Q: I was discharged as receiver a number of years ago. One of the defendants in the case has now sued me and my former attorney, contending we violated his civil rights when I sold some of his assets and that we conspired with the plaintiff to injure him. The former defendant did not obtain leave from the court that appointed me to sue me and my former attorney. Even though I was discharged and the case is closed, isn’t court permission to sue me still required?
A: I assume that since you were sued for civil rights violations, the new lawsuit is in federal court. If the case is in First, Seventh, Ninth or Tenth Circuits, yes, pursuant to the Barton Doctrine ( Barton v. Barbour, 104 U.S. 126 (1881)), receivership court permission to sue you is still required, despite the fact that you have been discharged and the case is over. In Barton, the Supreme Court stated the “general rule that before suit is brought against a receiver[,] leave of court by which he was appointed must be obtained.” Id. at 128. The basis for the rule is a fundamental principle of in rem jurisdiction: the court that first exercises jurisdiction over certain property may exclude other courts from exercising jurisdiction over it. Absent the rule, multiple courts could attempt to control the same property, at the same time, and this would result in, as the Supreme Court has said, “unseemly conflict.” Toucey v. N.Y. Life Ins. Co., 314 U.S. 118, 135 (1941).
The Ninth and other Circuits have held the Barton Doctrine applies, for policy reasons, even after a receiver is discharged. Absent its application they say it would be a “more irksome duty, and so it would be harder to find competent people to appoint.” In re Crown Vantage, Inc., 421 F.3d 963, 974 (9th Cir. 2005). In addition, the receiver might be continually looking over his or her shoulder to see whether the parties or others were disappointed with his or her actions and “his work for the court would be impeded.” Id. Or, they may ”have to pay higher malpractice premiums.” Matter of Linton, 136 F.3d 544, 545 (7th Cir. 1998).
In a new case, the Eleventh Circuit disagreed. Chua v. Ekonomou, 1 F.4th 948 (11th Cir. 2021). There, a receiver was sued two years after he was discharged. The Circuit examined the basis for the Barton Doctrine, discussed above, and held that once the case is over, the receivership court’s in rem jurisdiction ends and therefore “there is no longer a potential conflict in the exercise of jurisdiction…” Id. at 954, and Barton no longer applies. It also disagreed with the policy concerns advanced by the other Circuits; but for a good reason. It felt use of the Barton Doctrine to protect receivers was unnecessary because court-appointed receivers enjoy judicial immunity for acts taken within the scope of their authority. Id. at 955 (citations omitted). “That immunity applies even if his acts were ‘in error, malicious, or…in excess of [the appointing court’s] jurisdiction. And it extends to his counsel as well.” Id. (citations omitted).
What the Eleventh Circuit failed to appreciate is that, even though a receiver may have judicial immunity, the Barton Doctrine provides additional protections to receivers, by requiring proposed plaintiffs to seek receivership court permission to sue the receiver. Once the case is over, if a proposed plaintiff can just sue, without seeking court permission, the former receiver has to deal with the new litigation on his or her own dime, as there are no longer any receivership assets to pay such costs. The receiver will have to hire counsel and file a motion to dismiss, likely before a judge who may know nothing about receivership law or what went on in the case, or, worse, have to prepare and file a summary judgment motion, arguing judicial immunity. This costly exercise can be avoided, to a large extent, if the Barton Doctrine applies, especially in federal court, where a proposed plaintiff must prove it has a prima facie case, before permission to sue is allowed. See generally, Anderson v. U.S., 520 F2d. 1027,1029 (5th Cir. 1975); In re Kashani, 190 B.R. 875, 885 (9th Cir. BAP 1995) (suing trustee).
The prima facie requirement is not applied in California state court. The Barton Doctrine should still apply however, and if the case is over, and the receiver has been discharged, leave to sue the receiver should be difficult to get because: “As a general proposition a receiver has no official duties and is not a proper party to any action after being discharged by the court. The discharge order operates as res judicata as to any claims of liability against the receiver in her official capacity.” Vitug v. Griffin, 214 Cal. App.3d 488, 494 (1989); see also, Brockway Land & Water Co. v. Placer County, 124 Cal. App. 2d 371, 375 (1954).
Because the bar on suing a former receiver is based on res judicata, it is important that notice of the receiver’s final account and report and motion to be discharged not only be given to anyone who appeared in the case but also, as California Rules of Court 3.1184 states, to anyone “known to the receiver to have a substantial unsatisfied claim that will be affected by the order…” That way, once the receiver is discharged, suit against the former receiver will be inappropriate, and a Barton motion to sue the receiver should be denied.