Zizza v. Harrington (In Re Zizza)Zizza v. Harrington (In Re Zizza)
David G. Baker, on brief for appellant.
Eric K. Bradford, Stephen E. Meunier, and John Postulka, Trial Attorneys for the Office of the US Trustee, on brief for appellee.
I.
Zizza is a licensed attorney in Massachusetts. In 2007 and 2008, she was involved in two separate automobile accidents in which she claims she sustained injuries. On Nоvember 23, 2010, she filed suit against the driver in the first accident in Essex Superior Court in Lawrence (“the Duffy action“). On February 11, 2011, she filed suit against the driver in the second accident in Essex Superior Court in Salem (“the Sapienza action“). On February 25, 2011, the Superior Court dismissed the Duffy action for failing to meet the court‘s $25,000 jurisdictional threshold.
On March 6, 2011, Zizza filed a voluntary bankruptcy petition under Chapter 13, retaining Anthоny Rozzi as her attorney for the bankruptcy case. In her initial Statement of Financial Affairs, Zizza was asked to identify all suits to which she was a party within one year of filing her bankruptcy case. In her filed schedules, she did not disclose either the Duffy or Sapienza actions.
At the first meeting with her creditors on April 8, 2011, Zizza, accompanied by Attorney Rozzi, testified under oath and when asked whethеr there were any changes she wanted to make to her initial filings, she said “No.” Attorney Rozzi stepped in and stated that “[t]here are
Attorney Rozzi filed amended schedules on Zizza‘s behalf on Septеmber 23, 2011, which added several accounts receivable and money judgments, but did not list either the still pending Duffy or Sapienza actions. In September of 2012, Zizza settled the Sapienza action for $20,000, but she did not seek bankruptcy court approval for the settlement. On October 5, 2012, the Chapter 13 trustee, still unaware of the two lawsuits or the settlement, filed a motion to dismiss Zizza‘s bankruptcy case for failure to make plan payments. In response, on October 30, 2012, Zizza again amended her filings, finally disclosing the Duffy and Sapienza actions, as well as the settlement in Sapienza.
In light of Zizza‘s failure to disclose the Duffy and Sapienza actions in a timely manner, the Chapter 13 trustee moved to convert Zizza‘s Chapter 13 petition to a Chapter 7 petition. At the hearing on the trustee‘s motion, Attorney Rozzi argued that Zizza had not disclosed the lawsuits earlier because she did not believe they were viable. Attorney Rozzi further claimed that Zizza had not told him that the two lawsuits were active until October 2012.
The bankruptcy judge granted the motion to convert the case to a Chapter 7 petition, concluding that Zizza‘s failure to disclose the lawsuits indicatеd that she had not filed her bankruptcy case in good faith. The United States Bankruptcy Appellate Panel for the First Circuit affirmed the bankruptcy judge‘s decision. Zizza v. Pappalardo (In re Zizza), 500 B.R. 288 (B.A.P. 1st Cir. 2013).
Thereafter, on September 30, 2014, William Harrington, the United States Trustee for Region One, commenced an action seeking to deny Zizza‘s discharge on the grounds that she had made false oaths within the meaning of
Zizza appealеd to the district court, which affirmed the bankruptcy court‘s decision. Zizza v. Harrington (In re Zizza), No. 16-CV-40102-IT, 2017 WL 925002, at *1 (D. Mass. Mar. 8, 2017). A timely appeal to this court followed.
II.
While the district court affirmed the bankruptcy court‘s decision, we review the bankruptcy court‘s decision direсtly and “cede no special deference to the district court‘s determinations.” Gannett v. Carp (In re Carp), 340 F.3d 15, 21 (1st Cir. 2003). We review the bankruptcy court‘s findings of fact for clear error and its conclusions of law de novо. Id. “Whether a debtor possessed the requisite intent for
Under
Zizza does not seriously contest the first and third elеments of falsity and materiality. Zizza stipulated in the bankruptcy court that she failed to disclose the two lawsuits in her amended schedules. Omissions from schedules can constitute false oaths, In re Hannon, 839 F.3d at 71; see also Premier Capital, LLC v. Crawford (In re Crawford), 841 F.3d 1, 8 (1st Cir. 2016) (“When a debtor files her Schedules, she does so under the equivalent of an oath.“), and an omission of two pending lawsuits clearly concerned the estate‘s property. In re Hannon, 839 F.3d at 75.1
Zizza focuses her аrgument on the second denial of discharge element, which concerns scienter. According to Zizza, she informed Attorney Rozzi of the two lawsuits before the first creditors’ meeting and it was Attornеy Rozzi‘s negligence that led to the lengthy delay in disclosing the two lawsuits.
It is true that “an explanation by a bankrupt that he had acted upon advice of counsel who in turn was fully aware of all thе relevant facts generally rebuts an inference of fraud.” In re Mascolo, 505 F.2d 274, 277 (1st Cir. 1974). At the same time, “even the advice of counsel is not a defense when it is transparently plain that the property should be scheduled.” Id. at 277 n.4.
Here, the bankruptcy judge did not clearly err when he found that Zizza had made false statements with reckless indifference to the truth. The bankruptcy judge found that Zizza did not inform Attorney Rozzi that the Duffy and Sapienza actions were pending until October 2012, and the record supports this finding. Although Attorney Rozzi‘s comments at the creditors’ meeting indicate that he was aware of some pеnding lawsuits, he testified at the discharge trial that he believed the lawsuits faced jurisdictional and statute
It should hаve been “transparently plain” to Zizza, an experienced attorney, that she had an obligation to disclose the two lawsuits. In re Mascolo, 505 F.2d at 277 n.4. The question in the initial Statement of Financial Affairs could not have been clearer; it asked her whether she was involved in any suits within one year preceding her bankruptcy filing. Similarly, at the creditors’ meeting, she was asked directly whether she needed tо make any changes to her initial filings, and she responded “No.” Yet, only four days later, she was in state court arguing a motion to reinstate the Duffy action. As the bankruptcy judge found, the questions posed to Zizza “were in plain English, and as an attorney, Ms. Zizza knew the meaning of signing documents under oath.”
Finally, Zizza argues that the bankruptcy judge relied improperly on the Bankruptcy Appellate Panel‘s earlier decision in making his factual determinations. A review of the record reveals otherwise. Although the bankruptcy judge adopted “portions” of the Bankruptcy Appellate Panel‘s recitation of facts in his opinion, he did so only after reviewing the evidence submitted at trial and finding the panel‘s recitation “correctly and succinctly describe[d] the material events.” The bankruptcy judge undertook his own independent review of the evidence.
Because we affirm the denial of discharge under
For the foregoing reasons, we affirm. Costs are awarded to the United States Trustee.