In the

United States Court of Appeals

For the Seventh Circuit

No. 10-1882

IN RE:

JAY BERMAN,

Debtor.

FOLLETT HIGHER EDUCATION GROUP, INC.,

an Illinois corporation,

Plaintiff-Appellant,

v.

JAY BERMAN,

Defendant-Appellee.

Appeal from the United States District Court 

for the Northern District of Illinois, Eastern Division.

No. 1:09-cv-03377—Robert M. Dow, Jr., Judge.

ARGUED OCTOBER 22, 2010—DECIDED JANUARY 21, 2011 

Before KANNE, TINDER, and HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge. The bankruptcy court held

that a creditor failed to prove that a debt owed to it was
2 No. 10-1882

non-dischargeable under 11 U.S.C. § 523(a)(4), which

provides that a debt will not be discharged in bankruptcy

where that debtor has committed “fraud or defalcation

while acting in a fiduciary capacity, embezzlement, or

larceny.” Concluding that the creditor had not established that the debtor acted in any fiduciary capacity

toward the creditor, the court entered judgment for the

debtor. The district court affirmed the finding that the

debt was dischargeable, as do we. We agree with our

colleagues on the bankruptcy court and district court

that the creditor failed to show that the debtor owed

the creditor a fiduciary duty.

I. The Facts

Plaintiff-creditor Follett Higher Education Group, Inc.,

an Illinois corporation, manages more than 750 college

bookstores nationwide. In March 2004, Follett hired

Berman & Associates, Inc., an advertising brokerage

firm also located in Illinois, to place advertisements on

Follett’s behalf. Under the terms of their contract, Follett

paid Berman & Associates 110 percent of the cost of

advertisements that Berman & Associates placed with

media outlets around the country. Berman & Associates

then disbursed payments for the advertisements to newspapers, radio stations, and billboard operators and retained the extra ten percent as the fee for its services.

The two corporations renewed this arrangement

yearly until Follett learned in the summer of 2006 that

Berman & Associates had not paid several outstanding

advertising bills. Follett was forced to pay some media
No. 10-1882 3

Berman & Associates ceased operations during the summer 1

of 2006 and dissolved by the end of that year. Defendant Jay

Berman and his wife abandoned or threw away any paper

records of Berman & Associates and “got rid of all the computers” following the firm’s dissolution. The bankruptcy court

did not attribute any weight to Berman’s destruction of

the firm’s records. We defer to the discretion of the bankruptcy

judge, as trier of fact, in this regard.

Rule 7052 incorporates into bankruptcy procedure Rule 52 2

of the Federal Rules of Civil Procedure. Berman’s motion

invoked section (c) of that rule: “If a party has been fully

heard on an issue during a nonjury trial and the court finds

(continued...)

outlets directly without recovering the sums intended

for them that it had already given to Berman & Associates

for that purpose.1

On August 23, 2006, defendant-debtor Jay Berman, who

served as president, a director, and sole shareholder of

Berman & Associates, petitioned for Chapter 7 bankruptcy.

In his petition, Berman listed debts incurred by Berman

& Associates, including the debt owed to Follett, on his

schedules of outstanding debts. Follett then filed an

adversary action in Berman’s bankruptcy proceedings

claiming that Berman had breached a fiduciary duty

owed to Follett and that, as a result, the debt it was

owed was non-dischargeable pursuant to 11 U.S.C.

§ 523(a)(4). At the conclusion of Follett’s presentation

of evidence at trial, Berman moved for judgment on

partial findings under Federal Rule of Bankruptcy Procedure 7052. The bankruptcy judge granted Berman’s 2
4 No. 10-1882

(...continued)

against the party on that issue, the court may enter judgment

against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue.” Fed. R. Civ. P. 52(c).

motion, holding that Follett had failed to prove that

Berman was a fiduciary as required by the statute. The

bankruptcy court’s decision on the dischargeability of

a debt is a final judgment for purposes of appellate jurisdiction. In re Marchiando, 13 F.3d 1111, 1113-14 (7th Cir.

1994). The district court affirmed the bankruptcy court’s

judgment and this appeal followed. We have jurisdiction

to review the district court’s judgment pursuant to

28 U.S.C. § 158(d).

II. Exceptions from Discharge Under Section 523(a)(4)

Under section 727 of the Bankruptcy Code, and subject

to certain conditions to be fulfilled by the debtor, a bankruptcy court ordinarily will discharge a debtor’s debts,

releasing the debtor from liability for those debts. See 11

U.S.C. § 727. There are, however, some exceptions.

Section 523(a) of the Code excludes certain debts from

discharge, often, but not always, where the debt results

from some sort of intentional wrongdoing by the

debtor. Courts construe these exceptions narrowly, in

favor of the debtor, bearing in mind the goal of bankruptcy law to give the debtor a fresh start. E.g., In re

Crosswhite, 148 F.3d 879, 881 (7th Cir. 1998) (“When deciding whether a particular debt falls within a § 523
No. 10-1882 5

Black’s Law Dictionary defines “defalcation” as a “failure to 3

meet an obligation” or “a nonfraudulent default.” Black’s Law

Dictionary 479 (9th ed. 2009). Defalcation can be distinguished

from fraud and embezzlement on the basis that subjective,

deliberate wrongdoing is not required to establish defalcation, though some degree of fault is required. See Central

Hanover Bank & Trust Co. v. Herbst, 93 F.2d 510, 512 (2d Cir.

1937) (L. Hand, J.) (a fiduciary who takes money upon a conditional authority that may be revoked, and who knows that

the authority may be revoked, is guilty of a “defalcation”

even if the wrong falls short of fraud or embezzlement). We

have held that defalcation requires something more than

negligence or mistake, but less than fraud. See Meyer v.

Rigdon, 36 F.3d 1375, 1385 (7th Cir. 1994).

exception, courts generally construe the statute strictly

against the objecting creditor and liberally in favor of the

debtor.”). Debts will be discharged unless proven nondischargeable by a preponderance of the evidence. See

Grogan v. Garner, 498 U.S. 279, 291 (1991).

Follett argues that the debt owed to it should be excepted from discharge on the basis of Berman’s and

Berman & Associates’ alleged “defalcation while acting

in a fiduciary capacity.” 11 U.S.C. § 523(a)(4). To estab- 3

lish that a debt is non-dischargeable under section

523(a)(4), a creditor must show (1) that the debtor acted as

a fiduciary to the creditor at the time the debt was

created, and (2) that the debt was caused by fraud or

defalcation. See In re Frain, 230 F.3d 1014, 1019 (7th Cir.

2000); Klingman v. Levinson, 831 F.2d 1292, 1295 (7th Cir.

1987). Here, the parties dispute the first requirement:
6 No. 10-1882

whether there existed a fiduciary relationship that could

render the debt to Follett non-dischargeable. The bankruptcy judge found none. Distinguishing this case from

prior cases where fiduciary duties were found, Judge

Goldgar determined that Berman & Associates’ role as

Follett’s agent in purchasing advertising did not amount to

a fiduciary relationship. The judge also concluded that

even if the corporate parties’ relationship could be considered fiduciary, Follett had not established any kind

of obligation between Follett and Jay Berman, the individual debtor, nor had it shown that Berman &

Associates was Berman’s alter ego. Not finding any

fiduciary obligation on Berman’s part, the bankruptcy

court entered judgment in Berman’s favor.

We apply the same standard of review as the district

court, examining the bankruptcy court’s legal findings

de novo and its findings of fact for clear error. Ojeda v.

Goldberg, 599 F.3d 712, 716 (7th Cir. 2010); Frain, 230 F.3d

at 1017; Peterson v. Scott (In re Scott), 172 F.3d 959, 966

(7th Cir. 1999). Where the trial court correctly states the

law, its determination of whether the facts met the legal

standard will be disturbed only if it is clearly erroneous.

See Pinkston v. Madry, 440 F.3d 879, 888 (7th Cir. 2006).

Unlike most claims of non-dischargeability, this case

presents an added challenge for Follett because it contracted with Berman & Associates, not with Jay Berman,

the individual debtor. Berman & Associates is not the

debtor before us. Jay Berman is, and his debts are

subject to discharge unless Follett has proven an exception. Follett offers two theories for holding that the debt

is not dischargeable. Neither is persuasive.
No. 10-1882 7

A. Officer of an Insolvent Corporation

Follett argues first that Jay Berman owed a fiduciary

duty to the creditors of Berman & Associates because

he was an officer and director of an insolvent corporation. Under Illinois law, like the law of many states, a

corporate officer or director assumes a fiduciary duty

toward the corporation, its shareholders, and, upon the

corporation’s insolvency, also to its creditors. See, e.g.,

Atwater v. American Exchange National Bank of Chicago, 38

N.E. 1017, 1022 (Ill. 1893) (“directors . . . occupy a fiduciary

relation towards the creditors when the corporation

becomes insolvent”); Paul H. Schwendener, Inc. v. Jupiter

Electricity Co., 829 N.E.2d 818, 828 (Ill. App. 2005) (“once a

corporation becomes insolvent, the fiduciary duty of an

officer is extended to the creditors of the corporation”);

see also 5 William L. Norton, Jr., Norton Bankruptcy Law

& Practice § 96:4 (3d ed. 2010) (majority view is that

insolvency places corporate assets in trust for corporate

creditors, and in some jurisdictions the fiduciary duty

of directors shifts to include creditors).

Follett argues that this duty under state law amounts

to a fiduciary duty for purposes of federal bankruptcy

law under section 523(a)(4). Accepting this argument,

in the absence of proof of fraud, would go a long way

toward imposing non-dischargeable personal liability

on corporate officers and directors for general corporate

debts of faltering corporations.

This theory has divided bankruptcy and district

courts. Adopting the theory, for example, see Salem

Services, Inc. v. Hussain (In re Hussain), 308 B.R. 861, 867-68
8 No. 10-1882

(Bankr. N.D. Ill. 2004) (accepting theory but finding no

defalcation); Energy Products Engineering, Inc. v. Reuscher

(In re Reuscher), 169 B.R. 398, 402-03 (S.D. Ill. 1994) (accepting theory and reversing bankruptcy court’s dismissal of complaint); see also Berres v. Bruning (In re

Bruning), 143 B.R. 253, 256 (D. Colo. 1992) (holding that

a fiduciary obligation arises upon insolvency and falls

within section 523(a)(4)’s ambit). Other courts have

adopted a more limited view, recognizing that the Supreme Court has construed the scope of a fiduciary relationship under section 523(a)(4) more narrowly than

state law does for other purposes. See, e.g., Murphy &

Robinson Investment Co. v. Cross (In re Cross), 666 F.2d

873, 880-81 (5th Cir. Unit B 1982) (concluding that an

officer did not owe the corporation’s creditor any

fiduciary duty within the meaning of section 523(a)(4));

Economic Development Growth Enterprises Corp. v. McDermott

(In re McDermott), 434 B.R. 271, 281 (Bankr. N.D.N.Y.

2010), appeal docketed, No. 6:10-CV-0696 (N.D.N.Y. June 17,

2010) (determining that fiduciary obligations of officers

of insolvent corporations are insufficient for the purposes of section 523(a)(4)); First Options of Chicago, Inc. v.

Kaplan (In re Kaplan), 162 B.R. 684, 704-06 (Bankr. E.D. Pa.

1993) (rejecting the premise that an officer’s debt would

be non-dischargeable as a result of the corporation’s

wrongdoing, despite state law making the officer a fiduciary).

In this case, the bankruptcy court found that Follett

had not proved that Berman & Associates was insolvent,

so the court did not reach the question whether Berman,

as a director and officer, had a fiduciary duty to
No. 10-1882 9

creditors, let alone whether any such fiduciary duty

qualified Berman’s debt as non-dischargeable under

section 523(a)(4). Bearing in mind Berman’s controlling

role in the corporation, his own personal bankruptcy,

the end of the corporation’s business in 2006, and the

corporation’s inability to pay what it owed to Follett,

we believe the better approach is to address Follett’s

argument on the merits, which can be decided as a

matter of law. We hold that even if the evidence

showed that Berman & Associates was insolvent when

all or some part of the debt arose, so that Berman would

have had a fiduciary duty toward creditors under

Illinois law, this state law duty would not have constituted a basis for non-dischargeability of the debt

owed to Follett under section 523(a)(4).

Not all persons treated as fiduciaries under state law

are considered to “act in a fiduciary capacity” for purposes of federal bankruptcy law. The existence of a fiduciary relationship under section 523(a)(4) is a matter

of federal law. Frain, 230 F.3d at 1017. As we observed in

In re McGee, bankruptcy law “depends on, and implements, entitlements defined by state law, but which of

these entitlements is subject to discharge or a trustee’s

avoiding power is beyond state control.” 353 F.3d 537,

540 (7th Cir. 2003) (citations omitted). It is not sufficient

to show merely that a debtor was a fiduciary under

applicable state law. Although an officer or director of an

insolvent corporation may be deemed a fiduciary for

creditors under state law, the officer or director may not

be deemed, on that basis alone, a fiduciary under 11

U.S.C. § 523(a)(4).
10 No. 10-1882

The Davis Court was interpreting a predecessor statute that 4

stated in relevant part: “A discharge in bankruptcy shall release

a bankrupt from all his provable debts, except such as . . . were

created by his fraud, embezzlement, misappropriation, or

defalcation while acting as an officer or in any fiduciary capacity.” Bankruptcy Act of 1898, § 17, 30 Stat. 544, 550, formerly

codified at 11 U.S.C. § 35 (repealed 1978).

The Supreme Court taught in Davis v. Aetna Acceptance

Co., 293 U.S. 328 (1934), that the non-dischargeability

exception’s reference to fiduciary capacity was “strict

and narrow.” 293 U.S. at 333. As Justice Cardozo wrote

for the Court, the debtor “must have been a trustee

before the wrong and without reference thereto.” Id.4

Those facts are not present in a situation such as this,

where the corporation’s breach of its contract created

the debt. The resulting obligation to the creditor is not

“turned into” one arising from a trust. Id. at 334. Such

obligations are “remote from the conventional trust or

fiduciary setting, in which someone . . . in whom confidence is reposed is entrusted with another person’s

money for safekeeping.” See Marchiando, 13 F.3d at 1116.

At least in the absence of fraud, we decline to stretch

the section 523(a)(4) exception so far as to make officers

and directors of insolvent corporations personally

liable, without the ability to secure discharge in bankruptcy, for a wide range of corporate debts.

B. Express Trust or Implied Fiduciary Status

Under its second theory, Follett urges us to hold that

Berman & Associates owed it a fiduciary duty and then
No. 10-1882 11

As in Davis, the Court was interpreting an earlier version of 5

the exception, which stated in relevant part that “all persons

whatsoever, residing in any state, territory or district of the

United States owing debts which shall not have been created

in consequence of a defalcation as a public officer, or as

executor, administrator, guardian, or trustee, or while acting

in any other fiduciary capacity shall . . . be entitled to a discharge.” Forsyth, 43 U.S. at 206 (internal quotation marks

omitted).

to pierce the corporate veil to hold Jay Berman personally

responsible for the debt of Berman & Associates. We

agree with the bankruptcy and district courts that Follett

failed to prove that the corporation owed it a fiduciary

duty, so we do not reach the veil-piercing issue.

Long before its discussion in Davis v. Aetna Acceptance

Co., the Supreme Court addressed the scope of the nondischargeable debt exception in Chapman v. Forsyth, 43 U.S.

(2 How.) 202 (1844). There, the Court held that a

cotton “factor” tasked with selling 150 bales of cotton on

behalf of his principal did not fall within the statutory

exception. The Court cautioned about the implications 5

of a broad interpretation—one that risked swallowing

the rule of dischargeability—and concluded that the

exception was intended to be limited: “In almost all the

commercial transactions of the country, confidence is

reposed in the punctuality and integrity of the debtor,

and a violation of these is, in a commercial sense, a disregard of a trust. But this is not the relation spoken of in . . .

the act.” 43 U.S. at 207. The Court reiterated its

limited interpretation, and the consistency of its application, in Davis. See 293 U.S. at 333.
12 No. 10-1882

Our application of the Court’s guiding principle is no

different. We have recognized that the exception encompasses only “a subset” of fiduciary obligations. In re

Woldman, 92 F.3d 546, 547 (7th Cir. 1996). At the time of

Davis, the subset was limited to express trusts, and did

not include trusts implied by law. See 293 U.S. at 333.

Since then, however, courts have expanded the application of section 523(a)(4) beyond express trusts to

certain relationships where the law imposes fiduciary

obligations, such as the obligation an attorney owes to a

client or a director owes to shareholders. See Marchiando,

11 F.3d at 1115; see also LSP Investment Partnership v.

Bennett (In re Bennett), 989 F.2d 779, 784-85 (5th Cir. 1993)

(holding that the “technical” or “express” trust requirement is no longer “limited to trusts that arise by virtue

of a formal trust agreement, but includes relationships

in which trust-type obligations are imposed pursuant to

statute or common law”). Thus, our threshold inquiry

is whether Berman & Associates owed Follett a fiduciary

obligation through the presence of either an express

trust or an implied fiduciary status arising from their

contractual relationship.

1. No Express Trust

Follett maintains that it has shown sufficient evidence

to demonstrate the existence of an express trust settled

by Follett, with itself as the beneficiary and Berman &

Associates as the trustee, over the years of their contractual relationship. We disagree. In McGee, we described the hallmarks of a trust to include “[s]egregation
No. 10-1882 13

of funds, management by financial intermediaries, and

recognition that the entity in control of the assets has

at most ‘bare’ legal title to them.” 353 F.3d at 540-41.

These hallmarks, as well as a demonstration of clear

intent to create a trust, can distinguish a trust relationship from an ordinary contractual relationship. See

Robert E. Ginsberg, Robert D. Martin & Susan V. Kelley,

Ginsberg & Martin on Bankruptcy § 11.06 at 11-112 (5th

ed. 2010) (collecting cases). Implied trusts lacking these

hallmarks, such as constructive or resulting trusts

imposed on transactions as a matter of equity, do not

fall within the statutory exception. See Marchiando, 13

F.3d at 1115-16. Unlike express trust arrangements, fiduciary duties arising under constructive or resulting trusts

are found to be implied by courts only as a result

of existing debts. For a section 523(a)(4) exception to

apply, the fiduciary duties must exist prior to the debt.

See id.; Carlisle Cashway, Inc. v. Johnson (In re Johnson),

691 F.2d 249, 251-52 (6th Cir. 1982) (noting that the

term “fiduciary” in the non-dischargeable debt exception does not extend to implied trusts).

The contracts between Berman & Associates and Follett

stated that Berman & Associates would provide Follett

with bill-paying services. Nothing in those contracts

reflected an intent to create an express trust. Nothing in

the record suggests that Berman & Associates maintained any separate fiduciary account or that the contracts required segregation of funds on Follett’s behalf.

We agree with the bankruptcy and district courts that

Follett did not prove the existence of an express trust.
14 No. 10-1882

2. No Implied Fiduciary Status

In the absence of an express trust, Follett faces an

uphill battle to prove a fiduciary relationship. Follett

points to our holdings in Marchiando and McGee to argue

that the nature of the three-year relationship between

the two corporations was sufficient to imply fiduciary

duties within the meaning of the statute. Follett

misreads those cases, which provide useful guidance

on the implied fiduciary theory.

In Marchiando, the owner of a convenience store

declared bankruptcy after failing to remit the proceeds

of state lottery ticket sales. 13 F.3d at 1113. An Illinois

state statute provided that lottery ticket proceeds

“shall constitute a trust fund” until paid to the state. 20

ILCS § 1605/10.3. We acknowledged that a fiduciary

relationship may arise separately from an express trust,

but we held that the state statute alone did not create

a fiduciary obligation within the meaning of section

523(a)(4). Non-dischargeability requires more. We explained that the non-dischargeability standard could

be met where a fiduciary relationship involved a difference in knowledge or power giving one party a

position of ascendancy over another. 13 F.3d at 1116.

Though the relationship in that case did not meet the

standard, we described how the law, and the nondischargeability exception in particular, separates relationships “in which one party to the relation is incapable

of monitoring the other’s performance” from relationships between equals. Id.

In McGee, a city ordinance created a fiduciary obligation

on the part of a landlord to hold all security deposits
No. 10-1882 15

Follett argues on appeal that the bankruptcy court “disre- 6

garded” McGee and that, had it known the court would take

that approach, it would have argued its claim under an embezzlement theory (which would not have required proof of

fiduciary capacity) in the alternative. We think the bankruptcy

court’s interpretation of our prior case law was correct. And

Follett had every opportunity to argue its claim under whatever theory or theories it liked. It was not entitled to try one

theory, lose with it, and then start over.

separate from other funds. 353 F.3d at 540. In that case,

again, the ordinance’s label of the landlord’s obligation

as “fiduciary” did not qualify the parties’ relationship as

falling within the section 523(a)(4) exception. But its

requirement that the deposit be segregated, as well as

the disparity in power governing those funds, led us to

conclude that the “economic relation” created by the

ordinance imposed fiduciary obligations within the

meaning of section 523(a)(4). Id. at 541.6

This analysis applies beyond cases like Marchiando

and McGee, where a statute or ordinance forms the basis

of a fiduciary obligation, to those more closely resembling this case, where a contract is necessary to establish a fiduciary relationship. Justice Cardozo wrote for

the Davis Court that it is the substance of a transaction,

rather than the label assigned to it, that determines

whether there is a fiduciary relationship for bankruptcy

purposes. 293 U.S. at 334. Thus, in such cases, we have

held that the obligations of the contract, like the legislative labels in Marchiando and McGee, do not alone

establish a fiduciary relationship within the meaning
16 No. 10-1882

of section 523(a)(4). See Frain, 230 F.3d at 1017; Woldman,

92 F.3d at 547.

We addressed this issue in Frain, in which shareholders of a closely held corporation sought to except

from discharge a debt owed to them by the corporation’s major shareholder on the ground that he had violated provisions of a shareholder agreement. We acknowledged that Frain, the debtor and the corporation’s

chief operating officer, had a “natural advantage” over

the other two shareholders because of his knowledge of

the corporation’s finances. That fact alone was not enough

to meet the high standard of section 523(a)(4), but Frain

also maintained “ultimate power” over both his own

employment and the direction of the corporation. Id. at

1017-18. His “control over the day-to-day business of

the corporation and ownership of 50% of the shares gave

him significant freedom to run the corporation as he

saw fit.” Id. at 1018. This substantial concentration of

power under the corporation’s internal structure created

a fiduciary duty that fell within the meaning of

section 523(a)(4).

Our analysis in Woldman was similar, though the outcome differed. There, two lawyers agreed to share

equally any attorney fees generated by a personal

injury case that one lawyer had referred to the other.

92 F.3d at 546. Although under Illinois law, partners or

joint venturers owe each other a fiduciary obligation,

we did not extend the section 523(a)(4) exception so far.

Id. at 546-47. We observed that, as here, the debtor’s

only duty was to honor the agreement. There was no
No. 10-1882 17

substantial inequality in power or knowledge between

the parties to distinguish them as anything other than

equal partners. Their relationship fell “at the opposite

end of the broad spectrum of fiduciary obligations”

from cases within the meaning of the section 523(a)(4)

exception, such as those involving a trustee and child

beneficiary or a lawyer and client. Id. at 547.

Here, the bankruptcy judge correctly concluded that

an ordinary principal-agent or buyer-seller relationship,

without more, is not a fiduciary relationship under

section 523(a)(4). Nothing in the substance of the relationship between Follett and Berman & Associates qualified it as a fiduciary relationship within the meaning of

section 523(a)(4). Their creditor-debtor relation did not

involve any “special confidence[s]” like those present

in other types of relationships that we and other courts

have recognized to fit within the exception on a case-bycase basis. Marchiando, 13 F.3d at 1116. See, e.g., Johns v.

Johns (In re Johns), 181 B.R. 965, 970-73 (Bankr. D. Ariz.

1995) (parent, a trustee of funds for the benefit of his

son, was a fiduciary for purposes of non-dischargeability);

Griffiths v. Peterson (In re Peterson), 96 B.R. 314, 321-

24 (Bankr. D. Colo. 1988) (investment advisor with statutory duties qualified as fiduciary within the meaning of

section 523(a)(4)); Purcell v. Janikowski (In re Janikowski),

60 B.R. 784, 789 (Bankr. N.D. Ill. 1986) (fiduciary relationship created between an attorney and client under

Illinois law fell within section 523(a)(4) exception); Eau

Claire County v. Loken (In re Loken), 32 B.R. 205, 210-11

(Bankr. W.D. Wis. 1983) (public register of deeds and
18 No. 10-1882

fee collector served in fiduciary capacity for purposes

of section 523(a)(4)).

A commercial principal like Follett, or like the cotton

principal long ago in Forsyth, who seeks the protection

of a trust in the event of bankruptcy can create an

express trust by putting clear requirements to that effect

in its contracts, such as requiring segregation of funds

held in trust for it. Otherwise, as the Supreme Court

observed, if the non-dischargeable debt exception were

to include such ordinary relationships as this one, it

would be difficult to limit its application at all. Forsyth,

43 U.S. at 207.

III. Conclusion

Follett did not establish that Berman & Associates

acted in a fiduciary capacity, under any theory, within

the meaning of 11 U.S.C. § 523(a)(4). We therefore affirm

the bankruptcy court’s decision holding the debt to

Follett to be dischargeable.

AFFIRMED.

1-21-11