Braum et al v. Fidelity Land Title Agency of Cincinnati, Inc.

UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
In re: 	W ILLIAM C. HAKE,
Debtor
Case No. 	03-33697
Adv. No. 	06-3470
FIDELITY LAND TITLE A GENCY OF
CINCINNATI , I NC.,
Plaintiff
v.
SCOTT L. BRAUM
ELIZABETH HAKE,
Defendants
Judge Waldron
Chapter 7
DECISION GRANTING
(1) MOTION TO REMAND AND (2)
DETERMINING MOTION TO DISMISS
TO BE MOOT, WITHOUT ANY MERIT
DETERMINATION AND WITHOUT
PREJUDICE TO ANY DECISION OF
THE STATE COURT
DATED AT DAYTON, OHIO this 28th Day of December, 2006:
INTRODUCTION
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: December 28, 2006
____________________________________________________________
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The court initially notes that the legal principles relevant in this proceeding were
previously before this court in Adversary 06-3312, when, after extensive filings and
memoranda, the Plaintiff in that proceeding, Royal Land Title Agency, Ltd., recognizing
the appropriate application of the Barton Doctrine, dismissed its action against the
chapter 7 Trustee and Scott L. Braum (“Braum”), as attorney for the chapter 7 Trustee.1
In this proceeding, Adversary 06-3470, appropriate application of the Barton Doctrine
results in remand to the State Court to resolve the Plaintiff, Fidelity Land Title Agency of
Cincinnati, Inc.’s (“Fidelity”) claims against Braum, not as attorney for the Trustee, but
as attorney for the non-debtor party, Elizabeth Hake (“E. Hake”) and the Fidelity’s
claims against E. Hake. 	In order to clarify these appropriate, but different, results,
including why a state court motion concerning attorney fees and sanctions was removed
to this bankruptcy court from the Montgomery County Court of Common Pleas and why
this 	court 	is 	remanding 	this 	case 	back 	to 	the 	state 	court, 	without 	any 	merit
determinations of the underlying issues and without any prejudice to any subsequent
state court decisions, some background information will be helpful.
BACKGROUND OF THE STATE COURT LITIGATION
Braum was involved in prepetition litigation in a state court action concerning
causes of action that generally fall under the heading of real estate fraud. 	The specific
details of the state court proceedings are not necessary for this decision, except to note
that when the bankruptcy case of William C. Hake was filed and the chapter 7 trustee
succeeded to the debtor William C. Hake’s causes of action, the chapter 7 Trustee
determined to pursue these claims and moved to employ Braum as Special Counsel to
1 See Order Determining No Issues Remain and Directing Clerk to Close Adversary (Doc. 46, October 26,
2006, Adv. 06-3312).
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the Trustee. 	As an asset of the chapter 7 bankruptcy estate, the Trustee can pursue
any pre-petition cause of action of the Debtor. See generally 11 U.S.C. §§ 541 and 704.
Accordingly, Braum was appointed Special Counsel by this bankruptcy court to pursue
actions on behalf of the Trustee.
PROCEDURAL HISTORY OF PENDING PROCEEDING
On November 7, 	2006, Braum and E. Hake filed a Notice of Removal of Fidelity
Land Title Agency of Cincinnati, Inc.’s Motion for Sanctions and Attorney Fees Relating
to Special Counsel Scott L. Braum and Elizabeth Hake in Spaeth, et al. v. Charske, et
al., Case No. 2005-CV-1069 in the Common Pleas Court of Montgomery County, Ohio.
(Doc. 1) 	The Notice of Removal was filed pursuant to 28 U.S.C. § 1452(a) and
Bankruptcy Rule 9027. 	On November 15, 2006, Fidelity filed its Objection to Removal
of Fidelity Land Title of Cincinnati, Inc.’s Motion for Sanctions and Attorneys Fees
Relating to Attorney Scott L. Braum and Elizabeth Hake in Spaeth, et al. v. Charske, et
al., Case No. 2005-CV-1069 in the Court of Common Pleas, Montgomery County, Ohio
and Motion to Remand. (Doc. 7) 	On November 25, 2006, Braum and E. Hake filed a
Motion of Respondents, Special Counsel, Scott L. Braum and Elizabeth Hake, to
Dismiss Fidelity Land Title Agency of Cincinnati, Inc.’s Claims for Sanctions and
Attorney Fees, Combined with Notice and Opportunity to Object. (Doc. 17) 	On
December 4, 2006, Braum and E. Hake filed their Response (Doc. 20) to Fidelity’s
Objection to Removal and also the Motion to Remand. 	On December 6, 2006, Fidelity
filed its Reply (Doc. 21) in support of their Objections to Removal and Motion to
Remand. 	On December 7, 2006, Fidelity filed a Memorandum in Opposition (Doc. 22)
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to Braum and E. Hake’s Motion to Dismiss. 	On December 14, 2006, Braum and E.
Hake filed a Reply (Doc. 23) in support of their Motion to Dismiss.
It is worthy of note that only William C. Hake filed bankruptcy. 	Braum added the
Debtor’s 	wife, 	E. 	Hake, 	as an additional Plaintiff in the amended 	complaint and
separately represented her in the state court litigation. Since she was never a debtor in
the bankruptcy court, her representation by Braum was never a matter for involvement
by this bankruptcy court.
One of the Defendants in the state court lawsuit was Fidelity. 	On 	October 	23,
2006, Fidelity filed a motion in the state court for attorney fees and sanctions against
Braum and E. Hake. (See Exhibit A to Doc. 1) 	Although the particulars of the
allegations and the procedural details of the state court litigation prior to the Motion (See
Exhibit A to Doc. 1) are not significant for this decision, the state court motion alleged, in
essence, that Braum, importantly for this decision, as attorney for E. Hake, not as
attorney for the chapter 7 Trustee, engaged in frivolous proceedings in the state court
proceeding against Fidelity for which Fidelity seeks to a money judgment against Braum
and E. Hake.
ANALYSIS
It is settled bankruptcy law that a trustee acting in an official capacity and parties
employed by the trustee have certain protections under what is known as the Barton
Doctrine. 	The origin of the Barton Doctrine is an 1881 United States Supreme Court
decision, Barton v. Barbour, 104 U.S. 126 (1881). 	The decision holds that an action
cannot be brought against a receiver without obtaining leave of court from the tribunal
that appointed the receiver. 	The Barton Doctrine has been extended to apply to
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trustees in bankruptcy for acts in their official capacity. Allard v. Weitzman (In re
DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir. 1993); In re Linton, 136 F.3d 544,
545 (7th Cir. 1998). See also In re Triple S Restaurants, 342 B.R. 508 (Bankr. W.D. Ky.
2006). 	In addition, these principles apply to counsel for a trustee. See Lowenbraun v.
Canary (In re Lowenbraun), 453 F.3d 314, 321 (6th Cir. 2006); Greenblatt v. Richard
Potasky Jeweler, Inc. (In re Richard Potasky Jeweler, Inc.), 222 B.R. 816, 822 (S.D.
Ohio 1998), citing Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236, 1241
(6th Cir. 1993).
It is readily apparent that the Barton Doctrine does not protect either Braum in his
role as the attorney for E. Hake, or E. Hake from Fidelity’s sanctions motion. 	These
parties in their lawyer/client relationship fail to come within the ambit of protection
afforded by the Barton Doctrine.
Fidelity has specifically noted in its Motion to Remand – “Fidelity’s motion is
against non-debtor Elizabeth Hake and her attorney, Braum, who cannot be ‘special
counsel’ as to his representation of her as a non-debtor.” (Doc. 7 – page 6). 	While
Braum and E. Hake appear to argue that the actions on behalf of the Trustee and E.
Hake are “inextricably linked” [See Page 7, Footnote 6 of Doc. 20], none of the cases
cited in the voluminous filings of either party support the Barton Doctrine protecting a
stranger to the bankruptcy court or her counsel.
The fact that Braum also represented the Trustee does not extend the Barton
Doctrine to his representation of other parties not in a direct relationship to the Trustee,
who happen to be part of the same litigation. 	Braum does not cite to any reported
decision for this principle, and the court upon its own independent research is not aware
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of any such extension of the Barton Doctrine, nor would this court find any such
extension appropriate in the circumstances of this adversary.
Additionally, of importance to a full analysis of the issues presented in this
proceeding is a recognition that the merits of Fidelity’s Motion (See Exhibit A to Doc. 1),
and this court specifically expresses no opinion on the merits, would be best determined
by the state court. 	The state court that presided over the litigation would obviously be
the most appropriate forum to determine whether fees and sanctions, if any, can be
fairly attributed to Braum’s separate representation of E. Hake. 	To the extent such
findings by the state court may require a careful parsing of Braum’s role as counsel for
E. Hake as opposed to his role as Special Counsel for the Trustee, the state court,
intimately familiar with the details of the state court proceedings and its own decisions,
is in a much better position than this court to make those determinations.
This court does not presume to propose any particular method for the state court
to analyze the relief sought in Fidelity’s Motion. Instead, this court simply holds that the
Barton Doctrine protects Braum from being sanctioned in the state court for his actions
as the Trustee’s Special Counsel; however, no such Barton Doctrine protection extends
to Braum as the attorney for E. Hake or to E. Hake in the state court litigation. 	The
court finds it appropriate to remand this proceeding pursuant to 28 U.S.C. § 1452(b). 2
The parties devote much discussion to whether the state court sanctions motion
(See Exhibit A to Doc. 1) is properly under this court’s jurisdiction. 	The court finds it
unnecessary to address this question. 	This court assumes it has jurisdiction based, at
least, on the broad concept of “related to” bankruptcy jurisdiction in 28 U.S.C. § 1334;
2 28 U.S.C. § 1452(b) states, in relevant part, “[t]he court to which such claim or cause of action is
removed may remand such claim or cause of action on any equitable ground.”
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however, remand is necessary in this instance for the reasons stated. 	In addition, this
court’s remand moots any concern of Fidelity that the initial removal was untimely under
Bankruptcy Rule 9027.
CONCLUSION
Fidelity’s Motion to Remand (Doc. 7) is GRANTED. The Motion to Dismiss (Doc.
17), filed by Braum and E. Hake is DETERMINED TO BE MOOT, WITHOUT ANY
MERIT DETERMINATION AND WITHOUT PREJUDICE TO ANY DECISION OF THE
STATE COURT.
c:
Elizabeth Hake, 5380 Flora Drive, Lewisberg, Ohio 45338 (Plaintiff)
Scott L. Braum, Esq., 3131 South Dixie Drive, Suite 400, Dayton, Ohio 45439 (Atty. for
the Plaintiff/Special Counsel for Trustee)
James A. Matre, Esq., 225 Pictoria Drive, Suite 200, Cincinnati, Ohio 45246 (Atty. for
the Defendant Fidelity Land Title Agency of Cincinnati, Inc.)
William C. Hake, 5380 Flora Drive, Lewisburg, Ohio 45338 (Debtor)
Donald F. Harker, III, Esq., One First National Plaza, Suite 2103, 130 West Second
Street, Dayton, Ohio 45402-1503 (Atty. for the Debtor)
Paul H. Spaeth, Esq., 130 West Second Street, Suite 450, Dayton, Ohio 45402
(Chapter 7 Trustee)
Office of the United States Trustee, 170 North High Street, Suite 200, Columbus, Ohio
43215
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