Husky International Electronics, Inc. v. Ritz, ___ S.Ct.___, 2016 WL 2842452 (May 16, 2016) (case no. 15-145)
The United States Supreme Court, in Husky International Electronics, Inc. v. Ritz, on 5/16/16, reversed a 5th circuit Court of appeals case, In re Ritz, 787 F.3d 312 (5th Cir., May 22, 2015) and resolved a split among Circuit Courts nationwide, by the US Supreme Court ruling that the term “actual fraud” in Bankruptcy Code 11 USC § 523(a)(2)(A) encompasses forms of fraud, like fraudulent conveyance schemes, that can be effected without a false representation.
In Husky, the US Supreme Court ruled that anything that counts as “fraud” and is done with wrongful intent is “actual fraud,” although “the term is difficult to define more precisely.” However, there was “no need to adopt a definition for all times and all circumstances here because, from the beginning of English bankruptcy practice, courts and legislatures have used the term ‘fraud’ to describe a debtor’s transfer of assets that, like [the debtor’s] scheme, impairs a creditor’s ability to collect the debt.”
The US Supreme Court’s 7-1 decision, with only Justice Thomas dissenting, is consistent with In re Lawson, 791 F.3d 214 (1st Cir., July 1, 2015); McClellan v. Cantrell, 217 F.3d
890 (7th Cir. 2000); In re Vitanovich, 259 B.R. 873 (6th Cir. B.A.P. 2001) and In re Vickery, 488 B.R. 680 (10th Cir. B.A.P., March 13, 2013), all of which held that “actual fraud” under § 523(a)(2)(A) does not require a misrepresentation.