[00:00:00] Speaker 12: The United States Court of Appeals for the Ninth Circuit is now in session. [00:00:04] Speaker 09: Please be seated. [00:00:11] Speaker 11: Good afternoon. [00:00:14] Speaker 11: Welcome to our Browning, or to our chambers, to Richard Chambers Courthouse here in lovely Pasadena. [00:00:21] Speaker 11: This is the time set for the case of Henry, Kevin, Harry, Gilman, Detter, Tammy Phillips, and Tammy [00:00:30] Speaker 11: Phillips a PLC versus Amy Goldman Well the party's ready to proceed all right. [00:00:39] Speaker 11: Let me just check judge Gould. [00:00:41] Speaker 11: Can you hear me? [00:00:42] Speaker 06: Yes, I can hear you okay. [00:00:45] Speaker 11: Thank you, then we're ready to proceed you may come forward [00:01:00] Speaker 05: Good afternoon, Your Honors. [00:01:01] Speaker 05: My name is Charles Jacob. [00:01:02] Speaker 05: I represent the Appellant, Tammy Phillips, and the Tammy Phillips Professional Law Corporation. [00:01:06] Speaker 07: Council, I'm having trouble hearing you right off the bat, so that's okay. [00:01:09] Speaker 07: If you could speak up, that'd be great. [00:01:11] Speaker 05: I'd ask for 15 minutes just to make a presentation reserved, 15 minutes for a bottle. [00:01:17] Speaker 05: I am Charles Jacob, the attorney for the Appellants. [00:01:21] Speaker 05: Wanted just to touch on a few things here. [00:01:23] Speaker 05: I mean the briefs are really detailed obviously, we got a rough treatment from the bankruptcy court and like the district court we have a situation where the judges seems to be conflating the ideas of immunity and Standard of care and gross negligence linking those two when this court itself and Castillo I think at the closing part of that opinion basically expressed that once you've got immunity this whole idea of gross negligence or [00:01:51] Speaker 05: Or neglige a simple negligence whatever is all irrelevant. [00:01:54] Speaker 05: I mean the case is done at that point So I think you've already attacked and destroyed part of what is said in that continental coin case Obviously the relief we're seeking here is to get this case Reversed us to the immunity defense to get remanded back to a different court in the same central district of California of a different division and [00:02:18] Speaker 05: Remanded with some sort of instruction that there is no gross negligence requirement as the district court Concluded we brought a state law claim for for breach of fiduciary duty and that is not an element of that claim What I think what is happening on is there's a bit of confusion by people Influenced by this bankruptcy review commission having a proposal to impose a gross negligence standard [00:02:45] Speaker 05: And it gets somehow bound up into the idea of an exception to immunity, when these are two different things. [00:02:50] Speaker 05: Immunity is our defenses. [00:02:52] Speaker 05: But the standard of care is an element of a prima facie case of the breach of fiduciary duty. [00:02:56] Speaker 07: Well, in fairness, they may be confused by our case law, which I find confusing. [00:03:01] Speaker 07: Are you drawing a distinction between the type of immunity afforded to a trustee who affirmatively seeks court permission before the fact as opposed to one who seeks it after the fact? [00:03:12] Speaker 07: Do you draw that distinction? [00:03:14] Speaker 05: I think that's an important issue in some sense. [00:03:17] Speaker 05: If I understand you correctly, we do have a heavy reliance. [00:03:22] Speaker 05: We've cited the McKenzie case from the Sixth Circuit as explaining these things and why we have decisions like the Hammond case or the case where basically the Harris case is a long stream of cases saying get your comfort order. [00:03:40] Speaker 05: That's my terminology. [00:03:41] Speaker 05: It's common cause. [00:03:43] Speaker 05: It's common existence and probate cases they call it petition for instructions. [00:03:47] Speaker 07: So I'm just trying to get at a simple question, but I might not have asked it very well. [00:03:51] Speaker 07: But if a trustee affirmatively seeks permission and then acts pursuant to a court order, is it your view that that trustee is entitled to what I think you're calling absolute immunity? [00:04:02] Speaker 05: The terminology might change. [00:04:05] Speaker 05: I've heard it called derived judicial immunity. [00:04:07] Speaker 07: It's just a yes or no. [00:04:09] Speaker 07: So before you go into the intricacies, I'm just asking, would you agree that someone who [00:04:14] Speaker 07: a trustee who acts pursuant to a court order directing or allowing a particular action is entitled to immunity? [00:04:24] Speaker 05: Yes, with one exception or two exceptions. [00:04:26] Speaker 05: It has to be a candid disclosure full and frank to the court and so forth. [00:04:30] Speaker 05: So that is sort of, it makes the court, that person an arm of the court basically. [00:04:35] Speaker 05: So that's not an issue here. [00:04:37] Speaker 06: Well, counsel, would it make a difference if the approval were obtained before or after the action? [00:04:43] Speaker 05: I think that's seeing you're getting yes, it would okay. [00:04:47] Speaker 06: What difference would it make? [00:04:49] Speaker 05: Well in the sense of getting a decision affirmed The argument was made by the opposing council that everything is a non-protein once when something is abandoned And you we're talking about two different situations Well, I don't think it doesn't have to be property abandonment Judge Robinson's question is more general than that [00:05:11] Speaker 05: Okay. [00:05:13] Speaker 05: I'd like to buy a vowel. [00:05:14] Speaker 05: Can I get another? [00:05:16] Speaker 06: So my question was, does it make a difference whether the trustee sought approval before the action was taken or after the action was taken? [00:05:26] Speaker 05: Suppose in some cases there might be an argument for ratification, but I generally think you should get it before and that's what makes you keep creates the immunity So so counsel in your view can the test from Castillo and the test from Harris coexist They're fundamentally different cases, and this is why I cite what I wanted to start off by saying is say You have to step back and look at the the bankruptcy code. [00:05:53] Speaker 05: It's created on a model of probate and [00:05:55] Speaker 05: in which we have people called trustees who have fiduciary duties. [00:05:59] Speaker 05: And why do we have fiduciary duties? [00:06:02] Speaker 05: The purpose is to assure that the trustee is not sloppy or disloyal. [00:06:09] Speaker 05: And the way you do that is Congress's enforcement mechanism. [00:06:14] Speaker 05: Because beneficiaries are vulnerable to misconduct by trustees. [00:06:17] Speaker 05: And the cost of monitoring trustees is very expensive. [00:06:21] Speaker 05: So. [00:06:21] Speaker 06: Council, what's your answer to the question? [00:06:25] Speaker 06: whether Harris and Castillo can coexist? [00:06:29] Speaker 06: Yes or no? [00:06:30] Speaker 05: Yes, because Harris and those line of cases are dealing, I think, with situations where you have a fiduciary duty, a first-party claim. [00:06:38] Speaker 05: Whereas I think that [00:06:41] Speaker 07: When you have a first-party case that's Mackenzie is saying that's when you need these orders these comfort orders Another way to slice it Is that those that line of cases that you're talking about sometimes they're referred to as comfort orders sometimes they're referred as derivative immunity But those are cases to go back to what John Judge Robinson was asking about [00:07:01] Speaker 07: where a trustee is asked in advance for permission and is acting pursuant to a court order. [00:07:07] Speaker 07: And it's hard for me to imagine a trustee doing that and not being entitled to immunity. [00:07:11] Speaker 07: It's not a trick question. [00:07:12] Speaker 07: It just seems to me to be, that's the easy case. [00:07:15] Speaker 07: And I have a hard time hearing you say yes to even that premise. [00:07:19] Speaker 05: I agree, but the next step might be an argument that the trustee obtained an order, and she never did. [00:07:24] Speaker 07: Okay. [00:07:24] Speaker 07: No, no, no. [00:07:25] Speaker 05: I'm just... Okay. [00:07:26] Speaker 05: I'm with you. [00:07:27] Speaker 07: Again, not a trick question. [00:07:28] Speaker 07: That's just that premise, that hypothetical. [00:07:30] Speaker 07: I'm not talking about your case. [00:07:31] Speaker 05: Okay. [00:07:32] Speaker 07: And then take it to the next step if you were to just help us tease out your view of this law. [00:07:37] Speaker 07: If a trustee does not act pursuant to a court order, does not seek advance permission, but after the fact seeks immunity, that seems to be more of a castillo circumstance. [00:07:49] Speaker 07: And then I think you have a question about the scope of immunity that might be afforded. [00:07:55] Speaker 11: I Really I really can't answer off the top man Let me ask you that what test would you apply here Castillo or Harris Harris because Castillo is a third-party There's no fiduciary duty owed in that Castillo situation Harris Did your client get approval from the Bankruptcy Court? [00:08:21] Speaker 11: for whatever action [00:08:26] Speaker 05: My client is is a beneficiary not a trustee. [00:08:30] Speaker 12: Oh, I'm sorry so I Want to go back to what you just said that Castillo doesn't apply here And I guess I don't understand what your understanding of Castillo is based on that answer so Well the Castillo case was a third party. [00:08:49] Speaker 05: I mean they're big the Trustee this is a breach of fiduciary duty case. [00:08:53] Speaker 05: It's a first party case. [00:08:54] Speaker 05: It's not a third party [00:08:56] Speaker 05: Who is not owed a non-beneficiary someone who's not owed fiduciary duties is not the complainant my clients are Beneficiaries and should be respected through fiduciary duties, and that's why we have a complaint for breach of fiduciary duty I don't think that Castillo is only applying to the third party situation well There are a lot of people who say that this is a great Mix-up and the Mackenzie cases like that they say that you need this and [00:09:21] Speaker 12: There are different different Okay, so I'm coming back to the question I Read Castillo is trying to apply the Supreme Court's decision in Antoine for what does judicial immunity mean as applied to a bankruptcy trustee and taking those more general principles that the Supreme Court discussed Outside the bankruptcy context and putting it in this context. [00:09:43] Speaker 12: That's how I read Castillo I don't see anything in the Castillo decision that would tell me that [00:09:47] Speaker 05: the reasoning there applies based on whether we have a third-party claim or we have a Beneficiary claim what in that case tells you that that makes a difference well it might go back to Antoine because Antoine was in general not not looking at any case about with fiduciary duties as someone one commentator said his name was Bogart the real problem here is that almost all these quasi judicial immunity cases involve people who [00:10:14] Speaker 12: Who do not owe fiduciaries like they're acting as judges you you don't owe a fiduciary duties to me You can make mistakes and so forth your trustees are different I'm sorry to jump in but your point is then if you have a claim involving parties where there is a fiduciary relationship That judicial immunity can't apply is that your point just sort of a more general principle No, you can get the judicial immunity through that comfort order, and that's the only way [00:10:40] Speaker 05: I believe so. [00:10:41] Speaker 05: And I don't. [00:10:43] Speaker 04: The reason you're saying that, just to make sure I understand, is that you think that when somebody is alleging a breach of fiduciary duty, what the trustee is doing is just not adjudicatory under Castillo. [00:10:56] Speaker 04: That the trustee is operating in a business or administrative capacity, and that's why you can do this. [00:11:02] Speaker 05: Well, if the plaintiff is not a beneficiary, that's the distinction I've made. [00:11:10] Speaker 05: Maybe I could get to something that you're talking about in the immunity area. [00:11:24] Speaker 05: The Castillo cases and the cases that are following it or, yes, following it, they're looking for adjudicatory acts. [00:11:34] Speaker 05: And the Charles Tab, I think the Castillo case cites [00:11:39] Speaker 05: both the Cooley treatise on torts and Charles Tab's discussion of the development of bankruptcy law and it closes with some sort of warning we're dealing with a certain type of action on calendaring something but it's not going to necessarily apply in other cases because you have to look at a functional analysis and what is the function of the trustee at issue and what is the implication of granting immunity. [00:12:07] Speaker 05: It's a bit different when you're dealing with the preservation of property, because this is a fiduciary duty, and it's expressly out there. [00:12:17] Speaker 05: Because Cooley was cited there, please take note that I think Cooley stated in his treatise, section 396, that judicial action basically implies not merely a question, but a question referred for solution to a particular officer involved, a non-judicial officer [00:12:38] Speaker 05: That person is going to have the discretion And have to live with it right or wrong, but that person has authority and in this case in the issue of abandonment of property the statute section 554 and the Reed case say that that doesn't go to the the trustee that's a decision made by the judge and they're the ones who make the call and [00:13:02] Speaker 12: So in this maybe to ask it a different way is it possible for a trustee to do anything adjudicative in? [00:13:09] Speaker 12: Relation to someone where there might be a fiduciary duty owed to them is it possible for those two things to exist together I Don't know on the fact. [00:13:19] Speaker 05: I don't see it on the facts here. [00:13:20] Speaker 12: We're too far away I'm just trying to figure out how these doctrines what they mean and what their boundaries are and how they relate to each other and so I'm trying to get if [00:13:30] Speaker 12: Your argument might make sense if your position is that when you are, when a trustee is interacting with somebody that has a fiduciary obligation to it, just categorically can't be doing anything adjudicative. [00:13:44] Speaker 12: If that's your argument, then maybe I would understand the position. [00:13:47] Speaker 12: I'm not sure I understand that to be the case in terms of is it true that everything that a trustee does in relation to creditors categorically is non-adjudicative? [00:13:59] Speaker 05: No, I think there's I I can't say that it's partially because my background say that then how can Castillo be completely off the table if a trustee is interacting with people the creditors that it owes fiduciary obligations to Well if you even if you want to bring in Castillo and say that's part of part of it You still deal with the fact that under Charles tab and so forth [00:14:23] Speaker 05: He does the Castillo analysis in term they said trustees have multiple functions and preservation of property is not one of them excuse me have different functions and Preservation of property and collection is one of these administrative ministerial functions I get that you're trying to say that Preservation of property that's the sort of management of a bankruptcy estate is outside of whatever immunity is Being discussed in Antoine and Castillo fair [00:14:59] Speaker 12: i'm drawing a blank on it so if i could just move on and and uh... well i i i'm not going to go just yet i think you said a minute ago [00:15:08] Speaker 12: that Castillo can't apply here at all because we have a trustee that's interacting with creditors and there's some fiduciary obligations that may or may not exist there. [00:15:18] Speaker 12: And so Castillo is off the table because you can't have immunity for fiduciary obligations. [00:15:23] Speaker 12: And I'm trying to get at is it possible that you could have adjudicatory functions even in relation to creditors where a fiduciary obligation might extend but nonetheless trigger [00:15:37] Speaker 12: The principles being discussed in Antoine and Castillo. [00:15:40] Speaker 12: And so we have to do that analysis. [00:15:42] Speaker 12: And maybe you're correct that all the trustee is doing in terms of marshaling and managing the bankruptcy estate is going to fall outside of adjudicatory functions which Antoine and Castillo are talking about. [00:15:53] Speaker 12: But that doesn't mean that Antoine and Castillo just categorically don't apply in this context. [00:15:57] Speaker 05: So are you saying that if someone didn't get that comfort order, they could nevertheless be eligible [00:16:05] Speaker 05: in a fiduciary situation under Castillo. [00:16:12] Speaker 12: I'm asking you, why isn't that true? [00:16:16] Speaker 05: I just don't see it. [00:16:18] Speaker 05: And I don't see that Antoine was directing the Castillo court to address this situation of fiduciary situations. [00:16:31] Speaker 05: Again, the difference here noted by the [00:16:36] Speaker 05: the literature seems to be that the first part, the distinction between first and third party cases in terms of how you do an analysis and the immunity situation under those sort of comfort order cases will give you the derivative immunity and I don't think Antoine speaks to that issue. [00:17:02] Speaker 05: The problem is that these are contrary [00:17:06] Speaker 04: antagonistic forces congress's mechanism is breach of fiduciary duties to ensure good good results and as soon as you start throwing immunity casually you're undermining the legislative intent it would seem back to the standard of care issue yes so you're arguing that it should just be negligence but the district court and bankruptcy court held you to a higher standard of gross negligence why do you think that the standard should be negligence as opposed to gross negligence [00:17:33] Speaker 05: Cases like Mosser say this is the best thing for good administration. [00:17:38] Speaker 05: It's also the root of the law that was Congress used as a model in trust law. [00:17:44] Speaker 05: The Restatement Second had that law, simple negligence standard. [00:17:50] Speaker 05: And what is more, the United States Supreme Court in the Willoughby case uses that standard expressly and refers to, I think it's referring to trust law cases. [00:18:00] Speaker 05: Under your case, Leite, basically, unless Congress has come out and said something different, even though the Willoughby case was a case under the 1898 Bankruptcy Act, you don't presume that Congress meant a change. [00:18:17] Speaker 05: On top of that, you've got this wonderful observation that the Commission wanted to change the standard, but Congress didn't adopt it. [00:18:26] Speaker 05: And of course, you can talk about sounds of silence. [00:18:28] Speaker 05: What do we infer? [00:18:29] Speaker 05: But we know that the Congress did adopt some of those changes and put them in Bapsipa. [00:18:34] Speaker 05: I know of one. [00:18:36] Speaker 05: limitations on homestead exemptions and so forth. [00:18:38] Speaker 05: So this is something that clearly Congress as a body rejected, I guess. [00:18:43] Speaker 04: This continental coin case from the bankruptcy court in the central district seems to have been influential, at least in this district, in guiding what people might think the standard of care should be. [00:18:53] Speaker 04: One of the points that the judge makes in that case is that [00:18:57] Speaker 04: If we just have a negligent standard, the bankruptcy system will grind to a halt because we'll just have negligent suits and we need greater protection for trustees so that trustees are more willing to take on this responsibility. [00:19:08] Speaker 04: How do you address that? [00:19:11] Speaker 05: First, I think it's all, at least in the case of what we have in front of us here with abandonment of property, the statute actually, Section 554 essentially makes the [00:19:25] Speaker 05: the trustee apply for that comfort order the Continental coin case says Well, we're going to have a lot of comfort orders. [00:19:33] Speaker 05: We don't that's going to overwhelm us and that that's easily resolved through the fact that you can have a streamlined application so if the trustee gives notice of intent to abandon and nobody nobody complains, that's it you have consent or an estoppel so that [00:19:53] Speaker 05: There is no longer issue of a problem a liability issue for that trustee mr. Jacob I wanted to go all the way back to the beginning in the in the jurisdiction. [00:20:04] Speaker 01: I want to make sure I understand your jurisdictional Position correctly because at first glance this looks a lot like the sort of thing that we would need a certification to decide it's a [00:20:15] Speaker 01: purely legal issue that's divided the circuit, that's what was at issue in Bullard. [00:20:20] Speaker 01: So is your, do I understand correctly that your view is that by holding that the trustee had quasi-judicial immunity, which I think you'd said kind of doesn't admit of flavors of standards of liability, it's just the end of the case, proceeding to remand for determination of whether there was a showing of gross negligence was, [00:20:45] Speaker 01: It's self-feudal because if if the trustee has quasi-judicial immunity your position is that's just the the end of it That's an absolute immunity within its proper scope that would make it That is yes, they kill Our position are you agreeing with the premise and judge Johnson's question? [00:21:05] Speaker 07: There's crazy immunity that it's absolute [00:21:08] Speaker 05: Well, there's nothing left to do. [00:21:10] Speaker 05: I think that is, yes, because I think that's what Castillo says. [00:21:13] Speaker 07: I just needed a yes or no. [00:21:14] Speaker 07: I'm interrupting his question, but I just wanted to make sure that your nod of the head was you agree with that premise. [00:21:19] Speaker 01: Yes. [00:21:20] Speaker 07: OK. [00:21:20] Speaker 01: OK. [00:21:20] Speaker 01: Because if there were remand for it would look more like the Guglielmoza case or others, it wouldn't quite be final. [00:21:31] Speaker 01: And so it does take the fact that it was the final adjudication. [00:21:35] Speaker 01: There wasn't really much more, even though the district [00:21:38] Speaker 01: thought that there might be more for the Bankruptcy Court to do on remand, your position is once it was recognized as immunity, that was final for purposes of 158D1. [00:21:47] Speaker 01: Is that right? [00:21:49] Speaker 05: Right. [00:21:50] Speaker 05: I think the way you put it is that this is a meaningless remand because the bankruptcy court is going to be obligated to follow what the higher court said, and the higher court said she's got immunity. [00:22:08] Speaker 05: So that's us out of court. [00:22:09] Speaker 05: We're at both levels. [00:22:11] Speaker 05: It's final. [00:22:12] Speaker 01: No factual development you think you could do with respect to this? [00:22:15] Speaker 05: Well, I mean, if we were told that that if we had to show gross negligence, we think we did. [00:22:24] Speaker 05: But if we didn't and want someone can show that or we would be able to file a revised complaint and basically focusing on the school or case. [00:22:34] Speaker 03: Am I correct in assuming that you're standing on the complaint? [00:22:38] Speaker 05: Oh, we think it's fine. [00:22:39] Speaker 03: I mean, the issue is that this... So you're standing on the complaint that you have right now in the record. [00:22:45] Speaker 05: We say that the trustee, that complaint shows gross negligence. [00:22:49] Speaker 05: This is a trustee, she's alleged to have gotten notice in ample time, and she did nothing. [00:22:55] Speaker 03: And this is... So that's a yes, there's no attempt to replede additional allegations. [00:22:59] Speaker 05: Well, there might be other things that can be added in there because there are a lot of facts over time with this. [00:23:06] Speaker 03: But then how would we have jurisdiction under 158 D 1 if if you're going to go back that doesn't that bring it squarely under Google user Because I thought given the way that you brief this case in the jurisdictional issue that you were prepared to stand on the complaint Rather than follow up on the remand to attempt to add additional allegations I thought that was your position the way that you had briefed this issue, but you're saying that that may not be the case and [00:23:36] Speaker 05: Well, I don't know if we're sent back, with the prospect of being sent back to argue about gross negligence, I don't see what we'll... No, I'm asking your position. [00:23:49] Speaker 05: I think it's going up to the Supreme Court or going down, because the Willoughby case seems to be controlling. [00:23:57] Speaker 05: This is the development of [00:24:00] Speaker 03: I'm not sure I understand your answer. [00:24:02] Speaker 03: Are you saying that because you think that it's futile anyway? [00:24:06] Speaker 03: You're not going to attempt to amend and you'll stand on the current complaint Because just a moment ago in response to judge Johnstone's questions. [00:24:14] Speaker 05: You said there might be additional allegations that may be played I'm not sure where you stand on that issue I thought it would be a strategic decision-making as to how much we're gonna fight and where we would do it I think that even if you [00:24:29] Speaker 05: If you can amend and satisfy some people about gross negligence, you could go up to a court and say that this is improper development of federal common law. [00:24:41] Speaker 05: Congress created rules in a bankruptcy code which largely region state law, and now these decisions are involving people [00:24:50] Speaker 05: Making federal communist what's necessary for a breach of fiduciary duty against a bankruptcy trustee? [00:24:57] Speaker 11: And if you're telling this you're going to go back and amend the complaint that matters It it matters [00:25:05] Speaker 03: I think the issue that I'm struggling with, and maybe some of my colleagues share this, is that this was technically a remand for the bankruptcy court to determine whether amendment would be futile, right? [00:25:21] Speaker 03: So if you basically are telling this panel that you're going to stand on the current complaint, I think that that moves you a fair ways towards finality, and that means that we can take [00:25:30] Speaker 03: possibly means that we can hear at this moment in time. [00:25:34] Speaker 03: But if you're saying, well, there are additional allegations and I want the opportunity to argue before the bankruptcy court to amend the complaint and have that question of fertility be determined before the bankruptcy court pursuant to the remand from the district court, then there may be a jurisdictional problem. [00:25:51] Speaker 03: That's why I'm asking you these questions. [00:25:54] Speaker 05: Okay, well, I think the term futility was in two reasons. [00:26:00] Speaker 05: Futile to try to get a judge to change the position she already took in the bankruptcy court because she already said it was futile. [00:26:08] Speaker 05: And she dismissed without giving a leave to amend. [00:26:11] Speaker 05: And the district court should have taken it on review and said she did something wrong, but she didn't. [00:26:18] Speaker 05: And so, given our view of what immunity is, [00:26:23] Speaker 05: If she has immunity, the whole thing is pointless because there is no negligence. [00:26:27] Speaker 07: But I still don't hear you really answering Judge Wynn's question. [00:26:30] Speaker 07: Is it your intent? [00:26:32] Speaker 07: Was it your intent? [00:26:32] Speaker 07: I understood. [00:26:33] Speaker 07: Let me just say, I understood that you sidestepped or I should say declined the opportunity to try to amend on remand and instead decided to appeal. [00:26:46] Speaker 07: You had that opportunity and I heard what I read in this sequence is that your client did not take that opportunity, did not want to amend. [00:26:55] Speaker 07: Is that right? [00:26:57] Speaker 05: We did not want to amend because we did not think it was needed amendment. [00:27:01] Speaker 07: Okay, so the answer to Judge Wynn's question, and these are not trick questions, but now I'm concerned that I misunderstood your intent. [00:27:09] Speaker 07: My understanding is that your answer to Judge Wynn's question is that your client does not intend to amend. [00:27:16] Speaker 05: That decision hasn't been made yet. [00:27:18] Speaker 05: But it's something that I... We have jurisdiction. [00:27:24] Speaker 03: We're going to need an answer from you because we're trying to figure out whether it's an interlocutory order or not. [00:27:30] Speaker 03: And so if there's possible amendment of the pleadings, that means that the party's legal rights and positions haven't been fixed and we may not have jurisdiction. [00:27:40] Speaker 03: But if you're going to rest on the current complaint, then that means there's not a whole lot left to be done. [00:27:47] Speaker 05: I guess I should say that I don't see how amendment would do anything given what immunity is and that immunity is absolute So I don't see the difference so your view is that after the ruling by Judge Fitzgerald The case was over unless you appealed to us at that level yeah, so so so then you think the case is over unless you appeal to us Yes, and it's also because there there is no [00:28:16] Speaker 00: you're immune what's the point gross negligence or whatever no I understand that that's the reasoning behind your decision I think what we're all trying to assess here is should we even be doing this right now and the only way we can do this is if we're appealing a final order so you have to convince us that we are actually are reviewing a final order are we reviewing a final order from your perspective we look at a number of things [00:28:43] Speaker 05: the violin taste or the various theories out there, and we said this is She what they've done is they fixed our rights But I think anything short of a yes for you is a problem, okay, so so are we reviewing a final order I? [00:29:04] Speaker 00: That is my view yes, okay, and and now I'll ask why are we reviewing a final order? [00:29:10] Speaker 00: Why do you think it's fine? [00:29:11] Speaker 00: I think you said because under in the light of Judge Fitzgerald's ruling. [00:29:15] Speaker 05: There's nothing more you can do The practical aspect of the the bankruptcy judge having to follow the orders of the the district court and also Because of what what the Castillo court has basically indicated and others that it's it's an absolute [00:29:33] Speaker 05: Once you have the immunity, it doesn't matter what the state of mind is. [00:29:38] Speaker 05: So there's nowhere to go. [00:29:40] Speaker 07: So that's another way of saying, getting back to Judge Wynn's question, that you're standing on your complaint because you think the district court was wrong. [00:29:47] Speaker 07: You're not trying to amend. [00:29:48] Speaker 07: You don't intend to amend. [00:29:49] Speaker 07: And you want to appeal instead because you think that was the end of the road. [00:29:52] Speaker 05: Yeah. [00:29:54] Speaker 11: Do you want to reserve that last minute? [00:29:57] Speaker 11: Yes. [00:29:57] Speaker 11: All right. [00:29:57] Speaker 11: Thank you. [00:30:11] Speaker 10: Good afternoon, your honors. [00:30:13] Speaker 10: Lon McIntyre, appearing on behalf of Amy Goldman, who is the Chapter 7 trustee in this matter. [00:30:21] Speaker 10: It is our position that Harris and Castillo can coexist in this legal analysis that I'd like to lay out for you. [00:30:33] Speaker 10: We contend that we're a bankruptcy trustee has engaged in discretionary decision-making activity [00:30:40] Speaker 10: without a court order, immunity applies to preclude personal liability unless the trustee was grossly negligent. [00:30:50] Speaker 10: There are situations in which bankruptcy trustees exercise discretionary judgment and make discretionary decisions that adjudicate personal rights that do not require a court order. [00:31:06] Speaker 10: There are other situations that [00:31:08] Speaker 10: that do require a court order. [00:31:09] Speaker 07: Whether a court order is required or not, a trustee can always seek that permission, it seems to me. [00:31:16] Speaker 07: I don't know, anything that would prevent a trustee from seeking permission. [00:31:18] Speaker 07: And for those trustees that are acting to pursue into a court order, that seems to me to be an easy case, OK? [00:31:26] Speaker 07: And so what happens when a trustee, in other words, easy, meaning I think that person is a vote of 1 out of 11, that person seems to me to be clearly entitled to immunity. [00:31:35] Speaker 07: But what about the person who doesn't? [00:31:38] Speaker 07: act pursuant to a court order. [00:31:39] Speaker 07: What's the test and what is the scope of the immunity under your view? [00:31:45] Speaker 10: The test for a situation as we have here where the bankruptcy trustee did not seek a court order in making her determination that this is a no asset case and that, which involves a discretionary judgment about whether or not seeking to recover certain assets or to engage with property of the estate [00:32:05] Speaker 10: make sense given the cost of doing that and the value or the benefit to the creditors and beneficiaries of the estate. [00:32:14] Speaker 10: And that's the kind of decision that leads to what happened here, which was a request for a report of non-distribution. [00:32:21] Speaker 10: So in cases where there is a [00:32:25] Speaker 10: No court order has been obtained and the trustee has engaged in an adjudicatory or discretionary judgment. [00:32:34] Speaker 10: We contend that there is an appropriate basis for carving out gross negligence cases but continuing to give immunity for negligence cases because in the situation involving a bankruptcy trustee, there is an overlay of fiduciary duty. [00:32:52] Speaker 10: That doesn't exist in quasi in actual judicial immunity and judicial immunity cases the judge is absolutely immune and we agree with that proposition. [00:33:01] Speaker 08: There's no question about that, but you're but you're talking about giving You're talking about discretionary decisions that are business decisions not adjudicatory decisions. [00:33:11] Speaker 08: Is that correct? [00:33:12] Speaker 10: No, I think they're adjudicatory in the sense that those decisions lead to the filing of a report of no distribution. [00:33:21] Speaker 08: Sure, but these are decisions about whether the asset has any value, whether there's any practical value in going and managing the property, collecting the rent, rehabilitating the property, doing whatever it is. [00:33:32] Speaker 08: Those are all business decisions. [00:33:34] Speaker 08: That's not a classic adjudicatory decision. [00:33:37] Speaker 08: These are good business decisions that have to be made by [00:33:41] Speaker 08: all kinds of ordinary people outside of the judicial system every day. [00:33:45] Speaker 08: Why would we classify those as adjudicatory decisions just because they've been made by a trustee? [00:33:50] Speaker 10: I think it's because that those decisions result in the adjudication of the rights of the creditors and the debtor to property of the estate. [00:33:59] Speaker 10: That's the ultimate decision that you end up having as a result of the trustee engaging in those activities that your honor is considering. [00:34:08] Speaker 04: That's right. [00:34:08] Speaker 04: What aspects of a trustee's work would not be adjudicatory? [00:34:13] Speaker 04: Because it seems like we're describing basically everything that a trustee does. [00:34:16] Speaker 10: Well, I think more administrative activities would be things like filing certain reports. [00:34:23] Speaker 10: In Section 704 of Title 11, it talks about the various duties of a trustee and you can see that some of them are clearly administrative and some require the exercise of discretion and are adjudicatory because they determine the rights of the parties. [00:34:38] Speaker 08: Council, how do you square this theory with a case such as Mosser versus Darrow? [00:34:44] Speaker 08: The court there just said ordinary negligence principles apply to the receiver there. [00:34:51] Speaker 10: Well, I think that Mosser has been more broadly read than is justified. [00:34:57] Speaker 10: But Mosser said that really was talking about action that it characterized as willful and deliberate. [00:35:07] Speaker 10: That this trustee willfully and deliberately allowed an adverse interest to exist [00:35:13] Speaker 10: Interest adverse to the trust so your contention is that it really is talking about gross negligence Yes, at least either gross negligence or perhaps intentional conduct that is even beyond gross negligence but in in Mosser the court did not address negligence at all and in the sense that it talked it's the facts of its case in the language that it used was based upon a [00:35:41] Speaker 10: willful and deliberate conduct and I think that you have to narrow the holding of that case or that holding of that case is narrower than has been treated in some subsequent cases and it should be limited to the facts and to the language that the court was using in that case. [00:35:56] Speaker 04: What about just like a case like our case Cochise from 1983 where we said a trustee is subject to personal liability not only for intentional but also [00:36:07] Speaker 04: Negligent violations of duties imposed upon him by law. [00:36:10] Speaker 04: Why wouldn't that impose liability for negligence? [00:36:13] Speaker 10: I think that that is again that conclusion in making that conclusion the court cited Moser or Moser and again, I think the court made the mistake of Overly broadly interpreting what Moser stands for and I don't believe that Moser is [00:36:32] Speaker 10: Stands for that proposition that mere negligence is not subject to immunity. [00:36:38] Speaker 03: So let me ask you this in Castillo I think the court was trying to distinguish between activities that the trustee engaged in such as and it gave examples Activities such as collecting liquidating and distributing the debtors property to creditors and it was contrasting or comparing that with more traditional judicial activities and reading verbatim here such as seizing property summoning persons to appear before them and [00:37:02] Speaker 03: and committing people to prison. [00:37:04] Speaker 03: So the allegations here, as I understand it, is negligence and failing to preserve assets essentially for inaction taken in collecting the debtor's property. [00:37:14] Speaker 03: That sounds to me much more like the activities such as collecting, liquidating, and distributing debtor's property as compared to what Castillo described as judicial activities. [00:37:25] Speaker 03: How do you respond to that? [00:37:27] Speaker 10: Your Honor, I think that the test that Castillo applied [00:37:32] Speaker 10: identified as a key feature of adjudicatory versus administrative, whether substantial discretion is involved. [00:37:41] Speaker 03: And so in this... Well, sure, there's an element of discretion. [00:37:44] Speaker 03: I don't think that answers it. [00:37:46] Speaker 03: I think what Castillo was talking about following Antoine's teachings is to really look at the function. [00:37:55] Speaker 03: Right? [00:37:56] Speaker 03: And so that's why it was talking in that context about the common law duties that are trustee-like as opposed to more traditional activities. [00:38:07] Speaker 03: And quasi-immunity applies to one category but not the other. [00:38:11] Speaker 03: So it doesn't seem to be the distinction between negligence versus gross negligence, it's really looking at the function. [00:38:18] Speaker 03: And to me, the allegations here fall very much, it seems to fall very much in line with the activities described [00:38:25] Speaker 03: in Castillo as being trustee-like activities such as collecting, liquidating, and distributing the debtor's property to creditors. [00:38:34] Speaker 10: I understand. [00:38:35] Speaker 10: And it's our position that Castillo also says that you have to look at the and focus on the ultimate act rather than the constituent parts of the act. [00:38:45] Speaker 10: And here, it's our contention that the ultimate act is being complained of [00:38:49] Speaker 10: is that this report of non-distribution or no distribution was filed that ultimately cuts off creditors' rights and cuts off claims and allows property to be re-returned to the debtor. [00:39:04] Speaker 12: Does it do that by operation of law in and of itself or does it need court intervention, court approval? [00:39:08] Speaker 10: Most chapter, I'm sorry, most chapter 7 cases are resolved with a filing of a report of no distribution followed soon thereafter by case closure. [00:39:19] Speaker 10: And a report an order of the court is not required to accomplish accomplish. [00:39:24] Speaker 07: It wasn't a closure here, right? [00:39:25] Speaker 12: There never has been right because it did for us question Yeah, so I'm just trying to get out that would make sense if the trustee files the report and then the rights are set Everybody's rights are set [00:39:37] Speaker 12: It's a little different if the trustee files that report and then a court approves it or tinkers with it or whatever, right? [00:39:43] Speaker 12: So which, and you're saying that in the chapter 7 context that the trustee files that report and in and of itself, it sets everybody's rates. [00:39:50] Speaker 10: That can be the case, yes, unless there's an objection. [00:39:53] Speaker 12: When is it not? [00:39:54] Speaker 10: When there's an objection, timely objection made and then it goes to a hearing before the court. [00:40:01] Speaker 10: But most of the chapter 7 cases are not resolved that way and it is a possibility to resolve them [00:40:07] Speaker 10: and ultimately close the case without a court order. [00:40:10] Speaker 10: So again, we're in a circumstance where there's never been, you know, an adjudication, there's never been closure of the case because of extensive litigation and multiple appeals to this court that intervened over the last decade, essentially. [00:40:27] Speaker 12: I mean, there's an argument to be said that [00:40:29] Speaker 12: The trustee files a report and there is no objection or no dispute that we're not really adjudicating. [00:40:34] Speaker 12: It's sort of resolution by consent in some sense, right? [00:40:38] Speaker 12: Because you had the ability to say, no, I don't like this. [00:40:40] Speaker 12: This is not protecting my rights or whatever and nobody said anything. [00:40:43] Speaker 12: And therefore, it just goes through as approved. [00:40:45] Speaker 12: That's not really an adjudication. [00:40:47] Speaker 10: I still think it is an adjudication because it does end up ultimately setting the party's rights, whether it's with a court order or without. [00:40:56] Speaker 07: Even without closure. [00:40:59] Speaker 10: Well, not without case closure. [00:41:01] Speaker 07: Right. [00:41:01] Speaker 07: And so that seems to be an important part that you're leaving out. [00:41:05] Speaker 07: I mean, I appreciate that there wasn't an objection, but then there wasn't closure. [00:41:09] Speaker 07: If there had been closure, that'd be one thing. [00:41:10] Speaker 07: But what do we do? [00:41:12] Speaker 12: Well, I think for my purposes of my question, closure doesn't matter. [00:41:14] Speaker 12: It's just like how you got there. [00:41:15] Speaker 12: And if you got there based on not having to resolve a fight, a conflict between people with opposing interests, is that really adjudication in the sense of, [00:41:25] Speaker 12: how we talk about that with judicial immunity, or is that just, it got resolved? [00:41:30] Speaker 10: I think it still constitutes an adjudication, maybe of a different flavor, but it certainly constitutes an adjudication because the ultimate act is case closure, which ultimately determines everybody's rights. [00:41:45] Speaker 10: I mean, the report of no distribution without objection is a final determination and adjudication of parties' rights. [00:41:51] Speaker 01: is back and i i i guess i have a question about that district courts uh... order here your position that the district court found that the trustee was entitled to quasi-judicial immunity that the district court that the trustee was entitled to yes yeah okay because i was negligence and not been adequately alleged well so that's where i'm confused we say in castillo several times and i think [00:42:21] Speaker 01: that it's generally what we take quasi-judicial immunity to be about is that it's absolute. [00:42:32] Speaker 01: But the district court here, and it sounds like your position is that first there's a determinant of quasi-judicial immunity, but it's not absolute. [00:42:42] Speaker 01: then leads to a gross negligence provision, which really isn't immunity at all. [00:42:49] Speaker 01: I'm trying to figure out, aren't we conflating those two ideas? [00:42:53] Speaker 01: I mean, the first question is, quasi-judicial immunity, as far as the cases that I've reviewed from our court and the Supreme Court is, it's kind of an on-off switch. [00:43:01] Speaker 01: I mean, once it's found, it's found. [00:43:03] Speaker 01: Now, the question about the scope of quasi-judicial immunity [00:43:07] Speaker 01: It may be that other cases in quasi-judicial immunity outside of the bankruptcy context, if a judge or someone cloaked with quasi-judicial immunity is willfully exceeding their jurisdiction, you're just not immune. [00:43:22] Speaker 01: But that goes to the immunity inquiry. [00:43:25] Speaker 01: Why would, I guess, can you explain to me how the standard of liability is downstream of the immunity finding? [00:43:35] Speaker 10: Well, it's our position that although quasi-judicial immunity has been called absolute immunity, there is a rational reason, and it's supported in several bankruptcy court cases, hasn't been directly addressed by this court, I don't believe. [00:43:53] Speaker 10: I think we agree that [00:43:56] Speaker 10: law is a little bit messy in this area. [00:43:59] Speaker 10: But it's our position that there should be a distinction made between negligence and gross negligence, and maybe we call it qualified quasi-judicial immunity. [00:44:11] Speaker 01: That's all we need in this area. [00:44:13] Speaker 01: But I mean, I think your friend makes a valid point here that that's kind of confusing and affirmative defense and an element of the claim in an odd way. [00:44:22] Speaker 01: Why wouldn't it just work to say, OK, I mean, I think let me know whether you accept it. [00:44:28] Speaker 01: I think your friend has said, [00:44:29] Speaker 01: We take the quasi-judicial immunity to be absolute. [00:44:31] Speaker 01: There's nothing to do here. [00:44:32] Speaker 01: And I guess I'm not sure why you don't agree with that. [00:44:35] Speaker 01: Why will you even say, right, quasi-judicial immunity, this case is done? [00:44:38] Speaker 01: Instead, you seem to agree with the district court to say that now, because of immunity, there's a further inquiry of gross negligence? [00:44:46] Speaker 10: Yes. [00:44:46] Speaker 10: And I think that because of the unique nature of the bankruptcy trustees' duties and the functions that they... Including fiduciary duties. [00:44:55] Speaker 07: Including fiduciary duties. [00:44:57] Speaker 07: That's the problem, right? [00:44:59] Speaker 07: There's a fiduciary duty there and so to extend immunity without limitation has been, it's very problematic for us. [00:45:10] Speaker 07: Our labels for these immunities are very inconsistent and I think confusing. [00:45:15] Speaker 07: I share Judge Johnson's current about putting absolute in front of something and then talking about a limited scope. [00:45:21] Speaker 07: But if you could go back to his question, if we think about quasi-judicial immunity without tacking absolute on the front of it, then it seems to me that you'd advocate for quasi-judicial immunity and that would be afforded to actions that are not more egregious than negligence. [00:45:38] Speaker 07: To me, the absolute label is what's messing us up. [00:45:42] Speaker 07: We're not talking about absolute immunity. [00:45:44] Speaker 07: That's Judge Johnson's point. [00:45:46] Speaker 10: Right. [00:45:47] Speaker 10: I agree. [00:45:48] Speaker 10: I think we're talking about an immunity that has a different scope than absolute immunity. [00:45:54] Speaker 10: And if you look at quasi-judicial immunity, the purposes for that immunity have always been that it protects the integrity of the judicial process and assures that there can be independent and impartial decisions. [00:46:10] Speaker 08: But it is absolute. [00:46:11] Speaker 08: Stumped versus yes, it is stumped versus Markman as long as you're a judicial official Then you're entitled to absolute immunity unless you are completely and utterly outside of your jurisdiction I don't disagree with you so the question of quasi judicial immunity I think goes to what does the quasi attached to judicial or does it attach to immunity that is are we talking about quasi immunity are we talking about quasi judicial immunity quasi judicial means [00:46:36] Speaker 08: that you are acting in the place of a judicial officer. [00:46:39] Speaker 08: And therefore, you are entitled to the immunity that a judicial officer, which would be entitled to, which would be absolute. [00:46:44] Speaker 08: It's just a fairly narrow category, at least in my view. [00:46:48] Speaker 10: I think that quasi attaches to both judicial and to immunity. [00:46:51] Speaker 08: Well, once you do that, you've just blown the whole thing wide open. [00:46:55] Speaker 07: We recognize this in plenty of post-Castillo cases that there are some actions that trustees take that are going to be entitled to immunity and some that are not. [00:47:03] Speaker 07: And we go trace that back to what bankruptcy judges have traditionally done. [00:47:06] Speaker 07: Sometimes they're acting in the place, as Judge Bybee suggests, of bankruptcy judges, and sometimes they are not. [00:47:12] Speaker 07: And the difference for this type of quasi-judicial immunity, when they're sometimes acting in the place of a judge, is they owe a fiduciary duty. [00:47:19] Speaker 07: Judges don't. [00:47:21] Speaker 07: Right. [00:47:21] Speaker 07: Right. [00:47:22] Speaker 08: Right. [00:47:22] Speaker 08: And I think... Why is your client acting in a quasi-judicial role here in managing these properties? [00:47:29] Speaker 08: I think that's what you'd have to convince me of. [00:47:31] Speaker 08: I'm happy to give your client quasi-judicial immunity when she is acting in a quasi-judicial role. [00:47:38] Speaker 08: I don't see managing the properties as a quasi-judicial role. [00:47:42] Speaker 08: That's the role of the trustee. [00:47:44] Speaker 08: And under state law principles, there's a negligent standard there. [00:47:50] Speaker 10: I understand. [00:47:50] Speaker 10: I think, again, I can only come back to our position that it's not just managing the properties that's at issue here. [00:47:58] Speaker 10: It's a discretionary decision that leads to the adjudication of private rights, ultimately. [00:48:04] Speaker 10: That's the ultimate act that is at stake here. [00:48:07] Speaker 07: Would you agree that the top of the decision tree is where Judge Bybee is pointing you to because there's sorting of the duties. [00:48:13] Speaker 07: The trustee does a lot of different things and some of them may fall into this camp and some of them may not be adjudicatory. [00:48:19] Speaker 07: Would you agree that the top of the decision tree is to look at the function that's being performed? [00:48:22] Speaker 10: Yes, Your Honor, I would. [00:48:23] Speaker 10: I think that's the first step. [00:48:24] Speaker 07: All right, so I think that's what Judge Bybee is asking you to is entertaining that some of these and he's questioning whether the action in this case really falls into this category at all and I think you'd agree if it doesn't [00:48:34] Speaker 07: Well, it just doesn't. [00:48:36] Speaker 07: And then the analysis doesn't go any farther. [00:48:38] Speaker 07: Isn't that right? [00:48:38] Speaker 07: I agree. [00:48:40] Speaker 01: But it can't be... I mean, the discretionary line is often thrown about in terms of what judicial and quasi-judicial immunity functions to protect. [00:48:51] Speaker 01: But it can't be that that's the test for whether... for the scope of quasi-judicial immunity. [00:48:56] Speaker 01: The mismanagement of an estate's funds [00:49:00] Speaker 01: both discretionary and certainly affects the rights of the parties because there might be nothing left in the estate due to the mismanagement but that doesn't make it quasi-judicial immune does it is that the right question you'd have us ask well I think it that that question turns on the assumption that there was that this case is about mismanagement of property of the state and again let's make it a hypothetical then [00:49:25] Speaker 01: I mean, that's the test I hear you urging, is okay, well, it's discretionary and it affects the rights of it, but it kind of affects the rights of it incidentally, because a right to nothing is not much of a right. [00:49:37] Speaker 01: But it just doesn't strike me that, in other words, I think you've heard from several of us the question, so what isn't immune then, aside from, well, what, you've talked about [00:49:49] Speaker 01: filing things, although of course there could be malpractice in those areas. [00:49:58] Speaker 01: Is anything about the fiduciary duty to manage the estate subject to liability or is it all quasi-judicially immune? [00:50:07] Speaker 10: Well I think that there are some acts that perhaps could be called management of the estate that are administrative in nature, but the acts in this case are [00:50:19] Speaker 10: that ultimately are part of that discretionary judgment that a bankruptcy trustee engages in every day and makes the ultimate determination resulting in whether or not the creditors and the debtors what their rights are to the property. [00:50:38] Speaker 03: Well, that's going pretty far afield of the complaint. [00:50:41] Speaker 03: I'm looking at the complaint. [00:50:42] Speaker 03: It's pretty short. [00:50:43] Speaker 03: It's 13 pages. [00:50:46] Speaker 03: The main two causes of action, first one being negligence and allowing waste against Defendant Goldman owes a fiduciary duty and basically didn't preserve the assets properly. [00:51:02] Speaker 03: And then the second one is failing to collect and distribute rent from properties. [00:51:08] Speaker 10: Yes, and they're both alleged to have occurred with gross negligence, which I think is something interesting to note. [00:51:15] Speaker 10: If the appellant does not believe that gross negligence is a carve-out from the immunity, why did he go to the trouble of alleging gross negligence? [00:51:26] Speaker 10: And I think that's probably because the bankruptcy courts in this jurisdiction [00:51:31] Speaker 10: have frequently said that gross negligence is not subject [00:51:42] Speaker 03: And perhaps my question wasn't clear. [00:51:44] Speaker 03: I focused on the allegations and the complaint because I'm trying to follow up on your answer as to why this is judicial like functions instead of more administrative in nature or common law what the trustees would usually be tasked with the responsibility to do which is to manage the property. [00:52:08] Speaker 10: Well, again, I think it comes back to our position that what's alleged to have happened here and what's complained of is an act that led to the alleged harm to the creditor, resulting from the ultimate determination that there's nothing to distribute to them. [00:52:30] Speaker 10: I think that there's no way to divorce the particular acts from the ultimate act as Castillo directs us to do. [00:52:38] Speaker 08: Then why shouldn't we just determine those questions that are raising the complaint on the merits? [00:52:43] Speaker 08: If your client has been negligent, then your client may be subject to under California law for breach of fiduciary duty. [00:52:49] Speaker 08: But if there was no waste of the assets and there was a good reason for not collecting the rent, then the court will say, yeah, there was a good reason for not collecting the rent. [00:52:58] Speaker 08: This was good business judgment. [00:52:59] Speaker 08: It was an exercise of discretion. [00:53:01] Speaker 08: It was not unreasonable. [00:53:02] Speaker 08: And therefore, there's no liability. [00:53:04] Speaker 08: Why wouldn't that just be the end of the case without any discussion of quasi-judicial immunity? [00:53:09] Speaker 10: Well, I think because of this overlay of a breach of fiduciary duty on the absolute judicial immunity [00:53:16] Speaker 10: concept. [00:53:17] Speaker 08: These are not judicial decisions. [00:53:20] Speaker 08: Wasting assets is not an adjudicatory decision. [00:53:23] Speaker 08: Failing to collect rent is not an adjudicatory decision. [00:53:27] Speaker 08: These are decisions that can be made by ordinary business people all the time who do not have law degrees and have no intention of going to law school. [00:53:35] Speaker 10: In the bankruptcy context, those decisions are made in the [00:53:39] Speaker 10: context of rules that say whether or not to collect rent is a discretionary decision that the [00:53:47] Speaker 10: bankruptcy trustee has to make and has to make that in terms of whether or not a meaningful distribution to creditors will result. [00:53:59] Speaker 07: So there is more- Because there's a cost benefit analysis, because it's part of the business judgment rule, because sometimes it doesn't make sense to go after the rents, right? [00:54:07] Speaker 07: That seems to me what you're not saying that Judge Bybee has baked into his question. [00:54:10] Speaker 10: That's partly correct, but it's not just a business judgment. [00:54:15] Speaker 10: It is It results in an adjudication of the private rights and that's the function test that that we know applies as a result of Antoine and was applied in Castillo, but I guess I Don't see that in the district courts [00:54:33] Speaker 01: And so I think in Castillo, we devoted several pages to just the question of whether quasi-judicial immunity applied to scheduling and noticing the bankruptcy hearing. [00:54:46] Speaker 01: The district court, there's nothing like that in the district court's order. [00:54:51] Speaker 01: So how are we to know what the, I think a lot of the questions here about how Castillo should apply to the conduct alleged in bankruptcy court. [00:55:03] Speaker 01: But we don't have much to go on, and so, I mean, don't we need to see a little bit more or do that ourselves to figure out the answer? [00:55:12] Speaker 01: I mean, doesn't Castillo demand more than what the district court provided here? [00:55:18] Speaker 10: I don't, I'm not sure if I'm getting the gist of your question, but I think my answer would be no, that what the district court looked at was whether or not there was an adjudicatory act that resulted [00:55:32] Speaker 10: Determination of the party's rights and and the district courts said we find that this was That that this qualifies as qualified that conduct of the bankruptcy trustee constitutes qualified [00:55:49] Speaker 10: that qualifies for quasi-judicial immunity. [00:55:55] Speaker 01: So, I mean, it seems to be a pretty broad line there then, right? [00:55:58] Speaker 01: So to take it, if that's what we take the rule to be, then going back to Judge Winn's question about the allegations at issue here, and Judge Bivey's concerns, I think, [00:56:12] Speaker 01: Any alleged waste or mismanagement of the property by the trustee is going to be subject to quasi-judicial immunity. [00:56:22] Speaker 01: There's no attempt to parse between particular actions that were being done that Antoine and Castillo seems to require us to do. [00:56:31] Speaker 01: It's all immune. [00:56:34] Speaker 10: Yeah, I just don't think that additional information or facts is necessary for the court to make the determination understanding that you're operating in the context of a bankruptcy trustee not a private trustee and You're operating under the bankruptcy code which requires trustees to perform certain actions So fair I mean that that's all very but again in Castillo we even distinguish between the scheduling of hearings and the giving of notice of hearings and and so [00:57:01] Speaker 01: We think that difference in functions was important under Antoine, but all alleged mismanagement of assets under a trustee's control, it's all quasi-judicial. [00:57:16] Speaker 01: That doesn't seem necessarily, I guess, it seems like we need to go down the road a little bit more to apply Antoine, to be faithful to Antoine, and that's what we did in Castillo. [00:57:27] Speaker 10: Well, in Castillo, in distinguishing or addressing the fact that there was a scheduling decision made and a notice that wasn't given, the court looked at both of those as one act and found that there was a judicial immunity applied to both of those acts. [00:57:48] Speaker 10: Here, I think you can look at the allegations of the complaint which state that certain conduct was engaged in. [00:57:56] Speaker 10: Go beyond that in in looking at the context of the case as a bankruptcy case and saying That those kinds of decisions are made by bankruptcy trustees as a part of their ultimate [00:58:07] Speaker 04: determination of the party's rights and that those... On this point, I understand you to be treating the category of what's adjudicatory as fairly broad given that it rolls up into an ultimate distribution. [00:58:21] Speaker 04: What authorities, case authorities, would you direct us to as best supporting the breadth of this category of decisions as adjudicatory? [00:58:30] Speaker 10: I think that I would point you to... Sorry, notes here. [00:58:38] Speaker 10: Well, going all the way back to Antoine, I would say that that case talks about authoritatively adjudicating private rights, and that's the touchstone. [00:58:48] Speaker 10: And that was reaffirmed by this circuit, the vitality of that case, in the Gay versus Parsons decision, a 2023 decision, 61, F4, 1088. [00:59:02] Speaker 10: I would also point to the language in the [00:59:09] Speaker 10: report of no distribution that says that the trustee has made a determination that there are no assets to distribute to the creditors therefore the case can be closed absent objection and this is a crucial part of the bankruptcy process that occurs on a regular basis and that language in the report of no distribution itself reflects that there's a determination made by the trustee that [00:59:39] Speaker 10: And that may have been that includes these the decision whether to collect rent or not correct collect rent and this decision whether to Undertake some kind of improvements to the real property that was fully secure Let me ask you a follow-up question to that council just because I just need some clarification in my mind So it's my understanding that the bankruptcy court authorized the abandonments correct in July of 2021. [01:00:02] Speaker ?: I [01:00:03] Speaker 10: That's correct your honor. [01:00:04] Speaker 02: Okay, so how is it that Harris doesn't come into play if the court said yeah? [01:00:07] Speaker 02: It's okay. [01:00:08] Speaker 02: I'm giving you permission. [01:00:09] Speaker 02: I agree with you How does that not give them derivative? [01:00:13] Speaker 10: immunity or die I Think it should I think that the fact that that notice of abandonment was approved by court order after full disclosure does give this case the imprimatur that you need for a Harris type situation and [01:00:30] Speaker 02: And so which case is controlling here? [01:00:33] Speaker 02: What analysis is controlling is it Harris or is it Castillo? [01:00:36] Speaker 10: Well, I think it's it's both. [01:00:38] Speaker 10: I mean, I think that hair under Harris you can look at that second order I know that my my colleague across the aisle here will have some arguments why we shouldn't consider that report of no distribution so [01:00:49] Speaker 10: Alternatively, I think under Castillo we can say that there was sufficient discretion, exercise that would qualify for immunity here. [01:01:02] Speaker 12: Can I ask one last question? [01:01:04] Speaker 12: Yes, I think that you alluded to earlier on your going back to your point about gross negligence And it's gonna have to be something more than negligence I think you acknowledged perhaps earlier that we would have to overrule kachis our decision in that case To adopt that rule do you agree with that I? [01:01:25] Speaker 12: Think that's press was asking about that I think that [01:01:30] Speaker 10: Cochise is distinguishable. [01:01:31] Speaker 10: I'm not sure that it has to be overruled Cochise involved fiduciary duties owed to third-party creditors Do you think that there's any precedent that we currently have that we have to overrule to get to the position that you're advocating today No, your honor. [01:01:50] Speaker 10: I think that there is no existing Ninth Circuit precedent that has to be overruled under my analysis and [01:01:57] Speaker 10: And I think that there's ample authority in the bankruptcy courts that talk about making this distinction between negligence and gross negligence that support what the district court did. [01:02:08] Speaker 10: No, agreed. [01:02:08] Speaker 10: They're not binding, but I think they have very persuasive reasoning and can certainly be considered by this court and should be followed. [01:02:16] Speaker 10: So in conclusion, because I know that I'm over time, I would request that this court affirm the district court's remand [01:02:23] Speaker 10: And allow this case to be processed in accordance with the district court's order. [01:02:29] Speaker 10: Thank you. [01:02:30] Speaker 05: Thank you your honors Mr.. Jacob you have a minute and four seconds I'm your minute man here There there was a question about RND the report of no distribution it was not accepted Excuse me [01:02:52] Speaker 05: There was an objection. [01:02:54] Speaker 05: There's a case from this court called In Ray Lee that says the form of the objection doesn't really matter. [01:02:58] Speaker 07: Where was the objection? [01:02:59] Speaker 07: Where do we find that? [01:03:01] Speaker 05: The attack, the homestead exemption was attacked. [01:03:04] Speaker 05: All the premises of the R&D were attacked. [01:03:08] Speaker 05: In fact, the debtor. [01:03:09] Speaker 05: Can you just show me in the record, where do I look? [01:03:12] Speaker 05: There is a listing of the events in the bankruptcy court. [01:03:15] Speaker 05: There was an attack on the report's assertion of what the exemptions would be. [01:03:20] Speaker 05: The debtor himself amended his schedules to add additional property and there was nothing heard from the debt from the the bankruptcy trustee again It takes the form of a objection the homestead exemption and also the amended schedules by the debtor himself [01:03:46] Speaker 05: The R&D came out four days later. [01:03:58] Speaker 05: We objected because we didn't see the numbers in the form of [01:04:02] Speaker 05: Well in the under the in Rayleigh case the form is not not critical here I appreciate the citation okay, and I am what you're pointing to with regard to form is Homestead or what do you what are you pointing to the the R&D states what the assets are what the exemptions are etc? [01:04:19] Speaker 07: And so I'm just looking for the objection sir. [01:04:21] Speaker 07: Where do I find that in the record? [01:04:24] Speaker 05: The Goldman filed supplemental exit what were titled supplemental exits of record includes the bankruptcy docket [01:04:30] Speaker 05: I think you're talking about June 26th of 2011 or something like that. [01:04:35] Speaker 05: So she files her R&D, and like four days later, we file that objection. [01:04:39] Speaker 05: Okay. [01:04:39] Speaker 05: And then about August, it might be number 35, if I can remember this, it's strange enough, that the debtor finally comes and says, oh, I've got this extra money on the side. [01:04:49] Speaker 07: So he himself says... Okay, but the objection you want me to look at is something filed four days after the R&D. [01:04:54] Speaker 07: Is that it? [01:04:54] Speaker 05: Well, that was one objection. [01:04:56] Speaker 05: And and what what I guess if you want to make one concluding statement right now you should do so okay, this is the Supreme Court has said something about or like or well Ian use of nunk pro-tunk orders and After the harm is done. [01:05:16] Speaker 05: I don't think I don't really know whether you can go back and say that [01:05:26] Speaker 05: Abandonment Well, I addressed that really thoroughly somewhere. [01:05:31] Speaker 05: I would say look at the joint the motion for judicial notice to see all the strange arguments that were made in terms of business decision-makings in particular one for a turnover order the judge the bankruptcy judge Actually did not actually sent the trustee back to the drawing board because she was refusing to collect rent saying oh We've got this business decision. [01:05:54] Speaker 05: It will be too expensive collective [01:05:56] Speaker 05: And the Chapter 7 handbook for trustees says, no, you sent out a turnover order. [01:06:01] Speaker 05: Most people will comply immediately. [01:06:02] Speaker 05: And that's what happened. [01:06:03] Speaker 11: Thank you. [01:06:04] Speaker 05: Thank you. [01:06:04] Speaker 11: Thank you. [01:06:05] Speaker 11: The case of Kevin Harry Gilman, Tammy Phillips versus Amy Goldman is now submitted. [01:06:13] Speaker 11: Mr. Jacob, Ms. [01:06:14] Speaker 11: McIntyre, thank you for your presentations here today. [01:06:17] Speaker 11: Thank you. [01:06:17] Speaker 11: We are adjourned. [01:06:38] Speaker 02: for this session stands adjourned.