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In re Continental Coin Corp.

August 21, 2009


The opinion of the court was delivered by: Percy Anderson United States District Judge

Bankruptcy Court Case No. 1:00-bk-15821-GM


Before the Court are appeals and a cross-appeal from Orders entered by the United States Bankruptcy Court for the Central District of California ("bankruptcy court") on December 12, 2007 and January 31, 2008. Chapter 11 Trustee Nancy Hoffmeier Zamora ("Trustee") and creditor Roger Virtue ("Virtue") filed these appeals in three cases (Case Nos. CV 08--0093; 08--1478; 08--2504). Because all three appeals seek review of the same two Bankruptcy Orders, the Court consolidated them under Case No. 08--0093. (See Nov. 7, 2008 Order.) Pursuant to Federal Rule of Civil Procedure 78, Local Rule 7-15, and Federal Rule of Bankruptcy Procedure 8012, the Court finds that this matter is appropriate for decision without oral argument.


On July 19, 2000, Continental Coin Corporation ("Debtor") filed a voluntary petition under Chapter 11 of the Bankruptcy Code. (Excerpts of Record ("ER") 46--47.) The Debtor owned and operated a retail store ("Retail Store") that sold precious gems, jewelry, numismatic coins, gold bullion, precious metals and collectibles, and exchanged foreign currency. It also owned a mint facility ("Mint") that made decorative and commemorative coins, refined precious metals, and subleased office and retail space to approximately eighteen subtenants.*fn1

On August 31, 2001, the Trustee was appointed. (ER 632--42.) The Trustee commenced selling the estate's assets and satisfying claims. She sold the Ground Leases and the Mint equipment on May 11, 2004. (ER 1122--24.)

Virtue is one of the Debtor's creditors. (ER 2237.) He contends that the Trustee improperly liquidated the estate. On July 31, 2007, Virtue filed a motion for leave to sue the Trustee and her counsel (ER 2208--2387). Virtue alleged that the Trustee failed to: (1) give notice of her intent to assume the leases for the Mint and Retail facilities (ER 2392); (2) hire brokers to assist with the sale or valuation of the leases, equipment, machinery and personal property (ER 2394); (3); accept reasonable offers for the leases and property, thus causing a significant loss for the estate (ER 2394--2401); and (4) respond to Virtue's requests for information (ER 2401--2402). Virtue sought recovery from the Trustee and her counsel based on the legal theories of breach of fiduciary duty, gross negligence, negligence, and legal malpractice. (ER 2402--2406.)

On December 12, 2007, the bankruptcy court held that the Trustee was entitled to quasi-judicial immunity for negligence, but that Virtue could pursue his claims against the Trustee for gross negligence and for breach of fiduciary duty.*fn2 (ER 2753.)

On December 21, 2007, the Trustee appealed. (ER 2767--2773.) On the same day, Virtue filed a motion to modify the order. He sought a determination that the Trustee could be held liable for the negligent violation of her statutory duties and that he could sue the Trustee's counsel. (ER 2774--2836.) On December 28, 2007, Virtue filed his complaint against the Trustee and her counsel.*fn3 (ER 2837--2860.) On January 8, 2008, the Trustee filed a motion to stay the December 12, 2007 Order and the adversary proceeding. (ER 2933--2942.) On January 31, 2008, the bankruptcy court denied Virtue's motion and granted the Trustee's motion for a stay.*fn4 (ER 3056--3066.)


The bankruptcy court's findings of fact are reviewed for clear error, and conclusions of law are reviewed de novo. Sousa v. Miguel (In re U.S. Trustee), 32 F.3d 1370, 1372 (9th Cir. 1994); Christensen v. Tucson Estates, Inc. (In re Tucson Estates, Inc.), 912 F.2d 1162, 1166 (9th Cir. 1990); Fed. R. Bankr. Proc. 8013; see also Curry v. Castillo (In re Castillo), 297 F.3d 940, 946 (9th Cir. 2002) ("The bankruptcy court's conclusions of law regarding the immunity of . . . a trustee are reviewed de novo, while findings of fact are reviewed for clear error."). Bankruptcy court's rulings on motions to stay or motions to require posting of a bond are reviewed for abuse of discretion. In re Irwin, 338 B.R. 839, 844 (E.D. Cal. 2006) (stay reviewed for abuse of discretion); In re Swift Aire Lines, Inc., 21 B.R. 12, 14--16 (9th Cir. BAP 1982) (requiring bond is discretionary).


A. Quasi-Judicial Immunity

The Trustee argues that she is entitled to absolute quasi-judicial immunity for any claim based on her decisions of how and when to sell the estate's assets. The bankruptcy court held that the Trustee was entitled to quasi-judicial immunity for negligence, but that immunity did not extend to grossly negligent or willful conduct.

Judicial immunity insulates judges from suit for adjudicative acts. Forrester v. White, 484 U.S. 219, 225--28, 108 S.Ct. 538, 543--545, 98 L.Ed. 2d 555 (1988). This immunity "is not reserved solely for judges, but extends to non-judicial officers for 'all claims relating to the exercise of judicial functions[,]'" through the doctrine of quasi-judicial immunity. Castillo, 297 F.3d at 947 (quoting Burns v. Reed, 500 U.S. 478, 499, 111 S.Ct. 1934, 114 L.Ed. 2d 547 (1991) (Scalia, J., concurring in part and dissenting in part)). In Antoine v. Byers & Anderson, Inc., 508 U.S. 429, 113 S.Ct. 2167, 124 L.Ed. 2d 391 (1993), the United States Supreme Court established a two-part test for determining if a non-judicial officer is entitled to quasi-judicial immunity. First, a court must undertake "a considered inquiry into the immunity historically accorded the relevant official at common law and the interest behind it." Id. at 432, 113 S.Ct. at 2170. Second, a court must consider whether a judge, if performing the particular action at issue, would be entitled to absolute immunity. Id. at 435, 113 S.Ct. at 2171. Under the second prong, "the touchstone for the doctrine's applicability has been performance of the function of resolving disputes between parties, or of authoritatively adjudicating private rights." Id. at 435--36, 113 S.Ct. at 2171 (internal quotations and citations omitted). Thus, "[w]hen judicial immunity is extended to officials other than judges, it is because their judgments are functionally comparable to those of judges - that is, because they, too, exercise a discretionary judgment as part of their function." Id. at 436, 113 S.Ct. at 2171 (internal quotations and citations omitted).

Accordingly, here the Court: must first inquire as to the immunity historically accorded a bankruptcy trustee at common law, during the development of the common-law doctrine of judicial immunity. We next consider whether the particular functions of the bankruptcy trustee at issue in this case . . . are functions involving the exercise of discretionary judgment.

Castillo, 297 F.3d at 949. The bankruptcy court characterized this test as requiring "the court to first look at the position at issue . . . to see if it is one whose functions were historically judicial in nature, and therefore was afforded immunity, and only then to determine if the particular action being taken by the individual in that position was an adjudicative function (first categorize the actor and then look at the nature of the action)." (ER 2742.) In applying this test, the bankruptcy court determined that the Trustee could invoke quasi-judicial immunity, and that such immunity extended to the actions taken here. It ...

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