Reversing the Fifth Circuit, the Supreme Court held in Husky International Electronics Inc. v. Ritz that a debt can be nondischargeable for “actual fraud” under Section 523(a)(2)(A) of the Bankruptcy Code in the absence of a fraudulent misrepresentation to the creditor, according to ABI’s Bill Rochelle in today’s Rochelle Daily Wire. Writing the majority opinion yesterday, Justice Sonia Sotomayor held that “actual fraud” subsumes “forms of fraud, like fraudulent conveyance schemes, that can be effected without a false representation.” A “fraudulent conveyance of property made to evade payments to creditors” is among the types of actual fraud that can result in a nondischargeable debt, she said. Dissenting in the 7-1 decision, Justice Clarence Thomas argued that the majority’s opinion ignores the plain meaning of the statute. Citing the Norton and Collier treatises that agree with his interpretation, he said that the “context” of the subsection “dictates that ‘actual fraud’ ordinarily does not include fraudulent transfers.” Read the full analysis.
ABI's Supreme Court page has more information on Husky International Electronics Inc. v. Ritz, including amicus briefs, a video recap of the oral argument featuring Bill Rochelle and additional filings in the case.
For more on the case, watch Prof. Michelle Harner talk to Danielle Spinelli and Eric Brunstad, recapping their debate on the issues in the case at a special “Eye on Bankruptcy” segment from last month's Annual Spring Meeting. Watch here.
Brunstad will also be a speaker on a special media webinar tomorrow looking at the Supreme Court’s decision in Husky International Electronics Inc. v. Ritz. A limited number of spots will be made available for ABI members and registration details will be in tomorrow’s ABI Headlines and via ABI social media (http://twitter.abi.org, http://facebook.abi.org).
