Sherman

Opinion by Judge BYBEE; Dissent by Judge FISHER.

OPINION

Ordinarily, an individual’s debts may be discharged in Chapter 7 bankruptcy under 11 U.S.C. § 727 . However, a debt may not be discharged if it results from a violation of state or federal securities laws. 11 U.S.C. § 523 (a)(19)(A)(i). The question in this case is whether the exception to discharge in § 523(a)(19) 1 applies when the debtor himself is not culpable for the securities violation that caused the debt. The bankruptcy court held that the debt was subject to discharge; the district court disagreed and held that the debt was excepted from discharge in bankruptcy. We agree with the bankruptcy court that the exception to discharge applies only to those who have themselves violated the securities laws. We thus reverse the judgment of the district court.

I

We have previously described the facts in this case, which we will relate briefly. See In re Sherman (“Sherman I”), 491 F.3d 948, 953-56 (9th Cir.2007). In 1997, the SEC instituted an enforcement action against several companies, which, among other things, led to the court appointment of a receiver. 2 See id. at 953-54 & n. 3 (citing SEC v. Whitworth Energy Res.…

dissenting:

I respectfully dissent because the majority disregards the plain meaning of “for” in 11 U.S.C. § 523 (a)(19) and misconstrues Sherman’s role as a so-called “honest but unfortunate” debtor. The majority holds that a debt is only “for the violation of any of the Federal securities laws,” § 523(a)(19)(A)(i), when the debtor committed the violation. Maj. Op. 1012. The word “for” carries no such limitation. A debt is also “for” a violation of the securities laws when it is an obligation to return the proceeds of the violation being held in trust for the wrongdoer — which describes Sherman’s debt. The word “for” has many meanings, but as the majority concedes, one of them is “because of,” “on account of,” 1 “as a result of,” 2 “having (the thing mentioned) as a reason or cause.” 3 In context, that is plainly how § 523(a)(19) uses the preposition. See Brown v. Gardner, 513 U.S. 115, 118 , 115 S.Ct. 552 , 130 L.Ed.2d 462 (1994) (“Ambiguity is a creature not of definitional possibilities but of statutory context....”). Causation is not the only possible meaning of “for,” but it is the most ordinary and natural one and thus the controlling one. See Engine Mfrs. Ass’n v. S.…