LAMAR, ARCHER & COFRIN, LLP v. APPLING
No. 16-1215
SUPREME COURT OF THE UNITED STATES
Decided June 4, 2018
584 U. S. ____ (2018)
Argued April 17, 2018
OCTOBER TERM, 2017
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
Syllabus
LAMAR, ARCHER & COFRIN, LLP v. APPLING
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT
Respondent R. Scott Appling fell behind on his bills owed to petitioner law firm Lamar, Archer & Cofrin, LLP, which threatened to withdraw representation and place a lien on its work product if Appling did not pay. Appling told Lamar that he could cover owed and future legal expenses with an expected tax refund, so Lamar agreed to continue representation. However, Appling used the refund, which was for much less than he had stated, for business expenses. When he met with Lamar again, he told the firm he was still waiting on the refund, so Lamar agreed to complete pending litigation. Appling never paid the final invoice, so Lamar sued him and obtained a judgment. Shortly thereafter, Appling and his wife filed for Chapter 7 bankruptcy. Lamar initiated an adversary proceeding against Appling in Bankruptcy Court, arguing that his debt to Lamar was nondischargeable pursuant to
Held: A statement about a single asset can be a “statement respecting the debtor‘s financial condition” under
(a) The key word in the relevant statutory phrase here is the preposition “respecting.” In ordinary usage, “respecting” means “concerning; about; regarding; in regard to; relating to.” Lamar contends that the definitions “about,” “concerning,” “with reference to,” and “as regards” denote a more limited scope than “related to.” And under that more limited meaning, Lamar asserts, a formal financial statement providing a detailed accounting of one‘s assets and liabilities would qualify as “a statement respecting the debtor‘s financial condition,” but a statement about a single asset would not. But the overlapping and circular definitions of these words belie the clear distinction Lamar attempts to impose. And the firm gives no example of a phrase in a legal context similar to the one at issue here in which toggling between “related to” and “about” has any pertinent significance.
Use of the word “respecting” in a legal context generally has a broadening effect, ensuring that a provision‘s scope covers not only its subject but also matters relating to that subject. Cf. Kleppe v. New Mexico, 426 U. S. 529, 539. Indeed, this Court has typically read the phrase “relating to“—one of respecting‘s meanings—expansively. See, e.g., Coventry Health Care of Mo., Inc. v. Nevils, 581 U. S. ____.
Appling and the United States, as amicus curiae, accordingly advance an expansive interpretation here. This Court agrees with them that, given the ordinary meaning of “respecting,” Lamar‘s statutory construction must be rejected, for it reads “respecting” out of the statute. See TRW Inc. v. Andrews, 534 U. S. 19, 31. Had Congress intended
(b) Lamar‘s interpretation would yield incoherent results. For instance, on Lamar‘s view, a misrepresentation about a single asset made in the context of a formal financial statement or balance sheet would constitute a “statement respecting the debtor‘s financial condition” and trigger
(c) The statutory history of the phrase “statement respecting the debtor‘s financial condition” corroborates this Court‘s reading. Between 1926, when the phrase was introduced, and 1978, when Congress enacted the Bankruptcy Code, Courts of Appeals consistently construed the phrase to encompass statements addressing just one or some of a debtor‘s assets or liabilities. When Congress used the materially same language in
(d) Lamar‘s additional arguments are unpersuasive. First, Lamar contends that Appling‘s construction gives
848 F. 3d 953, affirmed.
SOTOMAYOR, J., delivered the opinion of the Court, in which ROBERTS, C. J., and KENNEDY, GINSBURG, BREYER, and KAGAN, JJ., joined, and in which THOMAS, ALITO, and GORSUCH, JJ., joined as to all but Part III-B.
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
No. 16-1215
LAMAR, ARCHER & COFRIN, LLP, PETITIONER v. R. SCOTT APPLING
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT
[June 4, 2018]
JUSTICE SOTOMAYOR delivered the opinion of the Court.*
The Bankruptcy Code prohibits debtors from discharging debts for money, property, services, or credit obtained by “false pretenses, a false representation, or actual fraud,”
This case is about what constitutes a “statement respecting the debtor‘s financial condition.” Does a statement about a single asset qualify, or must the statement be about the debtor‘s overall financial status? The answer matters to the parties because the false statements at issue concerned a single asset and were made orally. So, if the single-asset statements here qualify as “respecting the debtor‘s financial condition,”
The statutory language makes plain that a statement about a single asset can be a “statement respecting the debtor‘s financial condition.” If that statement is not in writing, then, the associated debt may be discharged, even if the statement was false.
I
Respondent R. Scott Appling hired petitioner Lamar, Archer & Cofrin, LLP (Lamar), a law firm, to represent him in a business litigation. Appling fell behind on his legal bills, and by March 2005, he owed Lamar more than $60,000. Lamar informed Appling that if he did not pay the outstanding amount, the firm would withdraw from representation and place a lien on its work product until the bill was paid. The parties met in person that month, and Appling told his attorneys that he was expecting a tax refund of ““approximately $100,000,“” enough to cover his owed and future legal fees. App. to Pet. for Cert. 3a. Lamar relied on this statement and continued to represent Appling without initiating collection of the overdue amount.
When Appling and his wife filed their tax return, however, the refund they requested was of just $60,718, and they ultimately received $59,851 in October 2005. Rather than paying Lamar, they spent the money on their business.
Appling and his attorneys met again in November 2005, and Appling told them that he had not yet received the refund. Lamar relied on that statement and agreed to complete the pending litigation and delay collection of the outstanding fees.
In March 2006, Lamar sent Appling its final invoice. Five years later, Appling still had not paid, so Lamar filed suit in Georgia state court and obtained a judgment for
Lamar initiated an adversary proceeding against Appling in Bankruptcy Court for the Middle District of Georgia. The firm argued that because Appling made fraudulent statements about his tax refund at the March and November 2005 meetings, his debt to Lamar was nondischargeable pursuant to
The Bankruptcy Court held that a statement regarding a single asset is not a “statement respecting the debtor‘s financial condition” and denied Appling‘s motion to dismiss. 500 B. R. 246, 252 (MD Ga. 2013). After a trial, the Bankruptcy Court found that Appling knowingly made two false representations on which Lamar justifiably relied and that Lamar incurred damages as a result. It thus concluded that Appling‘s debt to Lamar was nondischargeable under
The Court of Appeals for the Eleventh Circuit reversed. It held that “statement[s] respecting the debtor‘s . . . financial condition’ may include a statement about a single asset.” In re Appling, 848 F. 3d 953, 960 (2017). Because Appling‘s statements about his expected tax refund were not in writing, the Court of Appeals held that
II
A
One of the “main purpose[s]” of the federal bankruptcy system is “to aid the unfortunate debtor by giving him a fresh start in life, free from debts, except of a certain character.” Stellwagen v. Clum, 245 U. S. 605, 617 (1918). To that end, the Bankruptcy Code contains broad provisions for the discharge of debts, subject to exceptions. One such exception is found in
More specifically,
B
1
“Our interpretation of the Bankruptcy Code starts ‘where all such inquiries must begin: with the language of the statute itself.“” Ransom v. FIA Card Services, N. A., 562 U. S. 61, 69 (2011). As noted, the relevant statutory text is the phrase “statement respecting the debtor‘s financial condition.” Because the Bankruptcy Code does not define the words “statement,” “financial condition,” or “respecting,” we look to their ordinary meanings. See ibid.
There is no dispute as to the meaning of the first two terms. A “statement” is “the act or process of stating, reciting, or presenting orally or on paper; something stated as a report or narrative; a single declaration or remark.” Webster‘s Third New International Dictionary 2229 (1976) (Webster‘s). As to “financial condition,” the parties agree, as does the United States, that the term means one‘s overall financial status. See Brief for Petitioner 23; Brief for Respondent 25; Brief for United States as Amicus Curiae 12.
For our purposes, then, the key word in the statutory phrase is the preposition “respecting,” which joins together “statement” and “financial condition.” As a matter of ordinary usage, “respecting” means “in view of: considering; with regard or relation to: regarding; concerning.” Webster‘s 1934; see also American Heritage Dictionary 1107 (1969) (“[i]n relation to; concerning“); Random House Dictionary of the English Language 1221 (1966) (“regarding; concerning“); Webster‘s New Twentieth Century Dictionary 1542 (2d ed. 1967) (“concerning; about; regarding; in regard to; relating to“).
According to Lamar, these definitions reveal that ““respecting’ can be ‘defined broadly,“” but that the word “isn‘t
The Court finds no basis to conclude, however, at least in this context, that “related to” has a materially different meaning than “about,” “concerning,” “with reference to,” and “as regards.” The definitions of these words are overlapping and circular, with each one pointing to another in the group. “Relate” means “to be in relationship: have reference,” and, in the context of the phrase “in relation to,” “reference, respect.” Webster‘s 1916; see also id., at 18a (Explanatory Note 16.2). “About” means “with regard to,” and is the equivalent of “concerning.” Id., at 5. “Concerning” means “relating to,” and is the equivalent of “regarding, respecting, about.” Id., at 470. “Reference” means “the capability or character of alluding to or bearing on or directing attention to something,” and is the equivalent of “relation” and “respect.” Id., at 1907. And “regard” means “to have relation to or bearing upon: relate to,” and is the equivalent of “relation” and “respect.” Id., at 1911. The interconnected web formed by these words belies the clear distinction Lamar attempts to impose. Lamar also fails to put forth an example of a phrase in a legal context similar to the one at issue here in which toggling between “related to” and “about” has any perti-
Use of the word “respecting” in a legal context generally has a broadening effect, ensuring that the scope of a provision covers not only its subject but also matters relating to that subject. Cf. Kleppe v. New Mexico, 426 U. S. 529, 539 (1976) (explaining that the Property Clause, “in broad terms, gives Congress the power to determine what are ‘needful’ rules ‘respecting’ the public lands,” and should receive an “expansive reading“).
Indeed, when asked to interpret statutory language including the phrase “relating to,” which is one of the meanings of “respecting,” this Court has typically read the relevant text expansively. See, e.g., Coventry Health Care of Mo., Inc. v. Nevils, 581 U. S. ____, ____ (2017) (slip op., at 7) (describing “‘relate to” as “expansive” and noting that “Congress characteristically employs the phrase to reach any subject that has ‘a connection with, or reference to,’ the topics the statute enumerates“); Morales v. Trans World Airlines, Inc., 504 U. S. 374, 378-390 (1992) (explaining that ““relating to“” has a “broad” ordinary meaning and accordingly holding that the Airline Deregulation Act of 1978 provision prohibiting the States from enforcing any law ““relating to rates, routes, or services“” of any air carrier pre-empted any fare advertising guidelines that “would have a significant impact upon the airlines’ ability to market their product, and hence a significant impact upon the fares they charge“); Ingersoll-Rand Co. v. McClendon, 498 U. S. 133, 139 (1990) (““A law “relates to” an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan.’ Under this ‘broad common-sense meaning,’ a state law may ‘relate to’ a benefit plan . . . even if the law is not specifically designed to affect such plans, or the effect is only indirect” (citation omitted)).
Advancing that same expansive approach here, Appling contends that a “statement respecting the debtor‘s finan-
The United States as amicus curiae supporting Appling offers a slightly different formulation. In its view, a “statement respecting the debtor‘s financial condition” includes “a representation about a debtor‘s asset that is offered as evidence of ability to pay.” Brief for United States as Amicus Curiae 11. Although Appling does not include “ability to pay” in his proffered definition, he and the United States agree that their respective formulations are functionally the same and lead to the same results. See Tr. of Oral Arg. 50-52, 58. That is so because to establish the requisite materiality and reliance, a creditor opposing discharge must explain why it viewed the debtor‘s false representation as relevant to the decision to extend money, property, services, or credit. If a given statement did not actually serve as evidence of ability to pay, the creditor‘s explanation will not suffice to bar discharge. But if the creditor proves materiality and reliance, it will be clear the statement was one “respecting the debtor‘s financial condition.” Whether a statement about a single asset served as evidence of ability to pay thus ultimately always factors into the
We agree with both Appling and the United States that, given the ordinary meaning of “respecting,” Lamar‘s preferred statutory construction—that a “statement respecting
We also agree that a statement is “respecting” a debtor‘s financial condition if it has a direct relation to or impact on the debtor‘s overall financial status. A single asset has a direct relation to and impact on aggregate financial condition, so a statement about a single asset bears on a debtor‘s overall financial condition and can help indicate whether a debtor is solvent or insolvent, able to repay a given debt or not. Naturally, then, a statement about a single asset can be a “statement respecting the debtor‘s financial condition.”
2
Further supporting the Court‘s conclusion is that Lamar‘s interpretation would yield incoherent results. On Lamar‘s view, the following would obtain: A misrepresentation about a single asset made in the context of a formal financial statement or balance sheet would constitute a “statement respecting the debtor‘s financial condition” and
In addition, a highly general statement like, “I am above water,” would need to be in writing to foreclose discharge, whereas a highly specific statement like, “I have $200,000 of equity in my house,” would not. This, too, is inexplicably bizarre.
3
Lastly, the statutory history of the phrase “statement respecting the debtor‘s financial condition” corroborates our reading of the text. That language can be traced back to a 1926 amendment to the Bankruptcy Act of 1898 that prohibited discharge entirely to a debtor who had “obtained money or property on credit, or obtained an extension or renewal of credit, by making or publishing, or causing to be made or published, in any manner whatsoever, a materially false statement in writing respecting his financial condition.” Act of May 27, 1926, §6, 44 Stat. 663-664.
When Congress again amended this provision in 1960, it retained the “statement in writing respecting . . . financial condition” language. See Act of July 12, 1960, Pub. L. 86–621, §2, 74 Stat. 409. Congress then once more preserved that language when it rewrote and recodified the provision in the modern Bankruptcy Code as
Given the historical presence of the phrase “statement respecting the debtor‘s financial condition,” lower courts had ample opportunity to weigh in on its meaning. Between 1926, when the phrase was introduced, and 1978,
In addition to its plain-text arguments discussed and rejected above, see supra, at 5-7, Lamar contends that Appling‘s rule undermines the purpose of
A
First, Lamar contends that Appling‘s construction gives
Section 523(a)(2)(A) has been applied when a debt arises from “forms of fraud, like fraudulent conveyance schemes, that can be effected without a false representation.” Husky Int‘l Electronics, Inc. v. Ritz, 578 U. S. ____, ____ (2016) (slip op., at 3).4 It also has been used to bar the discharge of debts resulting from misrepresentations about the value of goods, property, and services.5
Second, Lamar asserts that Appling‘s interpretation is inconsistent with the overall principle that the Bankruptcy Code exists to afford relief only to the ““honest but unfortunate debtor,“” Cohen, 523 U. S., at 217, because it leaves “fraudsters” free to “swindle innocent victims for money, property or services by lying about their finances, then discharge the resulting debt in bankruptcy, just so long as they do so orally.” Brief for Petitioner 35.
This general maxim, however, provides little support for Lamar‘s interpretation. The text of
“The House Report on the [Bankruptcy Reform Act of 1978] suggests that Congress wanted to moderate the burden on individuals who submitted false financial statements, not because lies about financial condition are less blameworthy than others, but because the relative equities might be affected by practices of consumer finance companies, which sometimes have encouraged such falsity by their borrowers for the very purpose of insulating their own claims from dis-
Specifically, as detailed in Field, the House Report noted that consumer finance companies frequently collected information from loan applicants in ways designed to permit the companies to later use those statements as the basis for an exception to discharge. Commonly, a loan officer would instruct a loan applicant ““to list only a few or only the most important of his debts“” on a form with too little space to supply a complete list of debts, even though the phrase, “I have no other debts,” would be printed at the bottom of the form or the applicant would be “instructed to write the phrase in his own handwriting.” Id., at 77, n. 13. If the debtor later filed for bankruptcy, the creditor would contend that the debtor had made misrepresentations in his loan application and the creditor would threaten litigation over excepting the debt from discharge. That threat was “often enough to induce the debtor to settle for a reduced sum,” even where the merits of the nondischargeability claim were weak. H. R. Rep. No. 95–595, p. 131 (1977).
Notably, Lamar‘s interpretation of “statement respecting the debtor‘s financial condition” would not bring within
IV
For the foregoing reasons, the Court holds that a statement about a single asset can be a “statement respecting the debtor‘s financial condition” under
It is so ordered.