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Summarizing by Lars Fuller

Thomas Scott Tufts v. Edward C. Hay

Case Type:
Case Status:
Affirmed in part and Reversed in part
United States Court of Appeals for the Eleventh Circuit Nos. 19-11496 & 19-11603 (11th Circuit, Oct 20,2020) Published
The Court of Appeals for the Eleventh Circuit (COA) affirmed the U.S. District Court’s decision to deny the motion to dismiss for lack of personal jurisdiction. However, the COA reversed the District Court’s decision to grant the motion to dismiss for lack of subject matter jurisdiction due to the Barton Doctrine. The COA held that Barton Doctrine did not apply to the specific underlying action, in part, because the associated bankruptcy was dismissed. The District Court had subject matter jurisdiction over the underlying action. The COA remanded the matter to the District Court.
Procedural context:
Hays, a North Carolina lawyer, represented Biltmore in a Chapter 11 proceeding. Tufts, a Florida lawyer, represented Biltmore in various matters in Florida involving a merger. Tufts was not properly employed due to reliance on Hays’ representations. The bankruptcy court ordered Tufts to disgorge fees received, and Tufts incurred fees and expenses as a result. The Biltmore bankruptcy dismissed in late 2017. In April 2018, Tufts sued Hays in the District Court under numerous theories, including negligent representation, intentional representation, and indemnification. Hays moved to dismiss the action due to a lack of personal jurisdiction. The District Court denied that motion. Hays filed a second motion to dismiss arguing the District Court lacked subject matter jurisdiction, because Tufts did not seek leave of the bankruptcy court as required under the Barton doctrine. The District Court granted this motion. Tufts appealed. Hays cross-appealed the order denying the motion to dismiss for lack of personal jurisdiction.
During the bankruptcy, Hays repeatedly told Tufts that Tufts was employed under a “bench order,” and Tufts was authorized special counsel. No such order existed. Hays admitted to the bankruptcy court that Hays told Tufts how to get paid under the bankruptcy court’s procedures. Hays failed to provide adequate information, including that all fees must be approved in advance by the bankruptcy court. Because Tufts was not properly employed by the bankruptcy estate, and the bankruptcy court ordered Tufts to disgorge all fees and expenses paid by the debtor. Tufts failed to return the fees. Tufts incurred numerous fees to defend and settle the fee dispute. The Biltmore bankruptcy was dismissed via consent order in late 2017.
The Hons. Martin, Rosenbaum, and Tallman

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