![]() ![]() Generally, courts will include in the order appointing a receiver a stay provision, which would prevent suits against the receiver the Barton Doctrine would also provide a stay on litigation without leave of the court. Principals of an entity that has been placed in receivership cannot file pleadings on behalf of/in the name of the receivership entity without the consent of the receiver. 1995), which makes it clear that the claims and defenses applicable to the entity before the receiver is appointed are not necessarily applicable to the receiver. This is in line with the analysis in Scholes v. Since a court-appointed receiver is “an officer of the court,” the doctrine of laches is not available as a defense against claims brought by the receiver. And, while still subject to argument, the majority of cases have held that in pari delicto/clean hands is not a defense, nor does it establish a lack of standing, once the “zombie” receivership entities have been freed of the control of their zombie master by the appointment of an independent receiver. However, in many instances, the receivership entities will have been directly injured by the conduct of the defendants. Often, the defendant in such an action brought by the receiver will attempt to challenge the standing of the receiver, either based upon the assertion that the cause of action, if any, belongs to the investors, not the receiver, or that the receiver may not bring the action due to the impact of in pari delicto or the “clean hands” doctrine.Ĭertainly, where the damage has been done directly to the investors, rather than the receivership entities, it is the investors who must bring the action. The typical appointment order issued by a receivership court will grant authority to the receiver to marshal and protect the assets of the estate and to engage in litigation in the discharge of his duties. Litigation by and Against the Receiver and the Receivership Estate
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