Joel Bander v. Misty Isaacson

• Court: Court of Appeals for the Ninth Circuit
• Decided: April 8, 2020
• Docket: 19-55564
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS APR 8 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

JOEL BANDER; ISYNERJI GLOBAL, No. 19-55564 INC., D.C. No. 8:18-cv-00781-DMG Appellants,

v. MEMORANDUM*

MISTY ANN PERRY ISAACSON; PAGTER AND PERRY ISAACSON, APLC,

Appellees.

Appeal from the United States District Court for the Central District of California Dolly M. Gee, District Judge, Presiding

Submitted April 3, 2020** Pasadena, California

Before: BEA and BADE, Circuit Judges, and DRAIN,*** District Judge.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable Gershwin A. Drain, United States District Judge for the Eastern District of Michigan, sitting by designation. Joel Bander and Isynerji Global, Inc. (collectively, “Appellants”) appeal the

district court’s judgment affirming the bankruptcy court’s denial of Appellants’

motion for leave to sue Misty Isaacson, the court-appointed special discovery

mediator in Appellants’ adversary action. We have jurisdiction under 28 U.S.C.

§ 1291. We review the bankruptcy court’s order denying leave to sue for an abuse

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

1090, 1094 (9th Cir. 2016), and we affirm.

Paul Allen filed a defamation action against Appellants in state court, which

resulted in Appellants obtaining a judgment for attorneys’ fees and costs against

Allen. See Allen v. Bander, No. B263586, 2015 WL 7180732, at *1 (Cal. Ct. App.

Nov. 16, 2015). Allen filed a Chapter 7 bankruptcy petition and sought to discharge

the judgment from the defamation action. Appellants subsequently filed an

adversary complaint against Allen seeking a declaration that the judgment from the

defamation action was non-dischargeable due to Allen’s “willful and malicious”

conduct. See 11 U.S.C. § 523(a)(6). The bankruptcy judge appointed Isaacson as

the special discovery mediator to assist the court in resolving discovery disputes that

arose in the adversary action. For the next nine months, Isaacson assisted the

bankruptcy court in resolving discovery disputes in the adversary action.

Several months after Isaacson’s appointment, Bander informed Isaacson

about an alleged conflict of interest: an attorney at Isaacson’s law firm, R. Gibson

2 Pagter, had represented a creditor in an unrelated adversary action against Bander in

2005. Isaacson immediately moved to terminate her appointment as the special

discovery mediator, and the bankruptcy court granted Isaacson’s motion. Bander

later demanded that Isaacson refund $11,836.84 in fees that Appellants had paid

Isaacson for her work as the special discovery mediator, but Isaacson refused.

Appellants then filed in the bankruptcy court a motion for a declaration that leave

was not required to sue Isaacson in state court or, in the alternative, permission to

sue Isaacson in state court. Appellants’ claims against Isaacson are based on

Isaacson’s alleged failure to perform a conflict check before she agreed to serve as

the special discovery mediator in the adversary action. The bankruptcy court denied

Appellants’ motion, and the district court affirmed. Appellants timely appealed to

this court.

1. The district court properly concluded that the Barton1 doctrine applied

to Appellants’ claims against Isaacson. Under the Barton doctrine, “plaintiffs must

obtain authorization from the bankruptcy court before ‘initiat[ing] an action in

another forum’ against certain officers appointed by the bankruptcy court for actions

the officers have taken in their official capacities.” In re Yellowstone, 841 F.3d at

1094 (alteration in original) (quoting Beck v. Fort James Corp. (In re Crown

Vantage, Inc.), 421 F.3d 963, 970 (9th Cir. 2005)). “The touchstone of the Barton

1 Barton v. Barbour, 104 U.S. 126 (1881).

3 inquiry is whether a suit challenges ‘acts done in [the officer’s] official capacity and

within his authority as an officer of the Court.’” Id. (citation omitted). “The

rationale for this doctrine is that ‘[t]he requirement of uniform application of the

bankruptcy law dictates that all legal proceedings that affect the administration of

the bankruptcy estate be brought either in bankruptcy court or with leave of the

bankruptcy court.’” Harris v. Wittman (In re Harris), 590 F.3d 730, 742 (9th Cir.

2009) (quoting In re Crown Vantage, Inc., 421 F.3d at 971).

Appellants argue that the Barton doctrine does not apply to their claims

against Isaacson because their claims are based on conduct that occurred before the

court appointed Isaacson as the special discovery mediator. We disagree. Isaacson’s

failure to perform a conflict check resulted in Isaacson accepting her appointment as

the special discovery mediator in Appellants’ adversary action against Allen.

Although Isaacson’s alleged breach occurred before Isaacson became the special

discovery mediator, the effects of the breach may be a basis on which to disqualify

her from acting in that capacity. Isaacson’s failure to discover the alleged conflict

allowed her to accept the appointment from the bankruptcy court, and any harm to

appellant occurred after she became the special discovery mediator.

Appellants also argue that the Barton doctrine does not apply to their claims

against Isaacson because Isaacson’s position as a special discovery mediator does

not affect the bankruptcy estate in the underlying Chapter 7 bankruptcy proceeding.

4 But Isaacson’s actions in her capacity as the special discovery mediator could affect

Allen’s bankruptcy estate. For example, if Isaacson did not allow discovery that

demonstrates Allen’s actions in the defamation case were “willful and malicious,”

the judgment from the defamation action could be dischargeable, see 11 U.S.C.

§ 523(a)(6), and more money could be in Allen’s estate for distribution to other

creditors.

Because Appellants’ action against Isaacson could affect Allen’s bankruptcy

estate, and the effects of Isaacson’s alleged breach disqualified her from acting as

the special discovery mediator in the adversary action, the district court properly

applied Barton to Appellants’ action against Isaacson. Appellants therefore were

required to seek permission from the bankruptcy court before filing a lawsuit against

Isaacson in state court.

2. The bankruptcy court properly denied Appellants motion for leave to

sue Isaacson in state court. This court has instructed bankruptcy courts to apply a

five-factor test to decide whether to grant leave to sue in another forum pursuant to

Barton or to retain jurisdiction over the claims in bankruptcy court. See In re

Yellowstone, 841 F.3d at 1096. These factors include: “(1) whether the acts

complained of ‘relate to the carrying on of the business connected with the property

of the bankruptcy estate,’ (2) whether the claims concern the actions of the officer

while administering the estate, (3) whether the officer is entitled to quasi-judicial or

5 derived judicial immunity, (4) whether the plaintiff seeks a personal judgment

against the officer and (5) whether the claims seek relief for breach of fiduciary duty,

through either negligent or willful conduct.” Id. (citation omitted).

Even if we were to find that the bankruptcy court abused its discretion

because it failed to apply this five-factor test to decide whether to grant Appellants

leave to sue Isaacson in state court, see United States v. Hinkson, 585 F.3d 1247,

1262 (9th Cir. 2009), that error was harmless. Appellants were not prejudiced by

the bankruptcy court’s denial of leave to sue Isaacson in state court because

Appellants do not point to any of Isaacson’s actions or rulings that adversely affected

their interests in Bander’s adversary action against debtor Allen.

AFFIRMED.