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Bartenwerfer v. Buckley

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Supreme Court of the United States
Bartenwerfer v. Buckley
Term: 2022
Important Dates
Argued: December 6, 2022
Decided: February 22, 2023
Outcome
Affirmed
Vote
9-0
Majority
Amy Coney Barrett
Concurring
Sonia Sotomayor • Ketanji Brown Jackson

Bartenwerfer v. Buckley is a case argued before the Supreme Court of the United States on December 6, 2022, during the court's October 2022-2023 term. The case was argued before the court on December 6, 2022.

The court affirmed the decision of the United States Court of Appeals for the 9th Circuit in a 9-0 ruling, holding that pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, a debtor like Kate Bartenwerfer who is liable for her partner’s fraud cannot discharge that debt in bankruptcy, regardless of her own culpability. Justice Amy Coney Barrett delivered the majority opinion of the court.[1] Click here for more information about the ruling.


HIGHLIGHTS
  • The issue: The case concerned a bankruptcy debtor's liability for another individual's fraud, even if the debtor was unaware of the fraud.
  • The question presented: "May an individual be subject to liability for the fraud of another that is barred from discharge in bankruptcy under 11 U.S.C. (the "Bankruptcy Code") § 523(a)(2)(A), by imputation, without any act, omission, intent or knowledge of her own?"[2]
  • The outcome: The court affirmed the lower court's ruling by a vote of 9-0. The court held pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, a debtor like Kate Bartenwerfer who is liable for her partner’s fraud cannot discharge that debt in bankruptcy, regardless of her own culpability.


    • The case came on a writ of certiorari to the U.S. Court of Appeals for the 9th Circuit. To review the lower court's opinion, click here.

    Timeline

    The following timeline details key events in this case:

    • February 22, 2023: The U.S. Supreme Court affirmed the 9th Circuit's ruling.
    • December 6, 2022: The U.S. Supreme Court heard oral argument.
    • May 2, 2022: The U.S. Supreme Court agreed to hear the case.
    • December 17, 2021: Kate Marie Bartenwerfer, the petitioner, appealed to the U.S. Supreme Court.
    • September 24, 2021: The 9th Circuit denied a petition for an en banc rehearing.
    • August 12, 2021: The 9th Circuit affirmed in part and reversed in part the lower court's ruling.

    Background

    David and Kate Bartenwerfer, a married couple, bought a home in San Francisco, California, and later sold it to Kieran Buckley. After the sale, Buckley sued the Bartenwerfers in state court for alleged defects in the house. He claimed (1) breach of contract, (2) negligence, (3) nondisclosure of material facts, (4) negligent misrepresentation, and (5) intentional misrepresentation. A jury found in Buckley's favor for breach of contract, negligence, and nondisclosure of material facts but did not rule in his favor for the remaining claims. Buckley was awarded damages and the Bartenwerfers filed for bankruptcy.[3][4]

    Buckley sued the Bartenwerfers in bankruptcy court, arguing the state court ruling could not be discharged in bankruptcy under 11 U.S.C. § 523(a)(2)(A). 11 U.S.C. § 523(a)(2)(A) provides that a debtor cannot discharge debt for money obtained by false pretenses or fraud. The bankruptcy court held that the Bartenwerfers intended to deceive Buckley and that Kate Bartenwerfer could be held liable for David Bartenwerfer's knowingly false representations to Buckley because of their business partnership.[3][4]

    On appeal, the Ninth Circuit Bankruptcy Appellate Panel ("BAP") affirmed the bankruptcy court's collateral estoppel ruling, and remanded the case for further proceedings to determine whether Kate Bartenwerfer knew or should have known of David's fraud, based on the United States Court of Appeals for the 8th Circuit's knew or should have known standard set in Walker v. Citizens State Bank (1984).[3][4]

    On remand, the bankruptcy court held that Kate Bartenwerfer could not be responsible for David's fraud, and the BAP affirmed the ruling. Buckley and the Bartenwerfers appealed to the full Ninth Circuit. The Ninth Circuit affirmed the collateral estoppel ruling and reversed the bankruptcy court's ruling that Kate Bartenwerfer was not responsible for David's fraud. The court remanded the case for further proceedings.[3][4]

    Question presented

    The petitioner presented the following question to the court:[2]

    Question presented:
    “ May an individual be subject to liability for the fraud of another that is barred from discharge in bankruptcy under 11 U.S.C. (the "Bankruptcy Code") § 523(a)(2)(A), by imputation, without any act, omission, intent or knowledge of her own?[5] ”

    Oral argument

    Audio

    Audio of oral argument:[6]




    Transcript

    Transcript of oral argument:[7]

    Outcome

    In a 9-0 opinion, the court affirmed the judgment of the United States Court of Appeals for the 9th Circuit, holding pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, a debtor like Kate Bartenwerfer who is liable for her partner’s fraud cannot discharge that debt in bankruptcy, regardless of her own culpability. Justice Barrett delivered the opinion of the court.[1]

    Opinion

    In the court's majority opinion, Justice Amy Coney Barrett wrote:[1]

    “

    The Bankruptcy Code strikes a balance between the interests of insolvent debtors and their creditors. It generally allows debtors to discharge all prebankruptcy liabilities, but it makes exceptions when, in Congress’s judgment, the creditor’s interest in recovering a particular debt outweighs the debtor’s interest in a fresh start. One such exception bars debtors from discharging any debt for money “obtained by . . . fraud.” 11 U. S. C. §523(a)(2)(A). The provision obviously applies to a debtor who was the fraudster. But sometimes a debtor is liable for fraud that she did not personally commit—for example, deceit practiced by a partner or an agent. We must decide whether the bar extends to this situation too. It does. Written in the passive voice, §523(a)(2)(A) turns on how the money was obtained, not who committed fraud to obtain it. [5]

    		”
    —Justice Amy Coney Barrett

    Concurring opinion

    Justice Sonia Sotomayor filed a concurring opinion, joined by Justice Ketanji Brown Jackson.

    In her concurring opinion, Justice Sotomayor wrote:[1]

    “

    The Bankruptcy Court found that petitioner and her husband had an agency relationship and obtained the debt at issue after they formed a partnership. Because petitioner does not dispute that she and her husband acted as partners, the debt is not dischargeable under the statute. The Court here does not confront a situation involving fraud by a person bearing no agency or partnership relationship to the debtor. Instead, “[t]he relevant legal context” concerns fraud only by “agents” and “partners within the scope of the partnership.” Ante, at 5–6. [5]

    		”
    —Justice Sonia Sotomayor • Ketanji Brown Jackson

    Text of the opinion

    Read the full opinion here.

    October term 2022-2023

    See also: Supreme Court cases, October term 2022-2023

    The Supreme Court began hearing cases for the term on October 3, 2022. The court's yearly term begins on the first Monday in October and lasts until the first Monday in October the following year. The court generally releases the majority of its decisions in mid-June.[8]


    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 U.S. Supreme Court, "Bartenwerfer v. Buckley", decided accessed February 22, 2023
    2. ↑ 2.0 2.1 U.S. Supreme Court, "Docket No. 21-908 QUESTION PRESENTED," accessed May 2, 2022
    3. ↑ 3.0 3.1 3.2 3.3 United States Court of Appeals for the 9th Circuit, Buckley v. Bartenwerfer (In re Bartenwerfer), decided September 24, 2021
    4. ↑ 4.0 4.1 4.2 4.3 U.S. Supreme Court, "KATE MARIE BARTENWERFER V. KIERAN BUCKLEY On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Ninth Circuit," filed December 17, 2021
    5. ↑ 5.0 5.1 5.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    6. ↑ Supreme Court of the United States, "Oral Argument - Audio," argued December 6, 2022
    7. ↑ Supreme Court of the United States, "Oral Argument - Transcript," argued December 6, 2022
    8. ↑ SupremeCourt.gov, "The Supreme Court at Work: The Term and Caseload," accessed January 24, 2022
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