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.[
1]*
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 (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 §523(a)(2)(A). 527 B. R.
545, 550–556 (MD Ga. 2015). The District Court affirmed. 2016 WL
1183128 (MD 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. ___
(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.”[
2] 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 (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 (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
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 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 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 pertinent significance.
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
financial condition” is “a statement that has a direct relation to,
or impact on the balance of all of the debtor’s assets and
liabilities or the debtor’s overall financial status.” Brief for
Respondent 17 (internal quotation marks and citations omitted). “A
debtor’s statement describing an individual asset or liability
necessarily qualifies,” Appling explains, because it “has a direct
impact on the
sum of his assets and liabilities.”
Ibid. “Put differently, a debtor’s statement that describes
the existence or value of a constituent element of the debtor’s
balance sheet or income statement qualifies as a ‘statement
respecting financial condition.’ ”
Ibid.
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 §523(a)(2) inquiry at some
point.
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 the debtor’s
financial condition” means only a statement that captures the
debtor’s overall financial status—must be rejected, for it reads
“respecting” out of the statute. See
TRW Inc. v.
Andrews, 534 U. S. 19, 31 (2001) (“[A] statute ought
. . . to be so construed that . . . no clause,
sentence, or word shall be superfluous, void, or insignificant”
(internal quotation marks omitted)). Had Congress intended
§523(a)(2)(B) to encompass only statements expressing the balance
of a debtor’s assets and liabilities, there are several ways in
which it could have so specified,
e.g., “statement
disclosing the debtor’s financial condition” or “statement of the
debtor’s financial condition.”[
3] But Congress did not use such narrow language.
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 trigger §523(a)(2)(B)’s
heightened nondischargeability requirements, but the exact same
misrepresentation made on its own, or in the context of a list of
some but not all of the debtor’s assets and liabilities, would not.
Lamar does not explain why Congress would draw such seemingly
arbitrary distinctions, where the ability to discharge a debt turns
on the superficial packaging of a statement rather than its
substantive content.
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, 44Stat. 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, 74Stat. 409. Congress then once more
preserved that language when it rewrote and recodified the
provision in the modern Bankruptcy Code as §523(a)(2)(B).
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, 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.[
4] When Congress used the materially same language in
§523(a)(2), it presumptively was aware of the longstanding judicial
interpretation of the phrase and intended for it to retain its
established meaning. See
Lorillard v.
Pons, 434
U. S. 575, 580 (1978) (“Congress is presumed to be aware of an
administrative or judicial interpretation of a statute and to adopt
that interpretation when it re-enacts a statute without change”);
Bragdon v.
Abbott, 524 U. S. 624, 645 (1998)
(“When administrative and judicial interpretations have settled the
meaning of an existing statutory provision, repetition of the same
language in a new statute indicates, as a general matter, the
intent to incorporate its administrative and judicial
interpretations as well”).
III
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 §523(a)(2)
in two ways. Neither argument is persuasive.
A
First, Lamar contends that Appling’s
construction gives §523(a)(2)(B) an implausibly broad reach, such
that little would be covered by §523(a)(2)(A)’s general rule
rendering nondischargeable debts arising from “false pretenses, a
false representation, or actual fraud.” That is not so. Decisions
from this Court and several lower courts considering the
application of §523(a)(2)(A) demonstrate that the provision still
retains significant function when the phrase “statement respecting
the debtor’s financial condition” is interpreted to encompass a
statement about a single asset.
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).[
5] It also has been used to bar the discharge of debts
resulting from misrepresentations about the value of goods,
property, and services.[
6]
B
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 §523(a)(2) plainly
heightens the bar to discharge when the fraud at issue was
effectuated via a “statement respecting the debtor’s financial
condition.”[
7] The heightened
requirements, moreover, are not a shield for dishonest debtors.
Rather, they reflect Congress’ effort to balance the potential
misuse of such statements by both debtors and creditors. As the
Court has explained previously:
“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 discharge.”
Field v.
Mans, 516 U. S. 59, 76–77 (1995).
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
§523(a)(2)(B)’s reach the very types of statements the House Report
described, because those debts-only statements said nothing about
assets and thus did not communicate fully the debtor’s overall
financial status. Yet in
Field, the Court explained that the
heightened requirements for nondischargeability under §523(a)(2)(B)
were intended to address creditor abuse involving such statements.
516 U. S., at 76–77. Lamar’s construction also would render
§523(a)(2)(B) subject to manipulation by creditors, frustrating the
very end Congress sought to avoid when it set forth heightened
requirements for rendering nondischargeable “statements respecting
the debtor’s financial condition.”
Ibid.
Finally, although Lamar tries to paint a picture
of defenseless creditors swindled by lying debtors careful to make
their financial representations orally, creditors are not
powerless. They can still benefit from the protection of
§523(a)(2)(B) so long as they insist that the representations
respecting the debtor’s financial condition on which they rely in
extending money, property, services, or credit are made in writing.
Doing so will likely redound to their benefit, as such writings can
foster accuracy at the outset of a transaction, reduce the
incidence of fraud, and facilitate the more predictable, fair, and
efficient resolution of any subsequent dispute.
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 §523(a)(2) of
the Bankruptcy Code. The judgment of the Court of Appeals for the
Eleventh Circuit is affirmed.
It is so ordered.
