Q: I am a state court receiver for an LLC that owns a number of apartment buildings, which I am now managing. I have been sued by some tenants and a tenant group. They have not obtained receivership court permission to sue me, which I think is required. They contend that because their claims relate to my managing the business of the LLC they do not need prior permission to sue me and have cited 28 U.S.C. §959(a). Does this federal statute apply to me—a state court receiver?

A: No. 28 U.S.C. §959(a), which is an exception to the Barton Doctrine [Barton v. Barbour, 104 U.S. 126 (1881)], requiring prior receivership court approval to sue its receiver, has repeatedly been held to only apply to receivers appointed by federal courts. See, In re Jefferson County, Alabama, 484 B.R. 427,458-59 (Bank. N.D. Ala. 2012) ( hereinafter “Jefferson County”); Republic Bank of Chicago v. Lighthouse Mgmt. Grp. Inc., 829 F. Supp. 2d 766,772 ( D. Minn. 2010); Finnegan v. Clark, 2018 WL 2972504 ( C.D.Cal. 2018); Freeman v. County of Orange, 2014 WL 12668679 (C.D. Cal. 2014); Asset Recovery Group LLC v. Cabrera, 233 So. 3d 1173,1178 (Fld. 2017) (“28 U.S.C. §959(a) is not applicable to receivers appointed by state courts.”). Indeed, the court in Jefferson County, supra. noted: “This Court’s review of over 125 years of cases discussing 28 U.S.C. § 959 and its predecessor acts resulted in finding only one reported opinion of a court that has arguably viewed the exception to Barton as applicable to a state court-appointed receiver.” It goes on to point out in that one case: “The bankruptcy court simply assumed that if might apply and determined that because the Florida court receiver had never been ‘empowered  to operate the business’ that 28 U.S.C. §959(a) was inapposite.” It also notes the court never considered whether the exception only applied to federal receivers. Id. at fn. 29.

          Jefferson County has an interesting discussion of the origin of business exemption to Barton that 28 U.S.C. § 959(a) embodies and why it only applies to federal receivers. It explains that when Barton was decided Justice Miller dissented. He thought there should be a distinction between non-operational receiverships and operational receiverships. He also thought requiring someone to come to the receivership court to get permission to sue, which might be far away from where the claim arose, could be burdensome (remember its 1881) and it might impair the right to a jury trial, if the claims had to be adjudicated in the receivership court. His  dissent led Congress to enact the forerunner of the current statute. The 1887 version was clear that it only applied to federal receivers. It stated “[t]hat every receiver or manager of any property appointed by any court of the United States may be sued without leave …with respect to their acts…in carrying on business connected with the property”. The “appointed by any court of the United States” language was retained when the statute was amended in 1911. In 1948 the statute was changed to its current version by adding “Trustees” and “debtors in possession” to the statute, but at the same time omitted this language. So that now it reads, in part, “Trustees, receivers…including debtors in possession may be sued,  without leave of the court appointing them…” Despite the change, as the discussed supra., virtually all cases have held it still only applies to federal receivers. Not only because that was what was intended and its history, but because of its placement in the United States Code. The court explains: “Section 959 is part of Title 28 of the United States Code, the ‘Judiciary and Judicial Procedure,’ and Chapter 57 of Title 28, which is the chapter for ‘General Provisions Applicable to Court Officers and Employees.” Id. at 459. It states, based on Supreme Court authority, “ ‘the title of a statute and the heading of a section’ are ‘tools available for the resolution of a doubt’ about the meaning of a statute.” Id. It also notes that the “appointing” language itself, added in 1948, has been glossed over because trustees are now not appointed by the court and neither are debtors in possession. Trustees are appointed by the United States Trustee. 28 U.S.C. § 586(a). Debtors in possession are a creature of statute. 11 U.S.C § 1101(1). As a result, some courts have replaced it with a requirement that the person be an officer of a court of the United States, which would include trustees and debtors in possession, but not state court receivers. Id. at 460.

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