Tuesday, May 14, 2013

New Supreme Court Bankruptcy Law Opinion! - Bullock v Bankchampaign, NA


Bullock v Bankchampaign, NA (2013)

The Supreme Court held the term "defalcation" under the Bankruptcy Code requires a showing the debtor committed an "intentional wrong," or at a minimum, a conscious disregard for "a substantial and unjustifiable risk" while acting as a fiduciary.

A judgment was entered against Mr. Bullock after he breached his fiduciary duties as trustee for a family trust. The court found no apparent malicious motive.

He later filed bankruptcy and a creditor sought determination that the judgment was non-dischargeable based on "defalcation" under 11 U.S.C. § 523(a)(4).

Under the noscitur a sociis cannon of statutory interpretation, the Court looked to the other forms of conduct prohibited under (a)(4) (fraud, embezzlement, larceny) to determine "defalcation" requires an element of bad faith or immorality.

Read the full opinion for complete analysis: http://www.supremecourt.gov/opinions/12pdf/11-1518_97be.pdf