Halloum v. Kasolas (In re Halloum)

BAP No. EC-15-1401-JuKuMa (BAP 9th Cir. Oct. 27, 2016) (unpublished)
The BAP for the 9th Circuit affirmed the ruling of the bankruptcy court (E.D. Ca.) denying chapter 7 debtors' motion for leave to sue the chapter 7 trustee. The bankruptcy court correctly applied the "Barton" doctrine requiring debtors to establish a prima facie case against trustee. Bankruptcy court's prior determination under separate motion that debtors failed to establish prima facie case was sufficient to deny motion. Further, Debtors pending appeal of prior ruling rendered second motion duplicative, and balancing interests of all parties, suit would result in tremendous waste of judicial and the parties' resources.
Procedural context:
Following evidentiary hearing on motion for judgment as a matter of law, bankruptcy court dismissed debtors' suit against trustee and other parties. Debtors appealed to BAP for 9th Circuit. While appeal was pending, debtors filed motion for leave to sue trustee. Bankruptcy court denied motion based on prior ruling and pending appeal. Debtors appealed to BAP for 9th Circuit.
Debtors filed state court complaint against various parties, including chapter 7 trustee, for alleged damages related to pending bankruptcy case. Trustee removed case to bankruptcy court. Trustee filed motion for contempt for stay violation, and for other sanctions. Bankruptcy court ruled that sanctions motion would be treated as counterclaim or affirmative defenses to debtors' claims. Trustee and other defendant moved for summary judgment. Court held evidentiary hearing, then dismissed case, finding no basis for liability against any defendant, and finding that debtors had failed to obtain leave to sue trustee as required under Barton Doctrine, i.e., Barton v. Barbour, 104 US 126 (1881). Debtors appealed. Debtors then filed motion for leave to sue trustee. Bankruptcy court denied motion, based on pending appeal, and based on prior finding of lack of merit.
Jury, Kurtz, Martin

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