In Re: United Tax Group LLC

Filing 12

MEMORANDUM AND ORDER Affirming the Bankruptcy Court's Order (B.D.I. 162, 172). The hearing scheduled for March 8, 2018 is CANCELLED. Signed by Judge Leonard P. Stark on 3/7/18. (ntl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
IN RE: UNITED TAX GROUP, LLC,

: Chapter 7
:
Debtors.
: Bankr. Case No. 14-10486-LSS
_______________________________________________ :
SWZ FINANCIAL II, LLC, and TAX HELP MD, INC., :
:
Appellants,
: Civ. No. 18-93-LPS
v.
:
:
GEORGE L. MILLER, Chapter 7 Trustee,
:
:
Appellee.
:
______________________________________________________________________________
MEMORANDUM
Pending before the Court is an appeal (D.I. 1) by appellants SWZ Financial II, LLC
(“SWZ”) and Tax Help MD, Inc. (“Tax Help”) (“Appellants”) from the Bankruptcy Court’s
December 28, 2017 bench ruling and subsequent order (B.D.I. 162, 172)1 (“Order”) denying
Appellants’ motion for leave to commence state court proceedings (B.D.I. 118, 119) (“Barton
Motion”) against George L. Miller, as Chapter 7 Trustee (“Trustee”) for the estate of United Tax
Group, LLC (“Debtor”), and his counsel. On January 16, 2018, Appellants filed an emergency
motion seeking expedited consideration of the appeal (D.I. 4) (“Emergency Motion”) on the basis
that the statute of limitations to bring the action under Florida law will expire on March 13, 2018.
On January 25, 2018, the Court granted the Emergency Motion and set an expedited briefing
schedule. (D.I. 8) The merits of the appeal are fully briefed. (D.I. 9, 10, 11) The Court did not
hear oral argument because the facts and legal arguments are adequately presented in the briefs and
record, and the decisional process would not be significantly aided by oral argument. For the
reasons that follow, the Court will affirm the Order.

1

The docket of the Chapter 7 case, captioned In re United Tax Group, LLC, Case No. 14-10486
(LSS) (Bankr. D. Del.), is cited herein at “B.D.I. __.”

I.

BACKGROUND
The following facts appear to be undisputed. Prior to the bankruptcy, United Tax Group,

LLC (“United Tax”) was a tax resolution company, and SWZ was its secured creditor. (D.I. 9 at 3)
When United Tax defaulted on its loan, SWZ initiated an action in Florida state court, and the
parties reached a settlement in lieu of foreclosure, pursuant to which Debtor transferred open
taxpayer accounts to SWZ as well as the mail necessary to service such taxpayer accounts. (Id. at
4) SWZ contracted with Tax Help to service the open taxpayer accounts transferred from United
Tax. (Id.) SWZ could have, at any time thereafter, redirected United Tax’s mail to a new address,
but it did not. On March 5, 2014, United Tax filed its chapter 7 petition, and the Trustee was
appointed. On March 14, 2014, the Trustee entered the Debtor’s former offices in Florida and
ordered SWZ to turn over mail addressed to the Debtor, which included mail that SWZ and Tax
Help needed to service the open accounts. (Id.) The Trustee also caused mail in the Debtor’s name
to be forwarded to the Trustee’s office. (Id.) The Trustee filed an adversary proceeding against
Appellants, asserting voidable preference, fraudulent transfers, and fiduciary duty claims. (Id. at 6)
Appellants seek to file claims of conversion and tortious interference with business
relationships based on the Trustee’s taking of the taxpayer mail. Appellants assert that the mail was
not an asset of the estate and was of no value to the estate. (Id. at 5) The mail was instead property
of SWZ. (Id. at 3-4) Appellants allege that the Trustee made misrepresentations of his legal
authority to take the mail, as well as veiled financial threats against SWZ. (Id.) According to
Appellants, the Trustee took the mail with the specific intent of harming SWZ and not for the
benefit of the estate. (Id. at 5) Appellants claim the Trustee had no intent of acting on the taxpayer
accounts, did not open most of the mail, and did not return the mail after being contacted and
informed of SWZ’s ownership and need. (Id.) Appellants allege that the Trustee’s actions
interfered with Appellants’ ability to service the transferred taxpayer accounts, resulting in injury to
SWZ and to the taxpayer customers. (Id.)
2

On May 26, 2017, Appellants filed the Barton Motion, seeking permission to sue the Trustee
and his bankruptcy counsel, Ciardi Ciardi & Astin (“Ciardi”), including for claims of conversion
and tortious interference with business relationships against the Trustee. (D.I. 10 at 3) The Barton
doctrine is traced to the Supreme Court’s decision Barton v. Barbour, 104 U.S. 126, 128-29 (1881),
and it “requires a party-in-interest to seek stay relief from the bankruptcy court in order to sue a
bankruptcy trustee in another forum.” In re Day, 2014 WL 636797, *22 (Bankr. D.N.J. Feb. 7,
2014). “It is for the appointing court, in its discretion, to decide whether it will determine for itself
all claims of or against the receiver, or will allow them to be litigated elsewhere.” In re VistaCare
Group, LLC, 678 F.3d 218, 225 (3d Cir. 2012) (internal quotations and citation omitted). “Because
a judgment against the trustee, whether ultimately satisfied out of the assets of the estate or out of
the trustee’s pockets, may affect the administration of the estate, the requirement of uniform
application of bankruptcy law dictates that all legal proceedings that affect the administration of the
bankruptcy estate be either brought in the bankruptcy court or with the permission of the bankruptcy
court.” Id. at 228 (internal quotations and citation omitted).
Certain courts have recognized two exceptions to the Barton doctrine – that is, situations in
which leave of the appointing court is not necessary – the “business exception” and the “ultra vires
exception.” The “business exception” is codified in 28 U.S.C. § 959(a) and provides, in relevant
part, that “Trustees, receivers or managers of any property, including debtors in possession, may be
sued, without leave of the court appointing them, with respect to any of their acts or transactions in
carrying on business connected with such property.” As the Trustee has never operated the
Debtor’s business, the parties agree that the business exception is not at issue. (See D.I. 9 at 2; D.I.
10 at 7) At issue in this case is the ultra vires exception. A classic example of the ultra vires
exception is an action against a receiver who seizes or otherwise attempts to administer property
that is not receivership property, but that actually belongs to a third party. See In re DMW Marine,
LLC, 509 B.R. 497, 506 (Bankr. E.D. Pa. 2014) (citations omitted).
3

Appellants’ Barton Motion sought leave under Barton to file a state court action and did not
address the ultra vires exception. (See B.D.I. 118 & 119) In their reply, Appellants argued that the
exception should apply because “at least one circuit has applied the ultra vires exception to a
receiver taking mail that did not belong to the estate.” (B.D.I. 125 at 2 (citing Teton Millwork Sales
v. Schlossberg, 311 Fed. App’x 145, 148 (10th Cir. 2009)) The receiver in Teton Millwork Sales
was charged with collecting the husband’s assets incident to a divorce proceeding. See 311 Fed.
App’x at 147. The husband had a 25% interest in a corporation. Id. The receiver redirected the
corporation’s mail and seized other assets without vetting the issue of veil-piercing with a court of
competent jurisdiction. Id. The Tenth Circuit found that the receiver’s actions fell squarely within
the ultra vires exception to the Barton doctrine. Id. at 148. Appellants argued that the facts alleged
here were like Teton Mill, “where similarly a receiver took possession of property that did not
belong to the estate.” (B.D.I. 125 at 3) “Therefore, the Trustee’s actions were ultra vires, and
Movants should be granted leave to pursue their claims in Florida.” (Id.)
The Trustee and Ciardi objected to the Barton Motion. (B.D.I. 124) The Bankruptcy Court
held an evidentiary hearing on December 20, 2018, at which two witnesses testified: Richard
Sabella, a principal of SWZ, and the Trustee. The Trustee testified that, in accordance with his
standard practice in corporate chapter 7 cases, he sent a change-of-address form to the United States
Postal Service requesting that mail addressed to the Debtor at the Debtor’s address be redirected to
him. (12/28/17 Hr’g Tr. at 16:4-9) Mr. Sabella testified that while at the Debtor’s offices, the
Trustee stated that the mail was his, and that SWZ would regret that it had foreclosed prebankruptcy rather than under the auspices of the bankruptcy court. (Id. at 17:20-25) Mr. Sabella
testified that he believed this and other antagonistic statements were intended to intimidate him into
complying with the Trustee’s demands. (Id. at 17:22-18:8)
The Bankruptcy Court issued a bench ruling on December 28, 2017. (See B.D.I. 162) At
the outset of the ruling, the Bankruptcy Court reviewed a recent Third Circuit case, VistaCare,
4

which applied the Barton doctrine to trustees in bankruptcy (id. at 3:25-5:18); the Barton decision
itself (id. at 5:19-8:11); and leading cases construing the ultra vires exception (id. at 8:12-14:10).
The Bankruptcy Court then carefully reviewed its findings of fact, based on witness testimony,
regarding the events that led to the Trustee’s possession of the Debtor’s mail. (See id. at 15:1420:25) The Bankruptcy Court held that: (i) the Third Circuit has not expressly recognized the ultra
vires exception to the Barton doctrine (id. at 5:8-18); (ii) to the extent the Third Circuit would
recognize such an exception, it would be limited to “seizures of property from a third party, and by
that I mean taking by force” (id. at 14:12-15); and (iii) none of the three ways in which the Trustee
came into possession of the Debtor’s mail (by redirection via the post office, by picking up same at
SWZ’s invitation, or by SWZ voluntarily sending the Trustee the mail) constituted a seizure of the
mail by force that would fall within the ultra vires exception to the Barton doctrine (id. at 19:920:25).
II.

PARTIES’ CONTENTIONS
Appellants appeal only that “portion of the Bankruptcy Court’s Order that the Trustee’s

action with respect to the taking, forwarding, and retaining of the mail, rightful property of SWZ[,]
does not fall within the ultra vires exception to the Barton doctrine.” (D.I. 9 at 9)2 Appellants
2

Having determined that the ultra vires exception to the Barton doctrine did not apply, and that
Appellants were required to seek leave from the Bankruptcy Court to file a state court action, the
Bankruptcy Court denied leave based on its determination that:
The factual bases of the claims for conversion, interference with business
relationships, malicious prosecution, and civil conspiracy have all been raised in
multiple filings and context[s] in these bankruptcy cases. They include the motion
for summary judgment in the SWZ adversary, the motion to dismiss in the Welke
adversary, the motion to dismiss the entire bankruptcy case, the motion to remove
the trustee, and in discovery. The movants have chosen to raise these facts in this
Court and seek relief based on these facts. It makes no sense and would be
inefficient to put these matters before two courts, and there would also be a risk of
inconsistent decisions, and so I will deny the motion.
(12/28/17 Hr’g. Tr. at 24:1-13) Appellants do not appeal this ruling or argue it was an abuse of
5

argue the ultra vires exception is not limited to cases of seizure or forcible taking, but rather
encompasses cases where a receiver mistakenly or wrongfully takes or maintains possession of nonestate property. (Id.) According to Appellants, “[n]o other court has gone as far as to expressly
require forcible taking in order to apply the ultra vires exception to the Barton doctrine.” (Id. at 17)
Appellants further argue that even if seizure were required, the Trustee’s threats and
misrepresentation of his legal authority to take possession of the taxpayer mail constituted a seizure
for purposes of the ultra vires exception to the Barton doctrine. (Id. at 14-16)
III.

JURISDICTION AND STANDARD OF REVIEW
This Court has jurisdiction to hear appeals “with leave of the court, from interlocutory

orders and decrees, of bankruptcy judges entered in cases and proceedings referred to the
bankruptcy judges under section 157 of this title.” 28 U.S.C. § 158(a)(3). Appellants contend that
the Order is a final order because denial of the Barton motion conclusively and finally resolved the
dispute before the Bankruptcy Court with respect to such motion and no complaint or further
actions raised in the Barton motion are currently before the Bankruptcy Court. The Court agrees
the Order is final. The Court reviews the Bankruptcy Court’s findings of fact for clear error and
exercises plenary review over questions of law. See Am. Flint Glass Workers Union v. Anchor
Resolution Corp., 197 F.3d 76, 80 (3d Cir. 1999). The Court must “break down mixed questions of
law and fact, applying the appropriate standard to each component.” Meridian Bank v. Alten, 958
F.2d 1226, 1229 (3d Cir. 1992). “A finding is ‘clearly erroneous’ when although there is evidence
to support it, the reviewing court on the entire evidence is left with the definite and firm conviction
that a mistake has been committed.” United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948).

discretion. (See D.I. 9 at 3)
6

IV.

DISCUSSION
A.

The Third Circuit Has Not Recognized the Ultra Vires Exception

In VistaCare, a chapter 7 trustee was appointed to oversee the liquidation of an estate which
consisted of a 12.2-acre parcel of land consisting of 45 lots, 44 of which were subdivided and zoned
for mobile homes. VistaCare, 678 F.3d at 222. Lot 45 contained a retirement and assisted living
facility. See id. The lots were subject to several restrictions, including restriction on the sale of the
44 lots to the residents of the mobile homes. See id. The trustee sold lot 45. See id. Thereafter,
and notwithstanding the restrictions, the trustee sold some of the 44 lots to residents of the mobile
homes. See id. Although the trustee obtained relief from the township to do so, the trustee did not
notice the purchaser of lot 45. See id. at 222-23. The purchaser of lot 45 asserted that the sale of
the 44 lots in derogation of the restriction was unlawful and damaged the value of his property, and
therefore sought leave to sue the trustee in Pennsylvania state court. Id. at 223. The bankruptcy
court expressed doubt as to whether leave was needed, opining that Barton was “antiquated and
probably not controlling in the Third Circuit.” Id. Nonetheless, the bankruptcy court performed a
Barton analysis and granted the purchaser’s motion to sue in state court. Id.
On appeal, the Third Circuit stated: “In sum, we hold that the Barton doctrine remains valid,
and therefore, subject to the exception in § 959(a), a party must first obtain leave of the bankruptcy
court before it brings an action in another forum against a bankruptcy trustee for acts done in the
trustee’s official capacity.” Id. at 232.
In its ruling here, the Bankruptcy Court highlighted the significance of this recent guidance
from the Third Circuit in addressing Appellants’ request for relief:
Important to me in addressing the United Tax matter is that the Third Circuit
expressly and explicitly recognizes only one exception to the Barton Doctrine;
namely, the [§] 959 [business] exception . . . In Vista Care, the Third Circuit does not
specifically discuss an ultra vires exception, and it certainly does not in any way
define the contours of such an exception.
(12/28/17 Hr’g Tr. at 5:8-14) The Court agrees with the Bankruptcy Court’s reading of VistaCare.
7

As Appellants cite no Third Circuit authority addressing the ultra vires exception, and the Third
Circuit has not recognized it, the Bankruptcy Court was not required to undertake the ultra vires
analysis at all.
B.

Even if the Third Circuit Recognized the Ultra Vires Exception, the
Bankruptcy Court’s Interpretation Is Well Supported by Case Law

“In an attempt to understand [the ultra vires exception]” asserted by Appellants, “which to
me is not plain on its face,” the Bankruptcy Court reviewed Barton (see id. at 5:19-8:11), the two
circuit cases cited by most courts in discussing the exception (id. at 8:12-12:21), and other cases
cited by Appellants (id. at 11:8-14:10). On appeal, Appellants argue that “wrongful possession” of
the mail, standing alone, falls within the scope of the ultra vires exception. In discussing cases
applying the exception, the Bankruptcy Court observed that they all involved seizure, i.e., the taking
of possession by force.3 Based on its review of the cited cases, and in absence of clear authority on
the issues, the Bankruptcy Court concluded that, to the extent there is an ultra vires exception to the
Barton doctrine, it has over time, been limited to instances in which the trustee wrongfully seizes

3

The Bankruptcy Court considered Leonard v. Vrooman, 383 F.2d 556 (9th Cir. 1967), a case in
which the appointed receiver persuaded a local constable to unlock a building that the debtor did not
own but used to store goods and equipment, then took possession of the property, posted notices,
and placed his own locks on the doors. In determining that the Trustee may be sued for damages
arising out of his illegal occupation of non-estate property, the circuit court stated: “It is true that the
receiver trustee is charged by the bankruptcy act with gathering assets of the bankruptcy, and that
his failure to act diligently in this respect could result in a claim against him. Yet this diligence in
this case was misdirected and should have been exercised in ways other than forcible entry and
retention of possession.” Id. Discussing Teton Millwork, the receiver appointed to recover and
collect assets in a divorce proceeding discovered that the husband owned a 25% interest in a
corporation and proceeded to seize the corporation’s assets, including proprietary information and
mail. There, the receiver falsely represented that he had legal authority to seize the corporation’s
assets and provided incomplete and misleading documents relating to his authority. The
Bankruptcy Court noted that while it is unclear from the opinion exactly how the receiver seized the
corporation’s property, it was still clear that the ultra vires act in that case was a seizure of property.
(Id. at 11:4-7) Finally, the Bankruptcy Court reviewed In re Happy Hocker Pawn Shop, Inc., 212
Fed. App’x 811 (11th Cir. 2006), a case in which “the action that was allowed to proceed in state
court was one in which the trustee took possession of a nondebtor’s business by changing the locks”
. . . “[o]nce again, this is forcible trespass.” (Id. at 12:18-21)
8

non-estate property. (Id. at 14:12-17)
The Bankruptcy Court noted it was not alone in reaching this conclusion and quoted, at
length, the analysis set forth in the DMW Marine case. (See 12/28/17 Hr’g Tr. at 13:4-14:10
(quoting DMW Marine, 509 B.R at 507-08). The bankruptcy court in DMW Marine stated:
Over the years, courts have curtailed the scope of the “ultra vires” exception to the
Barton Doctrine. While no court has said as much definitively, it may be no
exaggeration to state that the exception applies only in cases in which a receiver
wrongfully seizes or controls non-receivership property.
...
The apparent disfavor with which courts have viewed the “ultra vires” exception
seems to be based on a second rationale for the Barton doctrine that has developed: a
common law interest in protecting trustees and receivers from claims that they are
personally liable for their official actions.
...
Courts also have reasoned that permitting damages actions against receivers, whether
ultimately satisfied out of the assets of the estate or out of the trustee’s pockets, may
affect the administration of the estate . . .
...
The Third Circuit in VistaCare Group endorsed much of this reasoning. As a trial
court, it is appropriate for the bankruptcy court to follow Vista Care Group on the
issue.
Id. at 507 (citations and quotations omitted). The bankruptcy court further stated:
After taking into account the reasoning in VistaCare Group, as well as what I
perceive as the trend in the case law, I consider it more likely than not that, when
faced squarely with the issue, the Court of Appeals will hold that damage actions
against a receiver are subject to the Barton doctrine, even if the damage action is
based on the theory that the receiver exceeded his or her authority, unless the
conduct at issue involved the seizure of non-receivership property.
Id. at 508 n.17. The Bankruptcy Court concluded that “to the extent that the Third Circuit would
recognize the ultra vires exception, [it] would limit the exception to the seizure of property in the
possession of a third party. And by seizure, I mean the taking of possession by force.” (12/28/17
Hr’g Tr. at 12:22-13)
Appellants argue that the Bankruptcy Court erred in determining that, under Barton and
subsequent case law, a forcible taking or seizure is required for the ultra vires exception to apply.
(See D.I. 9 at 10-14) Appellants contend that the cases cited by the Bankruptcy Court impose no
9

requirement of seizure; that the proper analysis focuses only on whether a receiver exceeded his or
her authority; and that the ultra vires exception may apply when a receiver mistakenly takes or
retains the property of another. (See id. at 10-14) However, Appellants’ arguments rest on factually
distinguishable cases from outside of this circuit and unreported cases.
The Court agrees with DMW Marine that, as a trial court, it was appropriate for the
Bankruptcy Court to follow the reasoning set forth in VistaCare, even though that case did not
address the ultra vires exception.4 While the Third Circuit’s commentary, recognizing only the §
959(a) business exception to the Barton doctrine, was dictum, dictum in a decision of the Court of
Appeals is entitled to deference and is not to be disregarded lightly. See Off. Comm. of Unsecured
Creditors of Cybergenics Corp. ex rel. Cybergenics Corp. v. Chinery, 330 F.3d 548, 561 (3d Cir.
2003). In absence of other clear authority, the Third Circuit’s interpretation of the Barton doctrine,
and particularly of the policies underlying the doctrine, supports the Bankruptcy Court’s conclusion
that, to the extent the Third Circuit would even recognize the ultra vires exception, it would be
limited to seizure of non-estate property.
C.

Findings of Fact Are Not Clearly Erroneous

Appellants further argue that, even if a forcible taking or seizure were required to establish
the ultra vires exception, the Trustee’s actions with respect to the mail satisfy that standard.
According to Appellants, the Trustee used “coercion and a wrongful assertion of legal authority” to
obtain possession of the mail, and this amounts to a seizure. (D.I. 9 at 10) Conversely, the Trustee
argues that the Bankruptcy Court held an evidentiary hearing and made specific factual findings
supporting its conclusion that there was no seizure. The Trustee argues that Appellants have not
pointed to any alleged error in the Bankruptcy Court’s findings of fact. (D.I. 10 at 13)

4

VistaCare addressed whether the Barton doctrine even applied to bankruptcy trustees, and if so,
whether the bankruptcy court abused its discretion in permitting the plaintiff to proceed in state
court. See VistaCare, 678 F.3d at 227.
10

This Court reviews the Bankruptcy Court’s factual findings for clear error. See Anderson v.
City of Bessemer City, N.C., 470 U.S. 563, 573-74 (1985). Moreover, because the findings of fact
were based upon determinations related to the credibility of witnesses, this Court is obligated to
give even greater deference to the Bankruptcy Court’s factual determinations. See id. Based on the
witnesses’ testimony, the Bankruptcy Court found that in accordance with his standard practice in
corporate chapter 7 cases, the Trustee sent a change-of-address form to the United States Postal
Service requesting that mail addressed to the Debtor at the Debtor’s address be redirected to him.
(Id. at 16:4-9) The Trustee did not take any mail with him the day of the visit but instructed that all
accumulated mail in SWZ’s possession be sent to him. (Id. at 18:9-12) After communications
between Mr. Sabella and SWZ, Mr. Zentner, another principal of SWZ, made the decision to
comply with the Trustee’s demands, and SWZ sent the mail to the Trustee. (Id. at 18:9-18:20) In
further communications, Mr. Sabella wrote to the Trustee stating that SWZ had received debtor
mail with notations on the envelope indicating that it could not be forwarded. Mr. Sabella offered
to send the mail to the Trustee and suggested contacting the post office regarding further deliveries
and forwarding of the Debtor’s mail. (Id. at 18:21-19:1) Thereafter, the Trustee sent the post office
a second change-of-address form with respect to the Debtor’s mail. (Id. at 19:1-3) Two years later,
the Trustee picked up 161 boxes of documents from the Debtor’s office with SWZ’s consent. (Id. at
19:4-19:5) Based on these findings, the Bankruptcy Court concluded that:
[W]hile there were various ways in which Mr. Miller came into possession of the
mail, none of these ways were by a seizure. Mr. Miller came into possession of the
debtor’s mail through a change-of-address form. The mail was addressed to the
debtor at a lease that was in existence on the date of the filing of the petition, as
shown on Schedule G. That lease did not expire until December 31, 2014. Further,
Mr. Miller testified that submitting a change-of-address form to the postal service
was part of his expected duties as a trustee and part of an audit checklist for chapter 7
trustees. Further, SWZ clearly consented to the change of address by virtue of their
March 25, 2014 e-mail.
...
Mr. Miller also came into possession of mail in 2016 when he was invited to pick up
the 161 boxes of the debtor's files. This is not a seizure either.
...
11

Finally, Mr. Miller came into possession of mail because Mr. Sabella directed his
assistants to box the mail and send it to Mr. Miller. Mr. Sabella was acting as SWZ
in that regard. SWZ had time between Mr. Miller’s visit to consider whether to
comply with Mr. Miller’s demands, and Mr. Zentner made a business decision that
SWZ was better off complying with the demand than not. SWZ also determined not
to raise the issue with the Court.
...
Mr. Sabella argues that he felt compelled to comply with Mr. Miller's request and/or
that Mr. Miller’s statements were meant to intimidate him. My observation of Mr.
Sabella on the stand, both at the hearing on this motion and previously, is that Mr.
Sabella is not easily intimidated. And he did not testify that he was actually
intimidated. Rather, I believe that SWZ did exactly what Mr. Sabella testified it did.
It considered its options and made a calculated determination that it was better to
comply with Mr. Miller’s demands in the hopes of avoiding litigation. When the
litigation ensued, SWZ decided then to raise the mail issue in response. This
conduct does not amount to a seizure, much less a forcible seizure. Mr. Miller did
not lockdown SWZ’s offices or even the debtor’s offices. And he did not take any
mail out the door with him, except with the consent of SWZ.
(12/28/17 Hr’g. Tr. at 19:5-20:25) These findings support the Bankruptcy Court’s conclusion that
none of the three ways in which the Trustee came into possession of the Debtor’s mail (by
redirection via the post office, by picking up same at SWZ’s invitation, or by SWZ voluntarily
sending the Trustee the mail) constituted a seizure of the mail by force that would fall within the
ultra vires exception to the Barton doctrine (id. at 19:9-20:25).
The Court finds no error in the Bankruptcy Court’s conclusions that the ultra vires exception
to the Barton doctrine has not been recognized by the Third Circuit, and that, to the extent that the
Third Circuit would even recognize it, the exception would not apply in this situation based on the
Third Circuit’s opinion in VistaCare. As no exception to the Barton doctrine applies, the
Bankruptcy Court was correct in requiring Appellants to seek leave from the Bankruptcy Court
before filing an action against the Trustee in another forum.
V.

CONCLUSION
For the foregoing reasons, the Court will affirm the Order. An appropriate Order follows.
_________/s/_____________________
HON. LEONARD P. STARK
UNITED STATES DISTRICT COURT

March 7, 2018
Wilmington, Delaware
12

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
IN RE: UNITED TAX GROUP, LLC,

: Chapter 7
:
Debtors.
: Bankr. Case No. 14-10486-LSS
_______________________________________________ :
SWZ FINANCIAL II, LLC, and TAX HELP MD, INC., :
:
Appellants,
: Civ. No. 18-93-LPS
:
v.
:
:
GEORGE L. MILLER, Chapter 7 Trustee,
:
:
Appellee.
:
______________________________________________________________________________
ORDER
At Wilmington, this 7th day of March, 2018, for the reasons set forth in the accompanying
Memorandum issued this same date;
IT IS HEREBY ORDERED that:
1.

The Bankruptcy Court’s Order (B.D.I. 162, 172) is AFFIRMED.

2.

The hearing previously scheduled for March 8, 2018 is cancelled.

3.

The Clerk of the Court is directed to CLOSE Civ. No. 18-93-LPS.

____________/s/__________________
HONORABLE LEONARD P. STARK
UNITED STATES DISTRICT JUDGE

13