Bad Judges and Cockroaches, Part V

Let's return to our "Bad Judges and Cockroaches" series because it gives me a chance to illustrate how smart Legal Schnauzer readers are.

In our previous post in the series, I noted that a helpful reader had pointed me toward a case with strong connections to my legal-malpractice claim against Birmingham attorney Richard Poff.

I was astonished when I first read Watson v. Parker (264 B.R. 685, 2001). "I'll be darn," I thought, "Legal Schnauzer readers know their stuff."

The case originated in Kansas and involved a woman named Jenee Marie Watson, who had filed a legal-malpractice claim against an attorney named Richard W. Parker. The U.S. Bankruptcy Appellate Panel for the Tenth Circuit found that Watson's lawsuit was due to be discharged along with the other debts in Parker's bankruptcy case.

This is exactly the outcome Richard Poff is seeking in my legal-malpractice case against him. And Jefferson County Circuit Judge Allwin Horn appears ready to hand Poff such an outcome on a proverbial silver platter.

But there are some differences between Watson and my case, differences that indicate that Poff should not receive the outcome that Parker received. Certainly he should not receive such an outcome for the reasons Judge Horn has cited.

Before we go further, the U.S. Court of Appeals for the 10th Circuit issued a ruling on Watson in December 2002, and that can be found here. The 10th Circuit affirmed the bankruptcy appellate panel's finding. The bankruptcy appellate panel's finding does not appear to be available on the Web. But we will look briefly at the key points:

First, here's something I was wrong about: My lawsuit is a claim under bankruptcy law. The Watson panel found that "a claim will exist if some pre-petition conduct has occurred that will give rise to liability." Poff's liability to me for legal malpractice arose from his conduct prior to filing a bankruptcy petition. That means my lawsuit is a claim that can be discharged in his bankruptcy case. (Ouch, didn't like reading that.)

But here's where Judge Horn was wrong: I am not required to seek permission from the bankruptcy court in order to proceed in state court. In fact, I cannot seek permission, and here is why:

Poff's bankruptcy case, like that of the attorney in Watson, has been completed and his debts discharged. In order for my claim to be discharged, Poff's bankruptcy case has to be reopened. And who can reopen a bankruptcy case? Watson answers that question clearly:

"Bankruptcy Rule 5010 delineates the procedure for reopening a case. Only a debtor, creditor or trustee has standing to move for the reopening of a case."

Obviously, I'm not a debtor or a trustee in Poff's bankruptcy case. And I'm not a creditor because Poff did not list me in his schedules. According to Watson, if Poff wants to make me a creditor, he has to reopen his bankruptcy case and amend his schedules. I do not have the standing to do anything with Poff's bankruptcy case.

Bankruptcy law is complex, but this just makes common sense. When I read Horn's ruling in my case, I thought, "How am I supposed to go to bankruptcy court and get permission to do something when I don't have anything to do with that case? My name isn't mentioned anywhere in it?" I remember telling my wife, "If I go to bankruptcy court and do what Horn is ordering me to do, they are going to look at me like I'm nuts. Horn is sending me on a glorified snipe hunt."

And Watson shows that I was right about that, even if it was for the wrong reason.

Now here's a question: Was Judge Horn just mistaken in his order or did he issue his order intentionally, knowing I would get rebuffed at bankruptcy court and would probably become frustrated and just drop my case? You can probably guess which one I think it is.

So, under the law, here is what has to happen: Poff needs to go to bankruptcy court, where he is the debtor and thus has standing, and reopen his case. He needs to amend his schedules and seek to have my claim discharged. If he doesn't do this, and so far he hasn't, then by law my case must proceed in state court.

Here is where it gets tricky for Poff, and I suspect this is why neither he nor his protector, Judge Horn, want to have his bankruptcy case reopened: I'm hardly an expert on bankruptcy procedure, but if his case is reopened and I'm added as a creditor, I'm pretty sure I would be notified by the court of my right to contest discharge of my claim. One of the counts in my legal-malpractice lawsuit is for fraud, and claims that resulted from fraudulent conduct generally are not dischargeable under bankruptcy law. I would attempt to show the bankruptcy court that my claim resulted from fraud and should not be discharged.

I suspect that Poff, and his buddy Judge Horn, want no part of that process.

Why is that? Here is one reason, I suspect. In Watson, the lawsuit/claim was discharged partly because the bankruptcy panel found that Watson did not have a fiduciary relationship with her attorney, Parker. The panel found that a general attorney-client relationship is not sufficient to establish a fiduciary relationship. Such a relationship exists only where there is an express or technical trust.

Goodness knows, I'm not an expert on "express or technical trusts," and Watson is not clear about what this entails. But here, I believe, is where a key difference between Watson and my case comes into play. Watson hired Parker to represent her in an employment case, in federal court. Her case was dismissed, and Watson alleged that the dismissal was the result of Parker's negligence.

The record is not clear, but it appears that Watson had hired Parker on a contingency basis. In other words, it looks as though she paid him no money up front and was to receive a percentage of any recovery he obtained on her behalf. Because of that, the bankruptcy panel appears to find, she did not suffer the injury to "either a creditor or a creditor's property" that is required by case law.

My case is different. I paid Poff $4,500 up front to represent me. If my reading of Watson is correct, that established a fiduciary relationship. And Poff's failure to take hardly any appropriate action on my behalf represents an injury both to me and my property (the $4,500).

In Watson, the creditor was given the opportunity in bankruptcy court to present evidence of both injury and the "intent to deceive" required by fraud. She was unable to present such evidence, and her claim was discharged.

In my case, I would present evidence of both injury and fraud. I feel certain Richard Poff knows this. I imagine Judge Horn knows this too, and that's why he tried to send me on a snipe hunt to bankruptcy court.

Thanks to a Legal Schnauzer reader, I now have a pretty good idea of the motives behind Horn's unlawful ruling.

I will keep you posted on this segment of As the Schnauzer Turns.