U. S. Supreme Court Rules On Fraud Exception to Discharge of Debts in Bankruptcy

Wow. When New York’s highest court renders a decision providing guidance on civil fraud claims, it’s exciting (and instructive). (See New York High Court Reinforces Justifiable Reliance and Loss Causation in Fraud.) But when the United States Supreme Court gets into the act, it’s truly momentous … at least for someone who studies every tidbit of fraud jurisprudence that comes around.

In Bartenwerfer v. Buckley, 598 U. S. ____ (2023), the Supreme Court ruled that a debtor in bankruptcy cannot discharge a debt that arose from the fraudulent conduct of the debtor’s partner, even if the debtor did not personally participate in or even know about that fraud. The decision has impact in New York because partners of a general partnership and joint venturers are personally liable for the torts (including fraud) of their agents acting on behalf of the partnership or joint venture.

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