The Fifth Circuit joined three other circuits by endowing bankruptcy trustees and their attorneys with broad immunities.

The owner of a corporation placed his company in chapter 11, but the bankruptcy judge soon supplanted the owners’ control by appointing a chapter 11 trustee. Later, the owner sued the trustee and the trustee’s counsel for breach of contract, fraud and malicious prosecution, among other claims.

Bankruptcy Judge Stacey G.C. Jernigan of Dallas issued a 55-page report, recommending that the district court dismiss the suit. The district judge adopted the report and recommendation, prompting the owner to appeal.

Relying on the principles of absolute and qualified immunity, the Fifth Circuit upheld dismissal in a per curiam opinion on February 4, observing that the district court had adopted Judge Jernigan’s “meticulous and well-reasoned” report and recommendation.

The Fifth Circuit had ruled almost 40 years ago that trustees have “absolute immunity for all actions taken pursuant to court order.”

While the Fifth Circuit did not have controlling precedent, the appeals court said that the Third, Fourth and Sixth Circuits afford “qualified immunity for personal harms caused by actions taken within the scope of their official duties.” Those circuits do not provide immunity only for ultra vires actions, meaning those “that fall outside the scope of their duties as trustees.”

Finding “no compelling reason to depart from our sister circuits’ sensible approach,” the appeals court held “that bankruptcy trustees in the Fifth Circuit are entitled to qualified immunity for personal harms caused by actions that, while not pursuant to court order, fall within the scope of their official duties.”

The appeals court also upheld dismissal of the claims against counsel for the trustee, holding that “this immunity extends to [the trustee’s] attorneys under both a derivative theory of judicial immunity and under the separate doctrine of attorney immunity for essentially the same reasons articulated by the district court.”