Wortley v. Bakst

Barbara Wortley, Trafford's president and shareholder, filed a Chapter 7 petition for bankruptcy on Trafford's behalf and the case was assigned to Bankruptcy Judge John Olson. Judge Olson appointed Michael Bakst as a trustee. While Bakst was litigating the Trafford adversary cases, his law firm, Ruden McClosky, hired Judge Olson's fiance, Steven Fender, to join its bankruptcy group. Judge Olson eventually ordered the Wortley parties to pay over $2.5 million to Trafford's bankruptcy estate. The Wortley parties then filed suit in state court alleging that Bakst hired Fender as part of a scheme to improperly influence Judge Olson and to secure favorable rulings. The state court action was removed to federal bankruptcy court, where it was dismissed. The court concluded that it does not have appellate jurisdiction to consider the merits of the Wortley parties' appeal. The court explained that the bankruptcy court had only "related to" jurisdiction over the claims asserted against Bakst and Fender by the Wortley parties, and as a result it did not have authority to enter a final order of dismissal. The bankruptcy court should have submitted a report with proposed conclusions of law recommending dismissal of the complaint to the district court. Because the case should have gone there first, the court transferred the unauthorized order to the district court for review as a report with proposed conclusions of law under 28 U.S.C. 157(c)(1). View "Wortley v. Bakst" on Justia Law