New opinion — Third Circuit holds that bankruptcy trustees enjoy qualified immunity

In re J & S Properties — bankruptcy — affirmance — Hardiman

After a bankruptcy trustee seized a rental property owned by the debtor, the tenant sued to regain possession of the property. The district court held that the trustee had qualified immunity from the suit, and today the Third Circuit affirmed:

The question presented is whether qualified immunity applies to discretionary actions taken by a trustee to preserve the bankruptcy estate’s assets, and whether that immunity protects Trustee Swope’s conduct in this case. We will affirm because Swope exercised reasonable care under the circumstances and did not violate clearly established law.

A sharp reader points out to me that the opinion says it reviews factual findings for clear error. In Semcrude — also a bankruptcy case involving an appeal from a grant of summary judgment — the court applied plenary review and cited a prior case rejecting any application of the clear-error standard to a bankruptcy court’s summary-judgment ruling. Other circuits recently have done the same. On a first read, I’m not sure the opinion actually applied clear-error review to any factual finding, but still this strikes me as a point likely to sow confusion that the court may want to clarify.

Joining Hardiman was Roth; Fisher concurred in the judgment, arguing that the qualified immunity defense was not preserved because it was not raised in bankruptcy court but that affirmance is still warranted based on quasi-judicial immunity. Arguing counsel were Mary Sheats of Frank Gale for the appellant and Andrew Sperl of Duane Morris for the appellee.