United States Bankruptcy Appellate Panel of the Ninth Circuit
In re: PAUL HURLEY, Debtor.
v.
UNITED STATES OF AMERICA; ACCESSLEX INSTITUTE dba Access Group, Appellees. PAUL HURLEY, Appellant, Adv. No. 2:17-ap-01025-TWD
Submitted Without Oral Argument on May 23, 2019
Appeal
from the United States Bankruptcy Court for the Western
District of Washington Honorable Timothy W. Dore, Bankruptcy
Judge, Presiding
Appellant Paul Hurley pro se on brief; Annette L. Hayes and
Pooja Faldu Davé on brief for Appellee the United
States of America; Joseph Ward McIntosh of McCarthy &
Holthus, LLP on brief for Appellee Accesslex Institute dba
Access Group.
Before: BRAND, KURTZ and FARIS, Bankruptcy Judges.
OPINION
BRAND,
Bankruptcy Judge
INTRODUCTION
Appellant
Paul Hurley appeals a summary judgment order in favor of the
United States and Accesslex Institute, dba Access Group
(together, "Defendants"). The bankruptcy court
determined that, given Hurley's legal background and the
nature of his criminal conduct, he was unable to establish
good faith under Brunner[1] and therefore was not
entitled to a hardship discharge of his student loans under
§ 523(a)(8).[2] We AFFIRM.
I.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
A.
Prepetition events
Hurley
received his law degree in 2004 and his L.L.M. in tax in
2006. He received federal and private student loans to fund
his legal education and bar examination costs. Hurley was
admitted to practice law in the state of Washington in
November 2006 but changed his license to inactive status in
January 2010.
Hurley
has made payments on both his federal and private student
loans. He consolidated his federal student loans in 2010 and
entered into an Income Based Repayment Plan. He has also been
diligent in his efforts to obtain deferments and
forbearances. Hurley was not in default on his student loans
at the time he filed for bankruptcy.
In June
2009, Hurley was hired as a revenue agent for the Internal
Revenue Service. Hurley conducted audits of taxpayers'
federal tax returns.
In July
2015, Hurley began auditing the 2013 and 2014 tax returns for
Have a Heart Compassion Care, Inc., a medical marijuana
dispensary.[3]Hurley met with Ryan Kunkle, the
representative for Have a Heart, on several occasions to
discuss the tax returns. After the men had completed the
audit process and signed the necessary forms, they went
outside to have a discussion "off the record." As
part of that discussion, Hurley told Kunkle that he had saved
Have a Heart over $1 million in taxes. Hurley then solicited
a bribe of $20, 000 from Kunkle, which Hurley stated he
needed to help pay his student loan debt. Fearing that Hurley
would not present the signed audit documents to his superiors
to complete the matter, Kunkle agreed to make the payment.
Kunkle immediately reported the incident to law enforcement,
who arrested Hurley after Hurley was recorded accepting two
cash payments of $5, 000 and $15, 000 from Kunkle.
Subsequently, Hurley resigned from the IRS, and he was
indicted for federal offenses in connection with this
conduct.
On May
13, 2016, Hurley was convicted for the crimes of Receiving a
Bribe by a Public Official and Receiving an Illegal Gratuity
by a Public Official, both felonies. He was sentenced to
thirty months' imprisonment and three years'
supervised release. Following his conviction, Hurley was
disbarred from the practice of law by order of the Washington
Supreme Court. Hurley was released from prison in June 2018
and is living in a halfway house in Seattle.
B.
Postpetition events
Hurley
filed a chapter 7 bankruptcy case one month after his
conviction. His debts consist almost entirely of his student
loan debt. Hurley represented that, as of the petition date,
his student loan debt totaled approximately $256, 000. Hurley
was granted a discharge on September 14, 2016.
1.
Hurley's § 523(a)(8) complaint
In
February 2017 and while incarcerated, Hurley filed a
complaint against Defendants, [4] seeking to discharge his entire
student loan debt under § 523(a)(8). In support of his
undue hardship claim, Hurley noted his conviction,
incarceration, disbarment from the practice of law, and
resulting financial circumstances. Hurley stated that due to
his disbarment and felony record, he would be unable to
return to his former profession or be employed at the same
income level, even if he could find any substantive
employment following his release. Therefore, requiring him to
pay his student loan debt would impose an undue hardship on
him and his dependents. At the time Hurley sought his
hardship discharge, he was 45 years old and had a 3-year-old
son. Hurley did not note any medical or other condition that
prevented him from working in the future.
2.
Defendants' motion ...