Edward Lasseville v. Court of Appeal of California, Second Appellate District, Division Five, et al.

A bankruptcy court’s decision to abstain is not reviewable, even “by the Supreme Court of the United States under section 1254.” 28 U.S.C. § 1334(d). The Los Angeles County Public Guardian procedurally secured the result that the debtor must defend itself in state court once the bankruptcy court abstained and the federal courts were divested of power to protect the debtor. The circuits are deeply divided on the scope of trustee authority under 11 U.S.C. § 323—an issue that became outcome-determinative here. The result was an estate with no debt—after the trustee declared it was not administering any real property—nor any assets, because the trustee agreed to trade the $740,000 parcel of real property owned by petitioner to the Public Guardian in exchange for “$38,756.34 for Chapter 7 bankruptcy administrative expenses.” The Public Guardian’s private law firm secured roughly $190,000 from that deal—all processed after the case had been dismissed with prejudice. That void judgment was appealed. The Public Guardian and the trustee secured dismissal of the appeal by asserting that, under federal law, only the trustee could determine the outcome of this issue. Thus resolved not on merit but § 323 power—after abstention. State review was cut off. Federal review was impossible. Now a state case presents a clean Article III vehicle to review a federal issue—-one Congress otherwise made unreviewable through the federal courts-—arising only because of the decision to abstain. The openly divided circuit courts may now be settled. The question presented is: Whether due process permits a state actor to secure federal abstention and assert exclusive federal trustee power under “a case under this title” 11 U.S.C. § 323 to deny the Fourteenth Amendment right to defend in state court.