Balser v. Dept. of Justice, Office U.S. Trustee

Decision Date29 April 2003
Docket NumberNo. 02-35114.,02-35114.
Citation327 F.3d 903
PartiesRichard A. BALSER; Corinne L. Balser, Plaintiffs-Appellants, v. DEPARTMENT of JUSTICE, OFFICE of the UNITED STATES TRUSTEE, Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

M. Robert Dauber, Kiersten A. Murphy and Karen Stillwell. Arizona State University College of Law, Civil Practice Clinic, Tempe, AZ, attorneys for the appellants.

Robert P. Brouillard, Assistant United States Attorney, Seattle, WA, attorney for the appellees.

Appeal from the United States District Court for the Western District of Washington; Marsha J. Pechman, District Judge, Presiding. D.C. No. CV-00-02127-MJP.

Before: D.W. NELSON, THOMAS, Circuit Judges, and PREGERSON, District Judge.*

OPINION

THOMAS, Circuit Judge.

This appeal presents the question, inter alia, as to whether sovereign immunity bars a suit filed against a United States trustee acting in his official capacity based on acts conducted within the course and scope of his employment. We hold that it does and affirm the district court.

I

The bankruptcy proceedings were initiated as three involuntary Chapter 7 petitions filed by Carillon Gardens Associates, LLC ("Carillon") against Homewood Development, Inc., Richard A. Balser, and Corinne L. Balser (collectively, "the debtors"). Eventually, the three petitions were administratively consolidated and converted to a Chapter 11 bankruptcy. The debtors thereafter acted as debtors-in-possession. Carillon moved for the appointment of an examiner in the case pursuant to 11 U.S.C. § 1104. The debtors stipulated to the appointment, and the bankruptcy court entered an order authorizing the United States trustee to appoint an examiner with expanded powers pursuant to 11 U.S.C. § 1104(c), including the power and duty to manage the debtors' rental properties and a power concurrent with the debtor to seek approval of sale of the properties subject to Carillon's secured claims. The United States trustee selected Perry Stacks ("Stacks") as the examiner, and the bankruptcy court entered an order approving the appointment after notice and hearing.

Carillon subsequently filed a request for relief from the automatic stay pursuant to 11 U.S.C. § 362(d) for the purpose of foreclosing on its secured claims against the debtors' real property. Shortly thereafter, the examiner filed a motion for approval of a proposed sale of the real property for a purchase price of $1,592,500, free and clear of liens pursuant to 11 U.S.C. § 363. After notice to creditors and all parties in interest, including the debtors, the bankruptcy court entered an order granting Carillon relief from the automatic stay, provided that any foreclosure sales not be conducted earlier than August 23, 1996. The purpose of this was to enable the examiner to complete the sales of the property. The debtors objected to the terms of the sale proposed by the examiner. However, the bankruptcy court approved the sale free and clear of liens on June 6, 1996. The bankruptcy court denied the debtors' motion for reconsideration on June 20, 1996. The debtors filed a notice of appeal of the order approving the sale. However, they did not pursue the appeal, and it was dismissed.

The bankruptcy court approved the debtors' joint plan of reorganization on June 22, 1999, and the Chapter 11 cases were closed on December 17, 1999.

On August 10, 2000, Richard and Corinne Balser ("the Balsers") contacted the Assistant United States trustee who had been assigned the debtors' case and complained about the examiner's conduct in the Chapter 11 cases. The Assistant United States trustee commenced an investigation and ultimately determined that there had been no evidence of fraud or other wrongdoing to require further action and so advised the Balsers. The Balsers then filed this pro se action on December 19, 2000, alleging that the United States trustee had acted negligently and fraudulently in connection with the appointment and supervision of the examiner. Specifically, the Balsers allege that two sales involving ten properties were conducted in a negligent and unlawful manner, which resulted in the sale of ten properties significantly below market value and without notice to the Balsers. In particular, the Balsers allege that examiner Stacks fraudulently collaborated with attorney Lawrence Ream ("Ream"), who served as the property buyer's attorney, even though he had a prior and existing business relationship with Stacks in which Ream provided legal representation and services to Stacks. The Balsers allege that the United States knew of the conflict of interest and fraudulent conduct, but it failed to follow its statutory duty to supervise the administration of Balsers' estate in a manner that protected the Balsers' interests.

The Balsers further asserted that the United States trustee's conduct violated their federal constitutional rights set forth in the Fifth, Seventh, Ninth, and Fourteenth Amendments. The Balsers sought injunctive and monetary relief, including a claim for approximately $5,000,000 in damages.

After first providing the Balsers with the opportunity to amend their complaint, the district court dismissed the complaint on the basis that the United States trustee is immune from suit under the doctrine of sovereign immunity. The district court also concluded that if the suit had been brought against the United States trustee in his individual capacity, it would be barred by judicial immunity. The Balsers timely appealed.1

II
A

The United States, as a sovereign, is immune from suit unless it has waived its immunity. See Dep't of Army v. Blue Fox, Inc., 525 U.S. 255, 260, 119 S.Ct. 687, 142 L.Ed.2d 718 (1999); U.S. v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 63 L.Ed.2d 607 (1980). A court lacks subject matter jurisdiction over a claim against the United States if it has not consented to be sued on that claim. See McCarthy v. U.S., 850 F.2d 558, 560 (9th Cir.1988). "When the United States consents to be sued, the terms of its waiver of sovereign immunity define the extent of the court's jurisdiction." U.S. v. Mottaz, 476 U.S. 834, 841, 106 S.Ct. 2224, 90 L.Ed.2d 841 (1986) (citing U.S. v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 85 L.Ed. 1058 (1941)). In sovereign immunity analysis, any lawsuit against an agency of the United States or against an officer of the United States in his or her official capacity is considered an action against the United States. See Sierra Club v. Whitman, 268 F.3d 898, 901 (9th Cir.2001).

In this case, the Balsers sued "The Department of Justice, Office of United States Trustee," which the Balsers now ask us to construe as an action against the United States trustee. However captioned, the suit plainly states a cause of action against the United States. The Department of Justice is undisputably an agency of the United States. See 28 U.S.C. § 501. The Office of United States Trustee is under the supervision of the United States Attorney General. See 28 U.S.C. § 581(a) & (c). The Attorney General of the United States is empowered to appoint United States trustees for each federal judicial district. Id. The term of the appointment is five years. See 28 U.S.C. § 581(b). Subject to certain restrictions that are not important to this analysis, the Attorney General fixes the annual salaries of United States trustees and assistant United States trustees. See 28 U.S.C. § 587. The United States trustee system is funded by the federal treasury by virtue of special fees collected in bankruptcy cases. See 28 U.S.C. § 589a(b).

In sum, the district court properly construed the Balsers' action against "The Department of Justice, Office of United States Trustee" as one against the United States. As such, the doctrine of sovereign immunity would apply unless waived by the United States.

B

A waiver of sovereign immunity by the United States must be expressed unequivocally. See U.S. v. Nordic Village, Inc., 503 U.S. 30, 33, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992). As a general matter, purported statutory waivers of sovereign immunity are not to be liberally construed. Id. at 34, 112 S.Ct. 1011.

The Balsers argue that the Bankruptcy Code provides an express waiver of sovereign immunity for suits against United States trustees in 11 U.S.C. § 106(a). A close examination of the Code refutes this suggestion. Section 106(a) contains a waiver of sovereign immunity as to "a governmental unit." The phrase "governmental unit" is defined in 11 U.S.C. § 101(27) as follows:

"governmental unit" means United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States (but not a United States trustee while serving as a trustee in a case under this title), a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government;

Id. (emphasis supplied).

Thus, by its plain terms, the Bankruptcy Code does not contain an unequivocally express waiver of sovereign immunity for United States trustees. To the contrary, United States trustees expressly are excepted from the § 106(a) sovereign immunity waiver.2 Thus, the Balsers' argument fails.3

C

The Balsers argue, in the alternative, that the Federal Tort Claims Act ("FTCA") provides an avenue of relief. See 28 U.S.C. §§ 1346(b), 2671-80. The FTCA grants a limited waiver of sovereign immunity by making the United States liable to the same extent as a private person for certain torts of federal employees acting within the scope of their employment. See 28 U.S.C. §§ 1346(b)(1), 2674. The Balsers neither asserted this theory of liability in their pleadings nor requested that the district court grant leave to amend their complaint to assert this theory. On appeal, the Balsers request us to reverse the district court and require the district court to allow an...

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