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Mykal S. Ryan v. David R. Ruby

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA


October 27, 2011

MYKAL S. RYAN,
PLAINTIFF,
v.
DAVID R. RUBY, INDIVIDUALLY; DOES 1 THROUGH 20, INCLUSIVE, DEFENDANTS.

The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER DENYING WITHOUT PREJUDICE MOTION TO DISMISS [Doc. No. 2].

This is an action alleging defamation and improper disclosure of private information. Currently before the Court is Defendant's Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Having considered the parties' arguments, and for the reasons set forth below, the Court DENIES the motion WITHOUT PREJUDICE. [Doc No. 2.]

BACKGROUND

Defendant David R. Ruby is the Chapter 7 bankruptcy trustee for Plaintiff Mykal S. Ryan's bankruptcy proceeding, which has been pending in the Eastern District of Virginia since July 16, 2008. (Defendant's Request for Judicial Notice ("RJN"), Ex. 1 [Doc. No. 5].)

Plaintiff commenced the instant action against Defendant on July 14, 2011. [Doc. No. 1.] In his complaint, Plaintiff alleges Defendant violated and continues to violate California Civil Code § 46 by making numerous defamatory statements. (Compl. ¶ 1.) According to Plaintiff, Defendant told others that Plaintiff stole more than a million dollars from Plaintiff's nephew's trust, that he stole money from his mother, that he stole money and property from his nephew, and that he stole property in his house. (Id.) Plaintiff further alleges that Defendant violated Plaintiff's privacy rights under the California Constitution and the Federal Privacy Act by informing others of Plaintiff's Post-Traumatic Stress Disorder ("PTSD") disability, without authorization, and by making materially false statements that Plaintiff is mentally disturbed and mentally deficient. (Id. ¶¶ 3, 5-6.) According to Plaintiff, these actions also violate the Due Process Clause of the Fourteenth Amendment because they interfered with Plaintiff's right to obtain employment. (Id. ¶ 3.) Plaintiff alleges that as a result of Defendant's actions, Plaintiff lost his employment as an aerospace engineer as well as his Top Secret security clearance. (Id. ¶¶ 3, 16-17.) Finally, Plaintiff alleges Defendant's actions constitute disability discrimination in violation of the Americans with Disability Act ("ADA"). (Id. ¶ 7.) Plaintiff lists forty four individuals to whom Defendant allegedly made the above defamatory statements and improper disclosures. (Id. ¶ 9.)

Defendant filed the present motion on September 15, 2011. Plaintiff filed a late opposition on October 13, 2011.*fn1 Defendant filed a reply on October 17, 2011. The Court finds the motion suitable for disposition without oral argument pursuant to the Civil Local Rule 7.1(d)(1).

LEGAL STANDARD

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the pleadings. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of "entitlement to relief."'" Id. (internal citation omitted). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

In ruling on a motion to dismiss, the court must "accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party." Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). The court, however, need not accept "legal conclusions" as true. Iqbal, 129 S. Ct. at 1949. Thus, "a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. It is also improper for the court to assume that plaintiff "can prove facts that it has not alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). On the other hand, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal, 129 S. Ct. at 1950.

DISCUSSION

In this case, Defendant contends the Court should dismiss all of Plaintiff's claims because the allegedly defamatory statements and disclosures were made in Defendant's official capacity.

I. The Barton doctrine

First, Defendant argues Plaintiff's complaint should be dismissed because it violates the Barton doctrine.*fn2 Under the Barton 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." In re Crown Vantage, Inc., 421 F.3d 963, 970 (9th Cir. 2005) (citing cases). Part of the rationale underlying the Barton doctrine is that the court appointing the receiver has in rem subject matter jurisdiction over the receivership property. Id. at 970. Accordingly, allowing the unauthorized suit to proceed "would [be] an usurpation of the powers and duties which belong[] exclusively to another court." Barton, 104 U.S. at 136. The Barton doctrine applies in bankruptcy to the same extent as in other proceedings involving receivers. See In re Crown Vantage, 421 F.3d at 971.

Defendant, however, failed to show that the actions challenged in this case were done in Defendant's "official capacity." See id. at 970. Under Rule 12(b)(6), "[t]he defendant bears the burden of showing no claim has been stated." Gould Elecs. Inc. v. United States, 220 F.3d 169, 178 (3d Cir. 2000). In this case, Defendant merely alleges in a conclusory manner that "[a]s set forth in defendant's disclosure to the [United States Bankruptcy Court ("USBC")] for the Eastern District of Virginia, defendant's only actions concerning plaintiff herein have been taken in defendant's official capacity as Chapter 7 trustee." (Mem. of P.&A. ISO Def. Motion to Dismiss, at 1 [Doc. No. 2-1].) In doing so, Defendant cites to his disclosure to the USBC for the Eastern District of Virginia, which states: "The Trustee represents that he has taken no action whatsoever relating to the Debtor and/or this bankruptcy case other than in an official capacity as Chapter 7 trustee and that he has not acted outside the scope of his authority in any respect." (RJN, Ex. 2,¶ 6.) Notably, Defendant fails to cite to any document that would corroborate this assertion. Because Defendant failed to do more than assert in a conclusory manner that the actions were taken in his "official capacity," he failed to meet his burden of showing that the complaint should be dismissed for violation of the Barton doctrine. See Gould Elecs., 220 F.3d at 178.

To the extent Defendant contends that Plaintiff failed to allege in his complaint that the actions were not taken in an "official capacity," the Court rejects that argument. This is not one of the elements of Plaintiff's cause of action that Plaintiff had to allege in his complaint. Rather, as the moving party, Defendant had the burden of showing that no claim has been stated due to the applicability of some defense. See id. In any event, at least based on the documents presently before the Court, Plaintiff's complaint appears to rebut Defendant's allegations by stating that the allegedly defamatory statements and improper disclosures were made in California and not Virginia, where the bankruptcy case is pending, and that they were made without Plaintiff's authorization. (See Compl. ¶¶ 3, 6, 9, 22.) Moreover, in his opposition to Defendant's motion to dismiss, Plaintiff asserts that Defendant's defamatory statements were "fully outside the authorized duties and responsibilities of the Chapter 7 trustee position" and were not made in Defendant's official capacity. (Pl. Opp, at 10 [Doc. No. 9]; see also id. at 33.)

II. Quasi-judicial immunity

Second, Defendant contends that as a court-appointed Chapter 7 trustee, he is entitled to quasi-judicial immunity. "Bankruptcy trustees are entitled to broad immunity from suit when acting within the scope of their authority and pursuant to court order." Bennett v. Williams, 892 F.2d 822, 823 (9th Cir. 1989). Before immunity attaches, however, certain conditions must be satisfied: (1) the trustee must obtain court approval and give notice to the debtor of the proposed action; (2) the trustee's disclosure must be candid; and (3) the act must be within the trustee's official duties. See id. (citations omitted). Notably, misrepresentations or any other malfeasance by the trustee are not protected, and the trustee may be personally liable. See, e.g., New Alaska Dev't Corp. v. Guetschow, 869 F.2d 1298, 1304-05 (9th Cir. 1989) (a receiver was not entitled to broad immunity for alleged slander because such action "was not a function intimately connected with his receivership duties"); In re Cochise College Park, Inc., 703 F.2d 1339, 1359-60 (9th Cir. 1983) (trustee's fraudulent and negligent misrepresentations may be actionable if they were "uttered either in bad faith or without reasonable grounds for belief in [their] truth").

In this case, Plaintiff alleges Defendant defamed him and improperly disclosed private information about him. In the absence of any other evidence, it cannot be presumed that such actions were authorized by the bankruptcy court.*fn3 See New Alaska, 869 F.2d at 1304-05 & n.9. Moreover, taking Plaintiff's allegations as true, the above statements were "uttered either in bad faith or without reasonable grounds for belief in [their] truth," In re Cochise College Park, 703 F.2d at 1359. (See, e.g., Compl. ¶ 8 ("Mr. Ruby's violation of my privacy and disability discrimination and defamation were done to prevent me from obtaining employment and were done in a manner that was intentional, willful and malicious manner [sic] so as to place me in a false light and to harm my reputation and to harm me physically.").) Because Defendant failed to provide anything except the conclusory assertion that the challenged statements were made in his official capacity, he failed to demonstrated that he is entitled to quasi-judicial immunity.

III. California Civil Code § 47

Defendant next contends that Plaintiff's claim under California Civil Code § 46 fails because Defendant's statements were privileged. Section 46 provides a cause of action for slander, which it defines as "a false and unprivileged publication, orally uttered," that, inter alia, "[c]harges any person with crime," "[t]ends directly to injure him in respect to his office, profession, trade or business," or " by natural consequence, causes actual damage." Cal. Civ. Code § 46. Section 47, however, makes privileged any publication or broadcast made "[i]n the proper discharge of an official duty" or, subject to certain exceptions, "[i]n any (1) legislative proceeding, (2) judicial proceeding, [or] (3) in any other official proceeding authorized by law." Id. § 47(a)-(b).

As already noted, Defendant failed to demonstrate that the statements challenged in this case were made in his official capacity or were otherwise authorized. Accordingly, Defendant failed to demonstrate that his statements were privileged under Section 47(a).

IV. Anti-SLAPP motion

Finally, in passing, Defendant contends that Plaintiff's complaint should be stricken under § 425.16(b) of the California Code of Civil Procedure because Plaintiff's action arises from Defendant's protected conduct as the Chapter 7 bankruptcy trustee. An anti-SLAPP motion to strike*fn4 requires a two-step inquiry. First, the defendant must make an initial prima facie showing that the plaintiff's suit arises from the defendant's protected activity-i.e, an act in furtherance of the defendant's rights of petition or free speech. Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1110 (9th Cir. 2003). In this case, Defendant's anti-SLAPP motion fails at the first step. "[T]he critical point is whether the plaintiff's cause of action itself was based on an act in furtherance of the defendant's right of petition or free speech." City of Cotati v. Cashman, 29 Cal. 4th 69, 78 (2002). As already noted, Defendant failed to demonstrate that the challenged statements in this case were made in his official capacity. Because Defendant cannot show that Plaintiff's action is based on Defendant's protected conduct as the Chapter 7 bankruptcy trustee, the anti-SLAPP motion fails.

CONCLUSION

Defendant failed to carry his burden of demonstrating that the challenged statements in this case were made in his official capacity. As such, the Court DENIES WITHOUT PREJUDICE Defendant's motion to dismiss on all grounds.

IT IS SO ORDERED.


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