In re Appling (Ch. 7 Case No. 13-30083, Adv. No. 13-3042)
The plaintiff, a law firm, contended that the debtor had agreed to pay his outstanding legal fees, as well as subsequent fees, as soon as he received his income tax refund if the law firm would continue to represent him in certain state court litigation. The law firm continued to represent the debtor, the debtor failed to pay his legal fees, and the law firm obtained a state court judgment against the debtor in state court. After the debtor filed bankruptcy, the law firm contended the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A). The court held that the debtor’s oral representation to use his tax refund to pay the legal fees was not a statement respecting his financial condition, that the law firm’s reliance was justifiable, and that, if the law firm proved the remaining elements of section 523(a)(2)(A), the law firm’s claim for damages included legal fees incurred both prior to and subsequent to the alleged misrepresentation.