When R. Scott Appling fell behind in paying his legal bills, he orally told his attorneys that he would repay them with a tax refund he was expecting to get. When he got the (lower than expected) refund, he used it to pay other expenses instead, lying to his attorneys so they would continue with the representation. After the attorneys sued Appling and got judgment, he petitioned for a Chapter 7 discharge. In an adversary proceeding the attorneys argued that Appling’s debt should not be discharged under 11 U.S.C. sec. 523(a)(2)(A) because of his knowing misrepresentations. Appling argued that he was entitled to the discharge because his oral misrepresentations constituted “statement[s] respecting the debtor’s . . . financial condition” that had to be in writing for the exemption to apply under 11 U.S.C. sec. 523(a)(2)(B). The attorneys argued that the misrepresentations here were about a single asset, and not Appling’s overall financial condition, but the Eleventh Circuit ruled for Appling. The Court, in a unanimous decision by Justice Sotomayor, affirmed, holding that a debtor’s misrepresentation about even a single asset constituted a statement about his or her “financial condition” sufficient to require it to be in writing in order for it to exempt a debt from discharge. Justices Thomas, Alito, and Gorsuch did not join the portion of the decision analyzing congressional intent for these portions of the Bankruptcy Code. A link to the opinion in Lamar, Archer & Cofrin, LLP v. Appling is here.
Court Permits Bankruptcy Discharge Despite Oral Misrepresentation Over Ability To Pay Legal Bill
TAGGED: scotus, Bankruptcy Discharge, 11 U.S.C. sec. 523(a)(2)(A), 11 U.S.C. sec. 523(a)(2)(B), Lamar Archer & Cofrin LLP v. Appling