Whether a debtor in bankruptcy may discharge liability for unlawfully violating a nonsegregated statutory trust

QUESTION PRESENTED This petition arises from the collision of two federal statutes, namely Bankruptcy Code (11 U.S.C.) § 523(a)(4) and the Perishable Agricultural Commodities Act of 1930, as amended (7 U.S.C. §§ 499a-499t) (PACA). PACA regulates the interstate sale of produce, and imposes a trust upon produce and its proceeds for the benefit of produce sellers. 7 U.S.C. § 499e(c)(2). Use of trust assets is restricted, and failure to maintain the trust is unlawful, but the statute does not require trust funds to be segregated from other funds. 7US.C. § 499b(3), (4); 7 C.F.R. § 46.46(b). Individual debtors who file for chapter 7 bankruptcy can discharge some of their debts. 11 U.S.C. § 727(a). But Bankruptcy Code § 523(a)(4) bars discharge of certain debts incurred “while acting in a fiduciary capacity.” In general, the fiduciary-capacity requirement is satisfied by a statutory trust. Larson v. Bayer (In re Bayer), 521 B.R. 491, 506 (Bankr. E.D.Pa. 2014). The dispute in this case turns on whether a federal statute imposing a nonsegregated trust, like PACA, satisfies the fiduciary-capacity requirement. Federal courts are “hopelessly divided” (id. at 509), with circuit courts split four to three. The question presented is: May a debtor in bankruptcy discharge liability for unlawfully violating a nonsegregated statutory trust?