## Facts

- Dr. Hassan Hamidi Hashemi, a physician, took a six-week trip to Europe with his family and used his American Express cards for close to 170 charges totaling more than \$60,000, including expensive meals and luxury purchases.
- When the trip began, Hashemi owed more than \$300,000 to other credit card companies but owed American Express only about \$227.
- Hashemi had previously carried American Express balances exceeding \$60,000 and had not previously defaulted, but his annual income was under \$60,000.
- Hashemi’s main asset was a one-half ownership interest in a condominium project, and while he was abroad a second-mortgage holder began foreclosure proceedings against that project.
- Hashemi claimed the trip’s purpose was to ask his mother-in-law for funds to help with the condominium project.
- After returning, Hashemi promptly filed for bankruptcy and listed the American Express debt.
- American Express filed an adversary proceeding seeking a determination that the debt was nondischargeable as “actual fraud” under 11 U.S.C. § 523(a)(2)(A) and also sought a money judgment on the debt.
- The bankruptcy court denied Hashemi’s request for a jury trial, found the debt nondischargeable, and entered a money judgment for the balance plus interest; the district court affirmed.

## Issues

1. Does the Seventh Amendment entitle a debtor to a jury trial in a § 523(a)(2)(A) dischargeability proceeding, and, if a money judgment is also sought, is there a jury right on that component?
2. Did American Express present sufficient evidence of “actual fraud” under § 523(a)(2)(A), including a misrepresentation (or false pretense), intent to deceive, and justifiable reliance?
3. May American Express recover attorney’s fees as the prevailing party in the dischargeability litigation based on a contractual fee provision?

## Decision

- The court held there is no Seventh Amendment right to a jury trial on the dischargeability determination because the relief is equitable in nature.
- The court recognized that entering a money judgment is a legal remedy, but held any jury right on that aspect was waived in this bankruptcy setting.
- The court affirmed the finding that the American Express debt was obtained by “actual fraud” and was nondischargeable under § 523(a)(2)(A).
- The court affirmed the award of attorney’s fees to American Express where fees were authorized by the cardmember agreement.
- Disposition: Affirmed.

## Legal Principles

- Dischargeability proceedings under § 523(a) seek equitable relief; the Seventh Amendment does not guarantee a jury trial on dischargeability.
- Under the Seventh Amendment analysis described in *Granfinanciera*, courts look to the historical analogue and, especially, whether the remedy sought is legal or equitable; nondischargeability relief is equitable.
- Although a money judgment is a legal remedy, a debtor may forfeit a jury demand in bankruptcy proceedings tied to the claims allowance process.
- For credit-card debts under § 523(a)(2)(A), each use of the card can be treated as an implied representation that the cardholder intends to repay (and is not using the card while intending not to pay).
- Fraudulent intent may be inferred from the overall circumstances, including the debtor’s financial condition, the size and nature of charges (such as luxury spending), and the timing of the charges relative to bankruptcy.
- “Justifiable reliance” does not require the creditor to investigate absent warning signs and may be supported by a borrower’s prior payment history and the issuer’s ordinary authorization practices.
- Findings on intent and related factual questions in dischargeability litigation are reviewed for clear error.
- Attorney’s fees may be awarded in a § 523(a)(2)(A) action when an enforceable contract and applicable nonbankruptcy law provide for fee shifting; the Bankruptcy Code does not bar such fees solely because the dispute arises in dischargeability litigation.

## Conclusion

The Ninth Circuit affirmed a bankruptcy judgment holding Dr. Hashemi’s American Express charges nondischargeable for actual fraud under § 523(a)(2)(A), ruled that dischargeability is tried to the court without a jury (and any jury right tied to a money judgment was waived in this context), and upheld American Express’s recovery of attorney’s fees under the parties’ contract.


American Express Travel Related Services Co. v. Hashemi, 104 F.3d 1122 (1996)