Quasi-Judicial Immunity Shields Trustee from Personal Liability Qua...

 By: Barry Z. Bazian

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Smith v. Silverman (In re Smith),[1] the Second Circuit held that a bankruptcy trustee could not be held personally liable for deciding not to pursue the estate’s only potential sources of recovery. In Smith, the debtor, a former president of Meadow Mechanical Corp., filed two suits in 1990: a dissolution action against the corporation’s shareholders and an action to recover on a promissory note the actions.[2] The debtor moved to have the Bankruptcy Court compel the trustee to pursue against the corporation.[3] These actions were unresolved and had been left dormant for several years when Smith filed for bankruptcy in 1997.[4] A trustee was appointed in the case, but he decided not to prosecute the claims, but the court denied the motion based on the trustee’s assertion that litigating the claims would not be worth the expense.[5] Subsequently, the bankruptcy case was closed and the trustee was discharged.[6] Over a year later, the debtor brought a motion to re-open the bankruptcy case to pursue a cause of action against the trustee, alleging that the trustee breached his fiduciary duties by negligently failing to pursue the actions.[7] The Bankruptcy Court denied the motion, and the District Court affirmed.[8]

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