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June 4, 2014

Burton v Infinity Capital Management, (2014) 753 F.3d 954

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The Ninth Circuit holds an attorney who prepares an order to show cause for a judge’s signature is not entitled to absolute quasi-judicial immunity.

Freddy Joe Burton retained Jan Paul Koch to file a lawsuit after a bicycle accident. Burton granted Valley Hospital Medical Center a lien on his recovery; Valley Hospital sold its receivable to Infinity Capital Management.  Burton declared bankruptcy after the case settled.  After attorney’s fees, costs, and his personal injury settlement exemption, Burton had a credit in Koch’s trust account.

Infinity filed a state interpleader action against all other similar lien holders making a claim on Burton’s settlement funds in Koch’s account. Koch appeared at the first case management conference and told the judge he would submit the remaining settlement funds to the bankruptcy court.

Koch did not appear at the subsequent case management conference in the state court interpleader action. Following that conference, the trial court directed Infinity’s counsel, Gugino, to prepare an order to show cause requiring Koch to appear and explain his failure to deposit the remaining settlement funds.  Gugino sent the order to Koch, who asserted the automatic stay prevented proceedings against property of the bankruptcy estate.

The trial court did not enter the order prepared by Gugino. The court entered a minute order requiring all parties, and Koch, to appear to address whether Koch was required to deposit the entire proceeds of the settlement into the interpleader action.

Koch filed a complaint against Gugino and the trial court judge in federal district court claiming they violated the automatic stay. The trial judge was dismissed based on judicial immunity.  The Ninth Circuit agreed with the district court Gugino was not entitled to quasi- judicial immunity.

The immunity granted prosecutors and judges does not extend to private actors. Gugino’s preparation of the order did not involve discretionary judgment protected by the judicial immunity doctrine.  Gugino was not entitled to immunity because he prepared the order at the trial court’s request; he was not a court official, and had volunteered to prepare the order.

Finally, the Court rejected Gugino’s contention that public policy dictated immunity should apply to him. Gugino argued having attorneys prepare orders preserves scarce judicial resources, and the practice would be inhibited if attorneys were exposed to civil liability for doing so.  The Court held judicial economy is not justification for altering precedent.  Affording immunity could protect attorneys who intentionally violate the automatic stay by presenting orders to judges not informed of the bankruptcy filing.

Comment: Attorneys who take otherwise proper actions that violate the automatic bankruptcy stay are not entitled to immunity, even if the acts are done with the consent of, or at the direction of, a judge in a different matter

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