Northbay Wellness v. Beyries, No. 13-17381 (9th Cir. 2015)
Annotate this CaseAfter attorney Michael Beyries stole $25,000 from his client, Northbay, he filed for bankruptcy and Northbay sought a determination that the debt was nondischargeable. The bankruptcy court applied the doctrine of unclean hands and held that Northbay's illegal marijuana sales prevented it from obtaining relief. The court reversed, concluding that Beyries's wrongdoing outweighed Northbay's and that application of the unclean hands doctrine to absolve an attorney of responsibility for stealing for his client would be contrary to the public interest.
Court Description: Bankruptcy The panel reversed the district court’s affirmance of the bankruptcy court’s conclusion that a judgment debt was not nondischargeable under 11 U.S.C. § 523(a)(4) as a debt for fraud or defalcation while acting in a fiduciary capacity. The debt was for the chapter 7 debtor’s breach of contract and conversion of a legal defense trust fund for Northbay Wellness Group, operator of a medical marijuana dispensary. The debtor served on Northbay’s board of directors and acted as its attorney. The bankruptcy court held that under the doctrine of unclean hands, Northbay’s illegal marijuana sales prevented it from obtaining relief under § 523(a)(4). The panel reversed because the debtor’s wrongdoing outweighed Northbay’s and because application of the unclean hands doctrine to absolve an attorney of responsibility for stealing from his client would be contrary to the public interest.
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