Sixth Circuit holds that notice to a creditor’s former attorney doesn’t comport with due process


Bankruptcy rules require debtors to give the names and addresses of their creditors so that the creditors can receive notice of the bankruptcy proceedings. Some creditors may have obtained a civil court judgment against the debtor. And often those judgment creditors were represented by an attorney in the case that led to the judgment. In Lampe v. Kash, the Sixth Circuit addressed whether notice to that attorney is sufficient notice under the due process clause. If the Court answered “yes,” the buck would essentially pass from the debtor to the attorney that received a notice intended for a former client. But the Court went the other direction; it placed the onus on the debtor to give notice to the creditor, not the creditor’s former attorney.

The law firm Gerhardstein & Branch represented Lampe in a civil case against Kash. Gerhardstein & Branch successfully obtained a $25,000 judgment against Kash. Eight years later, the judgment remained unsatisfied and Kash filed for bankruptcy protection. When he listed the names and addresses of his creditors, he listed Lampe in care of Gerhardstein & Branch. The notice was sent to Gerhardstein & Branch, but never made it to Lampe. As a result, Lampe did not participate in the bankruptcy proceedings that discharged her judgment. The district court refused to allow Lampe to revive her judgment and she appealed.

The Sixth Circuit reversed the district court, holding that sending notice to Gerhardstein & Branch fell short of what the Due Process Clause requires—service of notice “reasonably calculated” to reach the creditor. The Court’s rationale was grounded in principles concerning a lawyer’s duty to former clients and agency. The Court observed that lawyers have “no general continuing obligation” to pass information to their former clients (though they should “use reasonable efforts” to do so). And while a lawyer’s knowledge is imputed to his client during the representation, the end of the representation also ends the imputation of knowledge. The Court also rhetorically asked, “What if the creditor fired the attorney for incompetence? What if there was a pay dispute? What if the attorney abandoned the client without telling him?” Those practical observations led to the conclusion that there was no reason for the debtor to believe that the notice would actually reach the creditor.

Practice Note: The Sixth Circuit stopped short of saying that notice to a creditor’s former attorney would never suffice or that an attorney has no obligation to forward a notice to a former client. But it is not without significance from a professional liability standpoint. Had the decision gone the other way, it could have raised possible liability exposure for attorneys that long-since stopped serving a client. For example, if the Sixth Circuit had affirmed, Lampe’s next step may have been to sue Gerhardstein & Branch for failing to ensure that she received the notice. But such a claim is now moot. Due to the failure of notice, the bankruptcy discharge could not affect Lampe’s judgment and Lampe suffered no injury through whatever Gerhardstein & Branch did or did not do to pass along the notice.

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