
Defendants-Appellees
Appeal from the United States District Court
for the Eastern District of Louisiana
Before JONES, Chief Judge, ELROD, Circuit Judge, and GUIROLA, District
Judge.*
EDITH H. JONES, Chief Judge:
H.S. Stanley, as trustee for the bankruptcy estate of Gary Eugene Hale,
appeals a summary judgment from the district court, which held that the
estate’s legal malpractice claims against Trinchard, Trinchard, & Trinchard LLC
(“Trinchard”) were time-barred. Because Congress expressed an overriding and
unqualified interest in allowing bankruptcy trustees sufficient time to discover
causes of action on behalf of their estates, we hold that § 108(a) of the
Bankruptcy Code, 11 U.S.C. § 108(a), extended Louisiana’s legal malpractice
*
District Judge, Southern District of Mississippi, sitting by designation.
No. 08-30899
peremption period. We reverse and remand to authorize the original complaint
to be pursued and to allow the filing of an amended complaint.
I. BACKGROUND
The facts of this case have been set out in detail in Stanley v. Trinchard,
500 F.3d 411 (5th Cir. 2007) (“Trinchard II”). Broadly, the case involves a multi-
million dollar judgment, referred to herein as Burge, against Gary Eugene Hale,
the result of which forced Hale into involuntary bankruptcy in October 2001. As
the appointed trustee of Hale’s bankruptcy estate, Stanley brought claims under
Louisiana law for breaches of professional and fiduciary duties constituting legal
malpractice against Hale’s attorneys, Trinchard, in April 2002.
The district court granted Trinchard’s motion for summary judgment,
initially finding that Hale’s bankruptcy discharge made it impossible for Stanley
to show that any damages resulted from Trinchard’s alleged malpractice.
Stanley v. Trinchard, 2005 WL 2037543, *13 (E.D. La. Aug. 1, 2005)
(“Trinchard I”). On appeal, this court reversed, holding that Hale’s bankruptcy
discharge did not vitiate his legal malpractice claims, and remanded for further
proceedings.1 Trinchard II, 500 F.3d at 431.
After remand, Trinchard filed another summary judgment motion,
claiming the lawsuit was barred by Louisiana’s one-year peremptive period. The
district court concluded that Hale knew or should have known of his legal injury
as of March 2001, and because of the one-year peremptive period, Stanley’s
lawsuit, filed in April 2002, was untimely. Stanley v. Trinchard, 2008 WL
2686364, at *5-6 (E.D. La. July 8, 2008) (“Trinchard III”). Stanley argued that,
1
Stanley’s claims against another Defendant, Northwestern National Insurance
Company of Milwaukee, Wisconsin, were included in Trinchard II. Those claims are not
relevant here.
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No. 08-30899
as trustee of Hale’s bankruptcy estate, he had filed the malpractice claims
within the two-year period allowed by § 108(a) of the Bankruptcy Code. The
district court responded:
In light of the fact that the rights attached to a peremptive period
extinguish upon the expiration of that period and that peremptive
periods cannot be interrupted or suspended, applying Section 108(a)
to peremptive periods would impermissibly alter substantive
property rights as defined by Louisiana law.
Id. at *6. Therefore, the district court held Louisiana’s peremptive period, and
not the Bankruptcy Code’s limitation period, governed the estate’s malpractice
claim. The court also denied Stanley’s proffered amendments to include
allegations against a former attorney at the Trinchard firm. Id. Stanley’s
motion to reconsider was rejected by the district court.
Stanley now appeals. He contends that § 108(a) of the Bankruptcy Code
preempts Louisiana’s peremption period; that there are material facts as to
whether Hale became aware of the claim in March 2001 or September 2001; and
that his addition of vicarious liability claims relates back to his original
complaint.
II. DISCUSSION
We review a grant of summary judgment de novo, using the same
standards applied by the district court. Warfield v. Byron, 436 F.3d 551, 557
(5th Cir. 2006). Summary judgment is proper when “the pleadings, the discovery
and disclosure materials on file, and any affidavits show that there is no genuine
issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” F ED. R. C IV. P. 56(c).
Bankruptcy Code § 108(a) allows a trustee to commence an action on
behalf of the debtor’s estate within the period allowed by state law for such an
3
No. 08-30899
action or within two years after the order for relief, whichever is later.2 See
United States ex rel. Am. Bank v. C.I.T. Constr. Inc. of Tex., 944 F.2d 253, 259
(5th Cir. 1991). The question here is whether Louisiana’s peremptive statute,
which controls the estate’s claim, is somehow exempt from § 108 because of its
status as a statute of repose.3 We hold that it is not. L A. R EV. S TAT. § 9:5605(A)
provides that no legal malpractice claims:
shall be brought unless filed in a court of competent jurisdiction and
proper venue within one year from the date of the alleged act,
omission, or neglect, or within one year from the date that the
alleged act, omission, or neglect is discovered or should have been
discovered; however, even as to actions filed within one year from
the date of such discovery, in all events such actions shall be filed at
the latest within three years from the date of the alleged act,
omission, or neglect.
These “periods of limitation . . . are peremptive periods within the meaning of
Civil Code Article 3458 4 and, in accordance with Civil Code Article 3461,5 may
2
11 U.S.C. § 108(a):
If applicable non-bankruptcy law, an order entered in a non-bankruptcy
proceeding, or an agreement fixes a period within which the debtor may
commence an action, and such period has not expired before the date of the
filing of the petition, the trustee may commence such action only before the
later of (1) the end of such period, including any suspension of such period
occurring on or after the commencement of the case; or (2) two years after the
order for relief.
3
Common law jurisdictions refer to this type of limitation as a statute of repose, while
states with civil codes use the term peremptive period. See Marchesani v. Pellerin-Milnor
Corp., 269 F.3d 481, 491 (5th Cir. 2001). No legal distinction exists.
4
“Peremption is a period of time, fixed by law, within which a right must be exercised
or be forever lost. Liberative prescription merely prevents the enforcement of a right by
action; in contrast, peremption destroys the right itself.” LA . CIV . CODE art. 3458.
5
“In contrast with prescription, peremption may be neither interrupted nor
suspended.” LA . CIV . CODE art. 3461.
4
No. 08-30899
not be renounced, interrupted, or suspended.” L A. R EV. S TAT. § 9:5605(b);
Reeder v. North, 701 So. 2d 1291, 1295 (La. 1997).
Trinchard argues that § 108(a) is inapplicable to statutes of repose,
including the statute controlling Louisiana’s malpractice claims.6 It argues that
Louisiana’s peremptive period is not a period in which an action may be
commenced but rather represents the lifespan of a substantive right. Atlas Iron
& Metal Co. v. Ashy, 918 So. 2d 1205, 1209 (La. Ct. App. 2006). Once the
substantive right has been extinguished, Trinchard contends that it may not be
resurrected through the Bankruptcy Code. As Trinchard notes, the Supreme
Court has cautioned that “[u]nless some federal interest requires a different
result, there is no reason why such [state law property] interests should be
analyzed differently simply because an interested party is involved in a
bankruptcy proceeding.” Butner v. United States, 440 U.S. 48, 55, 99 S. Ct. 914,
918 (1979).
We are sympathetic to the importance of preserving state law property
rights intact in bankruptcy. Butner itself, however, refers to superseding federal
interests. Id. The subject of bankruptcy falls within the express constitutional
powers of Congress, and bankruptcy law therefore takes precedence over state
laws under the Supremacy Clause. U.S. C ONST., art. VI. Section 108(a) is
6
Supporting its argument, Trinchard points to the legislative history surrounding the
adoption of § 108, which repeatedly uses the term “statute of limitations.” S. Rep. 95-989, at
30 (1977). As we have said before, a powerful line of Supreme Court authority suggests that
“legislative history should rarely be used in statutory interpretation, because only the text of
the law has been passed by Congress, not the often-contrived history.” See, e.g., Garrett v.
Circuit City Stores, Inc., 449 F.3d 672, 679 (5th Cir. 2006) (citing Exxon Mobil Corp. v.
Allapattah Servs. Inc., 545 U.S. 546, 568, 125 S. Ct. 2611, 2626 (2005)). In addition to our
generic aversion, there is nothing in § 108’s history that would lead one to believe that the
term “statute of limitations” was being used in a specific sense that was distinguishable from
a statute of repose. The legislative history, therefore, is of particularly little value here.
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No. 08-30899
written broadly to extend any “period [fixed inter alia by ‘applicable
nonbankruptcy law’] within which the debtor may commence an action.” The
statute’s clear purpose is to afford bankruptcy trustees extra time to assess and
pursue potential assets of the debtor’s estate. Congress drew no distinction
among the state law vehicles that govern time limits for filing suit, whether
statutes of limitations or prescription, repose or peremption. The language of
Section 108(a) compels the conclusion that Congress expressly extended the time
for pursuing any action that would otherwise be time-barred under state law.
There seems to be no authority on point apart from district court decisions
in this ongoing dispute. Other cases cited by the litigants are either not
inconsistent with or irrelevant to our conclusion. Trinchard cites Spears Carpet
Mills, Inc. v. Century Nat’l Bank, 85 B.R. 86, 88 (W.D. Ark. 1988), which noted
that a U.C.C. notification period had been held peremptive under Louisiana
law.7 The court went on to conclude that the notice provision constituted a
condition precedent but did not itself fix a period within which the debtor may
commence an action as required by § 108. See Spears, 85 B.R. at 88-89.
Louisiana law governing attorney malpractice suits, in contrast, both prescribes
a cause of action and states when it must be commenced. The latter is expressly
within § 108(a); the former provision is not.
Trinchard draws a similarly faulty comparison with 15 U.S.C. § 1635(f),
which provides a three-year period for rescinding a consumer credit transaction
under the Truth in Lending Act. Again, this is not akin to the commencement
of an action, and § 108(a) has correctly been held inapplicable to extend a period
7
The provision at issue, U.C.C. § 4-406(4), which Louisiana codified as LA . REV . STAT .
§10:4-406(4), states that a bank customer who does not notify a bank within a year of receiving
a bank statement of any items that contain an “unauthorized signature” is “precluded from
asserting against the bank such unauthorized signature . . . .”
6
No. 08-30899
that by its terms does not refer to commencement of an action. See, e.g.,
Williams v. Emc Mortgage Corp. (In re Williams), 276 B.R. 394, 397 (Bankr. E.D.
Pa. 2002).
Because we are interpreting § 108(a), Stanley’s proposed analogy to
11 U.S.C. § 546(a) is also unhelpful. In First Union National Bank v. Gibbons
(In re Princeton-New York Investors, Inc.), 219 B.R. 55, 64 (D.N.J. 1998), a court
allowed a trustee to bring a claim for fraudulent transfer under 11 U.S.C. §§ 544
and 548 after the time allowed by the applicable state statute of repose because
11 U.S.C. § 546(a) affords the trustee a two-year limitations period.8 Several
other courts have held that § 546 “preempts” state statutes of repose. See, e.g.,
Smith v. Am. Founders Fin., Corp., 365 B.R. 647, 677 (S.D. Tex. 2007). Section
546, however, concerns a federally created claim authorizing a trustee to avoid
the fraudulent transfer of property. In the present case, in contrast, federal law
extends the time period for bringing causes of action that existed independent
of bankruptcy and not as a result of the bankruptcy law.9
8
11 U.S.C. § 546(a):
An action or proceeding under section 544, 545, 547, 548, or 553 of this title may
not be commenced after the earlier of (1) the later of (A) 2 years after the entry
of the order for relief; or (B) 1 year after the appointment or election of the first
trustee under section 702, 1104, 1163, 1202, or 1302 of this title if such
appointment or such election occurs before the expiration of the period specified
in subparagraph (A); or (2) the time the case is closed or dismissed.
9
The Gibbons Court made this very distinction:
By its express language, § 108(a) only applies to causes of action that the debtor
owned prior to filing the bankruptcy petition. See, e.g., Andrew v. Coopersmith
(In re Downtown Investment Club III), 89 B.R. 59, 65 (B.A.P. 9th Cir. 1988)
(“Bankruptcy Code § 108(a) refers to pre-filing causes of action belonging to the
debtor and not to a cause of action created by the Bankruptcy Code.”).
However, when a trustee initiates a cause of action pursuant to § 544(b), he is
not acting as the debtor's representative but, rather, is standing in the shoes of
an unsecured creditor. See, e.g., Hassett v. McColley (In re O.P.M. Leasing
Services, Inc.), 28 B.R. 740, 760 (Bankr. S.D.N.Y. 1983).
7
No. 08-30899
Having concluded that § 108(a) expressly allowed Stanley to bring claims
on behalf of the estate until October 2003, we need not determine whether the
malpractice claim accrued in March or September of 2001. Stanley’s claim is
timely filed in either case.
Finally, we are asked to determine whether Stanley’s additional vicarious
liability claims were timely asserted. As the district court noted, “Louisiana law
allows a plaintiff to bring suit against an employer when the employee is
completely dismissed, even when the employer’s sole basis for liability is
vicarious liability” as long as the suit is not “prescribed.” Trinchard III at *5
(citing Bordelon v. Foster, 2008 WL 482613, at *5 (E.D. La. Feb 19., 2008)).
Leigh Ann Schell was an attorney employed by Trinchard until October
2000. Over two years after the bankruptcy case commenced, Stanley amended
his complaint to add Schell as a defendant and to add claims that Trinchard was
variously liable for improper oversight of Schell and her alleged negligence. In
Trinchard I, the district court granted summary judgment dismissing Schell
because both the peremption period and § 108(a)’s two-year grace period had run
prior to Stanley’s amended complaint. Stanley now appeals the district court’s
holding in Trinchard III that Stanley’s vicarious liability claims were also time-
barred. Stanley argues that he gave Trinchard fair notice of a vicarious liability
cause of action in his original complaint or, in the alternative, that the amended
complaint relates back to the original complaint.
Stanley’s original complaint asserted a claim for the firm’s “vicarious
liability for the negligence/fault of Ms. Trinchard” related to the Burge file.
Stanley asserts, however, that the original complaint, construed liberally, gave
219 B.R. at 58-59.
8
No. 08-30899
Trinchard fair notice of the occurrence for which Stanley sought relief. After
reviewing the original complaint, we agree that the original complaint put
Trinchard on notice that Stanley was seeking to hold the firm vicariously liable
for actions related to the firm’s handling of Burge. Because the original
complaint adequately put Trinchard on notice, it is unnecessary to consider
whether the amended complaint related back under F ED. R. C IV. P. 15(c).
III. CONCLUSION
For these reasons, we reverse and remand to reinstate the original
complaint and to permit Stanley to file an amended complaint asserting
Trinchard’s vicarious liability for Ms. Schell’s alleged negligence in the Burge
matter.
REVERSED AND REMANDED.
9