Case Summary:
Plaintiff and Defendant are former co-owners of a tavern. The business eventually failed, and the Plaintiff alleged that the Defendant converted funds from the business to pay his personal debts and expenses. Plaintiff sued the Defendant in state court, and the parties settled the matter by submitting it to binding arbitration. The arbitration agreement contained a provision stating that any award would be nondischargeable in bankruptcy. The arbitrators awarded the Plaintiff $310,000, and the Defendant subsequently filed bankruptcy. The Plaintiff brought this adversary and summary judgment motion to declare her debt nondischargeable. Plaintiff argues that the nondischargeability provision from the arbitration agreement is binding upon the Defendant, and even if it is not, promissory or judicial estoppel should prevent him from arguing the debt is dischargeable. The Defendant argues that he did not give his attorney the authority to enter into the agreement, that he understood any award would be dischargeable, and that promissory and judicial estoppel do not apply.

The Court found that although the Defendant did not sign the arbitration agreement himself, he was bound by it because he cloaked his attorney in the authority necessary to settle the case. The Court next found that the nondischargeability provision in the arbitration agreement was not binding on the Defendant. Prepetition waivers of discharge are not allowed. The Code authorizes certain postpetition waivers, but does not authorize prepetition waivers. The Plaintiff also did not satisfy the requirements of promissory or judicial estoppel. The debt may satisfy the elements required for nondischargeability under § 523(a)(2), (4), or (6), but genuine issues of material fact remain, so the Court denied summary judgment. Lastly, the Court found that the Defendant waived the attorney-client privilege by voluntarily disclosing otherwise privileged communications with his attorneys in affidavits submitted to the Court.

Statute/Rule References:
11 U.S.C. § 727(a)(10) -- Waiver of Discharge
Fed R. Evid. 502 -- Attorney-Client Privilege

Key Terms:
Attorney-Client Privilege
Estoppel
Waiver of Discharge