Thursday, June 25, 2015

Discharge of Malpractice Judgment in Bankruptcy

A recent bankruptcy case in Miami involved the issue of whether a certain dental malpractice claim was dischargeable in bankruptcy.  All debt, with certain exceptions, is generally dischargeable in a chapter 7 bankruptcy case.

In this case, the former patient sought to except the dental malpractice claim from the chapter 7 discharge on the allegation that the dentist obtained his fee under "false pretenses, a false representation, or actual fraud..." as set forth in section 523(a)(2)(A) of the bankruptcy code. In this case, the former dental patient alleged that there was a "false representation" or "fraud" by claiming that the dentist did not disclose his drug dependency and lapse in malpractice insurance.

 False Representation

In this case, the bankruptcy court did not find a "false representation." The bankruptcy court explained that to establish a "false representation" under 11 U.S.C. § 523(a)(2)(A) requires proof of a false or misleading statement with the intent to deceive, inducing a person to turn over money or property.  The court stated that the establishment of a  "false representation" requires an "expressed misrepresentation - oral or written"  and that "[s]ilence, or lack of communication, cannot deliver proof by a preponderance of the evidence."  In this case, the court did not find that the dentist had made any misrepresentations that were intended to deceive the former patient and cause her to turn over money or property.

Actual Fraud

The court also found that there was a lack of "actual fraud." The court reviewed that the establishment of "actual fraud" under this section "refers to common law fraud, and requires" the proof by a preponderance of the evidence that 1. there was a false representation made with the purpose and intent of deception, 2. that the representation was relied upon, 3. that the reliance was justifiably founded, and 4. that the person was damaged as a result of the false statement.   The court noted that "actual fraud" may be proven by a misrepresentation that is express or implied, but proof of actual fraud is required and not fraud merely implied in law.  The court found that the former patient did not prove express or implied "actual fraud" was committed.