Can a Defendant Sue a Receiver’s Property Management Company, or Are They Protected from a Lawsuit Like a Receiver?

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QUESTION: I hired a property management company to aid me in managing a receivership property. A defendant in the case has threatened to sue the management company for action taken at my request. Can the defendant sue the management company or is it protected from suit as I would be?

ANSWER: While a receiver has derived judicial immunity for action taken pursuant to or within the authority of his or her order of appointment, and court approval to sue the receiver is required, I have always been concerned whether those protections inure to the receiver’s employees and agents. A recent case decided by the United States District Court in Missouri held that the receiver’s agents and employees do have protection. In Ariel Preferred Retail Group, LLC et al., v. CWCapital Asset Management, et al., 883 F. Supp. 2d 797 (E.D. Mo. 2012), suit was filed against a receiver and the property management company he employed and others for trademark infringement, among other claims. The receiver and the property manager moved to dismiss the complaint on the ground that the court had no subject matter jurisdiction, because the plaintiffs had not obtained permission from the receivership court to sue them. The court agreed, relying in what is known as the “Barton Doctrine”, named after the Supreme Court case of Barton v. Barbour, 104 U.S. 126, 26 L. Ed. 672 (1881). There, the Supreme Court held, absent statutory authority, a receiver cannot be sued without leave of the appointing receivership court. The District Court noted that the Barton Doctrine has consistently been upheld and that the necessity for leave from the appointing court cannot be avoided by seeking relief in another court. As to the contention that the Barton Doctrine did not protect the receiver’s property manager, the court held the receiver’s order of appointment contemplated the receiver hiring agents to help administer the receivership estate. Citing to a number of bankruptcy cases, the court stated: “The Barton rationale extends to agents who are the functional equivalent of a trustee [or in this case, a receiver], where they act at the direction of the trustee [or receiver] for the purpose of administering the estate or protecting its assets.” 883 F. Supp. 3d at 817. It also pointed out that the Supreme Court in Barton actually said leave of court was needed to file suit against the receiver for the receiver’s actions “or that of his servants.” Barton, 104 U.S. at 137. See also Lawrence v. Goldberg, 573 F.3d 1265, 1270 (11th Cir. 2009) (affirming dismissal of lawsuit under the Barton Doctrine due to the plaintiff’s failure to seek leave in the bankruptcy court to file an action against the trustee and other parties assisting the trustee in carrying out his official duties).

Topics:  Infringement, Judicial Immunity, Property Management Companies, Receivership, Subject Matter Jurisdiction, Trademarks

Published In: Bankruptcy Updates, Civil Procedure Updates, Commercial Real Estate Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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