In re: Perle

A creditor does not have notice or actual knowledge of its debtor's bankruptcy sufficient to meet the filing exception under 11 U.S.C. §§ 523(a)(3) and (a)(6) if the creditor's lawyer, who no longer represents the creditor in the matter, is made aware of the bankruptcy after his representation of a different creditor.

In 2001, Cery Bradley Perle filed for Chapter 7 bankruptcy. His debts included a $350,000 arbitration award to the Fiero Brothers. Attorney Martin Russo represented Fiero Brothers during the arbitration, but Fiero Brothers ended its lawyer-client relationship with Russo in the matter when it retained California council to confirm and enforce the award. In his bankruptcy filing, Perle did not list Fiero Brothers as arbitration debt on his Schedule E or F form; instead, he listed the debt as "NASD/NASD Regulation" and an unknown amount. Two months after Perle filed bankruptcy, Russo found out about Perle's bankruptcy through another creditor client with whom Perle also owed debt. Russo did not inform Fiero Brothers of the bankruptcy filing. Perle's bankruptcy case closed in 2002, and in 2006, Fiero Brothers filed a motion to re-open the case to "challenge the dischargeability of the arbitration award." The bankruptcy court granted the motion, but declared the arbitration debt nondischargeable. The Bankruptcy Appellate Panel upheld the decision. Under Federal Rule of Bankruptcy Procedure 4007(c), a creditor has 60 days from the date of the first creditor's meeting to file a complaint of the nondischargeability status of the debt. There is an exception to the 60-day rule under 11 U.S.C. §§ 523(a)(3) and (a)(6) that applies if the creditor did not have notice or actual knowledge of the bankruptcy and therefore could not timely file a complaint. The Ninth Circuit held that the Fiero Brothers did not have proper notice or actual knowledge for two reasons. First, Perle did not properly list Fiero Brothers on the Schedule E form. Second, Russo's knowledge of Perle's bankruptcy did not impute onto Fiero Brothers because the lawyer-client relationship in the matter of the arbitration award had ended well before Russo gained knowledge of Perle's bankruptcy. AFFIRMED.