Joshua Jordan was the CEO of Prehired LLC (“Prehired”), a “members-only workforce accelerator.”
In December 2023, Jordan logged into Prehired’s Wells Fargo bank account online. He transferred $74,000 to the account of another entity he controlled and subsequently spent the money.
The problem for Jordan (among others) was that Prehired filed a chapter 11 bankruptcy petition in October 2022, more than a year before the transfer. In November 2022, Prehired moved to convert the bankruptcy case from chapter 11 to chapter 7. The bankruptcy court granted that motion, and the next day the U.S. trustee appointed an interim chapter 7 trustee (“Trustee”).
Upon learning of Jordan’s withdrawal, the Trustee sent a strongly worded letter to Jordan demanding return of the funds. After some back and forth, the Trustee made clear that the matter was “serious,” that the Trustee believed Jordan’s “actions may give rise to potential criminal liability,” and that Jordan “may wish to consult with appropriate counsel.” In re Prehired LLC, 2025 Bankr. LEXIS 1314, *6-7 (May 30, 2025).
Jordan then filed suit against the Trustee in federal district court for negligence, abuse of process, emotional distress, tortious interference, “free exercise claim violation,” conspiracy to obstruct justice, neglect to prevent conspiracy, fraudulent misrepresentation, and “declaratory judgment – institutional misconduct.” Jordan sought tens of millions of dollars in damages.
But before filing the suit, Jordan did not seek permission from the bankruptcy court. Even so, he later filed a “motion for comfort” asking the bankruptcy court to confirm it lacked jurisdiction to determine the applicability of the Barton doctrine. Jordan also moved for leave to pursue suit against the Trustee and other defendants in their individual capacities.
As we have discussed in prior posts, the Barton doctrine requires would-be plaintiffs to obtain permission from the court before suing certain court-appointed fiduciaries, such as receivers or trustees. In Prehired, Jordan violated the Barton doctrine by not seeking leave before filing suit.
Citing Third Circuit precedent, the bankruptcy court reasoned that “[it] must authorize any suit against a trustee for acts done in the trustee’s official capacity.” The screening requirement is jurisdictional. “[W]ithout permission of the bankruptcy court no other court would have jurisdiction to hear the suit. Therefore, the bankruptcy court has exclusive jurisdiction to determine whether a suit against a chapter 7 trustee may proceed.” 2025 Bankr. LEXIS 1314, *10.
Jordan argued that his claims were brought against the Trustee in his “personal”—and not “official”—capacity, and thus the Barton doctrine did not prevent his suit. The court called the assertion “nominal,” and noted that the “distinction does not excuse [Jordan] from having to comply with the Barton doctrine.” In any event, the Trustee’s actions for which Jordan sued—seeking return of the bankruptcy estate’s funds—were official capacity acts regardless of the label applied.
Next, Jordan argued that the ultra vires exception to the Barton doctrine prevented its application. The ultra vires exception applies when a proposed defendant acts outside of its official duties. See Leonard v. Vrooman, 383 F.2d 556 (9th Cir. 1967); Teton Millwork Sales v. Schlossberg, 311 F. App’x 145 (10th Cir. 2009).
The court in Prehired noted that the exception is “extremely narrow while the Barton doctrine itself is extremely broad. Indeed, it may be no exaggeration to state that the exception applies only in cases in which a [fiduciary] wrongfully seizes or controls non-[estate] property.” Indeed, the court noted, the “Third Circuit has not formally adopted the ultra vires exception.”
Ultimately, the bankruptcy court determined that it “need not decide whether there is an ultra vires exception to the Barton doctrine” because the Trustee acted within his official capacity. The Trustee demanded Jordan return money that was properly part of the bankruptcy estate. Jordan’s “contention that the [Trustee] acted ultra vires” therefore fails. The Trustee’s conduct was “at the heart of a trustee’s duties.” 2025 LEXIS 1314, *15.
Jordan’s last argument was that because he sought judgment against the Trustee and not from the estate, the Barton doctrine does not apply. The court found that argument without merit, as there “is no exception to the Barton doctrine . . . if the plaintiff is not seeking damages from the bankruptcy estate.” Id. *16.
Prehired reminds bankruptcy practitioners that post-hoc requests for permission to bring suit, often accompanied by attempts to fit proverbial square pegs into round holes, are unlikely to succeed.
