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Click here for the full text of this decision FACTS:California resident Donald Totten contacted the Dallas-based firm Tummel & Carroll for legal representation involving Louisiana corporations Worldwide Floral Inc. and Worldwide Floral Exchange. Totten was president of WFI and Robert Quinlivan was WFE’s president. As part of the discussions over the legal representation, Totten made several representations, such as that he was a wealthy investor familiar with commercial litigation. He said his Visa and MasterCard merchant account with a local bank had been improperly terminated, but he did not tell the firm that the application he filed to get a merchant account contained false or misleading information. Totten and Quinlivan signed a retainer agreement with the firm on a contingency-fee basis. Quinlivan signed in his corporate and individual capacities, while Totten signed only in his corporate capacity. The firm filed suit against the bank in Quinlivan’s individual capacity. At the hearing on Quinlivan’s request for a temporary injunction requiring the bank to reinstate the merchant account a WFE employee testified that the WFE merchant account application falsely stated that, even though Craig James was not an owner of WFE, his name was used because he had a better credit history than Totten and Quinlivan. Noting that Totten and Quinlivan had come to court with “unclean hands,” the district court denied the temporary injunction. Totten and Quinlivan told the firm it did not want to pursue the claim against the bank anymore. The firm billed the pair, and when they didn’t pay, the firm sued them, plus WFE and WFI, for breach of contract. The firm also alleged a fraud claim against Totten. The claim against Quinlivan settled for $45,222. The court judgment did not including findings that Quinlivan incurred his debt under false pretenses, and the action was severed from the case against Totten. Totten’s case eventually settled with for $36,000. The judgment was made executory in Louisiana in 1994 with prior notice of enforcement served on Quinlivan. Quinlivan and his wife filed for Chapter 7 bankruptcy in October 1996, but they did not list the judgment to the firm as a liability, even though it made up more than 50 percent of the total value of creditors’ claims against them. In 2002, the Quinlivans moved to reopen the case to get a discharge of their debt because the judgment had impressed a lien on real estate that Quinlivan inherited after his bankruptcy discharge. The firm found out about the bankruptcy at this time. The firm filed a complaint to exempt the dischargeability of the debt from the Louisiana executory judgment, and the bankruptcy court conducted a hearing in May and June of 2004. The bankruptcy court found that Quinlivan did not make fraudulent representations to the firm, and so held that 11 U.S.C. �523(a)(2)(A), did not bar the discharge. The bankruptcy also found that Totten’s misrepresentations were not made while Quinlivan was present, and found that Totten was not Quinlivan’s agent. On appeal to the district court, the firm argued that Quinlivan was responsible for Totten’s misrepresentations. Because there was not a “formal agency agreement” between the two, the district court said the law firm could not invoke �523(a)(2)(A). The bankruptcy court further ruled that Quinlivan’s failure to list the firm’s judgment against him was through inadvertence. HOLDING:Reversed and remanded. The court finds that when determining whether the �523(a)(2)(A) exception applies, the culpability of the indebted partner is irrelevant. Even if the partner is innocent of wrongdoing and had no knowledge or reason to know of the fraud, the debt cannot be discharged, according to �523(a)(2)(A). Therefore, if Totten acted as Quinlivan’s partner or agent, and Totten committed fraud in incurring debt to the firm, the Quinlivan’s debt cannot be discharged. The court faults the bankruptcy court for not exploring the nature of the relationship between Totten and Quinlivan. “The bankruptcy court’s conclusion erred in conflating the inquiry regarding whether Quinlivan knew about Totten’s representations and whether Totten was acting as Quinlivan’s agent. Under [Deodati v. M.M.] Winkler [& Assocs, 239 F.3d 746 (5th Cir. 2001)], debt incurred as a result of fraud cannot be discharged even if the debtor did not know or had no reason to know that his agent was acting fraudulently.” The case is remanded to determine whether Totten was acting as an agent for Quinlivan and whether Totten indeed committed fraud in securing the contract with the firm. OPINION:Clement, J.; Garwood, Clement and Prado, JJ.

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