F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

I N R E : C E R Y B R A D L E Y P E R

L E , Debtor
,

C E R Y B R A D L E Y P E R

L E , Appellant
,

v

.

A L F O N S O F I E R

O , A

ppellee

. N o. 11-60000

B AP No. 10-1048

OPI NI ON

Appeal from the Ninth Circuit B ankruptcy

Appellate Panel Pappas, Kirscher, and L

y nch, B a n k ruptcy J udg es, Presiding

Arg ued and Submitted December 7, 2012—Pasadena, California

F iled Aug ust 2, 2013

B efore: Sandra S. I

kuta and J a cqueline H. Ng uy en, Circuit J udg es, and L arry A. B urns, * District J udg e.

O pinion by J udg e B urns

* T h e Ho n o rab l e La r r y A. B urn s, U n ited S tates District J u d g e f or th e So u th ern District o f

Calif o rn ia, sittin g b y

d esig n atio n

.I N R E : P E R L E 2

SUMMARY * *

Bankruptcy

The panel affirmed the B ankruptcy Appellate Panel’s ruling that an a

rbitration d ebt was nondisch arg e able in bankruptcy under 11 U.S.C. §§ 523(a)(3) and 523(a)(6).

The panel held that the creditor’s challeng e to the discharg eability of the debt was n o t filed within 60 day s o f the first date set for the creditors meeting but nonetheless was timely becau s e the chapter 7 debtor did not adequately identify the debt on his Schedule E, and the creditor did not have notice o r actual knowled g e of the bankruptcy

. The
p a n e l held that the creditor’s lawy er’s knowledg e could no t be imputed to the creditor on an ag ency t h e o ry when the lawy er learned of the bankruptcy during his representation o f another c lient and after the completion of his representation of the creditor in relation to the debt.

COUNSEL

J anine R. Menhennet (arg ued), Solana B each, California; J oseph Darrell Palmer, L a w Offices of Darrell Palmer, Solana B each, California, for Defendant-Appellant.

L eslie Schwaebe A k ins, L e slie Schwaebe Akins, A L aw Corporation, Carlsbad, California, for Plaintiff-Appellee.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co u rt. It h as b een p rep ared b y

co urt staf

f f o r th e co n v en i en ce o f

th e read er.I N R E : P E R L E 3

OP INION

B URNS, District J udg e:

Under the ban k r u p t c y r ules, a c reditor has a limited window of time in which to c halleng e the discharg eability o f certain kinds of de b t s

. Th at window stay s open, thoug h, if the c reditor doesn’t receive adequate notice of the bankruptcy f rom the debtor. The question in this case is wh e t h e r t h e creditor’s lawyer’s knowledg e of the bankruptcy constitutes notice to the creditor. I n the abstract, it well mig ht. B u t here there’s a w rinkle: The lawy er learned o f the debtor’s b a n kruptcy during his representation of another client, a nd althoug h the lawy e r continued to represent t h e creditor on other matters, he no long er represented the creditor in relation
t o the debt at issue. On these facts, we hold that it stretch e s the a g ency principle too far to impute the lawy er’s knowledg e of the debtor’s bankruptcy to the creditor.

I. F actual Background

Cery B radley Perle filed for bankruptcy under Chapter 7 of the B ankruptcy Code in 2 001. Among Perle’s outstanding debts was a $350,000 arbitr at i on award to F iero B rothers, a New York securities dealer. The award was made in 1998 b y

a National A ssociation of Securities Dealers (NASD) arbitration panel, w hich fo u n d that Perle had committed securities f

r a ud. F iero B rothers was represented in the

a r b i t r ation by a New York-based lawy er named Martin Russo, but Russo did not continue to represent F iero B rothers in the matter after the arbitra t i on. I nstead, F iero B rothers retained California c ounsel to confirm the award in t he California Superior Court and to obta in an enforceable judg ment ag ainst Perle. Rus s o did, however, continue toI N R E : P E R L E 4

r e p resent F iero B rothers in other u nrelated matters after t h e arbitration.

I n his bankruptcy filing
, Perle didn’t list F iero B rothers o r the $350,000 arbitration a w a r d as such o n his Schedule E, a form o n w hich a Chapter 7 debtor is required to list creditors with unsecured prior i t y claims. I nstead, he listed “NASD/NASD Reg ulation” a s the creditor on the arbitration debt, and said that the amou n t o f t h e debt w as “unknown.” He also r ep o r t e d that the debt was incurred in 1 999 (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 t y

pe of priority claims listed below. Perle
wrote “Tax es, Governmental Debts.” F inally
, althoug h Perle listed specific cre d itors to whom he owed other NASD

ar b i t ration awards on his Schedule F
, a form for non priority claims, he did not name F iero B r others on that form either.

Two months a f

t e r Perle f

iled for b ankruptcy
, Corsair C a p i t a l P a r t n e r s , a p r i v at e e q u i t y f i r m , f i l e d a nondischarg eability complaint ag ainst Pe r l e relating to a default judg ment that it had obta i n e d a g ainst him. Corsair

was represented in the bankruptcy matter by Russo, the same lawy er w ho had p reviously represented F iero B rothers in the arbitration. A lthoug h Russo was obviously a ware of Perle’s bankruptcy
, and w as still representing F iero B rothers in other
matters , he never informed F iero B r others of the pending Perle bankruptcy

.

I n March 2002, Perle received a g e neral discharg e of his debts and his bankruptcy was c losed. Over f our y ears later,I N R E : P E R L E 5

in September 2006, F iero B rothers 1 filed a motion to reopen Perle’s bankruptcy in order to challeng e the discharg eability of the arbitration award. T he b a n k r uptcy court g ranted the motion, a

nd subsequently declared the arbitration d e bt nondischarg eable. That determination was upheld b y the B ankruptcy

Appellate Panel. Perle appeals.

II. Tim eliness of

F iero Brothers’ Challenge

Perle’s first arg u ment is that F iero B rothers’ challeng e to the discharg eability of the arbitration debt wa s untimely

. Under F ederal Rule of B ankruptcy Procedure 4007(c), a

c r e ditor g enerally has 60 day s from the first date set f o r t h e creditors meeting

to file a nondischarg eability complaint for certain k i n d s of debts. F iero B rothers’ nondischarg eability

co m p l a i n t w as obviously late, and by y e ars. B ut there is an

ex c e ption to the 60-day rule. Under 11 U.S.C. § § 523(a)(3) and (a)(6), debts that r esult from a d e b t or’s willful a nd malicious acts that injure others remain nondis c h a r g e able if they a re not listed in the debtor’s schedules “in time to p ermit

. . . timely filing of a proof of c laim and timely request f or a determination of discharg eability of such debt

. . . , unless such creditor had n otice or a c t u al k nowledg e of the case in time f or such timely filing and request.” The bankruptcy
court relied o n this e x ception to f ind that Perle’s debt to F iero B rothers was nondischarg eable.

Perle d oesn’t quibble that his d ebt to F iero B rothers is o f the ty pe that is nondischar ge able under 11 U .S.C.

1 Fiero Bro th ers h ad assig n ed th e arb itra t i o n aw ard to A lf o n so Fiero
, w h o in d iv id u ally f

iled th e ch allen g e to th e d isch arg eab ility o f th e d eb t in th e b an k ru p tcy co urt. Fo r sim

plicity
, w e ref

er to Fiero B ro th ers as th e cred ito r th ro u g h o u t th is o p i n io n

.I N R E : P E R L E 6

§§ 523(a)(3) and (a)(6). To g et around the ex c eption, he must therefore es t a b l i sh either that h e adequately identified the debt on his Schedule E, or if not, that F ie r o Br o t h ers nonetheless had notice or actual knowledg e o f his bankruptcy . He maintains he has established both.

A. P erle’s Schedule E

The information a b o u t the arbitration award debt that Perle listed on his Schedule E was patently inaccura t e

. Al t h o ug h Perle tries to downplay it, the description he provided was so nebulous that it was impossible to tell that it

was F iero B r o thers to whom he wa s a c tually indebted. F o r

ex a mple, althoug h the arbitration p anel ruled unambig uously that Perle was liable to F i er o B rothers in the amount o f $350,000.00, Perle didn’t name Fi e r o B rothers o n the Schedule E nor did he list the amount. I n stead, he incorrectly reported the debt was owed to “NASD/NASD Reg u l a t i o n,” and he stated the amount was “unknown.” He also misstated the d ate the debt had been incurred, listing it as 1 9 99 even thoug h the a

rbitration panel made the award in 1998. O n top of all of t h a t , the award was neither a “ tax ” nor a “g overnmental debt,” as Perle r e p resented on the top of the Schedule E.

Perl e a r g u es that b ecause the arbitration panel’s ruling

was titled “ NASD Reg u lation, I nc.,” he reasonably believed that the d ebt was owed to the N ASD and n ot to F iero B rothers. W e doubt it. The arbitration panel’s ruling was actually titled “Award,” a nd “NASD Reg ulation, I nc., Office of Dispute Resolution” was a mere subheading on the panel’s written judg ment. Reg ardless, Perle had testified in the 1998 arbitration and knew that i t was F iero B rothers, n ot the NASD, who had obtained the a ward ag ainst him. Moreover,I N R E : P E R L E 7

Perle listed other c reditors to whom he o w ed NASD

a r b i t ration awards by their names on his Schedule F
, whi c h
sug g ests that h e knew ex actly h ow to list F iero B rothers on his bankruptcy

schedules but chose not to.

Ellett v. S t anislaus
, 506 F .3d 774 (9th Cir. 2 007), is instructive. I n that c ase, a Chapter 13 debtor n o t i f i ed the California F r anchise Tax B oard of his bankrupt cy but misstated the final dig it of his social security number so that the board c ouldn’t conveniently locate his records and f i le a timely proof of claim. Id. at 7 76–77. Althoug h the board

co u l d h a ve identified the d ebtor with only a little dilig ence,

we held that it had no responsibility to; the burden was on the debtor, in the first instance, to list the info r mation correctly

. Id. at 781. Perle’s serial mischaracteriz ation of known d etails of the 1998 arbitration a

ward was far more eg reg ious than the apparently inadvertent transposition of a sing le d i git of a social security number in Ellett

. W e conclud e t h at Perle’s Schedule E did not provide F iero B rothers with proper notice of his bankruptcy

.

B. F iero Brothers’ Im puted or Actual K now ledge

Fi e r o B rothers’ challeng e to the discharg eability of t h e d e b t may still have been untimely if it nonetheless “had notice or actual knowledg e of the [ bankruptcy ] ” in time to file

a timel y nondischarg eability c omplaint. 1 1 U .S.C. § 523(a)(3). This leads to Perle’s alternative arg ument, which is that Russo’s knowledg e and awareness of the b ankruptcy should be impute d t o Fiero B rothers on an ag ency theory

. Ordinarily
, a lawy er is a clien t ’s ag ent and, consistent with
ag ency law, clients “are considered to have notice of all facts known to their lawy er-ag en t.” R inggold Corp. v

. W orrall
,I N R E : P E R L E 8

880 F .2 d 1 1 3 8
, 1141–42 (9th Cir. 1989). B ut the ag ency principle doesn’t neatly fit this case.

Russo had stopped r epresenting F iero B rothers in relation
t o the dispute with Perle more than three y ears before Pe rl e filed for bankruptcy

. I n fa c t , w e l l b efore Perle initiated his bankruptcy
, F iero B rothers retained California coun s e l w ho

were u n a ffiliated with Russo to pursue the debt. “[ O] rdinarily
, an a ttorney -client rel ationship is terminated

once representation is com p l eted.” Damron v. Herzog
, 67 F .3d 211, 213 (9th Cir. 1995). And, g enerally speaking
, a lawy er’s authority t o r e p resent a c lient ends “because the lawy e r h a s c o m p l e t e d t h e c o n t e m p l a t e d services.” Restateme n t (Third) of the L aw Governing L awy e rs § 31 (2000). H ere, the “contemplated services” that Russo performed f

or F iero B rothe r s c o nsisted of handling the arbitration. Once the arbitration e n d e d
, Russo n o long er represented F iero B rothers with respect to it. He did continue to handle other unrelated matters for F iero B rothers, but this is of litt l e s ig nificance considering that a lawy er’s representation of a client is subject-matter specific.

Add i tionally
, Russo learned of Perle’s bankruptcy on behalf of a differe n t client, Corsair, who was contesting the discharg eability o f its own debt. This disting uishes Perle’s

case from two cases on which he r e l i e s , L ompa v. P rice ( I n

re: Price)
, 871 F .2d 97 (9th Cir. 1989) and In r e Linzer
, 264 B .R. 243 (E.D.N.Y. 2001). I n both of those c a s e s , t he lawy er w ho received notice of the debtor’s bankr u p t c y was still re p r e s enting the creditor in relation to the debt that was owed. Here, in contrast, R u s so received notice o f Perle’s bankruptcy

as Corsair’s counsel, not as F iero B rothers’.I N R E : P E R L E 9

P e rle has identified no case, nor are we able to find one , that imputes to a cli ent knowledg e that his lawy er g ained while representing a different client. I n fact, the authority is
to the contrary

. I n M

aldonado v. Ramirez , 757 F .2d 48 (3rd Cir. 1985), the T hird Circuit held that “an attorney given notice of the bankruptcy on behalf of a particular client is not called upon to review all of h is o r her files to as c e r tain whether any other client may also have a claim ag ai n st the bankrupt.” Id

. at 51. W e ag ree with this statement, and think that a c ontrary rule would impose an undue burden on counsel. B ecause Russo no long er represented F iero B rothers

on the d e bt matter when Perle filed for bankruptcy
, a nd learned of the bankruptcy filing only in the course o f representing a different client, we a re unwilling to impute the notice o r actual knowledg e of Perle’s bankruptcy filing that he had to F iero B rothers.

W e affirm the B AP’s ruling that the arbitration debt was nondischarg eable under §§ 523(a)(3) and 523(a)(6) of the B ankruptcy Code. B ecause we find that the debt was nondischarg eable u nder these sections, w e don’t reach the question w hether it was also n ondischarg eable under § 523(a)(19).

AF F IRMED.