Does A Receiver Have To Comply With A Subpoena?
Does A Receiver Have To Comply With A Subpoena?

Q: I am a receiver in a partnership dispute case. I have been served with a subpoena issued from a case outside the receivership case, seeking partnership records and emails to and from a defendant in that case. Neither the partnership nor the partners are parties in that case. Do I have to comply with the subpoena? There are few liquid assets in the estate and it will be costly to locate and produce the documents.

A: Based on the reasoning in a recent bankruptcy case, from the Central District of California, if the subpoenaing party did not first obtain leave of the receivership court to subpoena you, you likely do not have to comply.

In the case, In re Egan Avenatti. LLP, 637 B.R. 502 (Bankr. C.D. Cal. 2022), the chapter 7 trustee was served with two subpoenas from Michael Avenatti’s criminal case in the Southern District of New York. They sought the production of various financial records and the trustee’s appearance, and stated the trustee could “not depart the Court without leave thereof, or the United States Attorney.” The trustee had four terabytes of data that would have to be gone through to locate all the subpoenaed records. (As an aside the court notes one terabyte would equal “50,000 trees made into paper and printed”. Id. at 504 fn.3.).

The trustee filed an emergency motion seeking permission, under 11 U.S.C. §363, to use estate property to pay for the time and expense to search for and produce the responding documents. The court denied the trustee’s motion.

The court notes that subpoenas are issued by a court, counsel merely fill them out and serve them on behalf of the issuing court. Id. at 507 fn.6. Because the subpoenas were issued without leave of the bankruptcy court, under the Barton doctrine, Barton v. Barbour, 104 U.S. 126 (1881), the issuing court had no jurisdiction and, hence, the subpoenas were invalid. Barton held that the failure to get prior receivership court permission to sue a receiver, deprived the other court of subject matter jurisdiction. Over the years this requirement has been expanded to cover other court appointed parties and their professionals, including bankruptcy trustees, their counsel and agents. See, In re Crown Vantage, Inc. 421 F.3d 963 (9th Cir. 2005).

The court held that Barton is not limited to simply prohibiting suing a trustee or receiver without court permission, but applies to all legal proceedings, including subpoenas. This is necessary, the court stated, in order not only to protect the court’s in rem jurisdiction over estate property, but to limit needless costs and impact on the estate’s administration. Id. at 508. The court cites In re Circuit City Stores Inc., 557 B.R. 443 (Bankr. E.D. Va. 2016), which also held Barton requires prior court permission to serve a subpoena on a trustee. It held that the purpose of the Barton doctrine is to prevent trustees from being subject to legal proceedings that interfere with their ability to administer the estate and, under Barton, the court serves as a gatekeeper to protect trustees from all outside legal proceedings. Id. at 449-450.

The court noted and rejected an unreported BAP case that held otherwise. In re Media Group, Inc. 2006 Lexis 4842, 2006 WL 6810963 (9th Cir. BAP 2006). It held Media Group was not controlling for a number of reasons. First, being a BAP opinion, it was not binding precedent. (While unstated, it is also an unreported decision.) Second, it held Media Group did not correctly apply Barton, by engaging in too narrow a reading in light of the 9th Circuit in Crown Vantage, supra. and other courts referencing its application to all legal proceedings. It also felt the BAP applied the wrong standard of review, de novo rather that clear error. The court does not mention that in the sixteen years since Media Group was decided it has only been cited once; in Circuit City, supra. which rejected it. 557 B.R. at 449.

The court’s decision applies with even more force where a subpoena is served on a receiver. Barton, first of all, was a receivership case. Its holding was only much later applied to trustees. More importantly, receivers are the court’s agents and act for the court. Turner v. Superior Court, 72 Cal.App. 3d 804, 819 (1977). A trustee, on the other hand, is an independent contractor, appointed by the United States Trustee, whose office is a component of the Justice Department. Avenatti. 637 B.R.  at 509 fn.10. The service of a subpoena on a receiver is akin to serving the court. The receivership court, therefore, has even more incentive than the bankruptcy court to determine how assets under its control, through its agent, are expended and what activities its agent and officer should be undertaking. Further, the requirement of prior court approval is not only consistent with Barton, but also with other acts which require prior court permission because they adversely affect the receivership. For example, receivership property cannot be levied on, garnished or attached without receivership court approval. Robbins v. Bueno, 262 Cal. App. 2d 79 (1968).

Therefore, you should respond to the subpoena, objecting that it is invalid because prior permission of the receivership court was not obtained. If the subpoenaing party files a motion for permission to subpoena you, you should ask the court to at least condition such allowance on the party paying the cost of complying with the subpoena, so the estate and its creditors do not bear that burden.


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