Comerica Bank cannot be held responsible for misconduct committed by a former Chapter 7 trustee during the decades-long bankruptcy of a Michigan tool manufacturer, the Sixth Circuit ruled Wednesday, bringing further closure to one of the region’s most protracted bankruptcy disputes.
In a published decision, a three-judge appellate panel upheld lower court rulings dismissing claims that Comerica and the law firm Plunkett Cooney PC were liable for the conversion of bankruptcy estate assets. The panel agreed that although the former trustee engaged in improper conduct, the bank itself neither committed fraud on the court nor exercised sufficient control over the trustee to be legally responsible.
The opinion, written by U.S. Circuit Judge Rachel S. Bloomekatz, affirms a district court judgment that left intact a series of transactions approved during the bankruptcy, rejecting efforts to unwind them or impose punitive damages.
The litigation stems from the 1995 bankruptcy of MTG Inc., a tool manufacturer whose case began under Chapter 11 before being converted to Chapter 7. After his appointment, Chapter 7 trustee Charles J. Taunt entered into a fee arrangement with Comerica, MTG’s largest secured lender.
Without disclosing the relationship to the bankruptcy court, Taunt accepted payments from Comerica to investigate its claims against the estate. During that period, the court issued several rulings favorable to the bank, including approval of its $5.3 million claim, relief from the automatic stay, and a settlement of lender-liability claims for $10,000.
The arrangement later came to light, prompting the U.S. Trustee’s Office to intervene. In 2007, the bankruptcy court vacated the Comerica-related orders and removed Taunt from his role.
Replacement trustee Guy C. Vining later pursued claims against Taunt, Comerica, and others, alleging conspiracy and fraud. Although the bankruptcy court warned that extended litigation was unlikely to benefit the estate, the case continued through years of discovery and extensive briefing.
After issuing a 408-page opinion, the bankruptcy court found that Taunt and his law firm committed fraud on the court but concluded that Comerica did not. The court also declined to void post-petition transfers that had been authorized at the time they occurred.
Both the district court and the Sixth Circuit affirmed those conclusions.
The appellate panel agreed that Comerica lacked the level of control over Taunt necessary to establish liability. While evidence showed the bank sought to influence the trustee, the court found that Taunt retained independent discretion over how he carried out his duties.
The judges also rejected arguments that vacating earlier bankruptcy orders retroactively invalidated transfers made under those rulings. The court clarified that the transfers remained authorized because they were lawful when executed.
The Sixth Circuit further upheld the bankruptcy court’s decision to award only limited attorney fees to Vining, noting that while uncovering misconduct had value, the broader litigation yielded minimal benefit to the estate. One vacated order, the court noted, had actually resulted in a payment to the estate that resolved claims deemed effectively worthless.
None of the parties responded to requests for comment Thursday. The panel consisted of U.S. Circuit Judges Raymond M. Kethledge, Joan L. Larsen, and Rachel S. Bloomekatz.
Vining v. Plunkett Cooney PC, No. 24-1979 (6th Cir.) Vining v. Plunkett Cooney PC et al., No. 2:22-cv-12661 (E.D. Mich. In re: MTG Inc., No. 2:95-bk-48268 (Bankr. E.D. Mich.)
