By Michael Fuller, Portland Trial Attorney
In re Perle (9th Cir. Aug. 2, 2013)
In 1998, Fiero Brothers won an arbitration award for securities fraud against Cery Perle.
Perle filed chapter 7 bankruptcy in 2001. His schedules disclosed the arbitration award but failed to list Fiero Brothers as a creditor.
Although Fiero Brothers' attorney participated in the bankruptcy on behalf of another client, Fiero Brothers never received direct notice and didn't appear in the case.
The Ninth Circuit Court of Appeals held the arbitration award was non-dischargeable because Fiero Brothers did not receive proper notice, despite its attorney's actual knowledge of the case.
The Court cited Ringgold Corp. v. Worrall, 880 F.2d 1138, 1141–42 (9th Cir. 1989) for the general rule that a lawyer's knowledge may be imputed upon a client.
However, the Court reasoned that under the facts of this case, agency theory was inapplicable because Fiero Brothers' attorney did not represent it in the bankruptcy at the time he learned of the case.
Read the full opinion for complete analysis: http://cdn.ca9.uscourts.gov/datastore/opinions/2013/08/02/11-60000%20web%20REVISED.pdf
Commentary: The equities in this case favor the creditor because its underlying claim is indisputably non-dischargeable. Even if the BAP held Fiero Brothers' attorney's knowledge constituted proper notice for purposes of section 523, Fiero Brothers might have nonetheless prevailed by proving the debtor's omission was intentional.