Forfeited § 523(a)(2)(A) “Financial Condition” Theories Receive Only Plain-Error Review (and Appellant Must Negate Alternative Nondischargeability Grounds)

1) Introduction

Case: Sharp v. Cox (captioned In re: Devin David Sharp; Amy Beth Sharp)
Court: United States Court of Appeals for the Tenth Circuit
Date: April 3, 2026
Posture: Debtor Amy Beth Sharp appealed the district court’s affirmance of a bankruptcy-court judgment declaring a wage-and-salary debt to two former employees (Nick Cox and Georgia Forsee) nondischargeable.

The dispute arose from Sharp’s operation of a cannabis/hemp delivery company, her hiring of Cox and Forsee as drivers and administrative/marketing staff, and her repeated assurances—oral and written—that investment funding had been secured and that wages/salaries would be paid once funding arrived. The bankruptcy court found Sharp’s conduct amounted to “false pretenses” under 11 U.S.C. § 523(a)(2)(A), rendering part of the unpaid salary debt nondischargeable.

The key appellate issue was not whether Sharp’s conduct was deceptive in substance, but whether she could on appeal newly invoke § 523(a)(2)(A)’s carveout for “a statement respecting the debtor’s or an insider’s financial condition”—and obtain de novo review—despite having failed to raise that theory in the bankruptcy court.

2) Summary of the Opinion

The Tenth Circuit affirmed. It held Sharp forfeited her “financial condition” theory by not presenting it to the bankruptcy court. Under controlling circuit law, a forfeited argument may warrant reversal only under plain-error review, and Sharp failed to satisfy (at least) the third and fourth prongs.

Critically, even assuming error might exist, the court held Sharp did not show a “reasonable probability” of a different outcome because—if the statements were truly “respecting financial condition”—the bankruptcy court could potentially have found nondischargeability under § 523(a)(2)(B) (written statements respecting financial condition). Sharp also failed to show that denying relief would seriously impair the “fairness, integrity, or public reputation” of judicial proceedings.

3) Analysis

A. Precedents Cited

  • In re Joelson, 427 F.3d 700 (10th Cir. 2005), abrogated on other grounds by Lamar, Archer & Cofrin, LLP v. Appling, 584 U.S. 709 (2018)
    Used for the unremarkable appellate practice point that where factual findings are not challenged, the appellate court may describe events based on the bankruptcy court’s findings. The citation also situates § 523(a)(2) doctrine in the post-Appling landscape.
  • Lamar, Archer & Cofrin, LLP v. Appling, 584 U.S. 709 (2018)
    While not applied to decide the merits here, Appling is the Supreme Court’s modern anchor for understanding what counts as a “statement respecting financial condition.” The Tenth Circuit’s emphasis on forfeiture/plain error effectively prevented Sharp from leveraging Appling on appeal without having litigated the issue below.
  • March v. IRS, 335 F.3d 1186 (10th Cir. 2003)
    Cited for the rule that waiver/forfeiture principles apply in bankruptcy appeals: a theory not raised in the bankruptcy court is forfeited.
  • U.S. Aviation Underwriters, Inc. v. Pilatus Bus. Aircraft, Ltd., 582 F.3d 1131 (10th Cir. 2009)
    Provides the preservation standard: an issue is not preserved unless the party alerts the trial court and seeks a ruling; merely advancing a “related theory” is insufficient.
  • Butler v. Daimler Trucks N. Am., LLC, 74 F.4th 1131 (10th Cir. 2023)
    Central to the disposition. The court relied on Butler for multiple principles: (i) arguments raised first in a reply brief are generally forfeited; (ii) preservation requires an articulated theory, not insinuation; (iii) unpreserved reversal arguments require plain-error briefing; and (iv) in civil cases, satisfying the fourth prong of plain error is “extraordinary and nearly insurmountable.”
  • Colo. Outfitters Ass'n v. Hickenlooper, 823 F.3d 537 (10th Cir. 2016)
    Cited to reject undeveloped issues mentioned only in the “Statement of the Case.” This reinforces disciplined appellate briefing requirements.
  • In re Robinson, 987 F.2d 665 (10th Cir. 1993) (per curiam)
    A close procedural analogue. There, a party’s underdeveloped nondischargeability theory was deemed not properly raised; the district court, acting as a reviewing court, erred by relying on that forfeited, fact-dependent theory. Robinson supports the notion that neither the district court nor the court of appeals should treat bankruptcy appeals as opportunities for “second-shot” theories.
  • Richison v. Ernest Grp., Inc., 634 F.3d 1123 (10th Cir. 2011)
    The opinion’s controlling framework. Richison is invoked for the adversarial-system rationale and for the rule that even a “purely legal” forfeited argument cannot justify reversal absent plain error. The court quotes Richison extensively to explain why appellate courts correct errors in addressing presented theories, rather than adjudicating new theories.
  • In re Paul, 534 F.3d 1303 (10th Cir. 2008)
    Reinforces that the court of appeals reviews the bankruptcy court independently and does not defer to the district court’s intermediate appellate analysis—undercutting Sharp’s reliance on the district court’s decision to reach the merits.
  • In re Talbot, 124 F.3d 1201 (10th Cir. 1997)
    Cited to acknowledge the general “no new issues on appeal” rule, while noting an exception for sovereign immunity—highlighting that Sharp’s statutory argument did not qualify for a similar exception.
  • Morales-Fernandez v. I.N.S., 418 F.3d 1116 (10th Cir. 2005) and United States v. Dominguez Benitez, 542 U.S. 74 (2004)
    Used for the third plain-error prong: the appellant must show a “reasonable probability” of a different result absent the error.
  • Somerlott v. Cherokee Nation Distribs., Inc., 686 F.3d 1144 (10th Cir. 2012)
    Reinforces that plain error in civil cases is “extraordinary and nearly insurmountable,” supporting rejection under the fourth prong.

B. Legal Reasoning

  1. Forfeiture was clear.
    Sharp litigated only whether her conduct constituted “false pretenses, a false representation, or actual fraud” under § 523(a)(2)(A). She did not argue the “financial condition” carveout in bankruptcy court, so the theory was forfeited.
  2. De novo review was unavailable.
    The court rejected three attempted workarounds:
    • “Inherently implicated” theories still must be articulated; related arguments do not preserve distinct statutory theories.
    • The district court’s willingness to reach the merits does not change the court of appeals’ preservation analysis, especially because the court of appeals reviews the bankruptcy court independently.
    • Even “pure statutory interpretation” does not revive an unpreserved argument. Under Richison, reversal on a forfeited theory requires plain error.
  3. Plain-error review controlled—and Sharp failed it.
    The panel assumed (without deciding) the first two prongs (error and plainness) and resolved the case on prongs three and four:
    • Third prong (substantial rights): Sharp did not show a reasonable probability of a different outcome because, if the statements were “respecting financial condition,” the bankruptcy court might have applied § 523(a)(2)(B) (written financial-condition statements) to reach nondischargeability anyway. Because Sharp did not “explain why no other grounds can support affirmance,” she could not show prejudice.
    • Fourth prong (fairness/integrity/public reputation): Sharp did not show that affirming would seriously harm the integrity of proceedings—particularly given the underlying facts found by the bankruptcy court (employees induced to work without pay based on deceptive assurances).

C. Impact

Although designated as a nonprecedential “Order and Judgment” (citable for persuasive value), the decision meaningfully reinforces several practical rules in bankruptcy appeals within the Tenth Circuit:

  • § 523(a)(2)(A) carveout arguments must be raised early. Parties must explicitly litigate whether alleged misrepresentations are “statements respecting financial condition” in the bankruptcy court, not first on appeal.
  • “Pure legal issue” framing will not avoid plain-error rigor. Litigants cannot transform forfeited statutory arguments into de novo appellate issues by characterizing them as purely legal.
  • Plain-error prejudice must account for alternative statutory paths. Where a forfeited theory might merely shift analysis from § 523(a)(2)(A) to § 523(a)(2)(B), the appellant must confront that alternative basis (including factual predicates like “in writing” and “materially false”) to show a different likely outcome.
  • Civil plain error remains exceptionally difficult. The opinion underscores that prong four is rarely met in civil disputes, which will discourage “salvage” appeals premised on new legal theories.

4) Complex Concepts Simplified

  • Dischargeability / nondischargeability: Bankruptcy typically wipes out (“discharges”) many debts. Section 523 lists debts that are not wiped out.
  • § 523(a)(2)(A): Makes debts nondischargeable when the debtor obtained money/property/services/credit through “false pretenses,” “false representation,” or “actual fraud”—but excludes statements “respecting the debtor’s or an insider’s financial condition.”
  • § 523(a)(2)(B): Covers the financial-condition category that (A) excludes, but requires additional elements, including that the statement be in writing and materially false, among others.
  • Forfeiture vs. waiver (as used functionally here): If you do not raise an argument in the trial court, you generally cannot raise it on appeal. The opinion treats Sharp’s failure as forfeiture and applies plain-error limits on reversal.
  • Plain-error review (four prongs): A demanding appellate standard for unpreserved issues: (1) error, (2) plain, (3) affects substantial rights (likely changes outcome), and (4) seriously harms the fairness/integrity/public reputation of judicial proceedings.

5) Conclusion

Sharp v. Cox is a procedural decisional roadmap: a debtor (or any appellant) cannot hold a statutory defense in reserve and deploy it for the first time on appeal as a de novo issue—especially in § 523 litigation where different subsections may provide alternative routes to nondischargeability. Within the Tenth Circuit, even a “purely legal” new theory is reviewed (if at all) only for plain error, and the appellant must demonstrate outcome-changing prejudice while also negating alternative grounds that could sustain the judgment.