Richard Schultze v. David Chandler, Sr.

In this appeal, we consider whether the bankruptcy court properly exercised jurisdiction over a malpractice action against an attorney for the unsecured creditors’ committee and correctly dismissed the claim. We affirm.

I

Plaintiffs Richard Schultze, Lorenzo Zunino, Robert Becchetti, and Richard Questoni were investors in Colusa Mushroom, Inc. (“Colusa”), a California company that grew mushrooms for commercial sale. The business did not flourish, and the company filed a voluntary petition in bankruptcy under Chapter 11. The bankruptcy court appointed an unsecured creditors’ committee (“Committee”) pursuant to 11 U.S.C. § 1102 , consisting of Plaintiffs, two other individuals, and one business entity. Pursuant to 11 U.S.C. § 1103 (a), the Committee filed an application for permission to employ David Chandler as counsel for the Committee, and the court issued an order authorizing his employment.

Eventually, the court approved a plan of reorganization under which Colusa would sell its business and assets to a third party, Premier Mushroom, LP (“Premier”). All unsecured creditors, including Plaintiffs, were to receive pro rata shares of the sale proceeds. Under the terms…