In Chapter 7 proceeding filed by debtor-lawyer, Bankruptcy Ct. did not err in finding under 11 USC section 523(a)(4) that malpractice judgment against debtor was not dischargeable, where said judgment arose out of debtor’s “defalcation” while acting in fiduciary capacity when representing 90-year-old client in real estate transaction that resulted in client selling his home for substantially less than market value without debtor retaining life estate in said home, which resulted in client being evicted from home. Record showed that: (1) debtor could not communicate directly with Polish-speaking client, and that debtor communicated with client via translations made by opposing counsel; and (2) client obtained malpractice judgment, after state court found that debtor’s reliance on translations made by opposing counsel to communicate with his client was per se unreasonable. Moreover, Bankruptcy Ct. could properly look to debtor’s violation of at least three rules of professional responsibility to find that debtor’s substandard representation of client satisfied level of recklessness that in turn was sufficient to establish instant defalcation under section 523(a)(4).
Federal 7th Circuit Court
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