Lamar, Archer & Cofrin, LLP v. Appling

R. Scott Appling (debtor) hired law firm Lamar, Archer & Cofrin, LLP (Lamar) (creditor) to represent him in business litigation. After Appling fell behind in paying his bills, Lamar threatened to stop representing him. In response, Appling said that he was expecting a $100,000 tax refund, which would be enough to pay his outstanding and future legal fees. Consequently, Lamar kept representing him. When the tax refund came through, however, Appling received only $59,851, and Appling and his wife used the money for their business instead of paying Lamar. At a subsequent meeting with Lamar, Appling stated that he was still awaiting the refund, prompting Lamar to again continue representing him. Five years after the underlying litigation ended, the legal fees remained outstanding. Lamar sued Appling, obtaining a judgment for the fees. Before Lamar could recoup on that judgment, Appling and his wife filed for Chapter 7 bankruptcy, seeking a discharge of their debts. As part of the bankruptcy, Lamar initiated an adversary proceeding against Appling, arguing that Appling’s debt to Lamar wasn’t dischargeable because it arose from fraudulent statements about the tax refund. Appling countered that the debt remained dischargeable because his false statements weren’t in writing. The bankruptcy court held in Lamar’s favor, finding the debt nondischargeable. The district court affirmed, but the court of appeals reversed, holding that the debt was dischargeable. The United States Supreme Court granted certiorari.