When Court Authorization Isn't Enough: The New Limits of Trustee Immunity

The Ninth Circuit’s recent en banc decision in Phillips v. Goldman (In re Gilman) has renewed attention on one of the most important protections available to bankruptcy trustees: immunity from personal liability arising out of estate administration.

Bankruptcy trustees have traditionally relied on quasi-judicial immunity to protect discretionary conduct undertaken in connection with estate administration. Gilman does not eliminate those protections, but it reflects increasing judicial attention to the scope and limits of a trustee’s quasi-judicial immunity in negligence-based claims.

Trustees have long handled litigation, asset recovery efforts, and settlement negotiations, but today, those matters often involve increasing complexity and substantial discretionary judgment. As those responsibilities expand, so too does the tension between two competing principles: protecting trustees from retaliatory litigation while preserving meaningful limits on immunity where conduct falls outside the judicial function itself. For bankruptcy practitioners, Gilman serves as an important reminder that immunity protections are strongest when trustees actively structure their conduct to fit within recognized immunity doctrines from the outset of the case.

Case Background: The Gilman Dispute

Gilman arose from a long-running Chapter 7 bankruptcy involving debtor Kevan Gilman and efforts by creditor Tammy Phillips and her law firm to collect on prepetition judgments. The Chapter 7 trustee, Amy Goldman, initially filed a no-asset report, later withdrew it, and eventually sought to abandon two real properties and a potential malpractice claim after concluding they had inconsequential value to the estate.

Phillips later filed an adversary proceeding against Goldman, alleging that she breached fiduciary duties by failing to preserve and safeguard estate assets. The complaint alleged that Goldman knew the real properties were deteriorating, failed to collect rents allegedly being received by the debtor or his family, and allowed estate assets to lose value over time. The bankruptcy court dismissed the claims on immunity and limitations grounds, and the district court affirmed the immunity ruling. Sitting en banc, the Ninth Circuit reversed, holding that the pleadings did not establish that Goldman was entitled to immunity at the motion-to-dismiss stage. Phillips v. Goldman (In re Gilman), No. 24-2249, 2026 WL 1257457, at *2–3, *11 (9th Cir. May 7, 2026).

Gilman’s significance lies in how the court separated protected judicial functions from other trustee conduct. The Ninth Circuit held that quasi-judicial immunity protects trustees from liability for functions involving discretionary judgment that are essential to the authoritative adjudication of private rights to the bankruptcy estate. But the court concluded that the allegations against Goldman involved functions such as gathering estate property, investigating the debtor’s finances, and safeguarding estate assets—functions the court characterized as more akin to property management than adjudication.

That distinction has become increasingly important in modern bankruptcy practice.

Trustees today are frequently required to exercise substantial discretion while overseeing avoidance litigation, fraud investigations, settlement negotiations, asset sales, and other complex recovery efforts on behalf of the estate. In this context, “operational conduct” refers to discretionary administrative or business-type decisions undertaken without direct judicial involvement or specific court authorization, as opposed to conduct implementing explicit judicial directives or core estate administration functions. 

Legal Framework: Quasi-Judicial and Derived Judicial Immunity

Trustee immunity is often discussed as a single doctrine, but bankruptcy courts have applied several overlapping immunity principles. Although courts do not always distinguish these doctrines precisely, the distinction matters for trustees seeking to protect their decisions from later challenges.

Quasi-judicial immunity generally protects trustees performing functions integrally related to the judicial process. The doctrine derives from the principle that court-appointed fiduciaries must be able to exercise discretionary judgment without fear of constant personal liability. Under Gilman, the relevant inquiry is functional: whether the trustee’s challenged conduct involved discretionary judgment essential to the adjudication of rights in the bankruptcy estate.

Importantly, immunity does not necessarily depend on whether the trustee’s decision was ultimately correct. The focus is whether the challenged conduct arose from protected judicial administration rather than from operational or administrative conduct too attenuated from the adjudicative process.

Courts across multiple circuits have long recognized both the importance and limits of trustees’ quasi-judicial immunity. The Supreme Court acknowledged in Mosser v. Darrow that bankruptcy trustees are not categorically insulated from liability for conduct undertaken during estate administration. 341 U.S. 267, 271–73 (1951). The Ninth Circuit previously applied a functional approach to quasi-judicial immunity in Bennett v. Williams (In re Castillo), focusing on the relationship between the challenged conduct and the bankruptcy process itself. 297 F.3d 940, 948–52 (9th Cir. 2002). Other circuits have likewise emphasized the need to protect trustees and court-appointed fiduciaries from retaliatory litigation arising out of contested estate administration. See, e.g., In re Linton, 136 F.3d 544, 545 (7th Cir. 1998); Carter v. Rodgers, 220 F.3d 1249, 1252–53 (11th Cir. 2000); Lowenbraun v. Canary, 453 F.3d 314, 321–22 (6th Cir. 2006).

Derived judicial immunity is narrower and often stronger because it is tied directly to explicit court authorization. Under Gilman, a trustee may be entitled to derived judicial immunity where the trustee acted within the scope of authority, interested parties had notice of the proposed acts, the trustee candidly disclosed the proposed acts to the bankruptcy court, and the court approved the acts. Gilman, 2026 WL 1257457, at *6–8.

That distinction may become increasingly important after Gilman. The farther a trustee moves away from active judicial supervision and into independent operational decision-making, the greater the risk litigants may argue immunity should not apply.

Broader Implications: How Gilman Reshapes Immunity Analysis

The significance of Gilman extends beyond any single dispute. The case reflects broader concerns about how immunity doctrines should operate in increasingly complex bankruptcies.

In cases involving substantial avoidance litigation, fraud investigations, difficult asset sales, or contested settlement negotiations, trustees may effectively manage years of litigation strategy and recovery efforts on behalf of the estate. As those functions become more operational or managerial in character, courts may look more closely at whether the challenged conduct truly derives from the judicial process.

The practical lesson is not limited to trustees. Any bankruptcy fiduciary seeking immunity protection must be prepared to show that the challenged conduct was grounded in court authority, tied to estate administration, and subject to meaningful judicial oversight. That same issue can arise for Chapter 11 trustees, liquidating trustees, plan administrators, litigation trustees, and other fiduciaries charged with implementing court-approved duties.

That shift could lead to increased scrutiny regarding the source of the trustee’s authority, the specificity of court approval, the degree of judicial supervision, and whether the trustee was implementing a judicial directive or exercising independent business judgment.

Strengthening Immunity Protections

Regardless of how courts ultimately refine trustee immunity doctrine, trustees can take several steps to maximize available protections.

Seek Specific Court Authorization

Stronger immunity arguments often arise when trustees act under specific court orders rather than under generalized statutory authority. For significant actions involving litigation strategy, settlements, investigations, or asset sales, trustees should consider seeking orders that expressly identify the conduct being authorized. In contentious matters, those orders may also include findings regarding the trustee’s reliance on professional advice, the business justification for the action, and the relationship between the proposed conduct and the trustee’s statutory duties.

Build the Record Before a Dispute Arises

Trustees should treat the bankruptcy record as a future immunity defense. Motions, declarations, hearing transcripts, and proposed orders should clearly explain the rationale for the proposed conduct, the material facts disclosed to the court, creditor participation, reliance on retained professionals, and the scope of judicial oversight obtained. Sparse records make it easier for later litigants to characterize trustee conduct as independent operational activity rather than protected judicial administration.

Avoid Informality in High-Risk Decisions

Significant litigation or estate-administration decisions made through undocumented conversations or informal communications may later be portrayed as conduct outside the judicial process. In contentious matters, trustees should consider formalizing major decisions through noticed motions, written professional recommendations, documented approvals, and periodic reporting to the court.

Define Professional Roles and Delegated Authority Clearly

Trustees often rely on financial advisors, special counsel, investigators, auctioneers, consultants, and other professionals. Retention applications and engagement terms should clearly define delegated authority, reporting obligations, trustee supervision, and the scope of court authorization. In substantial investigations or avoidance litigation, trustees may also consider seeking orders that expressly authorize the scope of investigative activity and anticipated reliance on retained professionals.

Anticipate Future Characterization of Trustee Conduct

Traditional estate administration activities, including claims reconciliation, court-approved settlements, Rule 2004 examinations, and asset liquidation pursuant to court order, are more likely to fit comfortably within an immunity doctrine. By contrast, discretionary administrative or business-type decisions undertaken without active judicial involvement may face greater scrutiny. Trustees should assume that later litigants will try to frame the challenged conduct as detached from court supervision.

Use Transparency as a Shield

Regular reporting, disclosure to creditors, noticed motion practice, and clear communication with the bankruptcy court can help show that the trustee acted within an actively supervised judicial process. That record may become critical if the trustee later needs to show that the challenged conduct was grounded in court authority rather than independent operational discretion.

The Future of Trustee Immunity

Gilman does not signal the end of broad immunity protections for bankruptcy trustees. Courts remain acutely aware that estate administration would become extraordinarily difficult if trustees faced routine personal liability exposure for every contested decision.

At the same time, the decision reflects increasing judicial willingness to examine whether challenged conduct truly derives from the judicial function itself. In an era where bankruptcy fiduciaries increasingly function as strategic managers of litigation and recovery efforts, Gilman suggests courts may focus less on the fiduciary’s title alone and more on the precise relationship between the challenged conduct and the judicial process itself.

For bankruptcy fiduciaries, the practical lesson is straightforward: immunity should not be assumed after the fact. It should be deliberately reinforced throughout the administration of the case through clear court authorization, careful record-building, transparency, and active judicial supervision. Derived judicial immunity arising from a trustee’s compliancewith a valid court order provides stronger protection than quasi-judicial immunity that islimited in scope.

This article was originally published in similar form by the American Bar Association, Litigation Section, Bankruptcy and Insolvency Committee, in June 2026.