Trustee liability: Is there enough protection for these "arms of the court?"

For decades, courts have remained divided on the issue of whether trustees may be held personally liable when acting within their statutory and official capacity. Two diverging schools of thought with their own unique perception as to the appropriate standard for imposing personal liability on bankruptcy trustees have emerged. Proponents of the negligence theory argue that holding trustees duly accountable for their actions encourages more efficient administration of the bankruptcy estate. Proponents of granting trustees additional protection counter that failure to adequately protect bankruptcy trustees from personal liability will only discourage qualified individuals from accepting trustee appointments. The real debate is over how much protection to grant them. Accordingly, this debate is the primary focus of this article as it traces the historical development of trustee liability as well as the range of protection subsequently accorded by the courts. As an added feature, particular and growing areas of interest to the trustee, including environmental and tax law, are also discussed.