On May 13, 2013, the Supreme Court announced its decision in Bullock v. BankChampaign, NA, a bankruptcy case. Bankruptcy law provides debtors a means of discharging their otherwise unmanageable debts, but there are exceptions. This case involved an exception for debts incurred through a type of misconduct known as “defalcation.” The question here concerned the degree of trustee misconduct required to trigger the defalcation exception, and whether such conduct can include actions that did not actually result in a loss of trust property.
In an opinion delivered by Justice Breyer, the Court held unanimously that the “defalcation” exception requires that the individual have knowledge of, or act with gross recklessness with respect to, the improper nature of the fiduciary behavior in question. The Court vacated the decision of the lower federal court and remanded the case for further proceedings.
To discuss the case, we have Zvi Rosen, who is an Adjunct Professor at New York Law School.