Amy L. Goldman v. Tammy R. Phillips, et al.

This case presents an important question of federal bankruptcy law that has squarely divided the lower courts. In the proceedings below, the en banc Ninth Circuit, siding with three circuits, held that a Chapter 7 trustee can be sued in her personal capacity for simple negligence. Unlike the Ninth Circuit (and its three companion circuits), four other circuits limit personal-capacity suits to “willful and deliberate” misconduct. And unlike both competing factions, the Fifth Circuit has staked out yet a third intermediate position—requiring a showing of “gross negligence” before a Chapter 7 trustee is personally liable. The decision below solidifies this three-way conflict. It involves a critical question that affects thousands of bankruptcies nationwide, and this is the perfect opportunity for the Court to impose a uniform rule in an area generating needless waste, inefficiency, and confusion. The question presented is: Whether Chapter 7 trustees may be personally liable for their official acts, and if so, under what standard liability is permitted.