ARCHER et ux. v. WARNER

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314 OCTOBER TERM, 2002
Syllabus
ARCHER et ux. v. WARNER
certiorari to the united states court of appeals for
the fourth circuit
No. 01–1418. Argued January 13, 2003—Decided March 31, 2003
A debt is not dischargeable in bankruptcy “to the extent” it is “for money
. . . obtained by . . . fraud.” 11 U. S. C. § 523(a)(2)(A). Petitioners, the
Archers, sued respondent Warner and her former husband in state court
for (among other things) fraud connected with the sale of the Warners’
company to the Archers. In settling the lawsuit, the Archers executed
releases discharging the Warners from all present and future claims,
except for obligations under a $100,000 promissory note and related in-
struments. The Archers then voluntarily dismissed the lawsuit with
prejudice. After the Warners failed to make the first payment on the
promissory note, the Archers sued in state court. The Warners filed
for bankruptcy, and the Bankruptcy Court ordered liquidation under
Chapter 7. The Archers brought the present claim, asking the Bank-
ruptcy Court to find the $100,000 debt nondischargeable, and to order
the Warners to pay the sum. Respondent Warner contested nondis-
chargeability. The Bankruptcy Court denied the Archers’ claim. The
District Court and the Fourth Circuit affirmed. The latter court held
that the settlement agreement, releases, and promissory note worked a
kind of “novation” that replaced (1) an original potential debt to the
Archers for money obtained by fraud with (2) a new debt for money
promised in a settlement contract that was dischargeable in bankruptcy.
Held: A debt for money promised in a settlement agreement accompanied
by the release of underlying tort claims can amount to a debt for money
obtained by fraud, within the nondischargeability statute’s terms.
Pp. 318–323.
(a) The outcome here is governed by Brown v. Felsen, 442 U. S. 127,
in which (1) Brown filed a state-court suit seeking money that he said
Felsen had obtained through fraud; (2) the court entered a consent de-
cree based on a stipulation providing that Felsen would pay Brown a
certain amount; (3) neither the decree nor the stipulation indicated the
payment was for fraud; (4) Felsen did not pay; (5) Felsen entered bank-
ruptcy; and (6) Brown asked the Bankruptcy Court to look behind the
decree and stipulation and hold that the debt was nondischargeable be-
cause it was a debt for money obtained by fraud. Id., at 128–129. This
Court found that, although claim preclusion would bar Brown from mak-
ing any claim “ ‘based on the same cause of action’ ” that he had brought

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Syllabus
in state court, id., at 131, it did not prevent the Bankruptcy Court from
looking beyond the state-court record and the documents terminating
the state-court proceeding to decide whether the debt was a debt for
money obtained by fraud, id., at 138–139. As a matter of logic, Brown’s
holding means that the Fourth Circuit’s novation theory cannot be right.
If reducing a fraud claim to settlement definitively changed the nature
of the debt for dischargeability purposes, the nature of the debt in
Brown would have changed similarly, thereby rendering that debt dis-
chargeable. This Court’s instruction that the Bankruptcy Court could
“weigh all the evidence,” id., at 138, would have been pointless, as there
would have been nothing for the court to examine. Moreover, the
Court’s statement in Brown that “the mere fact that a conscientious
creditor has previously reduced his claim to judgment should not bar
further inquiry into the true nature of the debt,” ibid., strongly favors
the Archers’ position. Finally, Brown’s basic reasoning applies here.
The Court noted that a change in the Bankruptcy Code’s nondis-
chargeability provision indicated that “Congress intended the fullest
possible inquiry” to ensure that “all debts arising out of ” fraud are “ex-
cepted from discharge,” no matter their form. Ibid. Congress also in-
tended to allow the determination whether a debt arises out of fraud to
take place in bankruptcy court, not to force it to occur earlier in state
court when nondischargeability concerns “are not directly in issue and
neither party has a full incentive to litigate them.” Id., at 134. The
only difference between Brown and this case—that the relevant debt
here is embodied in a settlement, not in a stipulation and consent judg-
ment—is not determinative, since the dischargeability provision applies
to all debts that “aris[e] out of ” fraud. Id., at 138. Pp. 318–322.
(b) The Fourth Circuit remains free, on remand, to determine
whether Warner’s additional arguments were properly raised or pre-
served, and, if so, to decide them. Pp. 322–323.
283 F. 3d 230, reversed and remanded.
Breyer, J., delivered the opinion of the Court, in which Rehnquist,
C. J., and O’Connor, Scalia, Kennedy, Souter, and Ginsburg, JJ.,
joined. Thomas, J., filed a dissenting opinion, in which Stevens, J.,
joined, post, p. 323.
Craig Goldblatt argued the cause for petitioners. With
him on the briefs was Seth P. Waxman.
Lisa Schiavo Blatt argued the cause for the United States
as amicus curiae urging reversal. With her on the brief
were Solicitor General Olson, Assistant Attorney General

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Opinion of the Court
McCallum, Deputy Solicitor General Clement, William
Kanter, and Robert Kamenshine.
Donald B. Ayer argued the cause for respondent. With
him on the brief were Jack W. Campbell IV and Rayford K.
Adams III.*
Justice Breyer delivered the opinion of the Court.
The Bankruptcy Code provides that a debt shall not be
dischargeable in bankruptcy “to the extent” it is “for money
. . . obtained by . . . false pretenses, a false representation, or
actual fraud.” 11 U. S. C. § 523(a)(2)(A). Can this language
cover a debt embodied in a settlement agreement that set-
tled a creditor’s earlier claim “for money . . . obtained by . . .
fraud”? In our view, the statute can cover such a debt, and
we reverse a lower court judgment to the contrary.
I
This case arises out of circumstances that we outline as
follows: (1) A sues B seeking money that (A says) B obtained
*Briefs of amici curiae urging reversal were filed for the State of Ohio
et al. by Betty D. Montgomery, Attorney General of Ohio, David M.
Gormley, State Solicitor, and Marcus J. Glasgow and John K. McManus,
Assistant Attorneys General, and by the Attorneys General for their re-
spective jurisdictions as follows: Bruce M. Botelho of Alaska, Janet Napo-
litano of Arizona, Bill Lockyer of California, M. Jane Brady of Delaware,
Robert A. Butterworth of Florida, Thurbert E. Baker of Georgia, Alan G.
Lance of Idaho, James E. Ryan of Illinois, Steve Carter of Indiana,
Thomas J. Miller of Iowa, Thomas F. Reilly of Massachusetts, Mike
Hatch of Minnesota, Mike Moore of Mississippi, Jeremiah W. (Jay) Nixon
of Missouri, Frankie Sue Del Papa of Nevada, David Samson of New
Jersey, Eliot Spitzer of New York, Roy Cooper of North Carolina, Wayne
Stenehjem of North Dakota, Robert Tenorio Torres of the Northern Mari-
ana Islands, W. A. Drew Edmondson of Oklahoma, Hardy Myers of Ore-
gon, D. Michael Fisher of Pennsylvania, Anabelle Rodrı´guez of Puerto
Rico, Paul G. Summers of Tennessee, John Cornyn of Texas, Mark L.
Shurtleff of Utah, Christine O. Gregoire of Washington, and Hoke Mac-
Millan of Wyoming; for AARP by Walter Dellinger, Jonathan D. Hacker,
Stacy J. Canan, Deborah M. Zuckerman, and Michael R. Schuster; and
for G. Eric Brunstad, Jr., by Mr. Brunstad, pro se, and Rheba Rutkowski.

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through fraud; (2) the parties settle the lawsuit and release
related claims; (3) the settlement agreement does not resolve
the issue of fraud, but provides that B will pay A a fixed
sum; (4) B does not pay the fixed sum; (5) B enters bank-
ruptcy; and (6) A claims that B’s obligation to pay the fixed
settlement sum is nondischargeable because, like the original
debt, it is for “money . . . obtained by . . . fraud.”
This outline summarizes the following circumstances: In
late 1991, Leonard and Arlene Warner bought the Warner
Manufacturing Company for $250,000. About six months
later they sold the company to Elliott and Carol Archer for
$610,000. A few months after that the Archers sued the
Warners in North Carolina state court for (among other
things) fraud connected with the sale.
In May 1995, the parties settled the lawsuit. The settle-
ment agreement specified that the Warners would pay the
Archers “$300,000.00 less legal and accounting expenses”
“as compensation for emotional distress/personal injury type
damages.” App. 61. It added that the Archers would “exe-
cute releases to any and all claims . . . arising out of this
litigation, except as to amounts set forth in [the] Settlement
Agreement.” Id., at 63. The Warners paid the Archers
$200,000 and executed a promissory note for the remaining
$100,000. The Archers executed releases “discharg[ing]”
the Warners “from any and every right, claim, or demand”
that the Archers “now have or might otherwise hereafter
have against” them, “excepting only obligations under” the
promissory note and related instruments. Id., at 67; see also
id., at 70. The releases, signed by all parties, added that
the parties did not “admi[t] any liability or wrongdoing,” that
the settlement was “the compromise of disputed claims, and
that payment [was] not to be construed as an admission of
liability.” Id., at 67–68, 71. A few days later the Archers
voluntarily dismissed the state-court lawsuit with prejudice.
In November 1995, the Warners failed to make the first
payment on the $100,000 promissory note. The Archers

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sued for the payment in state court. The Warners filed
for bankruptcy. The Bankruptcy Court ordered liquidation
under Chapter 7 of the Bankruptcy Code. And the Archers
brought the present claim, asking the Bankruptcy Court to
find the $100,000 debt nondischargeable, and to order the
Warners to pay the $100,000. Leonard Warner agreed to
a consent order holding his debt nondischargeable. Arlene
Warner contested nondischargeability. The Archers argued
that Arlene Warner’s promissory note debt was nondis-
chargeable because it was for “money . . . obtained by . . .
fraud.”
The Bankruptcy Court, finding the promissory note debt
dischargeable, denied the Archers’ claim. The District
Court affirmed the Bankruptcy Court. And the Court of
Appeals for the Fourth Circuit, dividing two to one, affirmed
the District Court. 283 F. 3d 230 (2002). The majority rea-
soned that the settlement agreement, releases, and promis-
sory note had worked a kind of “novation.” This novation
replaced (1) an original potential debt to the Archers for
money obtained by fraud with (2) a new debt. The new debt
was not for money obtained by fraud. It was for money
promised in a settlement contract. And it was consequently
dischargeable in bankruptcy.
We granted the Archers’ petition for certiorari, 536 U. S.
938 (2002), because different Circuits have come to different
conclusions about this matter, compare In re West, 22 F. 3d
775, 778 (CA7 1994) (supporting the novation theory), with
United States v. Spicer, 57 F. 3d 1152, 1155 (CADC 1995)
(“The weight of recent authority rejects” the novation the-
ory), cert. denied, 516 U. S. 1043 (1996).
II
We agree with the Court of Appeals and the dissent, post,
at 324–325 (opinion of Thomas, J.), that “[t]he settlement
agreement and promissory note here, coupled with the broad
language of the release, completely addressed and released

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each and every underlying state law claim.” 283 F. 3d, at
237. That agreement left only one relevant debt: a debt for
money promised in the settlement agreement itself. To rec-
ognize that fact, however, does not end our inquiry. We
must decide whether that same debt can also amount to a
debt for money obtained by fraud, within the terms of the
nondischargeability statute. Given this Court’s precedent,
we believe that it can.
Brown v. Felsen, 442 U. S. 127 (1979), governs the out-
come here. The circumstances there were the following:
(1) Brown sued Felsen in state court seeking money that
(Brown said) Felsen had obtained through fraud; (2) the state
court entered a consent decree embodying a stipulation pro-
viding that Felsen would pay Brown a certain amount;
(3) neither the decree nor the stipulation indicated the pay-
ment was for fraud; (4) Felsen did not pay; (5) Felsen entered
bankruptcy; and (6) Brown asked the Bankruptcy Court to
look behind the decree and stipulation and to hold that the
debt was nondischargeable because it was a debt for money
obtained by fraud. Id., at 128–129.
The lower courts had held against Brown. They pointed
out that the relevant debt was for money owed pursuant to
a consent judgment; they noted that the relevant judgment-
related documents did not refer to fraud; they added that the
doctrine of res judicata prevented the Bankruptcy Court
from looking behind those documents to uncover the nature
of the claim that had led to their creation; and they conse-
quently concluded that the relevant debt could not be charac-
terized as one for money obtained by fraud. Id., at 130–131.
This Court unanimously rejected the lower court’s reason-
ing. The Court conceded that the state law of claim preclu-
sion would bar Brown from making any claim “ ‘based on the
same cause of action’ ” that Brown had brought in state
court. Id., at 131 (quoting Montana v. United States, 440
U. S. 147, 153 (1979)). Indeed, this aspect of res judicata
would prevent Brown from litigating “all grounds for . . .

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recovery” previously available to Brown, whether or not
Brown had previously “asserted” those grounds in the prior
state-court “proceeding.” 442 U. S., at 131. But all this,
the Court held, was beside the point. Claim preclusion did
not prevent the Bankruptcy Court from looking beyond the
record of the state-court proceeding and the documents that
terminated that proceeding (the stipulation and consent
judgment) in order to decide whether the debt at issue
(namely, the debt embodied in the consent decree and stip-
ulation) was a debt for money obtained by fraud. Id., at
138–139.
As a matter of logic, Brown’s holding means that the
Fourth Circuit’s novation theory cannot be right. The re-
duction of Brown’s state-court fraud claim to a stipulation
(embodied in a consent decree) worked the same kind of no-
vation as the “novation” at issue here. (Despite the dis-
sent’s suggestions to the contrary, post, at 327, it did so by
an agreement of the parties that would seem to have “sev-
er[ed] the causal relationship,” ibid., between liquidated debt
and underlying fraud no more and no less than did the settle-
ment and releases at issue here.) Yet, in Brown, this Court
held that the Bankruptcy Court should look behind that stip-
ulation to determine whether it reflected settlement of a
valid claim for fraud. If the Fourth Circuit’s view were cor-
rect—if reducing a fraud claim to settlement definitively
changed the nature of the debt for dischargeability pur-
poses—the nature of the debt in Brown would have changed
similarly, thereby rendering the debt dischargeable. This
Court’s instruction that the Bankruptcy Court could “weigh
all the evidence,” 442 U. S., at 138, would have been point-
less. There would have been nothing for the Bankruptcy
Court to examine.
Moreover, the Court’s language in Brown strongly favors
the Archers’ position here. The Court said that “the mere
fact that a conscientious creditor has previously reduced his
claim to judgment should not bar further inquiry into the

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true nature of the debt.” Ibid.; accord, Grogan v. Garner,
498 U. S. 279, 290 (1991) (assuming that the Bankruptcy Code
seeks to “permit exception from discharge of all fraud claims
creditors have successfully reduced to judgment”). If we
substitute the word “settlement” for the word “judgment,”
the Court’s statement describes this case.
Finally, the Court’s basic reasoning in Brown applies here.
The Court pointed out that the Bankruptcy Code’s nondis-
chargeability provision had originally covered “only ‘judg-
ments’ sounding in fraud.” 442 U. S., at 138. Congress
later changed the language so that it covered all such “ ‘lia-
bilities.’ ” Ibid. This change indicated that “Congress in-
tended the fullest possible inquiry” to ensure that “all debts
arising out of ” fraud are “excepted from discharge,” no mat-
ter what their form. Ibid.; see also 11 U. S. C. § 523(a) (cur-
rent “any debt” language). Congress also intended to allow
the relevant determination (whether a debt arises out of
fraud) to take place in bankruptcy court, not to force it to
occur earlier in state court at a time when nondischargeabil-
ity concerns “are not directly in issue and neither party has
a full incentive to litigate them.” Brown, 442 U. S., at 134.
The only difference we can find between Brown and the
present case consists of the fact that the relevant debt here
is embodied in a settlement, not in a stipulation and consent
judgment. But we do not see how that difference could
prove determinative. The dischargeability provision ap-
plies to all debts that “aris[e] out of ” fraud. Id., at 138; see
also Cohen v. de la Cruz, 523 U. S. 213, 215 (1998). A debt
embodied in the settlement of a fraud case “arises” no less
“out of ” the underlying fraud than a debt embodied in a stip-
ulation and consent decree. Policies that favor the settle-
ment of disputes, like those that favor “repose,” are neither
any more nor any less at issue here than in Brown. See 442
U. S., at 133–135. In Brown, the doctrine of res judicata
itself ensured “a blanket release” of the underlying claim of
fraud, just as the contractual releases did here, post, at 324.

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See supra, at 318–319. Despite the dissent’s protests to the
contrary, post, at 323–327, what has not been established
here, as in Brown, is that the parties meant to resolve the
issue of fraud or, more narrowly, to resolve that issue for
purposes of a later claim of nondischargeability in bank-
ruptcy. In a word, we can find no significant difference be-
tween Brown and the case now before us.
Arlene Warner argues that we should affirm the Court of
Appeals’ decision on alternative grounds. She says that the
settlement agreement and releases not only worked a nova-
tion by converting potential tort liabilities into a contract
debt, but also included a promise that the Archers would not
make the present claim of nondischargeability for fraud.
She adds that, in any event, because the Archers dismissed
the original fraud action with prejudice, North Carolina law
treats the fraud issue as having been litigated and deter-
mined in her favor, thereby barring the Archers from mak-
ing their present claim on grounds of collateral estoppel.
But cf. Arizona v. California, 530 U. S. 392, 414 (2000)
(“[S]ettlements ordinarily occasion no issue preclusion . . .
unless it is clear . . . that the parties intend their agreement
to have such an effect”).
Without suggesting that these additional arguments are
meritorious, we note that the Court of Appeals did not deter-
mine the merits of either argument, both of which are, in
any event, outside the scope of the question presented and
insufficiently addressed below. See Roberts v. Galen of Va.,
Inc., 525 U. S. 249, 253–254 (1999) (per curiam). We choose
to leave initial evaluation of these arguments to “[t]he federal
judges who deal regularly with questions of state law in
their respective districts and circuits,” and who “are in a
better position than we,” Butner v. United States, 440 U. S.
48, 58 (1979), to determine, for example, whether the par-
ties intended their agreement and dismissal to have issue-
preclusive, as well as claim-preclusive, effect, and to what
extent such preclusion applies to enforcement of a debt spe-

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Thomas, J., dissenting
cifically excepted from the releases, supra, at 317; post,
at 325. The Court of Appeals remains free, on remand, to
determine whether such questions were properly raised or
preserved, and, if so, to decide them.
We conclude that the Archers’ settlement agreement and
releases may have worked a kind of novation, but that fact
does not bar the Archers from showing that the settlement
debt arose out of “false pretenses, a false representation,
or actual fraud,” and consequently is nondischargeable, 11
U. S. C. § 523(a)(2)(A). We reverse the Court of Appeals’
judgment to the contrary. And we remand this case for fur-
ther proceedings consistent with this opinion.
It is so ordered.
Justice Thomas, with whom Justice Stevens joins,
dissenting.
Section 523(a)(2) of the Bankruptcy Code excepts from dis-
charge “any debt . . . for money, property, [or] services, . . .
to the extent obtained by . . . false pretenses, a false repre-
sentation, or actual fraud.” 11 U. S. C. § 523(a)(2)(A) (em-
phasis added). The Court holds that a debt owed under a
settlement agreement was “obtained by” fraud even though
the debt resulted from a contractual arrangement pursuant
to which the parties agreed, using the broadest language
possible, to release one another from “any and every right,
claim, or demand . . . arising out of ” a fraud action filed by
petitioners in North Carolina state court. App. 67. Be-
cause the Court’s conclusion is supported neither by the text
of the Bankruptcy Code nor by any of the agreements exe-
cuted by the parties, I respectfully dissent.
The Court begins its description of this case with the ob-
servation that “the settlement agreement does not resolve
the issue of fraud, but provides that B will pay A a fixed
sum.” Ante, at 317 (emphasis added). Based on that erro-
neous premise, the Court goes on to find that there is “no
significant difference between Brown [v. Felsen, 442 U. S. 127

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(1979),] and [this case].” Ante, at 322. The only distinction,
the Court explains, is that “the relevant debt here is embod-
ied in a settlement, not in a stipulation and consent judg-
ment” as in Brown v. Felsen, 442 U. S. 127 (1979). Ante,
at 321.
Remarkably, however, the Court fails to address the criti-
cal difference between this case and Brown: The parties here
executed a blanket release, rather than entered into a con-
sent judgment. And, in my view, “if it is shown that [a] note
was given and received as payment or waiver of the original
debt and the parties agreed that the note was to substitute
a new obligation for the old, the note fully discharges the
original debt, and the nondischargeability of the original
debt does not affect the dischargeability of the obligation
under the note.” In re West, 22 F. 3d 775, 778 (CA7 1994).
That is the case before us, and, accordingly, Brown does not
control our disposition of this matter.
In Brown, Brown sued Felsen in state court, alleging that
Felsen had fraudulently induced him to act as guarantor on
a bank loan. 442 U. S., at 128. The suit was settled by stip-
ulation, which was incorporated by the court into a consent
judgment, but “[n]either the stipulation nor the resulting
judgment indicated the cause of action on which respondent’s
liability to petitioner was based.” Ibid. The Court held
that principles of res judicata did not bar the Bankruptcy
Court from looking behind the consent judgment and stipula-
tion to determine the extent to which the debt was “obtained
by” fraud. The Court concluded that it would upset the
policy of the Bankruptcy Code for “state courts to decide
[questions of nondischargeability] at a stage when they are
not directly in issue and neither party has a full incentive to
litigate them.” Id., at 134. Brown did not, however, ad-
dress the question presented in this case—whether a credi-
tor may, without the participation of the state court, com-
pletely release a debtor from “any and every right, claim, or
demand . . . relating to” a state-court fraud action. App. 67.

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Thomas, J., dissenting
Based on the sweeping language of the general release, it
is inaccurate for the Court to say that the parties did not
“resolve the issue of fraud.” Ante, at 317. To be sure, as
in Brown, there is no legally controlling document stating
that respondent did (or did not) commit fraud. But, unlike
in Brown, where it was not clear which claims were being
resolved by the consent judgment, the release in this case
clearly demonstrates that the parties intended to resolve
conclusively not only the issue of fraud, but also any other
“right[s], claim[s], or demand[s]” related to the state-court
litigation, “excepting only obligations under [the] Note and
deeds of trust.” 1 App. 67. See McNair v. Goodwin, 262
N. C. 1, 7, 136 S. E. 2d 218, 223 (1964) (“ ‘[A] compromise
agreement is conclusive between the parties as to the mat-
ters compromised’ ” (quoting Penn Dixie Lines v. Grannick,
238 N. C. 552, 556, 78 S. E. 2d 410, 414 (1953))).
The fact that the parties intended, by the language of the
general release, to replace an “old” fraud debt with a “new”
contract debt is an important distinction from Brown, for the
text of the Bankruptcy Code prohibits discharge of any debt
“to the extent obtained by” fraud. 11 U. S. C. § 523(a)(2)
(emphasis added). In interpreting this provision, the Court
has recognized that, in order for a creditor to establish that
a debt is not dischargeable, he must demonstrate that there
is a causal nexus between the fraud and the debt. See
Cohen v. de la Cruz, 523 U. S. 213, 218 (1998) (describing
§ 523(a)(2)(A) as barring discharge of debts “ ‘resulting
from’ ” or “ ‘traceable to’ ” fraud (quoting Field v. Mans, 516
U. S. 59, 61, 64 (1995))). Indeed, petitioners conceded at oral
argument that the “obtained by” language of § 523(a)(2) re-
quires a creditor to prove that a debtor’s fraud is the proxi-
mate cause of the debt. Tr. of Oral Arg. 10, 12; see also 1
Am. Jur. 2d, Actions § 57, p. 760 (1994) (“What is essential is
that the wrongful act charged be the proximate cause of the
1 There are no allegations that petitioners were fraudulently induced to
execute the settlement agreement or the general release.

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326 ARCHER v. WARNER
Thomas, J., dissenting
damage; the loss must be the direct result of, or proximately
traceable to, the breach of an obligation owing to the plain-
tiff ” (emphasis added)).
This Court has been less than clear with respect to the
requirements for establishing proximate cause. In the past,
the Court has applied the term “ ‘proximate cause’ to label
generically the judicial tools used to limit a person’s respon-
sibility for the consequences of that person’s own acts.”
Holmes v. Securities Investor Protection Corporation, 503
U. S. 258, 268 (1992). The Court has explained that, “[a]t
bottom, the notion of proximate cause reflects ‘ideas of
what justice demands, or of what is administratively possi-
ble and convenient.’ ” Ibid. (quoting W. Keeton, D. Dobbs,
R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts
§ 41, p. 264 (5th ed. 1984) (hereinafter Keeton)); see also
Palsgraf v. Long Island R. R. Co., 248 N. Y. 339, 352, 162
N. E. 99, 103 (1928) (Andrews, J., dissenting) (“What we do
mean by the word ‘proximate’ is, that because of conven-
ience, of public policy, of a rough sense of justice, the law
arbitrarily declines to trace a series of events beyond a cer-
tain point”). While the concept of proximate cause is some-
what amorphous, see Keeton 279, the common law is clear
that certain intervening events—otherwise called “supersed-
ing causes”—are sufficient to sever the causal nexus and cut
off all liability. See Exxon Co., U. S. A. v. Sofec, Inc., 517
U. S. 830, 837 (1996) (“ ‘The doctrine of superseding cause is
. . . applied where the defendant’s negligence in fact substan-
tially contributed to the plaintiff ’s injury, but the injury was
actually brought about by a later cause of independent origin
that was not foreseeable’ ” (quoting 1 T. Schoenbaum, Admi-
ralty and Maritime Law § 5–3, pp. 165–166 (2d ed. 1994)));
57A Am. Jur. 2d, Negligence § 790, p. 701 (1989) (“The inter-
vention, between the negligence of the defendant and the
occurrence of an injury to the plaintiff, of a new, independent,
and efficient cause, or of a superseding cause, of the injury
renders the negligence of the defendant a remote cause of

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327 Cite as: 538 U. S. 314 (2003)
Thomas, J., dissenting
the injury, and he cannot be held liable, notwithstanding the
existence of some connection between his negligence and
the injury”).
In this case, we are faced with the novel situation where
the parties have, by agreement, attempted to sever the
causal relationship between the debtor’s fraudulent conduct
and the debt.2 In my view, the “intervening” settlement
and release create the equivalent of a superseding cause, no
different from the intervening negligent acts of a third party
in a negligence action. In this case, the parties have made
clear their intent to replace the old “fraud” debt with a new
“contract” debt. Accordingly, the only debt that remains in-
tact for bankruptcy purposes is the one “obtained by” volun-
tary agreement of the parties, not by fraud.
Petitioners’ own actions in the course of this litigation sup-
port this conclusion. Throughout the proceedings below and
continuing in this Court, petitioners have sought to recover
only the amount of the debt set forth in the settlement agree-
ment, which is lower than the total damages they allegedly
suffered as a result of respondent’s alleged fraud. See Brief
for Petitioners 21 (“[T]he nondischargeability action was
brought solely in order to enforce the agreement to pay [the
amount in the settlement agreement]”). This crucial fact
demonstrates that petitioners seek to recover a debt based
only in contract, not in fraud.
2 Petitioners argue that any prepetition waiver of nondischargeability
protections should be deemed unenforceable because it is inconsistent with
the Bankruptcy Code and impairs the rights of third-party creditors.
Brief for Petitioners 24. As respondent points out, however, a creditor
forfeits the right to contest dischargeability if it fails to affirmatively re-
quest a hearing within 60 days after the first date set for the meeting of
the creditors. See 11 U. S. C. § 523(c)(1); Fed. Rule Bkrtcy. Proc. 4007(c).
Thus, presumably, creditors may choose, for any or no reason at all, to
forgo an assertion of nondischargeability under § 523(a)(2). Indeed, peti-
tioners have failed to point to any provision of the Bankruptcy Code that
specifically bars a creditor from entering into an agreement that impairs
its right to contest dischargeability.

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328 ARCHER v. WARNER
Thomas, J., dissenting
The Court concludes otherwise. The Court, however,
does not explain why it permits petitioners to look at the
settlement agreement for the amount of the debt they seek
to recover but not for the character of that debt. Neither
this Court’s precedents nor the text of the Bankruptcy Code
permits such a selective implementation of a valid agreement
between the parties.
* * *
The Court today ignores the plain intent of the parties, as
evidenced by a properly executed settlement agreement and
general release, holding that a debt owed by respondent
under a contract was “obtained by” fraud. Because I find
no support for the Court’s conclusion in the text of the Bank-
ruptcy Code, or in the agreements of the parties, I respect-
fully dissent.