Zizza v. Harrington (In Re Zizza)
875 F.3d 728
| 1st Cir. | 2017Background
- Kimberly Zizza, a Massachusetts attorney, had two personal-injury suits (Duffy and Sapienza) arising from separate car accidents in 2007–08. Duffy was initially dismissed for lack of jurisdiction; Sapienza remained pending and later settled for $20,000.
- Zizza filed Chapter 13 bankruptcy on March 6, 2011, but did not list Duffy or Sapienza in her initial schedules or in response to the Statement of Financial Affairs question about suits within the prior year.
- At the April 8, 2011 § 341 creditors’ meeting Zizza said there were no changes to her filings; her attorney, Anthony Rozzi, interjected that lawsuits would be added and later promised amended schedules.
- Amended schedules filed in September 2011 still omitted Duffy and Sapienza. Sapienza settled in September 2012 for $20,000 without bankruptcy approval; Zizza finally amended schedules to disclose both suits and the settlement in October 2012.
- The Chapter 13 trustee moved to convert to Chapter 7 for lack of good faith; the bankruptcy court converted the case, and later the U.S. Trustee sought denial of discharge under 11 U.S.C. § 727(a)(4)(A) (false oaths). After trial the bankruptcy court denied discharge for reckless indifference to the truth; the district court affirmed and the First Circuit affirmed on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Zizza made false statements under oath by omitting two lawsuits from schedules | U.S. Trustee: omissions were false oaths material to estate | Zizza: omissions were inadvertent or counsel's responsibility | Held: Yes — omissions are false oaths and material |
| Whether the false statements were made knowingly and fraudulently (scienter) | U.S. Trustee: Zizza acted with reckless indifference to the truth | Zizza: she told attorney Rozzi; any failure was his negligence/advice of counsel | Held: No clear error in finding Zizza did not inform Rozzi and acted with reckless indifference |
| Whether advice of counsel shields Zizza from § 727(a)(4)(A) liability | Zizza: reliance on counsel rebuts fraud inference | U.S. Trustee: advice of counsel fails if property obviously should be scheduled | Held: Advice of counsel not a defense where omissions were transparently plain to an attorney-debtor |
| Whether earlier Chapter 13 proceedings’ false oaths can support denial of Chapter 7 discharge | Zizza (raised on reply): Chapter 13 statements not "in connection with" Chapter 7 | U.S. Trustee: earlier proceedings are within § 727(a)(4) scope | Held: Argument forfeited by raising only in reply; court did not reach merits |
Key Cases Cited
- Gannett v. Carp, 340 F.3d 15 (1st Cir.) (standard of review for bankruptcy appeals)
- Hannon v. ABCD Holdings, LLC, 839 F.3d 63 (1st Cir.) (elements of § 727(a)(4)(A) and materiality of omissions)
- Premier Capital, LLC v. Crawford, 841 F.3d 1 (1st Cir.) (schedules filed under oath)
- Boroff v. Tully, 818 F.2d 106 (1st Cir.) (reckless indifference treated as fraud under § 727)
- In re Mascolo, 505 F.2d 274 (1st Cir.) (advice-of-counsel can rebut fraud except when property is transparently schedulable)
- Toye v. O'Donnell, 728 F.3d 41 (1st Cir.) (deference to bankruptcy judge on intent findings)
- Braintree Labs., Inc. v. Citigroup Glob. Mkts. Inc., 622 F.3d 36 (1st Cir.) (issue-preservation rules)