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` OCTOBER TERM, 2012
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`Syllabus
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` NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
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` being done in connection with this case, at the time the opinion is issued.
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` The syllabus constitutes no part of the opinion of the Court but has been
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` prepared by the Reporter of Decisions for the convenience of the reader.
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` See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
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`SUPREME COURT OF THE UNITED STATES
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` Syllabus
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` BULLOCK v. BANKCHAMPAIGN, N. A.
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`CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
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`THE ELEVENTH CIRCUIT
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` No. 11–1518. Argued March 18, 2013—Decided May 13, 2013
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` Petitioner’s father established a trust for the benefit of petitioner and
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`his siblings, and made petitioner the (nonprofessional) trustee. The
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` trust’s sole asset was the father’s life insurance policy. Petitioner
`borrowed funds from the trust three times; all borrowed funds were
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` repaid with interest. His siblings obtained a judgment against him
` in state court for breach of fiduciary duty, though the court found no
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`apparent malicious motive. The court imposed constructive trusts on
`certain of petitioner’s interests—including his interest in the original
`trust—in order to secure petitioner’s payment of the judgment, with
`respondent serving as trustee for all of the trusts. Petitioner filed for
`bankruptcy. Respondent opposed discharge of petitioner’s state-
`court-imposed debts to the trust, and the Bankruptcy Court granted
`respondent summary judgment, holding that petitioner’s debts were
`not dischargeable pursuant to 11 U. S. C. §523(a)(4), which provides
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`that an individual cannot obtain a bankruptcy discharge from a debt
`“for fraud or defalcation while acting in a fiduciary capacity, embez-
`zlement, or larceny.” The Federal District Court and the Eleventh
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`Circuit affirmed. The latter court reasoned that “defalcation requires
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`a known breach of fiduciary duty, such that the conduct can be char-
`acterized as objectively reckless.”
`Held: The term “defalcation” in the Bankruptcy Code includes a culpa-
`ble state of mind requirement involving knowledge of, or gross reck-
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`lessness in respect to, the improper nature of the fiduciary behavior.
`Pp. 4−9.
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`(a) While “defalcation” has been an exception to discharge in a
`bankruptcy statute since 1867, legal authorities have long disagreed
`about its meaning. Broad definitions of the term in modern and older
`dictionaries are unhelpful, and courts of appeals have disagreed
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` BULLOCK v. BANKCHAMPAIGN, N. A.
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`Syllabus
`about what mental state must accompany defalcation’s definition.
`Pp. 4−5.
`(b) In Neal v. Clark, 95 U. S. 704, this Court interpreted the term
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`“fraud” in the Bankruptcy Code’s exceptions to discharge to mean
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`“positive fraud, or fraud in fact, involving moral turpitude or inten-
`tional wrong, as does embezzlement; and not implied fraud, or fraud
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`in law, which may exist without the imputation of bad faith or immo-
`rality.” Id., at 709. The term “defalcation” should be treated similar-
`ly. Thus, where the conduct at issue does not involve bad faith, mor-
`al turpitude, or other immoral conduct, “defalcation” requires an
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` intentional wrong. An intentional wrong includes not only conduct
`that the fiduciary knows is improper but also reckless conduct of the
`kind that the criminal law often treats as the equivalent. Where ac-
`tual knowledge of wrongdoing is lacking, conduct is considered as
`equivalent if, as set forth in the Model Penal Code, the fiduciary “con-
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`sciously disregards,” or is willfully blind to, “a substantial and unjusti-
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`fiable risk” that his conduct will violate a fiduciary duty. Pp. 5−7.
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`(c) Several considerations support this interpretation. First, statu-
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`tory context strongly favors it. The canon noscitur a sociis argues for
`interpreting “defalcation” as similar to its linguistic neighbors “em-
`bezzlement,” “larceny,” and “fraud,” which all require a showing of
`wrongful or felonious intent. See, e.g., Neal, supra, at 709. Second,
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`the interpretation does not make the word identical to its statutory
`neighbors. “Embezzlement” requires conversion, “larceny” requires
`taking and carrying away another’s property, and “fraud” typically
`requires a false statement or omission; while “defalcation” can en-
`compass a breach of fiduciary obligation that involves neither conver-
`sion, nor taking and carrying away another’s property, nor falsity.
`Third, the interpretation is consistent with the longstanding princi-
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`ple that “exceptions to discharge ‘should be confined to those plainly
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`expressed.’ ” Kawaauhau v. Geiger, 523 U. S. 57, 62. It is also con-
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`sistent with statutory exceptions to discharge that Congress normally
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`confines to circumstances where strong, special policy considerations,
`such as the presence of fault, argue for preserving the debt, thereby
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`benefiting, for example, a typically more honest creditor. See, e.g., 11
`U. S. C. §523(a)(2)(A). Fourth, some Circuits have interpreted the
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`statute similarly for many years without administrative or other dif-
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`ficulties. Finally, it is important to have a uniform interpretation of
`federal law, the choices are limited, and neither the parties nor the
`Government has presented strong considerations favoring a different
`interpretation. Pp. 7−9.
`670 F. 3d 1160, vacated and remanded.
`BREYER, J., delivered the opinion for a unanimous Court.
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` Cite as: 569 U. S. ____ (2013)
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`Opinion of the Court
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`1
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` NOTICE: This opinion is subject to formal revision before publication in the
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` preliminary print of the United States Reports. Readers are requested to
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` notify the Reporter of Decisions, Supreme Court of the United States, Wash-
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` ington, D. C. 20543, of any typographical or other formal errors, in order
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` that corrections may be made before the preliminary print goes to press.
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`SUPREME COURT OF THE UNITED STATES
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`_________________
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` No. 11–1518
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`RANDY CURTIS BULLOCK, PETITIONER v.
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` BANKCHAMPAIGN, N. A.
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`ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
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`APPEALS FOR THE ELEVENTH CIRCUIT
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`[May 13, 2013]
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` JUSTICE BREYER delivered the opinion of the Court.
`Section 523(a)(4) of the Federal Bankruptcy Code pro-
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`vides that an individual cannot obtain a bankruptcy dis-
`charge from a debt “for fraud or defalcation while acting
`in a fiduciary capacity, embezzlement, or larceny.” 11
`U. S. C. §523(a)(4). We here consider the scope of the term
`“defalcation.” We hold that it includes a culpable state of
`mind requirement akin to that which accompanies appli-
`cation of the other terms in the same statutory phrase.
`We describe that state of mind as one involving knowledge
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`of, or gross recklessness in respect to, the improper nature
`of the relevant fiduciary behavior.
`I
`In 1978, the father of petitioner Randy Bullock estab-
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`lished a trust for the benefit of his five children. He made
`petitioner the (nonprofessional) trustee; and he trans-
`ferred to the trust a single asset, an insurance policy on
`his life. 670 F. 3d 1160, 1162 (CA11 2012); App. to Pet.
`for Cert. 33a. The trust instrument permitted the trustee
`to borrow funds from the insurer against the policy’s
`value (which, in practice, was available at an insurance-
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` BULLOCK v. BANKCHAMPAIGN, N. A.
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`Opinion of the Court
` company-determined 6% interest rate). Id., at 17a, 34a,
`50a.
`In 1981, petitioner, at his father’s request, borrowed
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`money from the trust, paying the funds to his mother who
`used them to repay a debt to the father’s business. In
`1984, petitioner again borrowed funds from the trust, this
`time using the funds to pay for certificates of deposit,
`which he and his mother used to buy a mill. In 1990,
`petitioner once again borrowed funds, this time using the
`money to buy real property for himself and his mother.
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`670 F. 3d, at 1162. Petitioner saw that all of the borrowed
`funds were repaid to the trust along with 6% interest.
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`App. to Pet. for Cert. 17a, 45a, 50a; Brief for Petitioner 3;
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`Brief for Respondent 2.
`In 1999, petitioner’s brothers sued petitioner in Illinois
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`state court. The state court held that petitioner had com-
`mitted a breach of fiduciary duty. It explained that peti-
`tioner “does not appear to have had a malicious motive in
`borrowing funds from the trust” but nonetheless “was
`clearly involved in self-dealing.” App. to Pet. for Cert. 45a,
`52a. It ordered petitioner to pay the trust “the benefits he
`received from his breaches” (along with costs and attor-
`ney’s fees). Id., at 47a. The court imposed constructive
`trusts on petitioner’s interests in the mill and the original
`trust, in order to secure petitioner’s payment of its judg-
`ment, with respondent BankChampaign serving as trustee
`for all of the trusts. 670 F. 3d, at 1162; App. to Pet. for
`Cert. 47a–48a. After petitioner tried unsuccessfully to
`liquidate his interests in the mill and other constructive
`trust assets to obtain funds to make the court-ordered
`payment, petitioner filed for bankruptcy in federal court.
`Id., at 27a, 30a.
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`BankChampaign opposed petitioner’s efforts to obtain a
`bankruptcy discharge of his state-court-imposed debts to
`the trust. And the Bankruptcy Court granted summary
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`judgment in the bank’s favor. It held that the debts fell
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`Opinion of the Court
` within §523(a)(4)’s exception “as a debt for defalcation while
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` acting in a fiduciary capacity.” Id., at 40a–41a. Hence,
`they were not dischargeable.
`The Federal District Court reviewed the Bankruptcy
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`Court’s determination. It said that it was “convinced” that
`BankChampaign was “abusing its position of trust by fail-
`ing to liquidate the assets,” but it nonetheless affirmed the
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`Bankruptcy Court’s decision. Id., at 27a–28a.
`In turn, the Court of Appeals affirmed the District
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`Court. It wrote that “defalcation requires a known breach
`of a fiduciary duty, such that the conduct can be character-
`ized as objectively reckless.” 670 F. 3d, at 1166. And it
`found that petitioner’s conduct satisfied this standard.
`Ibid.
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`Petitioner sought certiorari. In effect he has asked us
`to decide whether the bankruptcy term “defalcation” applies
`“in the absence of any specific finding of ill intent or evi-
`dence of an ultimate loss of trust principal.” Brief for
`United States as Amicus Curiae 1. See also Pet. for Cert.
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`i. The lower courts have long disagreed about whether
`“defalcation” includes a scienter requirement and, if so,
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`what kind of scienter it requires. Compare In re Sherman,
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`658 F. 3d 1009, 1017 (CA9 2011) (“defalcation” includes
`“even innocent acts of failure to fully account for money
`received in trust” (internal quotation marks and brackets
`omitted)), with In re Uwimana, 274 F. 3d 806, 811 (CA4
`2001) (defalcation occurs when “negligence or even an in-
`nocent mistake . . . results in misappropriation”), with 670
`F. 3d, at 1166 (“defalcation requires . . . conduct [that] can
`be characterized as objectively reckless”), and with In re
`Baylis, 313 F. 3d 9, 20 (CA1 2002) (“defalcation requires
`something close to a showing of extreme recklessness”). In
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`light of that disagreement, we granted the petition.
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` BULLOCK v. BANKCHAMPAIGN, N. A.
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`Opinion of the Court
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` II
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`A
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`Congress first included the term “defalcation” as an
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`exception to discharge in a federal bankruptcy statute in
`1867. See id., at 17. And legal authorities have disagreed
`about its meaning almost ever since. Dictionary defini-
`tions of “defalcation” are not particularly helpful. On the
`one hand, a law dictionary in use in 1867 defines the word
`“defalcation” as “the act of a defaulter,” which, in turn, it
`defines broadly as one “who is deficient in his accounts, or
`fails in making his accounts correct.” 1 J. Bouvier, Law
`Dictionary 387, 388 (4th ed. 1852). See also 4 Oxford
`English Dictionary 369 (2d ed. 1989) (quoting an 1846
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`definition that defines the term as “‘a breach of trust by
`one who has charge or management of money’”). Modern
`dictionaries contain similarly broad definitional language.
`Black’s Law Dictionary, for example, defines “defalcation”
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`first as “EMBEZZLEMENT,” but, second, as “[l]oosely, the
`failure to meet an obligation; a nonfraudulent default.”
`Black’s Law Dictionary 479 (9th ed. 2009) (hereinafter
`Black’s). See also American Heritage Dictionary 474 (5th
`ed. 2011) (“To misuse funds; embezzle”); 4 Oxford English
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`Dictionary, supra, at 369 (“monetary deficiency through
`breach of trust by one who has the management or charge
`of funds; a fraudulent deficiency in money matters”);
`Webster’s New International Dictionary 686 (2d ed. 1954)
`(“An abstraction or misappropriation of money by one, esp.
`an officer or agent, having it in trust”); Webster’s Third
`New International Dictionary 590 (1986) (“misappropria-
`tion of money in one’s keeping”).
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`On the other hand, an 1842 bankruptcy treatise warns
`that fiduciaries “are not supposed to commit defalcation in
`the matter of their trust, without . . . at least such crimi-
`nal negligence as admits of no excuse.” G. Bicknell, Com-
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`mentary on the Bankrupt Law of 1841, Showing Its
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`Operation and Effect 12 (2d ed. 1842). Modern dictionaries
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`Opinion of the Court
`often accompany their broad definitions with illustrative
`terms such as “embezzle,” American Heritage Dictionary,
`supra, at 474, or “fraudulent deficiency,” 4 Oxford English
`Dictionary, supra, at 369. And the editor of Black’s Law
`Dictionary has written that the term should be read as
`limited to deficiencies that are “fraudulent” and which are
`“the fault of someone put in trust of the money.” B. Gar-
`ner, Modern American Usage 232 (3d ed. 2009) (emphasis
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`added).
`Similarly, courts of appeals have long disagreed about
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`the mental state that must accompany the bankruptcy-
`related definition of “defalcation.” Many years ago Judge
`Augustus Hand wrote that “the misappropriation must be
`due to a known breach of the duty, and not to mere negli-
`gence or mistake.” In re Bernard, 87 F. 2d 705, 707 (CA2
`1937). But Judge Learned Hand suggested that the term
`“may have included innocent defaults.” Central Hanover
`Bank & Trust Co. v. Herbst, 93 F. 2d 510, 511 (CA2 1937)
`(emphasis added). A more modern treatise on trusts ends
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`its discussion of the subject with a question mark. 4 A.
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`Scott, W. Fratcher, & M. Ascher, Scott and Ascher on
`Trusts §24.26 p. 1797 (5th ed. 2007).
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`In resolving these differences, we note that this long-
`standing disagreement concerns state of mind, not whether
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`“defalcation” can cover a trustee’s failure (as here) to make
`a trust more than whole. We consequently shall assume
`without deciding that the statutory term is broad enough
`to cover the latter type of conduct and answer only the
`“state of mind” question.
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`B
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`We base our approach and our answer upon one of this
`Court’s precedents. In 1878, this Court interpreted the
`related statutory term “fraud” in the portion of the Bank-
`ruptcy Code laying out exceptions to discharge. Justice
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` BULLOCK v. BANKCHAMPAIGN, N. A.
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`Opinion of the Court
`Harlan wrote for the Court:
`“[D]ebts created by ‘fraud’ are associated directly with
`debts created by ‘embezzlement.’ Such association
`justifies, if it does not imperatively require, the con-
`clusion that the ‘fraud’ referred to in that section
`means positive fraud, or fraud in fact, involving moral
`turpitude or intentional wrong, as does embezzlement;
`and not implied fraud, or fraud in law, which may ex-
`ist without the imputation of bad faith or immorality.”
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`Neal v. Clark, 95 U. S. 704, 709 (1878).
`We believe that the statutory term “defalcation” should be
`treated similarly.
`Thus, where the conduct at issue does not involve bad
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`faith, moral turpitude, or other immoral conduct, the term
`requires an intentional wrong. We include as intentional
`not only conduct that the fiduciary knows is improper
`but also reckless conduct of the kind that the criminal
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`law often treats as the equivalent. Thus, we include reck-
`less conduct of the kind set forth in the Model Penal
`Code. Where actual knowledge of wrongdoing is lacking, we
`consider conduct as equivalent if the fiduciary “consciously
`disregards” (or is willfully blind to) “a substantial and
`unjustifiable risk” that his conduct will turn out to violate
`a fiduciary duty. ALI, Model Penal Code §2.02(2)(c), p.
`226 (1985). See id., §2.02 Comment 9, at 248 (explaining
`that the Model Penal Code’s definition of “knowledge” was
`designed to include “‘wilful blindness’”). That risk “must
`be of such a nature and degree that, considering the
`nature and purpose of the actor’s conduct and the cir-
`cumstances known to him, its disregard involves a gross
`deviation from the standard of conduct that a law-abiding
`person would observe in the actor’s situation.” Id.,
`§2.02(2)(c), at 226 (emphasis added). Cf. Ernst & Ernst v.
`Hochfelder, 425 U. S. 185, 194, n. 12 (1976) (defining
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`scienter for securities law purposes as “a mental state
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`Opinion of the Court
` embracing intent to deceive, manipulate, or defraud”).
`2
`Several considerations lead us to interpret the statutory
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`term “defalcation” in this way. First, as Justice Harlan
`pointed out in Neal, statutory context strongly favors this
`interpretation. Applying the canon of interpretation
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` noscitur a sociis, the Court there looked to fraud’s linguis-
` tic neighbor, “embezzlement.” It found that both terms
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`refer to different forms of generally similar conduct. It
`wrote that both are “‘ejusdem generis,’” of the same kind,
`and that both are “‘referable to the same subject-matter.’”
`95 U. S., at 709. Moreover, embezzlement requires a
`showing of wrongful intent. Ibid. (noting that embezzle-
`ment “involv[es] moral turpitude or intentional wrong”).
`See Moore v. United States, 160 U. S. 268, 269–270 (1895)
`(describing embezzlement and larceny as requiring “felo-
`nious intent”). See also, e.g., W. LaFave, Criminal Law
`§19.6(a), p. 995 (5th ed. 2010) (“intent to deprive” is part of
`embezzlement). Hence, the Court concluded, “fraud” must
`require an equivalent showing. Neal, supra, at 709. Neal
`has been the law for more than a century. And here, the
`additional neighbors (“larceny” and, as defined in Neal,
`“fraud”) mean that the canon noscitur a sociis argues even
`more strongly for similarly interpreting the similar statu-
`tory term “defalcation.”
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`Second, this interpretation does not make the word
`identical to its statutory neighbors. See Babbitt v. Sweet
`Home Chapter, Communities for Great Ore., 515 U. S.
`687, 698 (1995) (noting “[a] reluctance to treat statutory
`terms as surplusage”). As commonly used, “embezzlement”
`requires conversion, and “larceny” requires taking and
`carrying away another’s property. See LaFave, Criminal
`Law §§19.2, 19.5 (larceny); id., §19.6 (embezzlement).
`“Fraud” typically requires a false statement or omission.
`See id., §19.7 (discussing fraud in the context of false
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` BULLOCK v. BANKCHAMPAIGN, N. A.
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`Opinion of the Court
`“Defalcation,” as commonly used (hence as
`pretenses).
`Congress might have understood it), can encompass a
`breach of fiduciary obligation that involves neither conver-
`sion, nor taking and carrying away another’s property, nor
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`falsity. Black’s 479. See, e.g., In re Frankel, 77 B. R. 401
`(Bkrtcy. Ct. WDNY 1987) (finding a breach of fiduciary
`duty and defalcation based on an unreasonable sale of
`assets).
`Nor are embezzlement, larceny, and fiduciary fraud
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`simply special cases of defalcation as so defined. The
`statutory provision makes clear that the first two terms
`apply outside of the fiduciary context; and “defalcation,”
`unlike “fraud,” may be used to refer to nonfraudulent
`breaches of fiduciary duty. Black’s 479.
`Third, the interpretation is consistent with the long-
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`standing principle that “exceptions to discharge ‘should
`be confined to those plainly expressed.’ ” Kawaauhau v.
`Geiger, 523 U. S. 57, 62 (1998) (quoting Gleason v.
`Thaw, 236 U. S. 558, 562 (1915)). See Local Loan Co.
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`v. Hunt, 292 U. S. 234, 244 (1934); Neal, supra, at 709. It
`is also consistent with a set of statutory exceptions that
`Congress normally confines to circumstances where strong,
`special policy considerations, such as the presence of
`fault, argue for preserving the debt, thereby benefiting,
`for example, a typically more honest creditor. See, e.g., 11
`U. S. C. §§523(a)(2)(A), (a)(2)(B), (a)(6), (a)(9) (fault). See
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`also, e.g., §§523(a)(1), (a)(7), (a)(14), (a)(14A) (taxes);
`§523(a)(8) (educational loans); §523(a)(15) (spousal and
`child support). In the absence of fault, it is difficult to find
`strong policy reasons favoring a broader exception here, at
`least in respect to those whom a scienter requirement will
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`most likely help, namely nonprofessional trustees, perhaps
`administering small family trusts potentially immersed in
`intrafamily arguments that are difficult to evaluate in
`terms of comparative fault.
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`Fourth, as far as the briefs before us reveal, at least
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`Opinion of the Court
`some Circuits have interpreted the statute similarly for
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`many years without administrative, or other practical,
`difficulties. Baylis, 313 F. 3d 9. See also In re Hyman,
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`502 F. 3d 61, 69 (CA2 2007) (“This [scienter] standard . . .
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`also has the virtue of ease of application since the courts
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`and litigants have reference to a robust body of securities
`law examining what these terms mean”).
`Finally, it is important to have a uniform interpreta-
`
`tion of federal law, the choices are limited, and neither
`the parties nor the Government has presented us with
`strong considerations favoring a different interpretation. In
`addition to those we have already discussed, the Govern-
`ment has pointed to the fact that in 1970 Congress
`rewrote the statute, eliminating the word “misappropria-
`tion” and placing the term “defalcation” (previously in a
`different exemption provision) alongside its present three
`neighbors. See Brief for United States as Amicus Curiae
`16–17. The Government believes that these changes
`support reading “defalcation” without a scienter require-
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`ment. But one might argue, with equal plausibility, that
`the changes reflect a decision to make certain that courts
`would read in similar ways “defalcation,” “fraud,” “embez-
`zlement,” and “larceny.” In fact, we believe the 1970
`changes are inconclusive.
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` III
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`In this case the Court of Appeals applied a standard of
` “objectiv[e] reckless[ness]” to facts presented at summary
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`judgment. 670 F. 3d, at 1166. We consequently remand
`the case to permit the court to determine whether further
`proceedings are needed and, if so, to apply the heightened
`standard that we have set forth. For these reasons we
`vacate the judgment of the Court of Appeals and remand
`the case for further proceedings consistent with this
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`opinion.
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`It is so ordered.
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`9