Argued and Submitted December 7, 2012—Pasadena, California
Appeal from the Ninth Circuit Bankruptcy Appellate Panel Pappas, Kirscher, and Lynch, Bankruptcy Judges, Presiding
Janine R. Menhennet (argued), Solana Beach, California; Joseph Darrell Palmer, Law Offices of Darrell Palmer, Solana Beach, California, for Defendant-Appellant.
Leslie Schwaebe Akins, Leslie Schwaebe Akins, A Law Corporation, Carlsbad, California, for Plaintiff-Appellee.
The panel affirmed the Bankruptcy Appellate Panel's ruling that an arbitration debt was nondischargeable in bankruptcy under 11 U.S.C. §§ 523(a)(3) and 523(a)(6).
The panel held that the creditor's challenge to the dischargeability of the debt was not filed within 60 days of the first date set for the creditors meeting but nonetheless was timely because the chapter 7 debtor did not adequately identify the debt on his Schedule E, and the creditor did not have notice or actual knowledge of the bankruptcy. The panel held that the creditor's lawyer's knowledge could not be imputed to the creditor on an agency theory when the lawyer learned of the bankruptcy during his representation of another client and after the completion of his representation of the creditor in relation to the debt.
Before: Sandra S. Ikuta and Jacqueline H. Nguyen, Circuit Judges, and Larry A. Burns, [*] District Judge.
BURNS, District Judge:
Under the bankruptcy rules, a creditor has a limited window of time in which to challenge the dischargeability of certain kinds of debts. That window stays open, though, if the creditor doesn't receive adequate notice of the bankruptcy from the debtor. The question in this case is whether the creditor's lawyer's knowledge of the bankruptcy constitutes notice to the creditor. In the abstract, it well might. But here there's a wrinkle: The lawyer learned of the debtor's bankruptcy during his representation of another client, and although the lawyer continued to represent the creditor on other matters, he no longer represented the creditor in relation to the debt at issue. On these facts, we hold that it stretches the agency principle too far to impute the lawyer's knowledge of the debtor's bankruptcy to the creditor.
I. Factual Background
Cery Bradley Perle filed for bankruptcy under Chapter 7 of the Bankruptcy Code in 2001. Among Perle's outstanding debts was a $350, 000 arbitration award to Fiero Brothers, a New York securities dealer. The award was made in 1998 by a National Association of Securities Dealers (NASD) arbitration panel, which found that Perle had committed securities fraud. Fiero Brothers was represented in the arbitration by a New York-based lawyer named Martin Russo, but Russo did not continue to represent Fiero Brothers in the matter after the arbitration. Instead, Fiero Brothers retained California counsel to confirm the award in the California Superior Court and to obtain an enforceable judgment against Perle. Russo did, however, continue to represent Fiero Brothers in other unrelated matters after the arbitration.
In his bankruptcy filing, Perle didn't list Fiero Brothers or the $350, 000 arbitration award as such on his Schedule E, a form on which a Chapter 7 debtor is required to list creditors with unsecured priority claims. Instead, he listed "NASD/NASD Regulation" as the creditor on the arbitration debt, and said that the amount of the debt was "unknown." He also reported that the debt was incurred in 1999 (rather than 1998), and that the consideration for it was "Arbitration." At the top of the Schedule E, there was a space to identify the type of priority claims listed below. Perle wrote "Taxes, Governmental Debts." Finally, although Perle listed specific creditors to whom he ...