Fraud-on-the-Court Liability in Bankruptcy Is Limited to Court Officers; Vacatur of Orders for Trustee Misconduct Does Not Automatically Unwind Authorized Transfers

I. Introduction

Case: Guy Vining v. Plunkett Cooney, P.C. (arising from In re: M.T.G., Inc.)
Court: United States Court of Appeals for the Sixth Circuit
Date: January 14, 2026

This appeal arises from a decades-long Chapter 7 bankruptcy in which the original trustee, Charles Taunt, failed to disclose a fee agreement with the estate’s largest secured creditor, Comerica Bank—an omission that led to earlier findings of trustee conflict and fraud on the court. Successor trustee Guy Vining sought to “unwind” multiple consequences of Taunt’s tenure by (i) holding Comerica directly or vicariously liable for fraud on the court, (ii) avoiding post-petition transfers under 11 U.S.C. § 549(a) based on later vacatur of orders, and (iii) imposing conversion liability on Taunt/others on the theory that Taunt’s authority was retroactively invalid.

The Sixth Circuit affirmed summary judgment largely for defendants, reinforcing a set of practical limitations on using “fraud on the court,” avoidance, and conversion theories to retroactively destabilize court-authorized bankruptcy administration.

II. Summary of the Opinion

Fraud on the court: Comerica is not directly liable because fraud on the court requires conduct by an “officer of the court,” and Comerica (a creditor) is not one. Comerica is also not vicariously liable because no principal–agent relationship (right to control) was established between Comerica and Taunt in the bankruptcy proceeding, and the bank’s counsel had no Rule 2014 disclosure duty comparable to the trustee’s.
Sanctions/damages: The bankruptcy court did not abuse discretion by awarding only limited attorney’s fees (tied to discrete, fraud-remedy work) and declining broader compensatory/punitive relief.
§ 549 avoidance: Post-petition transfers were not avoidable where they were authorized by valid court orders at the time and the bankruptcy court did not vacate those orders with retroactive effect.
Conversion: Taunt’s control over estate property was not “wrongful” for conversion purposes because, during the relevant time, he had statutory trustee authority and acted pursuant to then-operative court orders; later disqualification did not retroactively transform authorized conduct into conversion.

III. Analysis

A. Precedents Cited

1. Trustee duties, fiduciary role, and the court’s reliance on trustee candor

In re Steele, 26 B.R. 233 (Bankr. W.D. Ky. 1982): Cited for the proposition that a trustee owes fiduciary duties to the court and parties and bears responsibility to uphold the integrity of bankruptcy administration—framing why nondisclosure by a trustee is uniquely court-corrupting.
In re Motorwerks, Inc., 371 B.R. 281 (Bankr. S.D. Ohio 2007): Used to describe the trustee’s core duty to marshal/sell assets for creditors, anchoring the trustee’s central administrative authority.
In re Slocombe, 344 B.R. 529 (Bankr. W.D. Mich. 2006): Supports the notion that bankruptcy courts rely on trustee representations to understand estate circumstances—making trustee candor pivotal.
In re M.T.G., Inc., 366 B.R. 730 (Bankr. E.D. Mich. 2007) [In re MTG I], aff’d, 400 B.R. 558 (E.D. Mich. 2009): The foundational prior decision in the same bankruptcy concluding Taunt/firm committed fraud on the court by nondisclosure under Rule 2014 and by obtaining orders benefitting Comerica.

2. Appellate standards and deference in bankruptcy appeals

In re Morris, 260 F.3d 654 (6th Cir. 2001) and Hancock v. McDermott, 646 F.3d 356 (6th Cir. 2011): The Sixth Circuit reiterated that it effectively reviews the bankruptcy court’s decision through the district court, applying bankruptcy-appellate standards.
In re McDonald, 29 F.4th 817 (6th Cir. 2022) and In re Fashion Shop of Ky., Inc., 350 F. App’x 24 (6th Cir. 2009): Reinforce the tri-part review framework: fact findings (clear error), legal conclusions (de novo), damages/sanctions (abuse of discretion).

3. “Fraud on the court” doctrine—elements, limits, and who can commit it

Buell v. Anderson, 48 F. App’x 491 (6th Cir. 2002): Provides the classic limiting formulation—fraud on the court is a species of fraud that defiles the court itself and disables impartial adjudication.
Demjanjuk v. Petrovsky, 10 F.3d 338 (6th Cir. 1993): Supplies the five-part test applied by the panel, including the “officer of the court” requirement and the duty-to-disclose component; also cited for the principle that attorneys’ positions demand heightened integrity.
Carter v. Anderson, 585 F.3d 1007 (6th Cir. 2009): Establishes the “clear and convincing evidence” burden to prove fraud on the court.
Okros v. Angelo Iafrate Constr. Co., 298 F. App’x 419 (6th Cir. 2008) and In re Michelson, 141 B.R. 715 (Bankr. E.D. Cal. 1992): Support the conclusion that fraud on the court is generally limited to misconduct involving an “officer of the court,” with the officer’s involvement elevating ordinary fraud into court-directed fraud.
Comput. Leasco, Inc. v. NTP, Inc., 194 F. App’x 328 (6th Cir. 2006) and In re DeLorean Motor Co., 991 F.2d 1236 (6th Cir. 1993): Illustrate that attorneys and bankruptcy trustees qualify as “officers of the court.”
In re Jemsek Clinic, P.A., 850 F.3d 150 (4th Cir. 2017): Cited as a caution that the panel’s discussion does not foreclose other sanction tools for misconduct falling short of fraud on the court.
Kennedy v. Schneider Elec., 893 F.3d 414 (7th Cir. 2018) and Mazzei v. The Money Store, 62 F.4th 88 (2d Cir. 2023): Used to emphasize fraud on the court as conduct that directly corrupts the judicial machinery, not merely hard-fought advocacy.
Berry v. City of Detroit, 25 F.3d 1342 (6th Cir. 1994): Applied to discount expert opinions that offered legal conclusions (e.g., declaring “fraud on the court” or ethics violations as ultimate issues).
Trendsettah USA, Inc. v. Swisher Int’l, Inc., 31 F.4th 1124 (9th Cir. 2022): Supports the distinction between ethics-rule violations and the higher bar for fraud on the court.

4. Vicarious liability and agency under Michigan law (as applied in bankruptcy litigation)

Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443 (2007): Supports the general proposition that state law governs many underlying liability issues in bankruptcy-related disputes, here prompting application of Michigan agency principles.
Theophelis v. Lansing Gen. Hosp., 424 N.W.2d 478 (Mich. 1988) and Rogers v. J.B. Hunt Transp., Inc., 649 N.W.2d 23 (Mich. 2002): Provide Michigan’s baseline framework for principal–agent vicarious liability.
Bailey v. Schaaf, 852 N.W.2d 180 (Mich. Ct. App. 2014), vacated in part on other grounds, 856 N.W.2d 692 (Mich. 2014) (mem.), and Al-Shimmari v. Detroit Med. Ctr., 731 N.W.2d 29 (Mich. 2007): Confirm that a principal can be liable for an agent’s torts even absent direct wrongdoing—if agency exists and the agent is liable.
Lincoln v. Gupta, 370 N.W.2d 312 (Mich. Ct. App. 1985): Used for the limiting principle that if the agent is not liable for the alleged tort, the principal cannot be vicariously liable on that theory.
St. Clair Intermediate Sch. Dist. v. Intermediate Educ. Ass’n/Mich. Educ. Ass’n, 581 N.W.2d 707 (Mich. 1998) and Holbrook v. Olympia Hotel Co., 166 N.W. 876 (Mich. 1918): Central to the panel’s rejection of agency—Michigan requires the principal’s “right to control” not just what is done but how it is done; the fee agreement did not confer that level of operational control over Taunt.
Germain v. Conn. Nat’l Bank, 988 F.2d 1323 (2d Cir. 1993): Cited (by analogy) to underscore that creditors usually act in their own interests and generally owe no fiduciary duty to other parties—supporting the court’s reluctance to treat the creditor as akin to a court officer.

5. Sanctions and remedies for fraud on the court—scope of discretion

In re Downs, 103 F.3d 472 (6th Cir. 1996); Chambers v. NASCO, 501 U.S. 32 (1991); and Universal Oil Prods. Co. v. Root Refin. Co., 328 U.S. 575 (1946): Ground the bankruptcy court’s inherent authority to sanction litigation misconduct that undermines justice.
In re Big Rivers Elec. Corp., 355 F.3d 415 (6th Cir. 2004) and In re Nowak, 586 F.3d 450 (6th Cir. 2009): Emphasize the breadth of discretion in choosing sanctions and the high bar for abuse-of-discretion reversal.
In re Dunning, 269 B.R. 357 (Bankr. N.D. Ohio 2001); In re Wavelength, Inc., 61 B.R. 614 (9th Cir. BAP 1986); and In re Zordan, 2006 WL 1791157 (Bankr. N.D. Ill. June 27, 2006): Demonstrate that punitive damages appear expressly in certain Code provisions—used to frame why courts are cautious when punitive relief lacks explicit statutory footing.
In re John Richards Homes Bldg. Co., 552 F. App’x 401 (6th Cir. 2013): Invoked for the caution against “broad punitive sanction powers” in bankruptcy absent clear statutory authorization, due to risk of abuse.

6. Avoidance under § 549, “authorization,” and void/voidable distinctions

In re Forbes, 372 B.R. 321 (6th Cir. BAP 2007): Cited for de novo review of legal conclusions in avoidance contexts.
United States v. Stewart, 73 F.4th 423 (6th Cir. 2023) and Flannigan v. Consol. Rail Corp., 888 F.2d 127 (6th Cir. 1989): Used to interpret “authorize” in ordinary meaning terms and to emphasize that courts speak through orders—bolstering the conclusion that transfers under orders are “authorized.”
In re Cambrian Holding Co., 110 F.4th 889 (6th Cir. 2024): Supports deference to a bankruptcy court’s interpretation of its own orders, critical to accepting the bankruptcy court’s clarification that vacatur was not retroactive.
In re D.H. Overmyer Telecasting Co., Inc., 53 B.R. 963 (N.D. Ohio 1984): Cited to reinforce a bankruptcy court’s discretion to craft equitable relief for fraud-related issues, including how far “unwinding” should go.
United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010): Supplies the modern federal framework for when judgments are “void” (typically jurisdictional defect or due process failure), limiting the “void ab initio” label.
Watt v. United States, 162 F. App’x 486 (6th Cir. 2006): Quoted for the concept of void ab initio as “as if it never existed,” which the court ultimately refused to apply broadly here.
In re Bean, 252 F.3d 113 (2d Cir. 2001): Supports the equity-based point that if a secured claim exceeds asset value, the estate may have no recoverable equity even if transfers are challenged.
In re Dave Noake, Inc., 45 B.R. 555 (Bankr. D. Vt. 1984): Used to illustrate the futility concern—avoidance may produce paperwork without changing the economic reality if the secured creditor’s position would simply be restored.
In re Schwartz, 954 F.2d 569 (9th Cir. 1992); Easley v. Pettibone Michigan Corp., 990 F.2d 905 (6th Cir. 1993); In re Garcia, 109 B.R. 335 (N.D. Ill. 1989); and In re Leeds, 589 B.R. 186 (Bankr. D. Nev. 2018): Address void/voidable debates for automatic-stay violations; the Sixth Circuit distinguished these as stay-violation cases and emphasized that Easley rejects Schwartz’s “void” approach in this circuit.

7. Conversion under Michigan law and trustee authority

Aroma Wines & Equip., Inc. v. Columbian Distrib. Servs., Inc., 871 N.W.2d 136 (Mich. 2015): Defines conversion as wrongful exercise of dominion over another’s personal property.
Victory Ests., L.L.C. v. NPB Mortg., L.L.C., 2012 WL 6913826 (Mich. Ct. App. Nov. 20, 2012) and Check Reporting Servs., Inc. v. Mich. Nat’l Bank-Lansing, 478 N.W.2d 893 (Mich. 1991): Used for the “inconsistent with ownership rights” measure of wrongfulness.
Yalda v. Better Made Snack Foods, Inc., 2018 WL 6184938 (Mich. Ct. App. Nov. 27, 2018) and Ritchie v. Attisha, 2021 WL 137252 (Mich. Ct. App. Jan. 14, 2021): Support the proposition that conversion fails where the actor had legal authority to control the property.
In re York, 291 B.R. 806 (Bankr. E.D. Tenn. 2003): Invoked by analogy regarding trustee dominion/control in administration.
In re Gray, 64 B.R. 505 (Bankr. E.D. Mich. 1986): Distinguished—while it required fee disgorgement for nondisclosure and described “disqualified ab initio” in that context, it did not mandate unwinding transactions reliant on the disqualified professional’s work, and it declined further sanctions.

8. Surety alignment

Ackron Contracting Co. v. Oakland County, 310 N.W.2d 874 (Mich. Ct. App. 1981): Cited for the point that a surety may assert the same defenses as its principal, relevant to American Casualty’s posture mirroring Taunt’s.

B. Legal Reasoning

1. A cabined view of “fraud on the court” in bankruptcy

The opinion tightens the doctrine around its institutional purpose: protecting the integrity of adjudication, not broadly punishing all litigation misconduct. By applying Demjanjuk v. Petrovsky’s five-factor test, the court elevated one threshold requirement above the rest in this case: the misconduct must be by an “officer of the court.”

The trustee (Taunt) qualifies as an officer of the court, and his Rule 2014 nondisclosure directly impaired the court’s ability to evaluate disinterestedness and the propriety of relief that benefited a secured creditor. A creditor, however, is typically an interested litigant, not a fiduciary to the tribunal; without being an officer of the court, Comerica could not be directly liable under this doctrine.

2. Vicarious liability rejected: no “right to control,” no agency

The court treated vicarious liability as a state-law agency problem (Michigan), requiring evidence that Comerica had the “right to control” how Taunt performed. The fee agreement created incentives and paid for discrete services, but it did not confer operational control over the trustee’s performance. Absent agency, Comerica could not be tagged with Taunt’s court-officer misconduct.

The court also refused to bootstrap liability through Comerica’s attorneys: even if counsel acted aggressively, the fraud-on-the-court theory in this record depended on the trustee’s special disclosure duty under Rule 2014, and expert opinions about ethics violations could not substitute for the legal elements of fraud on the court.

3. Remedy discipline: sanctions track benefit and institutional needs

The court reaffirmed broad inherent-power discretion, but also endorsed proportionality and restraint: the bankruptcy court could recognize the “inherent value” of exposing court-directed fraud while declining to fund decades of litigation that yielded only “small financial benefit” to the estate. This is an important corrective to the tendency of fraud-on-the-court claims to metastasize into open-ended fee-shifting.

4. § 549(a) avoidance: “authorized at the time” and not retroactively de-authorized

The key interpretive move is temporal and practical: § 549 targets post-petition transfers “not authorized.” These transfers were authorized when made because they were executed under operative court orders. Later vacatur did not automatically render the transfers “unauthorized” because (i) the bankruptcy court clarified it did not vacate with retroactive effect and (ii) “void ab initio” is ordinarily reserved for jurisdictional or due-process defects under United Student Aid Funds, Inc. v. Espinosa, which were not present.

The court further reinforced a bankruptcy-specific realism: even if unwinding were conceptually possible, the secured creditor’s oversecured/undersecured position and the absence of debtor equity could make the estate’s recovery illusory, while also risking destruction of value (e.g., undoing a settlement that brought cash in).

5. Conversion: later trustee disqualification does not rewrite history

Under Michigan conversion law, “wrongfulness” requires dominion inconsistent with the owner’s rights. A bankruptcy trustee, however, is statutorily empowered to take possession, liquidate, and settle claims on behalf of the estate. The court rejected the idea that later disqualification retroactively negates that statutory authority for purposes of tort liability—particularly where transfers were court-authorized at the time.

C. Impact

Limits on expanding fraud-on-the-court liability to creditors: The decision draws a bright, practical boundary: unless the party is an “officer of the court” (or is shown to be liable through a genuine agency relationship), fraud on the court will not be an all-purpose vehicle for sanctioning creditors who benefited from trustee misconduct.
Stability of bankruptcy administration and reliance on orders: By refusing to treat vacated orders as automatically void ab initio, the court protects transactional reliance on bankruptcy court orders and reduces incentives to relitigate long-closed distributions through § 549.
Remedy proportionality in long-running estate litigation: The opinion validates a sanctions approach that recognizes institutional harms (cleaning fraud from the record) while constraining fee awards to efforts that concretely advance that remedial goal.
Tort theories face statutory-authority barriers: Trustees (even if later removed) generally act under statutory and court-conferred authority; conversion claims premised on retroactive illegality will face steep hurdles absent truly ultra vires conduct.

IV. Complex Concepts Simplified

“Fraud on the court”: Not ordinary fraud between parties. It is misconduct so serious that it corrupts the court’s ability to function impartially—typically involving court officers (like trustees or lawyers) who owe special duties of candor.
“Officer of the court”: A person with a special role and heightened duty to the court (e.g., a bankruptcy trustee or attorney). Ordinary litigants like creditors usually are not officers of the court.
Rule 2014 disclosure: A bankruptcy rule requiring professionals/trustees seeking employment approval to disclose connections with parties like creditors. The trustee’s nondisclosure here mattered because it hid a conflict from the judge supervising the case.
Vicarious liability / agency (“right to control”): A principal can be liable for an agent’s misconduct if the principal had the right to control how the agent performed the work. Paying someone or benefiting from their work is not enough; control over the manner of performance is key.
“Void ab initio” vs. “voidable”: “Void ab initio” means treated as if it never existed (usually only for jurisdictional or due-process failures). “Voidable” means valid until set aside, and courts can tailor the consequences of setting it aside.
11 U.S.C. § 549(a) avoidance: A trustee can undo certain post-petition transfers of estate property if they were not authorized by the Bankruptcy Code or the court. If a transfer was made under a valid court order, it is generally “authorized.”
Conversion: A tort requiring wrongful control over another’s property. If the law authorized the person to control the property (as bankruptcy law authorizes trustees to control estate assets), conversion usually fails.

V. Conclusion

The Sixth Circuit’s decision reinforces three stabilizing principles in bankruptcy litigation: (1) fraud on the court is a narrow doctrine aimed at protecting the judicial process and typically requires misconduct by a court officer; (2) later vacatur of bankruptcy orders for trustee misconduct does not automatically make prior, order-authorized transfers avoidable under § 549, particularly absent retroactive vacatur and absent “void” defects under Espinosa; and (3) trustee disqualification does not retroactively convert authorized estate administration into conversion.

In practical terms, the opinion protects reliance on bankruptcy court orders, channels remedies toward the actual wrongdoer (the trustee/court officer who breached disclosure duties), and curbs attempts to use equitable-sounding labels (“void ab initio,” “conversion”) to reopen long-settled estate transactions without clear statutory footing.