Sherman v. Securities & Exchange Commission (In Re Sherman) (2011)

Sherman v. SEC, 658 F.3d 1009,1010 (9th Cir.2011).

In re Sherman, 658 F.3d 1009, 1010 (9th Cir. 2011), abrogated on other grounds by Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (2013).

“At the core of the Bankruptcy Code are the twin goals of ensuring an equitable distribution of the debtor’s assets to his creditors and giving the debtor a ‘fresh start.’ ” Sherman v. SEC (In re Sherman), 658 F.3d 1009, 1015 (9th Cir.2011), abr ogated on other grounds by Bullock v. BankChampaign, N.A., — U.S.-, 133 S.Ct. 1754 , 185 L.Ed.2d 922 (2013).

As we have observed “exceptions to discharge should be limited to dishonest debtors seeking to abuse the bankruptcy system in order to evade the consequences of their misconduct.” Sherman v. SEC (In re Sherman), 658 F.3d 1009, 1015-16 (9th Cir.2011), abrogated on other grounds by Bullock v. BankChampaign, N.A., - U.S. -, 133 S.Ct. 1754 , 185 L.Ed.2d 922 (2013).

Dep’t of Sec. v. Wilcox, 691 F.3d 1171, 1176 (10th Cir.2012) (quoting Sherman v. SEC, 658 F.3d 1009, 1018 (9th Cir.2011)).

See In re Uwimana, 274 F.3d 806 , 811 (4th Cir.2001) (stating that “even an innocent mistake which results in misappropriation or failure to account” can be a defalcation); In re Cochrane, 124 F.3d 978, 984 (8th Cir.1997) (concluding that defalcation does not require intentional wrongdoing; stating that it includes a fiduciary’s innocent failure to fully account for money received); In re Sherman, 658 F.3d 1009, 1017 (9th Cir.2011) (noting that intent to defraud is not requi…

Sherman v. SEC (In re Sherman), 658 F.3d 1009, 1015 (9th Cir. 2011). 19 4. 11 U.S.C. § 523 (a)(19) 20 21 In 2002, as part of the Sarbanes-Oxley Act, the Bankruptcy Code was amended to add Section 523(a)(19) as an additional exception to discharge which prohibits debtors from discharging 22 debts for securities violations.

In re Sherman, 658 F.3d 1009, 1017 (9th Cir. 2011), In re Uwimana, 274 F.3d 806 , 811 (4th Cir. 2001).

(In re Sherman), 658 F.3d 1009, 1017 (9th Cir.2011), quoting Blyler v. Hemmeter (In re Hemmeter), 242 F.3d 1186, 1190 (9th Cir.2001).

(In re Sherman), 658 F.3d 1009, 1017-18 (9th Cir. 2011).

(In re Sherman), 658 F.3d 1009, 1017-18 (9th Cir. 2011).

Comm'n 23 (In re Sherman), 658 F.3d 1009, 1017-18 (9th Cir. 2011).

The Supreme Court noted that some lower courts had held that “even innocent acts of failure to fully account for money received in trust will be held as non-dischargeable defalcation; no intent to defraud is required.” Id. (quoting Sherman v. SEC (In re Sherman), 658 F.3d 1009, 1018 (9th Cir. 2011)).

Generally, a “nominal defendant is ‘not a real party in interest because he has no legitimate claim to the disputed property.’” , 658 F.3d 1009, 1012 (9th Cir. 2011) (quoting , 504 F.3d 1130, 1141 (9th Cir. 2007)).

In Sherman, the Ninth Circuit considered “whether a debt can be ‘for’ one of the violations listed in § 523(a)(19)(A) when the debtor has not committed any of those violations.” In Re Sherman, 658 F.3d 1009, 1012 (9th Cir. 2011).

Comm’n (In Re Sherman), 658 F.3d 1009, 1012 (9th Cir. 2011).

Comm’n (In Re Sherman), 658 F.3d 1009, 1012 (9th Cir. 2011).

However, it is not these other people (whom Mr. Lake is 23 alleged to have defrauded) who hold the FTC Judgment, it is the FTC itself who holds the 24 FTC Judgment. 25 Under these circumstances, proper analysis of section 523(a)(2)(A) requires the 26 Court to determine whether the FTC Judgment is a debt for money, property or services 27 obtained by false pretenses, a false representation or actual fraud. 28 Probably the best interpretation of the meaning of the word “for” a…

As we have observed “exceptions to discharge should be limited to dishonest debtors seeking to abuse the bankruptcy system in order to evade the consequences of their misconduct.” Sherman v. SEC (In re Sherman), 658 F.3d 1009, 1015-16 (9th Cir. 2011).

As we have observed “exceptions to discharge should be limited to dishonest' debtors seeking to abuse the bankruptcy system in order to evade the consequences of their misconduct.” Sherman v. SEC (In re Sherman), 658 F.3d 1009, 1015-16 (9th Cir.2011).

(In re Sherman), 658 F.3d 1009, 1017 (9th Cir. 2011), 14 quoting Blyler v. Hemmeter (In re Hemmeter), 242 F.3d 1186 , 1190 15 (9th Cir. 2001). 16 In Bullock, the debtor had served as the trustee of a 17 family trust with a single asset, a life insurance policy on his 18 father’s life.

In re Sherman, 658 F.3d 1009, 1014-15 (9th Cir.2011).

See In re Uwimana, 274 F.3d 806 , 811 (4th Cir.2001) (stating that “even an innocent mistake which results in misappropriation or failure to account” can be a defalcation); In re Cochrane, 124 F.3d 978, 984 (8th Cir.1997) (concluding that defalcation does not require intentional wrongdoing; stating that it includes a fiduciary’s innocent failure to fully account for money received); In re Sherman, 658 F.3d 1009, 1017 (9th Cir.2011) (noting that intent to defraud is not requi…

Compare In re Sherman, 658 F.3d 1009 , 1017 (C.A.9 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 (C.A.4 2001) (defalcation occurs when "negligence or even an innocent mistake ... results in misappropriation"), with 670 F.3d, at 1166 ("defalcation requires ... conduct [that] can be characterized as objectively reckless"), and wi…

Dep’t of Sec. v. Wilcox (In re Wilcox), 691 F.3d 1171 (10th Cir. 2012); Sherman v. SEC (In re Sherman), 658 F.3d 1009 (9th Cir. 2011), abrogated on other grounds by Bullock v. BankChampaign, N.A., 569 U.S. 267 (2013); see 4 Collier on Bankruptcy ¶ 523.27[1] (16th ed. 2021) (“Section 523(a)(19) must be read narrowly and applied only to debtors who have been found to have violated securities laws.”). 51 In re Sherman, 658 F.3d at 1010 . 52 Id. 53 Id. 54 Id. at 1010–11. 55 Id. …

See Sherman v. SEC (In re Sherman), 658 F.3d 1009, 1012-17 (9th Cir. 2011); Oklahoma Dep’t of Sec., ex. rel.

Id. (internal citations and footnote omitted); see also In re Sherman, 658 F.3d 1009, 1016 (9th Cir.2011) (“The § 523(a)(19) exception, enacted as part of the Sarbanes-Oxley Act, responded to concerns that the Bankruptcy Code ‘permitted wrongdoers to discharge their obligations under court judgments or settlements based on securities fraud and other securities violations.’ S.Rep.

See Sherman v. SEC 16 (In re Sherman), 658 F.3d 1009, 1015 (9th Cir. 2011), abrogated on 17 other grounds by Bullock v. BankChampaign, N.A., ––– U.S. –––, 133 18 S.Ct. 1754 , 185 L.Ed.2d 922 (2013): “[T]he Supreme Court has adopted 19 a rule of construction interpreting exceptions to discharge 20 narrowly.

See Sherman v. SEC 16 (In re Sherman), 658 F.3d 1009, 1015 (9th Cir. 2011), abrogated on 17 other grounds by Bullock v. BankChampaign, N.A., ––– U.S. –––, 133 18 S.Ct. 1754 , 185 L.Ed.2d 922 (2013): “[T]he Supreme Court has adopted 19 a rule of construction interpreting exceptions to discharge 20 narrowly.

Compare In re Sherman, 658 F.3d 1009, 1017 (9th Cir.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 (4th Cir.2001) (defalcation occurs when “negligence or even an innocent mistake ... results in misappropriation”), with [In re Bullock ] 670 F.3d [1160], at 1166 [ (11th Cir.2012) ] (“defalcation requires ... conduct [that] can be …

See, e.g., In re Sherman, 658 F.3d 1009, 1014 (9th Cir.2011); Matter of Jadusingh, 2001 WL 360701 , at *2 (E.D.Pa.2001); In re Brady, 243 B.R. 253, 259 (E.D.Pa.2000).

See In re Sherman, 658 F.3d 1009, 1022 (9th Cir.2011) (“Federal courts may order equitable relief against a person who is not accused of wrongdoing in a securities enforcement action where that person: (1) has received ill-gotten funds; and (2) does not have a legitimate claim to those funds.” (quoting Cavanagh, 155 F.3d at 136)); Janvey v. Adams, 588 F.3d 831 , 835 n. 2 (5th Cir.2009) (same); SEC v. George, 426 F.3d 786 , 798 (6th Cir.2005) (same); Kimberlynn Creek Ranch, 2…

Republic of Rwanda v. Uwimana (In re Rewimana), 274 F.3d 806 , 811 (4th Cir.2001) (innocent or merely negligent conduct can show defalcation); see also Sherman v. Securities and Exchange Comm’n (In re Sherman), 658 F.3d 1009, 1017 (9th Cir.2011).