Blixseth v. Brown

Timothy Blixseth and his wife, Edra, developed the Yellowstone Mountain Club, an exclusive ski and golf resort in Montana that caters to the “ultra-wealthy.” Edra subsequently filed for bankruptcy on behalf of the Yellowstone entities, and the U.S. Trustee appointed nine individuals to serve as the Unsecured Creditors' Committee (UCC). Blixseth suspected that his attorney, Stephen Brown, used confidential information to Blixseth’s detriment in the bankruptcy proceedings. Brown was one of the UCC members. Blixseth filed suit against Brown, but the district court held that it lacked jurisdiction because Blixseth did not first obtain the bankruptcy court’s permission to sue, as required by Barton v. Barbour. No court of appeals has held that Barton applies to suits against UCC members, but some have extended Barton to actors who are not bankruptcy trustees or receivers. Because creditors have interests that are closely aligned with those of a bankruptcy trustee, the court explained that there is good reason to treat the two the same for purposes of the Barton doctrine. Therefore, the court concluded that Barton applies to UCC members like Brown who are sued for acts performed in their official capacities. The court also concluded that Blixseth does not need permission from the bankruptcy court before bringing his pre-petition claims in district court. In this case, Blixseth's claims of misconduct are so intertwined with and dependent upon Brown's actions as a member of the UCC that it is impossible to separate the pre-petition claims from Brown’s activities on the UCC. However, the court concluded that Blixseth needed the bankruptcy court’s permission before bringing claims challenging conduct related to Brown's actions after he was appointed UCC chair in district court. Finally, the court concluded that the district court’s order did not afford Blixseth anything close to an independent decision by an Article III adjudicator; Stern v. Marshall does not preclude bankruptcy courts from adjudicating Barton claims; and the court remanded for the bankruptcy court to consider whether Brown is entitled to derived judicial immunity for Blixseth’s post-petition claims. Accordingly, the court affirmed in part, vacated in part, and remanded in part. View "Blixseth v. Brown" on Justia Law