Lamar, Archer & Cofrin, LLP v. Appling

In 2004, R. Scott Appling retained the law firm Lamar, Archer & Cofrin, LLP for litigation matters. After falling behind on legal fees, Appling orally told the firm he expected a roughly $100,000 tax refund and would use it to pay the outstanding debt. Relying on this statement, the firm continued providing services. Appling later received only about $60,000 and used the funds for business expenses instead. The firm sued for unpaid fees. When Appling filed for Chapter 7 bankruptcy, the firm sought a ruling that the debt was non-dischargeable under 11 U.S.C. § 523(a)(2)(A) for false pretenses. The bankruptcy court, district court, and Eleventh Circuit all held that the statement was a “statement respecting the debtor’s financial condition,” which under the statute must be in writing to bar discharge. Because the statement was oral, the debt remained dischargeable. The Supreme Court granted certiorari to resolve a circuit split.

The U.S. Supreme Court unanimously affirmed, holding in an opinion by Justice Sotomayor that a statement about a single asset is indeed a statement respecting the debtor’s financial condition. Because it was made only orally and not in writing, the debt could not be excepted from discharge under § 523(a)(2)(A).

Whether a debtor’s oral misrepresentation about the value of a single, specific asset qualifies as a “statement respecting the debtor’s financial condition” under 11 U.S.C. § 523(a)(2), thereby requiring a written statement to render the debt non-dischargeable.

The ruling resolved a split among the circuit courts and narrowed the fraud exception for creditors. It reinforced that oral statements concerning a debtor’s financial status are insufficient to prevent the discharge of a debt, emphasizing the Bankruptcy Code's requirement for written financial statements and providing greater certainty to debtors while underscoring the need for creditors to obtain written documentation.