Bankruptcy
In Re: M.T.G. Inc.
Date: Jan. 14, 2026
Issue: Whether Comerica Bank can be held liable for the misconduct of a bankruptcy trustee.
Case Summary: In a unanimous decision, a Sixth Circuit panel affirmed a Michigan district court ruling that upheld the bankruptcy court’s refusal to hold Comerica liable for a bankruptcy trustee’s alleged misconduct.
Trustee Guy Vining sued Comerica Bank, Trustee Charles Taunt, and others over alleged misconduct in MTG’s bankruptcy. In 1995, MTG filed for Chapter 11 bankruptcy, which the Bankruptcy Court for the Eastern District of Michigan later converted to a Chapter 7 liquidation. After American Casualty issued a $1 million bond to protect the estate and its creditors, the court appointed Taunt as Chapter 7 trustee to liquidate MTG’s assets. Despite certifying he and his firm were disinterested, Taunt entered into an undisclosed fee agreement with Comerica, MTG’s primary lender and largest secured creditor, creating a conflict of interest.
Litigation began when Taunt sought approval to use the estate’s remaining funds to pay his fees and send the balance to Comerica. MTG’s attorney objected, and the U.S. Trustee, which oversees bankruptcy administration, found that Taunt violated disclosure rules. The district court removed Taunt as trustee and denied his firm all fees, and the bankruptcy court later vacated the Comerica Orders for fraud on the court.
Vining then sued Comerica, along with Taunt, his law firm, and American Casualty. Vining asserted pre-petition claims against Comerica for conduct that allegedly forced MTG out of business, and post-petition claims against Taunt, his firm, and Comerica based on Taunt’s failure to disclose the Comerica fee agreement.
The bankruptcy court granted summary judgment to Comerica on the post-petition claims, concluding that: Comerica was not liable for fraud on the court; several post-petition transfers of estate property arranged by Taunt were not avoidable and did not need to be reversed; only limited attorney’s fees were warranted; and Vining’s conversion claims failed. On appeal, the Eastern District of Michigan affirmed the bankruptcy court’s decision on all challenged claims. Vining later appealed the district court’s decision.
The Sixth Circuit panel affirmed. It held that Comerica could not be liable for fraud on the court because it was not an officer of the court and could not be vicariously liable absent a principal-agent relationship with the trustee or misconduct by its attorneys, and it concluded that the bankruptcy court acted within its discretion in limiting fees and denying punitive damages, given the minimal benefit to the estate. The panel also held that the post-petition transfers were authorized when made under valid court orders, that the later vacatur of those orders had no retroactive effect, and that avoidance would not benefit the estate, given the lack of equity and Comerica’s oversecured position. Finally, it affirmed dismissal of the conversion claims, explaining Taunt acted within his authority as Chapter 7 trustee when he controlled, liquidated, and settled the estate’s assets, and that his later disqualification did not retroactively invalidate his court-approved actions.
Bottom Line: The Sixth Circuit held that Comerica was not directly or vicariously liable for Taunt’s alleged misconduct.
Document: Opinion
