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Educational Financial Service v. Stephanie Henry (In re Henry)

Summarizing by Bradley Pearce

Selenberg v. Bates (In re Selenberg)

Two ethical lapses resulted in a nondischargeable debt.

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Case Type:
Case Status:
16-30649 (5th Circuit, May 08,2017) Published
Fifth Circuit affirmed ruling of district court (E.D. La.), which affirmed bankruptcy court judgment in favor of creditor on 523(a)(2)(A) claim. Debtor attorney obtained extension of credit from former client alleging malpractice by negotiating forbearance from suit in exchange for promissory note. Debtor used intentional fraud to obtain such extension of credit by failing to disclose material information to client, as required by professional ethical obligations, including duty to advise client of right to obtain independent legal counsel to evaluate proposed resolution of claim.
Procedural context:
Following trial on 523(a)(2) claim, bankruptcy court entered judgment in favor of plaintiff creditor. Debtor defendant appealed to district court, which affirmed. Debtor defendant appealed to Fifth Circuit.
In 2008, Bates asserted personal injury claim against former attorney, represented by Selenberg. Selenberg failed to file claim by statute of limitations deadline, and case was dismissed. Selenberg advised Bates that he had no malpractice insurance, and no money to pay her. Selenberg offered to give Bates a promissory note for $275k, plus attorneys' fees up to 25% of value of note, with Bates agreeing not to sue Selenberg for malpractice or to seek discipline against him. Selenberg never made payments on note, and Bates filed disciplinary complaint against him, then sued Selenberg on note. At that point, statute of limitations had run on civil malpractice claim. Selenberg filed chapter 7, and Bates commenced 523(a)(2) dischargeability action against him.
Prado, Higginson, Costa

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