Foster v. Aurzada

Case Type:
Case Status:
22-10310, 22-10318 (5th Circuit, Jan 03,2023) Published
Affirming the U.S. District Court for the Northern District of Texas (DC), the U.S. Court of Appeals for the Fifth Circuit (Circuit) agreed that the U.S. Bankruptcy Court for the Northern District of Texas (BC) had possessed subject-matter jurisdiction to rule over a timely removed case, commenced by Regina N.H. Foster (DR or Foster), as to the defendants relevant to this appeal and had properly dismissed the removed dispute on the basis of the Barton doctrine, as the latter does not apply to ultra vires acts.
Procedural context:
The DR appealed the BC's judgment as to the timeliness motion, the jurisdictional motion, and the motion to dismiss to the DC, which affirmed the BC's judgments. The DR timely appealed the DC's decision to the Circuit.
As part of a chapter 7 case filed by the DR in 2012, Areya Holder Aurzada (Trustee) initiated a case against the DR's husband, against whom the DR filed for divorce four days after her petition's docketing, and his company to determine whether three properties (the Properties) listed as assets by the DR in her petition were part of the bankruptcy estate, in addition to intervening in the divorce proceeding to protect the bankruptcy estate’s interest in the Properties. Singer & Levick PC (SLPC) served as counsel for the Trustee, assisting the latter with analyzing the competing claims of ownership over the Properties with the BC's approval. In 2018, although the DR objected, the BC approved SLPC's application; later that same year, without opposition from the DR, the Trustee filed, and the BC granted, SLPC's application for compensation. After the Trustee filed her final report and final account and distribution report certification, the BC approved the report and discharged the Trustee and closed the DR's case. Thereafter, the seeds of this appeal were planted. Almost ten months after her case's closing, the DR filed a motion to reopen the bankruptcy case so as to sue the Trustee and to vacate the judgment for lack of subject matter jurisdiction. The Trustee objected. After a hearing, the BC denied the motion. Without obtaining permission of the BC to sue the Trustee or SPLC in another forum, on November 7, 2019, the DR sued the Trustee, SLPC, her husband, two lawyers at SLPC, and SAI Reed Properties Inc. (SAI) in Texas state court. The Trustee filed a motion to reopen the bankruptcy case for the limited purpose of removing the action, considering dismissal, and imposing sanctions; the BC granted this motion after a hearing. On December 17, 2019, the Removing Defendants then filed a notice of removal to the BC. The DR filed two motions to remand; the removing defendants objected to both motions and filed a motion to dismiss.
Priscilla Richman; James C. Ho; and James L. Dennis

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