## Facts

- Between 2003 and 2007, Chrysalis Manufacturing Corp. purchased electronic components from Husky International Electronics, Inc. and incurred a debt of nearly $164,000.
- Daniel Lee Ritz, Jr. was a director and part owner of Chrysalis.
- Husky alleged Ritz transferred large sums from Chrysalis to other entities he controlled, leaving Chrysalis without assets to pay creditors.
- Husky sued Ritz personally under state-law theories that would impose individual liability based on the alleged asset-transfer scheme.
- Ritz filed for Chapter 7 bankruptcy, and Husky initiated an adversary proceeding seeking a determination that the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A) as a debt “obtained by . . . actual fraud.”

## Issues

1. Whether “actual fraud” in 11 U.S.C. § 523(a)(2)(A) requires a debtor’s false representation to the creditor.
2. Whether “actual fraud” in § 523(a)(2)(A) includes intentional fraudulent transfer schemes designed to hinder, delay, or defraud creditors, even absent misrepresentation.
3. Whether, if fraudulent transfers qualify as “actual fraud,” the debt at issue was “obtained by” that fraud within the meaning of § 523(a)(2)(A).

## Decision

- The Supreme Court reversed the Fifth Circuit in a 7–1 decision (Justice Sotomayor).
- The Court held that “actual fraud” in § 523(a)(2)(A) encompasses fraudulent conveyance schemes even when they do not involve a false representation.
- The Court remanded for further proceedings on whether the statutory requirement that the debt be “obtained by” the fraud was satisfied on the facts.

## Legal Principles

- Under 11 U.S.C. § 523(a)(2)(A), “actual fraud” is broader than misrepresentation-based fraud and includes intentional fraudulent transfers that hinder, delay, or defraud creditors.
- Reading “actual fraud” to require a misrepresentation would collapse it into “false pretenses” and “false representation,” contrary to the statute’s structure.
- Fraudulent conveyance is a recognized form of intentional fraud that may operate through concealment and hindrance rather than inducement by false statement.
- Even when conduct qualifies as “actual fraud,” nondischargeability under § 523(a)(2)(A) still depends on whether the debt was “obtained by” that fraud, a causal inquiry to be resolved on remand.

## Conclusion

The Court held that § 523(a)(2)(A) excepts from discharge debts connected to intentional fraudulent transfer schemes even without a debtor’s misrepresentation, and it returned the case for determination of whether the “obtained by” requirement was met.


Husky Int'l Elecs., Inc. v. Ritz, 578 U.S. 356 (2016)