Lamar, Archer & Cofrin, LLP v. Appling
138 S. Ct. 1752
SCOTUS2018Background
- Appling hired law firm Lamar, Archer & Cofrin and fell behind on legal fees; he told the firm he expected a large tax refund and the firm continued representation.
- The tax refund Appling actually received (~$59,851) was smaller than he had represented and was spent on business expenses; Appling later again represented he was awaiting the refund.
- Lamar obtained a state-court judgment for unpaid fees and Appling then filed Chapter 7 bankruptcy.
- Lamar brought an adversary proceeding seeking nondischargeability under 11 U.S.C. §523(a)(2)(A) (fraud by false pretenses/representations); Appling argued the statements were "statements respecting the debtor’s financial condition" governed by §523(a)(2)(B), which requires written statements.
- Bankruptcy Court and District Court treated the statements as ordinary fraud under §523(a)(2)(A); the Eleventh Circuit held a statement about a single asset can be a "statement respecting the debtor’s financial condition," so §523(a)(2)(B) applied and discharge was barred only for written statements.
- The Supreme Court affirmed the Eleventh Circuit: a statement about a single asset can qualify as a "statement respecting the debtor’s financial condition," so oral statements about a single asset fall under §523(a)(2)(B)’s category (and thus the writing requirement matters).
Issues
| Issue | Plaintiff's Argument (Lamar) | Defendant's Argument (Appling) | Held |
|---|---|---|---|
| Whether a statement about a single asset can be a “statement respecting the debtor’s financial condition” under §523(a)(2) | "Respecting" should be read narrowly to mean statements about overall financial condition; single-asset statements are not covered and thus fall under §523(a)(2)(A) | "Respecting" is broad; any statement that directly relates to or impacts overall financial condition (including single-asset statements) qualifies | A statement about a single asset can be a “statement respecting the debtor’s financial condition” under §523(a)(2) |
| Whether §523(a)(2)(B)’s writing requirement bars nondischargeability for Appling’s oral statements about a tax refund | If single-asset statements are not covered, Appling’s oral statements fall under (A) and can be nondischargeable without writing | Single-asset statements are covered by (B); because Appling’s statements were oral, (B)’s writing requirement prevents nondischargeability under that subsection | Because single-asset statements can be "respecting" financial condition, (B) applies and oral statements fail (B)’s writing requirement |
| Whether Lamar’s narrow reading avoids anomalous or unfair results | Narrow reading prevents oral misstatements from escaping §523(a)(2)(B)’s protections for creditors | Narrow reading would create arbitrary distinctions based on form; statutory text and history support broad reading | Court rejects Lamar’s narrow reading as textually and historically unsound; form-based distinctions would be incoherent |
| Whether the historical and policy context supports a broad or narrow reading of "respecting" | §523(a)(2)(B) should be limited to full statements of financial condition to avoid unduly restricting (A) and protect honest debtors | Historical judicial interpretations and statutory wording support treating single-asset statements as "respecting" financial condition; (B)’s heightened requirements reflect congressional balance | Historical practice and statutory interpretation support treating single-asset statements as covered by (B); policy concerns do not overcome the text and history |
Key Cases Cited
- TRW Inc. v. Andrews, 534 U.S. 19 (statutory interpretation should avoid rendering words superfluous)
- Kleppe v. New Mexico, 426 U.S. 529 (use of "respecting/relating to" often read broadly)
- Field v. Mans, 516 U.S. 59 (distinguishing reasonable vs. justifiable reliance and discussing congressional intent re: written statements)
- Cohen v. de la Cruz, 523 U.S. 213 (Bankruptcy Code’s policy favoring relief for the honest but unfortunate debtor)
- Lorillard v. Pons, 434 U.S. 575 (re-enactment of statutory language presumptively adopts settled judicial interpretations)