United States Trustee Region 21 v. Bast Amron LLP

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[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 20-12547
____________________
IN RE: MOSAIC MANAGEMENT GROUP, INC.,
Debtor.
___________________________________________________
UNITED STATES TRUSTEE REGION 21,
Plaintiff-Appellee
Cross-Appellant,
versus
BAST AMRON LLP,
Defendant-Appellant
Cross-Appellee.
____________________
Appeal from the United States District Court
for the Southern District of Florida
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2 Opinion of the Court 20-12547
D.C. Docket No. 16-bk-20833-EPK
____________________
Before JORDAN, BRASHER, and ANDERSON, Circuit Judges.
ANDERSON, Circuit Judge:
In this appeal after remand from the Supreme Court, we ad-
dress the appropriate remedy for the constitutional violation iden-
tified in Siegel v. Fitzgerald, 596 U.S. __, 142 S. Ct. 1770 (2022). We
received supplemental briefing and held another oral argument on
the remedy issues.
I.
In 2008, Debtors Mosaic Management Group, Inc., Mosaic
Alternative Assets, Ltd., and Paladin Settlements, Inc. filed for
Chapter 11 bankruptcy in the Southern District of Florida, a “UST
district” in which the U.S. Trustee program operates. In June 2017,
the bankruptcy court confirmed a joint Chapter 11 plan, under
which most of the Debtors’ assets were transferred to an Invest-
ment Trust managed by an Investment Trustee.
In September 2019, the Investment Trustee filed a motion
requesting a determination of the Investment Trust’s quarterly fee
liability and seeking a reimbursement of its overpayment of those
fees. Among other arguments, the Investment Trustee argued
that Congress violated constitutional tax and bankruptcy uni-
formity requirements when it passed the Bankruptcy Judgeship Act
of 2017 (the “2017 Amendment”), which temporarily increased
fees for the largest debtors in Chapter 11 cases in UST districts. The
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20-12547 Opinion of the Court 3
purpose of the 2017 Amendment was to address a dwindling U.S.
Trustee program budget resulting from declining bankruptcy fil-
ings and to fund bankruptcy judgeships. Bankruptcy Judgeship Act
of 2017, Pub. L. No. 115-72, sec. 1004(a), § 1930(a)(6), 131 Stat.
1224, 1232; H.R. Rep. No. 115-130, at 7–9 (2017), as reprinted in 2017
U.S.C.C.A.N. 154, 159. From 2018 through 2022, if the U.S. Trustee
System Fund had a balance of less than $200 million in the prior
fiscal year, the 2017 Amendment provided that the “quarterly fee
payable for a quarter in which disbursements equal or exceed
$1,000,000 shall be the lesser of 1 percent of such disbursements or
$250,000.” Pub. L. No. 115-72, sec. 1004(a), § 1930(a)(6), 131 Stat.
at 1232. Otherwise, the existing fee schedule remained. In contrast
to this amendment to 11 U.S.C. § 1930(a)(6) governing fees in the
UST districts, the 2017 Amendment did not explicitly amend 11
U.S.C. § 1930(a)(7) which governs fees in the six Bankruptcy Ad-
ministrator (“BA districts”) in Alabama and North Carolina. Sec-
tion 1930(a)(7) provided that “the Judicial Conference of the United
States may require the debtor in a case under chapter 11 of title 11
to pay fees equal to those imposed by paragraph (6) of this subsec-
tion.” 11 U.S.C. § 1930(a)(7). Thus, the Act did not explicitly re-
quire a comparable increase of the fees in the six BA districts that
are not part of the U.S. Trustee program. The Judicial Conference,
which oversees the BA districts, did not impose in the BA districts
the increased quarterly fee provision until September 2018 and
then only for cases filed on or after October 1, 2018.
Although the bankruptcy court denied most of the motion,
it held that the 2017 Amendment created a partial uniformity
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4 Opinion of the Court 20-12547
problem because 2% of the fees collected in the UST districts were
to be paid to the general U.S. Treasury fund, which would offset
the cost of a temporary bankruptcy judgeship in a BA district. The
court ordered the U.S. Trustee to credit the Investment Trustee a
sum equal to 2% of the quarterly fees paid since January 1, 2018.
The court rejected the Investment Trustee’s other challenges to the
increased quarterly fees.
The parties 1 received authorization to file a direct appeal to
this Court and we issued an opinion affirming in part and reversing
in part. In re: Mosaic Mgmt. Grp., Inc., 22 F.4th 1291 (11th Cir. 2022),
vacated sub nom. Bast Amron LLP v. United States Trustee Region 21, 142
S. Ct. 2862 (2022). We held that the 2017 Amendment properly
applied to a case that was pending and confirmed prior to the Act’s
enactment because Congress clearly expressed its intent to this ef-
fect. We also held that the 2017 Amendment does not violate sub-
stantive due process and is not a tax subject to the Tax Uniformity
Clause. Finally, we held that the 2017 Amendment presents no vi-
olation of the Bankruptcy Uniformity Clause.
Subsequently, the Supreme Court addressed the Amend-
ment and held that it violated the uniformity requirement of the
1 The law firm Bast Amron was substituted for the Investment Trustee before
we issued our first opinion in this case. Bast Amron thus stands in the shoes
of the Investment Trustee, who in turn stood in the shoes of the Debtors in
this bankruptcy case. To avoid confusion with the U.S. Trustee, the appellee
in this case, we will hereafter refer to the appellant parties to this appeal as the
Debtors, which also better describes their capacity in this bankruptcy case.
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20-12547 Opinion of the Court 5
Bankruptcy Clause, abrogating our opinion to the extent it held
that there had been no violation of the Bankruptcy Uniformity
Clause. Siegel v. Fitzgerald, 596 U.S. __, 142 S. Ct. 1770 (2022). How-
ever, the Court reserved decision on the issue of the appropriate
remedy, commenting that the parties raised “a host of legal and
administrative concerns with each of the remedies proposed, in-
cluding the practicality, feasibility, and equities of each proposal;
their costs; and potential waivers by nonobjecting debtors.” 142 S.
Ct. at 1783. Several days later, the Supreme Court granted the
Debtors’ petition for writ of certiorari in this case, vacated our
judgment, and remanded for further consideration in light of
Siegel. Bast Amron LLP v. U.S. Tr. Region 21, 142 S. Ct. 2862 (2022).
II.
The issue before us is the appropriate remedy for the consti-
tutional violation the Supreme Court found in Siegel. The Debtors
in this case—being debtors in a U.S. Trustee district—have been re-
quired to pay higher fees than a comparable debtor in one of the
six BA districts in Alabama or North Carolina. We now know, from
the Supreme Court decision in Siegel, that the differential treatment
of comparable debtors constituted a violation of the uniformity re-
quirement of the Bankruptcy Clause. Debtors in this case seek a
refund of the differential between what they have paid and the
lesser amount that a comparable debtor in one of the BA districts
paid. That differential persisted during 2018 and thereafter until
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Congress, becoming aware of the problem, enacted the 2020 Act 2
which presumably ended the different treatment. Thus, the issue
before us is whether the Debtors are entitled to such a refund, and
if not, what remedy is appropriate. 3
III.
When a statute unconstitutionally confers a benefit on one
class over another, courts have two options. First, they can declare
the statute “a nullity and order that its benefits not extend to the
class that the legislature intended to benefit” Sessions v. Morales-San-
tana, 582 U.S. 47, 72 (2017) (quoting Califano v. Westcott, 443 U.S. 76,
89 (1979)). As a second option, the court “may extend the coverage
of the statute to include those who are aggrieved by exclusion.” Id.Generally, extension of the benefit, rather than its nullification, is
the proper course. Id. at 74. Because the statute at issue in this case
imposes a burden instead of providing a benefit, the two options in
this case are: 1) nullify the burden (the fee increase); or 2) extend
the burden (the fee increase) to those initially excluded (the BA dis-
tricts). Although the right for equal treatment is rooted in the Con-
stitution, the remedy for its violation is not found there. Id. at 73.
2 The Bankruptcy Administration Improvement Act of 2020 (“2020 Act”) was
enacted by Congress, effective January 12, 2021. Pub. L. 116-325, 134 Stat.
5086. It effectively mandated that the fee increases that had been enacted in
the 2017 Amendment shall apply not only in the U.S. Trustee districts, but also
in the BA districts. Id. sec. 3(d)(2).
3 At oral argument the government expressly disavowed sovereign immunity,
so we need not address that matter.
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It is well established that in formulating the remedy for con-
stitutional violations like this one, courts should be guided by con-
gressional intent. Id. at 73 (“The choice between these outcomes
is governed by the legislature’s intent . . . ”); Levin v. Com. Energy,
Inc., 560 U.S. 413, 426–427 (2010) (“On finding unlawful discrimina-
tion, . . . courts may attempt, within the bounds of their institu-
tional competence, to implement what the legislature would have
willed had it been apprised of the constitutional infirmity.”); Ayotte
v. Planned Parenthood of N. New Eng., 546 U.S. 320, 330 (2006) (“the
touchstone for any decision about remedy is legislative intent”);
United States v. Booker, 543 U.S. 220, 246 (2005) (“We answer the re-
medial question by looking to legislative intent.”); Heckler v.
Mathews, 465 U.S. 728, 739 n.5 (1984) (“the court should not, of
course, ‘use its remedial powers to circumvent the intent of the
legislature’”) (quoting Westcott, 443 U.S. at 94 (Powell, J., concur-
ring in part)); Welsh v. United States, 398 U.S. 333, 366 (1970) (Harlan,
J., concurring) (observing that there is good reason for courts to
make necessary statutory repairs without impairing the legislative
goals). 4
4 This analysis has been applied to guide the remedy whether the underlying
infringement was a violation of the Equal Protection clause (Iowa-Des Moines
Nat’l Bank v. Bennett, 284 U.S. 239 (1931), and Mathews); a violation of the uni-
formity of tax treatment as between local and interstate commerce, as implied
in the Commerce Clause (McKesson Corp. v. Div. of Alcoholic Beverages & To-
bacco, 496 U.S. 18 (1990)); a violation of the First Amendment (Barr v. Am. Ass’n
of Pol. Consultants, 140 S. Ct. 2335 (2020)); or a violation of the Sixth Amend-
ment right to a jury trial (Booker).
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8 Opinion of the Court 20-12547
When determining which remedy the legislature would
have chosen, courts are to make two additional assessments. Mo-
rales-Santana, 582 U.S. at 75 (citing Welsh, 398 U.S. at 365). The first
is the court should “measure the intensity of commitment” to the
“main rule, not the exception.” Id. The second is that they should
“consider the degree of potential disruption of the statutory
scheme that would occur by extension as opposed to abrogation.”
Id. In Morales-Santana, the Court was faced with a statute’s dispar-
ate treatment of the residency requirements of unwed mother and
unwed fathers when passing citizenship to their children born
abroad. Unwed citizen mothers were only required to have one
year of residence in the United States while all other parents were
required to have five. In deciding whether to extend the benefit of
a shorter residency period required of unwed citizen mothers to
unwed citizen fathers, the Court examined other portions of the
citizenship law, and noted the congressional recognition of the
longstanding importance of physical presence in citizenship law as
the indicator of attachment to a country. Id. The Court also stated
that the “potential for ‘disruption of the statutory scheme’ is large.”
Id. Because both factors pointed against extending the shorter res-
idency exception, the Court nullified the favorable treatment for
unwed mothers.
IV.
Debtors in this case argue that they are entitled to a refund
of the increased portion of the trustee fees—i.e. the difference be-
tween the fees charged to them and the fees charged to comparable
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debtors in the BA districts—that they have been required to pay
throughout 2018 and thereafter until Congress equalized the fees
in the 2020 Act. They argue that strong Supreme Court precedent
supports such refunds as the appropriate remedy. For this proposi-
tion, Debtors rely upon Iowa-Des Moines National Bank v. Bennett,
284 U.S. 239 (1931), as representative of a long line of Supreme
Court cases holding that a state’s unequal taxation of comparable
and competing taxpayers violates the Equal Protection Clause, and
holding that the taxpayer who was required to pay the higher, dis-
criminatory tax is entitled to a refund. Although acknowledging a
state court could have removed the discrimination “by collecting
the additional taxes from the favored competitors,” id. at 247, the
Bennett Court held that the taxpayer who paid the higher taxes was
entitled to a refund. The Court held:
But it is well settled that a taxpayer who has been sub-
jected to discriminatory taxation through the favor-
ing of others in violation of federal law cannot be re-
quired himself to assume the burden of seeking an
increase of the taxes which the others should have
paid. Nor may he be remitted to the necessity of
awaiting such action by the state officials upon their
own initiative.
Id. at 247 (citations omitted).
Disagreeing with the Debtors, the U.S. Trustee’s primary ar-
gument is that refunds are not the appropriate remedy in this case
because Congress has already provided prospective relief in the
2020 Act. The U.S. Trustee argues that Congress, in the 2020 Act,
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has already chosen the remedy option of extending the burden (the
fee increase) to the previously excluded BA districts, thus rejecting
the other option which would have nullified the burden (the fee
increase) and warranted the refunds which Debtors seek.5 The U.S.
Trustee asserts that this remedial option is the one which will im-
plement the very clear congressional intention all along that the
2017 fee increase was intended to apply to all federal judicial dis-
tricts, including the BA districts. 6
Recognizing that its primary argument—i.e. prospective re-
lief only—fails to remedy the inequality that would remain during
the time between 2018 and January 12, 2021 (the effective date of
the 2020 Act, which cured the inequality prospectively), the U.S.
Trustee makes a secondary, alternative argument, as follows. The
alternative argument: even if retroactive relief were appropriate,
5 The U.S. Trustee thus relies on the above-described framework that the
Supreme Court has established for the determination of the appropriate rem-
edy for constitutional violations like this. As noted above, a reviewing court
should choose between two options: nullify the burden (the fee increase) or
extend the burden (the fee increase) to those previously excluded (the BA dis-
tricts), the choice to be guided by congressional intent.
6 In support of this congressional intention, the U.S. Trustee refers to the ev-
idence of this congressional intention as recited in this Court’s first opinion in
this case, In re Mosaic, 22 F.4th at 1310-19, as well as the 2020 Act itself which
chose to extend the fee increase to the BA districts, see Pub. L. 116-325, sec.
3(d)(2), § 1930, 134 Stat. 5086, 5088, and its legislative finding, see id. at 5086
(Congress explicitly “confirm[ed] the longstanding intention of Congress that
quarterly fee requirements remain consistent across all federal judicial dis-
tricts.”).
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the remedy should not be refunds to comparable debtors in the U.S.
Trustee districts like the Debtors here, but rather should be retro-
active collections from comparable debtors in the BA districts who
failed to pay the increased fees during 2018-2021 (i.e. what the par-
ties here refer to as the “clawback”).
We address first the U.S. Trustee’s alternative argument be-
cause it is readily rejected. This Court does not have the authority
to “claw back” additional fees from comparable debtors in the BA
districts. Neither those debtors nor the BA Administrators who
would prosecute the “clawback” are parties before this Court; thus
we have no jurisdiction over them. Nor is the Judicial Conference—
which would have the authority to order such “clawbacks”—a
party before this Court. And some of the BA districts are located
outside the Eleventh Circuit. Thus, the simple fact is that we can-
not implement this alternative resolution suggested by the U.S.
Trustee. And, as noted above, the Supreme Court in Bennett and
several other cases have made it clear that the party “who has been
subjected to [discrimination] through favoring others in violation
of federal law cannot be required himself to assume the burden of
seeking an increase of the taxes which other should have paid.” 284
U.S. at 247. Of course, Congress or the Judicial Conference might
have authority to order such “clawbacks,” but there is no sugges-
tion that either has moved to do so, or intends to do so. Indeed, as
noted, Congress in the 2020 Act was aware of the constitutional
violations and did choose the remedy of extending the burden (the
increased fee) to the BA districts. However, Congress remedied the
problem only prospectively and did not order such “clawbacks.”
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And, in Bennett, we are instructed that parties like the Debtors here
“may [not] be remitted to the necessity of awaiting such action by
the state officials upon their own initiative.” Id. Moreover, it is al-
together unclear whether, or to what extent, even Congress or the
Judicial Conference could effect such “clawbacks” in light of the
fact that, by now, the relevant bankruptcy estates have probably
made substantial distributions or undergone other substantial
change, or even closed.
Having rejected the U.S. Trustee’s alternative argument, we
turn to address its primary argument—i.e. that prospective-only re-
lief is appropriate. The U.S. Trustee attempts to distinguish the
Bennett decision and the other state tax cases upon which Debtors
rely. The U.S. Trustee argues that in those cases, the taxpayers seek-
ing refunds had been forced to pay the tax initially; they had no
“meaningful opportunity to withhold payment and to obtain a pre-
deprivation determination of the tax assessment’s validity.”
McKesson Corp., 496 U.S. at 38. The U.S. Trustee argues that this
case is in sharp contrast: here the debtors could have challenged the
constitutionality of the increase—employing either routine motion
or adversary proceeding—before the first installment became due
in the first quarter of 2018. They rely upon the dicta in McKesson
suggesting that the refunds ordered in that case and the long line
of Supreme Court cases upon which McKesson (and the Debtors
here) rely were dependent upon the fact that no meaningful pre-
deprivation remedy was available. See id. at 38 n.21 (“In contrast,
if a State chooses not to secure payments under duress and instead
offers a meaningful opportunity for taxpayers to withhold
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contested tax assessments and to challenge their validity in a pre-
deprivation hearing, payments tendered may be deemed ‘volun-
tary.’ The availability of a predeprivation hearing constitutes a pro-
cedural safeguard against unlawful deprivations sufficient by itself
to satisfy the Due Process Clause, and taxpayers cannot complain
if they fail to avail themselves of this procedure. Where voluntary
payment of a tax is knowingly made pursuant to an illegal demand,
recovery of that payment may be denied”) (citation and quotation
marks omitted).
Thus, the U.S. Trustee argues that the appropriate remedy
in this case is a prospective-only remedy, which remedy Congress
has already provided in the 2020 Act. It argues that there is prece-
dent for such a prospective-only remedy, citing Morales-Santana,
582 U.S. at 77, and that this is the remedy that would implement
congressional intent.
The U.S. Trustee’s argument based on the McKesson dicta
and the availability of a predeprivation remedy has been squarely
rejected by the Supreme Court. In Reich v. Collins, 513 U.S. 106(1994), the State of Georgia had exempted from the state income
tax retirement benefits paid by the state but not retirement benefits
paid by the federal government or any other employer. After the
Supreme Court in Davis v. Michigan Department of Treasury, 489 U.S.
803 (1989), held that such a tax scheme violated the constitutional
intergovernmental tax immunity doctrine, Georgia repealed its ex-
emption for state retirees, but did not allow refunds for federal re-
tirees for the open years before Davis during which the differential
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in tax had existed. A federal retiree challenged that unequal tax
treatment, relying on the same cases on which the Debtors here
rely, including McKesson and Bennett. In rejecting the federal re-
tiree’s claim for refunds, the Georgia Supreme Court held that
McKesson, Bennett, and similar cases that required refunds would
not apply and refunds would not be required if Georgia law pro-
vided a meaningful opportunity to litigate the validity of the chal-
lenged tax in a predeprivation process. Concluding that Georgia
provided “ample” predeprivation procedures, the Georgia Su-
preme Court denied the refunds sought by the federal retiree. The
Supreme Court granted certiorari and reversed the Georgia Su-
preme Court:
The Georgia Supreme Court is no doubt right that,
under McKesson, Georgia has the flexibility to main-
tain an exclusively predeprivation remedial scheme,
so long as that scheme is “clear and certain.” . . . In
this regard, the Georgia Supreme Court’s reliance on
Georgia’s predeprivation procedures was entirely be-
side the point (and thus error), because even assum-
ing the constitutional adequacy of these proce-
dures—an issue on which we express no view—no
reasonable taxpayer would have thought that they
represented, in light of the apparent applicability of
the refund statute, the exclusive remedy for unlawful
taxes.
513 U.S. at 111-12 (emphasis in original).
In Newsweek, Inc. v. Florida Department of Revenue, 522 U.S.
442 (1998), the Court again rejected the same argument based on
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the McKesson dicta and the availability of a predeprivation remedy.
The Florida statutes exempted newspapers but not magazines
from its sales tax. The Florida Supreme Court held that the differ-
ential tax treatment violated the First Amendment. However, the
Department of Revenue rejected Newsweek’s claim for refund, and
the Florida District Court of Appeals agreed, holding that
“McKesson is distinguishable because that holding was expressly
predicated upon the fact that the taxpayer had no meaningful pre-
deprivation remedy.” Newsweek, Inc. v. Dept. of Rev., 689 So.2d 361,
363 (Fla. Dist. Ct. App. 1997). Concluding that in Florida, adequate
predeprivation remedies were available to the taxpayer, the District
Court of Appeals denied the refund. In vacating the judgment of
the District Court of Appeals, and granting access to the refund
procedure, the Supreme Court held: “a State has the flexibility to
maintain an exclusively predeprivation remedial scheme, so long as
that scheme is clear and certain.” Id. at 444 (quotations and cita-
tions omitted; emphasis added).
Thus, in both Reich and Newsweek the Supreme Court clari-
fied McKesson, ruling that, in cases of differential tax treatment of
comparable taxpayers, the state can remedy the constitutional vio-
lation by choosing to extend the burden (the tax) to the previously
favored group. However, because the relevant law and available
procedures permitted both predeprivation and postdeprivation
process, both courts held that due process would not permit the
state to insist on the predeprivation remedy to the exclusion of the
postdeprivation refund remedy unless the exclusivity of the pre-
deprivation remedy was clear such that reasonable persons would
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16 Opinion of the Court 20-12547
not be misled. In other words, except in the unusual context of a
clear, exclusive predeprivation remedy, the past inequality must be
accounted for and the disfavored taxpayer is entitled to appropriate
refunds.
Thus, the Supreme Court has squarely rejected the U.S.
Trustee’s distinction of McKesson, Bennett, and the other state tax
cases on which Debtors here rely. Just as in Reich and Newsweek, in
this case also, routine bankruptcy procedures—whether simple
motion or adversary proceeding—were available both predepriva-
tion or postdeprivation. That is, Debtors here could have chal-
lenged the increased fee before paying same in early 2018 (predepri-
vation) and those same routine procedures were available postdep-
rivation, as actually utilized by Debtors in this case. In any event,
it certainly was not clear that the available predeprivation process
was exclusive. Thus, Reich and Newsweek squarely reject the U.S.
Trustee’s primary support for prospective relief only—i.e. that
McKesson-based distinction of the Debtors state tax cases requiring
refunds in a similar context.
The significance of Reich and Newsweek for the instant case
is not limited to their express rejection of the U.S. Trustee’s primary
argument in support of prospective-only relief. These decisions
also provide significant guidance for this case in that they came to
the Supreme Court in precisely the same posture that this case
comes to us. As both Reich and Newsweek came to the Supreme
Court, the constitutional violation had previously been
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established. 7 In both cases, it had already been determined that the
constitutional violation should be remedied by extending the bur-
den (the tax) to the previously favored group. 8 In both cases, the
state courts had denied the refunds that were claimed by the tax-
payers who had been discriminated against and had had to pay the
higher taxes during the open years before the tax scheme was
equalized by extending the tax to the previously favored group. 9
In other words, in both Reich and Newsweek, the state law
had chosen to cure the constitutional violation by prospectively ex-
tending the burden (the tax) to the previously favored group, but
7 In Reich, the Supreme Court had already determined in Davis v. Michigan
Department of Treasury, 489 U.S. 803 (1989), that Georgia’s differential treat-
ment of state retirees and federal retirees violated the Constitution. Reich, 513
U.S. at 108. In Newsweek, the Florida Supreme Court had already held that
Florida’s exemption from its sales tax of newspapers but not magazines vio-
lated the Constitution. Newsweek, 522 U.S. at 442; see also Dept. of Rev. v. Mag-
azine Publishers of Am., 604 So.2d 459 (Fla. 1992).
8 In Reich, the Georgia legislature had repealed the exemption from tax for
newspapers. See Reich, 513 U.S. at 108; see also Reich v. Collins, 422 S.E.2d 846,
847 (Ga. 1992) (noting that after the Supreme Court in Davis determined that
Georgia’s differential treatment of state retirees and federal retirees was un-
constitutional, the Georgia legislature repealed the exemption for state retir-
ees). In the Newsweek case, the Florida Supreme Court held that Florida’s ex-
emption for tax for newspapers but not magazines was unconstitutional, and
held that the proper remedy was to strike the exemption for newspapers. See
Magazine Publishers, 604 So.2d at 463-64.
9 See Reich, 513 U.S. at 108 (noting that Georgia repealed the exemption for
state retirees, but denied refunds for federal retirees). See Newsweek, 522 U.S.
at 443 (noting that the Florida court had denied refunds for the magazines).
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had denied refunds to the taxpayers who had been discriminated
against. In short, the state law had provided prospective-only relief.
The Supreme Court reversed, and held that due process required
refunds.10
The instant case comes to us in precisely the same posture
that Reich and Newsweek had come to the Supreme Court:
• As in Reich and Newsweek, the fact of the constitutional vio-
lation in this case has been established. See Siegel, 142 S. Ct.
at 1789.
• As in Reich and Newsweek, Congress has chosen to cure the
constitutional violation by prospectively extending the bur-
den (the fee increase) to the previously favored group (the
BA districts). See the 2020 Act, Pub. L. 116-325, 134 Stat.
5086.
• As in the state court stage of the Reich and Newsweek cases,
the U.S. Trustee urges us to approve a prospective-only rem-
edy and deny refunds to the Debtors in this case.
We conclude that we should follow the guidance of the Su-
preme Court decisions in Reich and Newsweek and Bennett (and the
other state tax cases upon which the Debtors rely). We conclude
that the prospective-only relief urged upon us by the U.S. Trustee
is not appropriate in this case.
10 Indeed, the long line of state tax cases mentioned above involved the same
posture and the same result. See, e.g., McKesson, 496 U.S. at 31 (“The question
before us is whether prospective relief, by itself, exhausts the requirements of
federal law. The answer is no”).
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20-12547 Opinion of the Court 19
We acknowledge the strong evidence of congressional in-
tention preferring the maintenance of the increased level of fees.
However, we note that the legislative intention in Reich and
Newsweek was the same. In Reich, the Georgia legislature had re-
pealed the exemption for state retirees, indicating its preference for
the tax over the exemption. The legislative intent was the same,
but even clearer, in Newsweek. There, the Florida Supreme Court
had already—well before the U.S. Supreme Court’s Newsweek deci-
sion in 1998—expressly held that the legislative intent preferred the
tax over the exemption. See Magazine Publishers, 604 So.2d at 463
(“Section 212.21 makes it clear that as between the imposition of
the tax or the granting of an exemption, the tax shall prevail.”).
Notwithstanding this legislative intent, the Supreme Court held
that due process required refunds.
Of course the result in Reich and Newsweek—and the result
in this case since we follow Reich and Newsweek—partially imple-
ments the legislative intent in that the tax was to be maintained in
the future. Although the refunds ordered by the Supreme Court in
Reich and Newsweek may have been in tension with the legislative
intent, such legislative intent cannot overcome the requirements
of due process. See Newsweek, 522 U.S. at 445 (“due process pre-
vents [the Department of Revenue] from applying this require-
ment to taxpayers, like Newsweek, who reasonably relied on the
apparent availability of a postpayment refund”). Thus, the results
in Reich and Newsweek allow implementation of as much of the leg-
islative intent as due process would permit. Similarly, in the instant
case, our result—requiring refunds, but recognizing future
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20 Opinion of the Court 20-12547
application of the fee increase, as mandated by Congress in the 2020
Act—implements as much of the congressional intent as due pro-
cess permits.
The only other support offered by the U.S. Trustee for the
prospective-only relief that it advocates is its citation to Morales-
Santana, 582 U.S. at 77, which did provide prospective-only relief
in a very different context. 11 For several reasons, we conclude that
we should be guided by Reich, Newsweek, Bennett, and the other
analogous state tax cases, rather than by Morales-Santana. First, the
Court in Morales-Santana merely concludes at the end of the opin-
ion that its ruling “should apply, prospectively, to children born to
unwed U.S.-citizen mothers.” 582 U.S. at 77. There is no explana-
tion on the basis of which we could be sure of a governing principle
of law defining when prospective application is appropriate. Sec-
ond, and significantly, the instant case is closely analogous to Reich
and Newsweek, for the reasons fully discussed above, but is very dif-
ferent from the Morales-Santana case. The right to citizenship issue
in Morales-Santana is very different from the inequality in trustee
fees at issue in this case. As Justice Thomas, joined by Justice Alito,
said in his concurring opinion, it is far from clear whether any
court, even the Supreme Court, has the power to confer or
11 The U.S. Trustee also cites the plurality opinion in Barr v. American Associa-
tion of Political Consultants, 591 U.S. __, 140 S. Ct. 2335, 2355 n.12 (2020), which
also suggests prospective-only relief. However, like Morales-Santana, the plu-
rality provides no explanation. Moreover, the prospective-only relief appears
to have been supported only by the two concurring Justices, plus possibly Jus-
tice Sotomayor (i.e. a total of only four Justices).
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20-12547 Opinion of the Court 21
withdraw citizenship on a basis other than as prescribed by Con-
gress. Id. at 78. Moreover, retrospective application of the Court’s
ruling would have been extremely harsh. That is, it is virtually un-
thinkable for the Court to have withdrawn the citizenship from
children of unwed mothers already born and who had already qual-
ified for citizenship under the previous one-year residency rule.
A third and significant reason prompting us to follow the
guidance of Reich, Newsweek, and Bennett is that we are also follow-
ing the “normal rule of retroactive application” of Supreme Court
decisions. Harper v. Va. Dept. of Taxation, 509 U.S. 86, 97 (1993); see
also id. at 94 (acknowledging “fundamental rule of retrospective op-
eration that has governed judicial decisions for near a thousand
years.”)(cleaned up). This is especially true in this case because the
rule identified in Siegel was not even a “new” rule which might in
some circumstances have warranted prospectively-only relief. 12
12 The risk of this constitutional violation of the Bankruptcy Uniformity
Clause has been apparent since the Ninth Circuit so ruled. See St. Angelo v.
Victoria Farms, Inc., 38 F.3d 1525 (9th Cir. 1994), amended by 467 F.3d 969 (9th
Cir. 1995). That ruling prompted the Judicial Conference and Congress to act
to avoid this risk. That led to the 2000 legislation which Congress intended to
ensure that uniform trustee fees would apply in all federal judicial districts—
both US Trustee and BA districts. See discussion in our earlier opinion in this
case, 22 F.4th at 1310-19; see also the congressional finding in the 2020 Act
(“confirm[ing] the longstanding intention of Congress that quarterly fee re-
quirements remain consistent across all federal judicial districts”). Thus, Con-
gress has been aware of the constitutional risks of differential trustee fees in
the IUS Trustee districts, as compared to the BA districts, for more than two
decades. Accordingly, the Supreme Court’s holding in Siegel did not announce
a “new” rule.
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22 Opinion of the Court 20-12547
Finally, in so holding we reach the same result reached by
every court to have addressed this issue. The Second Circuit13 and
the Tenth Circuit14 have ordered refunds for debtors in precisely
the same context as the Debtors in this case. Although the Second
Circuit provided no rationale at all, and although the Tenth Circuit
only noted that it lacked authority over the fees in the BA districts
and that the Second Circuit had already so ruled, we suspect that
our sister circuit courts probably were thinking along the lines of
the analysis we set out in this opinion. The only other court that
has addressed this issue is In re Circuit City Stores, Inc., 2022 WL
17722849 (Bankr. E.D. Va. Dec. 15, 2022). The bankruptcy judge
in that case followed the Second and Tenth Circuits and granted
refunds to debtors comparable to the Debtors in this case. The
bankruptcy judge distinguished the Morales-Santana decision and
relied on the same long line of state tax cases upon which we too
rely (e.g. Bennett, etc.).
The U.S. Trustee offers no analysis or briefing to explain why prospec-
tive-only relief would be appropriate in this case. See Harper, 509 U.S. at 94-
102; James B. Beam Distilling Co. v. Georgia, 501 U.S. 529 (1991); Richard S. Kay,
Retroactivity and Prospectivity of Judgments in American Law, 62 AM. J. COMP. L.
37 (2014). Thus, we follow the “normal” rule and apply the Siegel holding
retroactively, subject of course to any independent defense—e.g. statutes of
limitation or sovereign immunity.
13 In re: Clinton Nurseries, Inc., 53 F.4th 15, 29 (2d Cir. 2022), amending and rein-
stating 998 F.3d 56, 69-70 (2d Cir. 2021).
14 In re John Q. Hammons Fall 2006, LLC, No. 20 3203, 2022 WL 3354682 (10th
Cir. Aug. 15, 2022), reinstating 15 F.4th 1011, 1025-26 (10th Cir. 2021).
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20-12547 Opinion of the Court 23
For the foregoing reasons,15 we conclude that Reich,
Newsweek, Bennett, McKesson, and the long line of similar state tax
cases are closely analogous to the instant case and provide strong
precedent supporting the refund remedy urged upon us by the
Debtors. Accordingly, we hold that the appropriate remedy in this
case for the constitutional violation identified in Siegel is the refunds
that the Debtors in this case seek. The judgment of the court below
is vacated, and this case is remanded for further proceedings not
inconsistent with this opinion.
VACATED and REMANDED.
15 The U.S. Trustee suggest no other defense or bar to the refunds that Debt-
ors seek—e.g. statute of limitations or sovereign immunity. As noted, the U.S.
Trustee at oral argument affirmatively disavowed any sovereign immunity
bar.
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20-12547 BRASHER, J., Concurring 1
BRASHER, Circuit Judge, concurring:
I respectfully concur with the bottom-line result of the ma-
jority opinion, although I cannot agree with all of its reasoning.
When this appeal was last before us, I wrote separately to
make two points. First, I explained that “the substantial variance in
fees as between the Trustee and Bankruptcy Administrator districts
amounts to an unconstitutional lack of uniformity.” In re Mosaic
Mgmt. Grp., Inc., 22 F.4th 1291, 1328 (11th Cir. 2022) (Brasher, J.,
concurring). Second, I concluded that the investment trustee’s “re-
quested remedy—a refund of the higher fees, which were imposed
in 94% of the districts—is inappropriate because it is demonstrably
at odds with Congress’s intent.” Id. The Supreme Court reached
the same conclusion as me on the first issue and remanded for us
to consider the second issue. See Bast Amron LLP v. United States Tr.
Region 21., 142 S. Ct. 2862 (2022), and Siegel v. Fitzgerald, 142 S. Ct.
1770 (2022).
When a statute creates an unconstitutional disparity in treat-
ment, “there exist two remedial alternatives.” Califano v. Westcott,
443 U.S. 76, 89 (1979) (cleaned up) (quoting Welsh v. United States,
398 U.S. 333, 361 (1970) (Harlan, J., concurring in result)). A court
can level up by extending the favorable treatment to everyone or
level down by treating everyone like the disfavored class. A court’s
choice between the two remedies must be guided by legislative in-
tent. See Sessions v. Morales-Santana, --- U.S. ---, 137 S. Ct. 1678, 1699
(2017). An intent to level up is the default presumption, but an in-
tent to level down may be inferred where the favorable treatment
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2 BRASHER, J., Concurring 20-12547
was meant to be an “exception” to the “general rule . . . applicable
to a substantial majority.” Id. at 1701.
As I explained last time, it is obvious that Congress’s intent
supports the conclusion that we must level down. See Mosaic Mgmt.
Grp, 22 F.4th at 1329−30 (Brasher, J., concurring). The favorable
treatment here was a tiny exception to an otherwise comprehen-
sive scheme, and it was an accidental exception at that. Id. As a mat-
ter of equal treatment law, that is where the inquiry ends. We
should level down, even if such leveling down results in a prospec-
tive-only remedy or requires joining other parties. I therefore can-
not agree with the majority’s attempt to distinguish equal treat-
ment cases, such as Sessions v. Morales-Santana, from this one.
That said, however, I have since “acquired new wisdom” or
“more critically, have discarded old ignorance” that leads me to
change my bottom-line conclusion. Ring v. Arizona, 536 U.S. 584,
611 (2002) (Scalia, J., concurring). Specifically, the investment trus-
tee has identified a due process problem with a prospective-only
remedy, and I believe that the trustee’s due process argument has
merit.
When a person has been compelled by law to pay a tax or
fee, then that person has been deprived of property. To justify that
deprivation, the government must “satisfy the commands of the
Due Process Clause.” McKesson Corporation v. Division of Alcoholic
Beverages and Tobacco, 496 U.S. 18, 36 (1990). In a case like this one,
the due process clause commands that the government provide
“meaningful backward-looking relief ” if it has placed a taxpayer
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20-12547 BRASHER, J., Concurring 3
(or, here, a feepayer) “under duress promptly to pay a tax when
due” without the opportunity to fully litigate its legality. Id. at 31.
Despite my views of the proper equal treatment remedy, I
think the investment trustee has a due process right to a refund.
This is so for two reasons.
First, the government provided an opportunity to challenge
the legality of the fee, and the investment trustee took advantage
of it. The investment trustee challenged the imposition of the fee
at the earliest opportunity in the very bankruptcy case in which the
fee was imposed—this one. Having lost that challenge in the bank-
ruptcy court, the investment trustee was under a legal obligation
to pay the fee. This fact—that the investment trustee availed itself
of a process to challenge the fee—distinguishes it from someone
who belatedly seeks a refund of a fee that he never contested. It
would be inconsistent with due process to deny a backwards-look-
ing remedy when the investment trustee challenged the fee at an
early opportunity and then paid it under protest.
Second, a level-up refund remedy is our only option because
there is no lawful way to implement a backward-looking level-
down remedy. The creditors and debtors in the favored class of
bankruptcy cases have their own due process rights that prevent us
from retroactively assessing higher fees in those cases. Although
the imposition of a retroactive tax “does not necessarily deny due
process to those whose taxes are increased,” there is “some tem-
poral point” beyond which “the retroactive imposition of a signifi-
cant tax burden may be ‘so harsh and opposed as to transgress the
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4 BRASHER, J., Concurring 20-12547
constitutional limitation.’” Id. at 40 n.23 (quoting Welch v. Henry,
305 U.S. 134, 147 (1938)). I think we have reached that point. Even
though only a small number of bankruptcy cases would be affected
by a retroactive fee, too much time has passed to increase the fees
consistent with due process. This is especially true of bankruptcy
cases that have already been closed and the estate’s assets distrib-
uted or reorganized.
For these reasons, I respectfully concur in the result.