Schultze, et al. v. Chandler, Sr., et al., No. 12-15186 (9th Cir. 2014)
Annotate this CasePlaintiffs commenced this action against their attorney and his law firm in state court for legal malpractice, alleging that the attorney was negligent in the performance of his duties as counsel to the unsecured creditors' committee. At issue was whether the bankruptcy court properly exercised jurisdiction over the malpractice action for the committee and correctly dismissed the claim. The court concluded that the district court properly concluded that the bankruptcy court had jurisdiction over the removed legal malpractice action because it was a core proceeding. In this case, the employment of the attorney was approved by the bankruptcy court and was governed by 11 U.S.C. 1103; the attorney's duties pertained solely to the administration of the bankruptcy estate; and the claim asserted by plaintiffs was based solely on acts that occurred in the administration of the estate. The court also concluded that the district court correctly concluded that the bankruptcy court did not err in dismissing the complaint because the attorney did not owe an individual duty of care. Therefore, the court affirmed the district court's dismissal of the case on the merits.
Court Description: Bankruptcy. The panel affirmed the district court’s affirmance of the bankruptcy court’s dismissal of a malpractice action against an attorney for an unsecured creditors’ committee. The panel held that the bankruptcy court properly exercised jurisdiction over the legal malpractice action after its removal from state court because the action was a core proceeding. Agreeing with other circuits, the panel held that a post-petition claim brought against a court-appointed professional is a core proceeding. The panel held that this lawsuit fell easily within the definition of a core proceeding because the attorney’s employment by the committee and compensation were approved by the bankruptcy court, his duties pertained solely to the administration of the bankruptcy estate, and the claim asserted by committee members was based solely on acts that occurred in the administration of the estate. The panel held that the bankruptcy court correctly dismissed the action on the basis that the attorney represented only the committee and did not owe an individual duty of care to the committee members.
The court issued a subsequent related opinion or order on August 1, 2014.
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