Husky Int'l Electronics, Inc. v. Ritz (15-145)

argument 15-145

Husky Int'l Electronics, Inc. v. Ritz

Supreme Court of the United States 53 min 4 speakers 8 chapters transcribed 4 days ago official recording ↗

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What is the statutory purpose of the 1978 amendment adding “or actual fraud” to the discharge bar?

John G. Roberts 0:00

We'll hear argument next in case fifteen one hundred and forty five, Husky International Electronics versus Ritz. Mr. Voretzky.

Mr. Zoretsky 0:08

Mr Chief Justice, it may have pleased the Court. Congress amended the discharge bar in nineteen seventy eight to add actual fraud as an additional ground for barring discharge. That amendment must be given meaning. our interpretation is the only one that does so. Consistent with the common law understanding that Congress codified, actual fraud is a term of art that includes a recipient's knowing participation in a deliberate fraudulent transfer. By contrast, the Fifth Circuit's holding that actual fraud invariably requires a misrepresentation makes Congress's amendment superfluous, because it equates actual fraud with the pre existing terms, false pretenses and false representations. Respondents' interpretation is even worse.

Mr. Zoretsky 0:52

It merely restates a pre existing CENTER requirement, and in any event, Congress could not plausibly have added or actual fraud to the discharge bar in order to modify the previous terms to mean intentional false pretenses or an intentional false representation.

John G. Roberts 1:08

You you'd acknowledge, wouldn't you, that if the language we used in field against man's uh is applicable uh or if we meant it, that you lose, some degree of reliance is required to satisfy the element of causation inherit in the phrase obtained by?

Mr. Zoretsky 1:25

I don't think that language is applicable here because that language has to be.

John G. Roberts 1:33

does apply across the board, you certainly lose.

Mr. Zoretsky 1:36

Yes, if you believe that obtained by invariably requires reliance, but it does not, the the language and field was in the context of a misrepresentation case. What obtained by requires is causation in the context of a fraudulent transfer, where the recipient knowingly participates in a deliberate fraudulent transfer centuries of common law established that he commits actual fraud himself. He therefore obtains the property by actual fraud. That's the

Unknown 2:03

he would have to show down the road Yeah. Yeah. the money was obtained by writs because As I understand it, it was Uh transferred. And from the first company to a bunch of other companies, not to Mr. Ritz himself.

Mr. Zoretsky 2:25

That's correct, Justice Ginsburg. Down the road, we would need to show that our state law veil piercing uh theory is correct. That, however, is not the basis on which the Fifth Circuit rejected our claim. The Fifth Circuit rejected our claim on the sole ground that it thought actual fraud invariably requires a misrepresentation.

Unknown 2:43

You have to show under State Law not only the the veil pierc that there is veil pier piercing, but that there is fraud under state law?

Mr. Zoretsky 2:50

Correct. We would need to show two things under state law. First of all, that uh Ritz orchestrated a fraudulent transfer by transferring assets from Chrysalis to his other entities in order to hinder creditors. Second of all, we would have to show that he perpetrated that fraud for his own personal benefit, which is what would then allow us to pierce the corporate veil and hold him personally liable for the fraud that he committed.

Anthony M. Kennedy 3:14

Are you piercing the corporate veil as to the first company or as to the transferee companies?

Mr. Zoretsky 3:19

Anthony M. Kennedy 3:20

Mr. Zoretsky 3:21

we are piercing the It could be either, but uh but I think we are piercing the bail as to the transferee companies because we're pursuing this on a recipient theory.

Anthony M. Kennedy 3:29

Right. 'Cause 'cause I understood your whole brief to be pursuing this on a recipient theory. And your brief, you know, makes some sense as that. But then when you look back to your complaint It suggests that the veil piercing actually was uh attempted as to the transferor company, which doesn't do you any good under your theory.

Mr. Zoretsky 3:49

So the complaint fully spells out all of the details related to the transfers and generally this is a joint appendix ninety seven asks for uh avoidance of all fraudulent transfers to the extent necessary to satisfy plaintiff's claims. Throughout the litigation, the claims were then pursued on a transferee theory. The Fifth Circuit understood the claim that way and rejected it solely because, again, the lack of a misrepresentation.