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Sutherland Client Prevails in U.S. Supreme Court in Bullock v. BankChampaign

May 14, 2013

ATLANTA (MAY 14, 2013) – The United States Supreme Court yesterday issued a unanimous ruling in favor of the petitioner in Bullock v. BankChampaign, N.A., a pro bono bankruptcy case argued orally on behalf of the petitioner by Sutherland Asbill & Brennan LLP Partner Thomas M. Byrne on March 18. The case was brought before the Court in association with the Emory Law School Supreme Court Advocacy Project (ELSSCAP), a student-run Supreme Court litigation group.

Bullock was a tough case, as evidenced by aggressive questioning from most of the Justices, the fact that a majority of the circuit courts had decided the issue the other way, and the fact that the Solicitor General and a group of 14 bankruptcy law professors filed amicus briefs for the other side,” said Sutherland Pro Bono Partner John H. Fleming. “It is a very gratifying win. Congratulations to Tom and the ELSSCAP program for this terrific victory.”

The high court granted review in Bullock to resolve a circuit split regarding the interpretation of the term “defalcation” in the Bankruptcy Code—specifically, whether a fiduciary’s misconduct must be committed with the intent to defraud or the equivalent in order to prevent a debt from being discharged, particularly when there was no loss of trust assets. Lower courts had held that Randy Bullock, the petitioner, had committed defalcation in borrowing money from his father’s life insurance trust while serving as trustee. In the 9-0 opinion authored by Justice Breyer, the Court held that to prove “defalcation” a creditor must demonstrate that the debtor acted with a culpable state of mind involving knowledge of, or gross recklessness with respect to, the improper nature of the fiduciary behavior. The Court rejected arguments made by the bank that succeeded Mr. Bullock as trustee and by the U.S. Solicitor General.

“The debtor is pleased with the Court’s ruling today, which will afford him his day in court on the issue and, we expect, will result in discharge of the debt. The outcome also offers him and his family an opportunity to bring their discord to an end by mutual agreement,” said Mr. Byrne. “The Court’s opinion appears to resolve definitively the circuit split, with the result that the exception to discharge will remain within its appropriate domain and be reserved for truly bad actors.”

ELSSCAP students worked with Professor Sarah Shalf, ELSSCAP’s faculty adviser and director of Emory’s Field Placement and Professionalism programs, and James Engelthaler of Thigpen, Behel, Engelthaler & Scott, counsel for Mr. Bullock, in the lower appellate courts. ELSSCAP looks for meritorious cases to take before the Supreme Court, both in seeking a grant of certiorari and in filing an amicus brief to add additional perspective on an issue in a given case.

Sutherland Asbill & Brennan LLP is a law firm with global reach known for solving challenging business problems and resolving sophisticated legal issues for many of the world’s largest companies. Founded in 1924, the firm handles matters throughout the United States and worldwide. Seven major practice areas—corporate, energy and environmental, financial services, intellectual property, litigation, real estate, and tax—provide the framework for an extensive range of focus areas, allowing Sutherland attorneys to serve a diverse client base that ranges from small and medium-sized start-up businesses to a significant number of Fortune 100 companies.

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