Lamar, Archer & Cofrin, LLP v. Appling

• Citation: 138 S.Ct. 1752,201 L.Ed.2d 102
• Decision Date: 04 June 2018
• Docket Number: No. 16–1215.,16–1215.
• Parties: LAMAR, ARCHER & COFRIN, LLP, Petitioner v. R. Scott APPLING.
• Court: United States Supreme Court

138 S.Ct. 1752

201 L.Ed.2d 102

LAMAR, ARCHER & COFRIN, LLP, Petitioner

v.R. Scott APPLING.

No. 16–1215.

Supreme Court of the United States

Argued April 17, 2018.

Decided June 4, 2018.

Gregory G. Garre, Washington, DC, for Petitioner.

Paul Hughes, Washington, DC, for Respondent.

Jeffrey E. Sandberg, for the United States as amicus curiae, by special leave of the Court, supporting the respondent.

Robert C. Lamar, David W. Davenport, Lamar, Archer & Cofrin, LLP, Atlanta, GA, Gregory G. Garre, Benjamin W. Snyder, Seung Wan (Andrew) Paik, Latham & Watkins LLP, Washington, DC, for Petitioner.

Eugene R. Fidell, Yale Law School, Supreme Court Clinic, New Haven, CT, Paul W. Hughes, Michael B. Kimberly, Andrew J. Pincus, Charles A. Rothfeld, Jonathan Weinberg, Mayer Brown LLP, Washington, DC, for Respondent.

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," 11 U.S.C. § 523(a)(2)(A), or, if made in writing, by a materially false "statement ... respecting the debtor's ... financial condition," § 523(a)(2)(B).

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," § 523(a)(2)(B) poses no bar to discharge because they were not made in writing. If, however, the statements fall into the more general category of "false pretenses, ... false representation, or actual fraud," § 523(a)(2)(A), for which there is no writing requirement, the associated debt will be deemed nondischargeable.

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 $104,179.60. Shortly thereafter, Appling and his wife filed for Chapter 7 bankruptcy.

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 11 U.S.C. § 523(a)(2)(A), which governs debts arising from "false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's ... financial condition." Appling, in turn, moved to dismiss, contending that his alleged misrepresentations were "statement[s] ... respecting [his] financial condition" and were therefore governed by § 523(a)(2)(B), such that Lamar could not block discharge of the debt because the statements were not "in writing" as required for nondischargeability under that provision.

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 (Bkrtcy.M.D.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 § 523(a)(2)(A). 527 B.R. 545, 550–556 (M.D.Ga.2015). The District Court affirmed. 2016 WL 1183128 (M.D.Ga., Mar. 28, 2016).

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 § 523(a)(2)(B) did not bar Appling from discharging his debt to Lamar. Id., at 961.

The Court granted certiorari, 583 U.S. ––––, 138 S.Ct. 734, 199 L.Ed.2d 601 (2018), to resolve a conflict among the Courts of Appeals as to whether a statement about a single asset can be a "statement respecting the debtor's financial condition."¹ We agree with the Eleventh Circuit's conclusion and affirm.

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, 38 S.Ct. 215, 62 L.Ed. 507 (1918). To that end, the Bankruptcy Code contains broad provisions for the discharge of debts, subject to exceptions. One such exception is found in 11 U.S.C. § 523(a)(2), which provides that a discharge under Chapter 7, 11, 12, or 13 of the Bankruptcy Code "does not discharge an individual debtor from any debt ... for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by" fraud. This exception is in keeping with the "basic policy animating the Code of affording relief only to an ‘honest but unfortunate debtor.’ " Cohen v. de la Cruz, 523 U.S. 213, 217, 118 S.Ct. 1212, 140 L.Ed.2d 341 (1998).

More specifically, § 523(a)(2) excepts from discharge debts arising from various forms of fraud. Subparagraph (A) bars discharge of debts arising from "false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's ... financial condition." Subparagraph (B), in turn, bars discharge of debts arising from a materially false "statement ... respecting the debtor's ... financial condition" if that statement is "in writing."

B

"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, 131 S.Ct. 716, 178 L.Ed.2d 603 (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 always used that way." Brief for Petitioner 27. The firm contends that " ‘about,’ " " ‘concerning,’ " " ‘with reference to,’ " and " ‘as regards' " denote a more limited scope than " ‘related to.’ " Brief for Petitioner 3, 18, 27. When "respecting" is understood to have one of these more limited meanings, Lamar asserts, a "statement respecting the debtor's financial condition" is "a statement that is ‘about,’ or that makes ‘reference to,’ the debtor's overall financial state or well-being." Id., at 27–28. Under that formulation, a formal financial statement providing a detailed accounting of one's assets and liabilities would qualify, as would statements like " ‘Don't worry, I am above water,’ " and " ‘I am in good financial shape.’ " Id., at 19, 28. A statement about a single asset would not.

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...