Henry Hobbs, Jr. v. Buffets, L.L.C.

Case: 19-50765 Document: 00515624886 Page: 1 Date Filed: 11/03/2020
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
November 3, 2020
No. 19-50765 Lyle W. Cayce
Clerk
In the Matter of: Buffets, L.L.C., doing business as Old
Country Buffet, doing business as JJ North's Grand
Buffet, doing business as Country Buffet, doing
business as Home Town Buffet, doing business as
Ryan's, doing business as Ryan's Family Steakhouse,
doing business as Fire Mountain, doing business as
Granny's, doing business as Tahoe Joe's, doing business
as Tahoe Joe's Famous Steakhouse, doing business as
Roadhouse Grill, doing business as Buffets,
Incorporated, doing business as Ovation Brands, doing
business as Soup 'N Salad Unlimited; Ocb Restaurant
Company, L.L.C.; Fire Mountain Restaurants, L.L.C.;
Tahoe Joe's, Incorporated; Ocb Purchasing Company;
Hometown Buffett, Incorporated; Ryan's Restaurant
Group, L.L.C.,
Debtors,
Henry G. Hobbs, Jr.,
Appellant Cross—Appellee,
versus
Buffets, L.L.C., doing business as Old Country Buffet,
doing business as Country Buffet, doing business as
Home Town Buffet, doing business as Ryan's, doing
business as Ryan's Family Steakhouse, doing business as
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Fire Mountain, doing business as Granny's, doing
business as Tahoe Joe's, doing business as Tahoe Joe's
Famous Steakhouse, doing business as Roadhouse Grill,
doing business as JJ North's Grand Buffet, doing
business as Buffets, Inc., doing business as Ovation
Brands, doing business as Soup 'N Salad Unlimited;
Hometown Buffet, Incorporated; Ocb Restaurant
Company, L.L.C.; Ocb Purchasing Company; Ryan's
Restaurant Group, L.L.C.; Fire Mountain Restaurants,
L.L.C.; Tahoe Joe's, Incorporated,
Appellees Cross-Appellants.
Appeal from the United States Bankruptcy Court
for the Western District of Texas
USBC No. 5:16-BK-50557
Before Stewart, Clement, and Costa, Circuit Judges.
Gregg Costa, Circuit Judge:
Filing fees help fund the federal judiciary. It costs $400 to file a
lawsuit in federal district court; an appeal costs $505. See Schedule of Fees,
U.S. Dist. & Bankr. Court: S. Dist. of Tex.,
https://www.txs.uscourts.gov/page/FeeSchedule; see also 28 U.S.C. §§
1913, 1914. Bankruptcy court can be more expensive. Chapter 11 debtors pay
not only a filing fee of $1717 but also quarterly fees until the bankruptcy ends.
Id.; see also 28 U.S.C. § 1930(a)(6). A 2017 law imposed a temporary but
substantial increase in those quarterly fees for large Chapter 11 debtors. The
fee increase is an attempt to shore up the United States Trustee Program, so
it went into immediate effect only in the eighty-eight judicial districts that use
trustees. It took nine months for a similar fee adjustment to apply in the other
six judicial districts.
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Debtors nationwide have challenged the increased fees on numerous
grounds, including a claim that delayed implementation in the non-Trustee
districts means the fee amendment did not “establish . . . uniform Laws on
the subject of Bankruptcies throughout the United States.” U.S. CONST. art.
I, § 8, cl.4. Bankruptcy courts have disagreed on the constitutionality of the
fee increase, with a majority allowing it. We conclude that the fee increase is
constitutional and applies in this case.
I.
A.
Bankruptcy courts fall into two categories: those that are part of the
United States Trustee Program and those that use Bankruptcy
Administrators. Congress created this dual system in 1978 when it launched
a trustee pilot program within the Department of Justice. Bankruptcy
Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, 2662–65 (1978). Until
then, bankruptcy judges had shouldered many “administrative functions” on
top of their substantive work. Trustees absorbed those administrative duties
and began “serv[ing] as bankruptcy watch-dogs.” H.R. REP. NO. 95-595,
at 88 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6049. The program was
a success, so Congress made it permanent in 1986. Bankruptcy Judges,
United States Trustees, and Family Farmer Bankruptcy Act of 1986, Pub. L.
No. 99-554, 100 Stat. 3088, 3090–95 (1986).
But not for every district. Eighty-eight judicial districts participate in
the Trustee Program. See In re Clinton Nurseries, Inc., 608 B.R. 96, 108–09
(Bankr. D. Conn. 2019). The six districts in Alabama and North Carolina fall
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under the Bankruptcy Administrator program, which the Judicial Conference
oversees.1 Id.
The programs have different funding sources. The judiciary’s general
budget funds the Administrators. See In re Clayton Gen., Inc., 2020 Bankr.
LEXIS 842, at *23–24 (Bankr. N.D. Ga. Mar. 30, 2020). But debtors
primarily fund the Trustee Program. Id. Although annual appropriations
technically bankroll the program, Congress expected that debtor fees would
fully offset the cost. See Consolidated Appropriations Act of 2019, Pub. L.
No. 116-6, div. C., tit. II, 133 Stat. 13, 103–04 (2019). Such debtor-paid fees
include Chapter 11 quarterly fees. 28 U.S.C. § 1930(a)(6); see also id.
§ 589a(b)(5). The fees are based on all quarterly “disbursements” that
debtors make until their cases are “converted or dismissed.” 2 Id.
§ 1930(a)(6).
At first, debtors in Administrator districts were not required to pay
quarterly fees. The Ninth Circuit held that to be unconstitutional, reasoning
that Congress’ imposition of fees in some districts but not others—without
justification—violated the Bankruptcy Clause. St. Angelo v. Victoria Farms,
Inc., 38 F.3d 1525, 1529, 1531–32 (9th Cir. 1994), amended by 46 F.3d 969 (9th
Cir. 1995).
Congress fixed that problem with a law empowering the Judicial
Conference to set fees in Administrator districts that were “equal to those
imposed” in Trustee districts. 28 U.S.C. § 1930(a)(7). Those fees go to a
fund offsetting general judicial branch appropriations rather than the U.S.
1
It was originally thought that the exclusion of Alabama and North Carolina would
last only a few years, but a later law enshrined their special status. See Federal Courts
Improvement Act of 2000, Pub. L. No. 106-518, § 501, 114 Stat. 2410, 2421–22 (2000).
2
The statute charges quarterly fees on a sliding scale based on debtors’ quarterly
disbursements. See id. § 1930(a)(6).
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Trustee System Fund. Id. (citing id. § 1931). The Judicial Conference soon
exercised the authority Congress gave it, charging quarterly fees in
Administrator districts “in the amounts specified in 28 U.S.C. § 1930, as
those amounts may be amended from time to time.” JUDICIAL
CONFERENCE OF THE U.S., REPORT OF THE PROCEEDINGS OF THE
JUDICIAL CONFERENCE OF THE UNITED STATES: SEPT./OCT. 2001,
at 45–46 (2001), https://www.uscourts.gov/sites/default/files/2001-
09_0.pdf.
All was well with the two systems until just a few years ago. By the
mid-2010s, a decline in bankruptcy filings meant the Trustee Program was
no longer self-sustaining. H.R. REP. NO. 115-130, at 7 (2017), reprinted in
2017 U.S.C.C.A.N. 154, 159. Congress attempted to remedy the shortfall
in the Bankruptcy Judgeship Act of 2017 (a law we will call the “2017
Amendment”). Pub. L. No. 115-72, 131 Stat. 1224, 1229–34 (2017). The law
amended section 1930(a)(6) to increase the possible quarterly fees in Chapter
11 cases.3 Id. § 1004, 131 Stat. at 1232. The increase is temporary; it only
applies during the five fiscal years from 2018 through 2022. The increase is
conditional; it kicks in only if the Trustee System Fund’s balance was less
than $200 million “as of September 30 of the most recent full fiscal year.”
Id. And the increase is only for debtors with disbursements of $1 million or
more in a quarter. Id. If all of those criteria apply, the quarterly fee is “the
lesser of 1 percent of such disbursements or $250,000.” Id. The new
potential fee is a substantial increase from the old maximum fee of $30,000.
3
The Act also said that 98% of section 1930(a)(6) fees collected between fiscal years
2018 and 2022 would be deposited to the U.S. Trustee System Fund, while the other 2%
would go to the Treasury’s general fund to help pay for the new temporary judgeships. Id.;
see also H.R. REP. NO. 115-130, at 7–8.
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See 28 U.S.C. § 1930(a)(6) (2008) (charging a $30,000 fee for quarterly
disbursements exceeding $30 million).
Initially, only debtors in Trustee districts faced the fee increase. Many
courts in Trustee districts applied the new fees to any quarterly
disbursements that postdated the effective date of the 2017 Amendment,
even if the bankruptcy case had been pending before the fee increase. In these
courts, if a debtor disbursed $1 million or more starting in the first quarter of
2018, it owed the higher fees. But debtors in Administrator districts did not.
The Judicial Conference waited until September 2018 to adopt the
increased fee schedule. JUDICIAL CONFERENCE OF THE U.S., REPORT OF
THE PROCEEDINGS OF THE JUDICIAL CONFERENCE OF THE UNITED STATES:
SEPT. 13, 2018, at 11–12 (2018), https://www.uscourts.gov/sites/default/
files/2018-09_proceedings.pdf. In doing so, it applied the new fees only to
cases in Administrator districts “filed on or after October 1, 2018.” Id. So a
debtor in an Administrator district that filed for bankruptcy before the final
quarter of 2018 does not owe the increased fees no matter how long the case
remains pending.
B.
That brings us to this case. Buffets, L.L.C. and its affiliates
(collectively Buffets) operate buffet-style restaurants throughout the
country. Old Country Buffet and Ryan’s Family Steakhouse are examples.
In 2016, after a series of misfortunes, Buffets filed a Chapter 11 petition in the
Western District of Texas, which is a Trustee district. The bankruptcy court
confirmed Buffets’ plan in 2017. But the bankruptcies were still pending in
2018, after the new law went into effect.
In each of the first three quarters of 2018, Buffets reported over $1
million in total disbursements. Because the balance of the U.S. Trustee
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System Fund was below $200 million, the Trustee assessed quarterly fees of
$250,000.
Buffets refused to pay. Instead, it asked the bankruptcy court to
include in “disbursements” only payments made under the plan—that is,
payments to creditors, administrative expenses, etc. Buffets contended that
its normal operating expenses—things like food and napkins—should not
count as disbursements even though they were included on its quarterly
schedule. That would have allowed Buffets to avoid the new fees as
disbursements made “under the plan” were less than $1 million/quarter.
The Trustee objected.
In response, Buffets claimed that classifying operating expenses as
“disbursements” violated the Constitution’s “Fundamental Fairness
Clause” (if nothing else, a remarkably candid description as that
characterizes the claims of many litigants who nonetheless try to dress their
claims in a specific provision). The bankruptcy court denied the motion.
Buffets moved for reconsideration. This time, it also challenged the
constitutionality of the increased fees.
The bankruptcy court agreed with Buffets that the fee increase is
unconstitutional for multiple reasons. It first held that the law violated the
Constitution by increasing fees only in Trustee districts. The court thus
concluded that the Amendment should apply only when the bankruptcy case,
not the quarterly disbursement, was filed after the Administrator districts
implemented the fee increase. The court then went a step further,
concluding that the higher fees could never be applied to debtors like Buffets
whose cases were pending before enactment of the 2017 Amendment because
to do so would be an impermissibly retroactive imposition of “new duties and
liabilities” on Buffets for “transactions already completed.”
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The Trustee appealed. Buffets cross-appealed the “disbursements”
ruling, pressing its argument that it did not meet the dollar threshold for the
new fee. The district court certified questions about the new law’s
applicability and constitutionality to our court. We agreed to hear an appeal
that bypasses the district court. 28 U.S.C. § 158(d)(2). For such appeal, we
review the bankruptcy court’s factual findings for clear error and legal
conclusions de novo. Matter of Linn Energy, L.L.C., 936 F.3d 334, 340 (5th
Cir. 2019).
II.
We first address the cross-appeal on the “disbursements” question.
Recall that Buffets contends disbursements should be limited to bankruptcy-
related expenses like paying creditors and priority and administrative
expense claims. If it is correct, then it did not have $1 million in quarterly
disbursements, and its constitutional concerns with the fee increase go away.
So we must first consider this possible statutory resolution of the dispute. See
Ashwander v. Tenn. Valley Auth., 297 U.S. 288, 348 (1936) (Brandeis, J.,
concurring) (explaining that principles of restraint direct a court to first
address a statutory question when it may eliminate a constitutional issue).
But the disbursement issue does not end this appeal, as the bankruptcy
court correctly concluded that disbursements include all of Buffets’
payments, including operating expenses. The bankruptcy code does not
define “disbursements,” so we look to its ordinary meaning. Schindler
Elevator Corp. v. U.S. ex rel. Kirk, 563 U.S. 401, 407 (2011). A disbursement
is money paid out. Disbursement, Merriam-Webster Dictionary
(2016). The plain meaning would thus include all payments made by a
debtor, not just “bankruptcy-related” expenses.
Another stumbling block for Buffets’ argument is that it would give
“disbursements” a different meaning before and after confirmation. Buffets
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concedes that when section 1930(a)(6) first tied fees to disbursements, those
disbursements included all payments the debtor made. § 117, 100 Stat. at
3095. That is because the fees originally applied only preconfirmation,
during which all payments—including operating expenses—are dispersed
from the bankruptcy estate. Ten years later, Congress extended the quarterly
fees to include postconfirmation disbursements. In doing so, it did not
suggest a different treatment for postconfirmation disbursements. There is
a strong presumption against giving a word “two different meanings” when
it appears twice “in the same section of the statute.” See Mohasco Corp. v.
Silver, 447 U.S. 807, 826 (1980) (Stevens, J.); see also Cochise Consultancy,
Inc. v. United States ex rel. Hunt, 139 S. Ct. 1507, 1512 (2019) (noting that “a
single use of a statutory phrase must [typically] have a fixed meaning”).
Buffets wants us to do something even more drastic: give the exact same word
in a statute different meanings depending on the context in which it is
applied. Doing so would defy congressional intent and foster confusion.
Slashing a debtor’s operating expenses from disbursements only in
postconfirmation calculations would also create a circuit split, at odds with
the emphasis on uniformity that Buffets otherwise emphasizes. See In re
Westmoreland Coal Co., 968 F.3d 526, 532 (5th Cir. 2020) (explaining that our
normal reluctance to create circuit splits is even stronger for bankruptcy law).
Several circuits define “disbursements” as “all payments by or on behalf of
the debtor.” In re Cranberry Growers Coop., 930 F.3d 844, 853 (7th Cir.
2019); In re Genesis Health Ventures, Inc., 402 F.3d 416, 422 (3d Cir. 2005)
(including post-filing operational expenses); cf. In re Jamko, Inc., 240 F.3d
1312, 1313, 1315 (11th Cir. 2001) (defining disbursements as “all post-
confirmation disbursements made by a reorganized debtor,” including
operating expenses). Another expressly includes postconfirmation operating
expenses as “disbursements.” In re Danny’s Mkts., Inc., 266 F.3d 523, 526
(6th Cir. 2001); see also Collier on Bankruptcy ¶ 9.06[2] (Richard
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Levin & Henry J. Sommer eds., 16th ed. 2020) (stating that disbursements
include “all expenses paid by a debtor,” even postconfirmation operating
expenses). But see In re Brown, 2008 WL 899333, at *4 (Bankr. S.D. Tex.
Mar. 31, 2008).
We thus agree with the bankruptcy court and our sister circuits that
“disbursements” includes all payments a debtor makes.
III.
Because “disbursements” include all the payments Buffets made in
2018, its roughly $60 million of quarterly disbursements qualify for the
heightened fees. We must therefore answer the first certified question: Does
the Amendment apply to cases like Buffets’ that were pending when the
Amendment took effect? The statute gives a straightforward answer: yes.
A.
The Amendment applies to every “quarter in which disbursements
equal or exceed $1,000,000” for “fiscal years 2018 through 2022” when the
U.S. Trustee System Fund falls below the set amount. 28 U.S.C.
§ 1930(a)(6)(B). Removing any doubt, the 2017 Amendment states that the
fee increases apply to “disbursements made in any calendar quarter that
begins on or after” the Act’s enactment date of October 26, 2017. § 1004(c),
131 Stat. at 1232. The applicability of the new fee thus turns on when debtors
make disbursements, not when their cases are filed or confirmed. E.g., In re
Exide Techs., 611 B.R. 21, 26 (Bankr. D. Del. 2020).
It is not surprising that Congress applied the latest fee increase to
disbursements made after the Amendment’s effective date even if the cases
were previously pending. Congress did the same for prior amendments to
section 1930(a)(6). In 1996, Congress extended the law to require debtors to
pay quarterly fees beyond confirmation up until their cases were dismissed or
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converted. Id. at 29. Courts soon disagreed about whether the amendment
applied to cases in which plans had been confirmed before the amendment’s
enactment. Congress quickly resolved the dispute, passing legislation later
that same year clarifying that the amendment applied to debtors whose plans
were confirmed before or after the amendment took effect. In re Life Partners
Holdings, Inc., 606 B.R. 277, 284–85 (Bankr. N.D. Tex. 2019) (citing
Omnibus Consolidated Appropriations Act, Pub. L. No. 104-208, § 109(d),
110 Stat. 3009, 3009–19 (1996)). Since then, Congress has amended the fee
amounts in section 1930(a)(6) several times, and “it appears no one [has]
argued the changes did not apply to pending cases.” 4 Clayton, 2020 Bankr.
LEXIS 842, at *13. In making its most recent change to the quarterly fees,
Congress operated under this widespread understanding that fee increases
apply to postenactment disbursements in pending cases. Manhattan Props.,
Inc. v. Irving Trust Co., 291 U.S. 320, 336 (1934) (following longstanding
lower court interpretations of a Bankruptcy Act provision because it had been
amended numerous times without a statutory change to the construction
courts had given it).
The statutory history therefore confirms what the text says—new
disbursements, not new cases, trigger the higher fees. 5
4
Buffets did not make that argument in the bankruptcy court; the court took that
view on its own.
5
Congress did more in the 2018 Amendment than update the quarterly fee
schedule. It also made changes to Chapter 12, the section of the Bankruptcy Code that
allows farmers to reorganize. Those amendments expressly apply only to (1) new cases and
(2) pending cases with no confirmed plans and discharge orders. § 1005(c), 131 Stat. at
1234. That, Buffets argues, shows Congress would have said the same if it wanted the
quarterly fees to apply to pending cases. But we decline to draw that negative inference.
See Martin v. Hadix, 527 U.S. 343, 356–57 (1999) (noting that “negative inference”
arguments are weak when legislation addresses different subjects). The Chapter 12
amendments do show that Congress can make legislation explicitly applicable to pending
cases when necessary. But there is an extra element of “necessity” for the Chapter 12
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B.
Buffets contends that applying the new fees in pending cases is
impermissibly retroactive. Applying a new law to events occurring before it
was enacted may give rise to due process concerns. Landgraf v. USI Film
Prods., 511 U.S. 244, 280 (1994). Retroactive application deprives parties of
adequate notice and undermines “settled expectations.” Id. at 265. As a
result, there is a presumption against reading a statute in a way that raises
those retroactivity concerns. Id.
But that presumption kicks in only when there is a possibility that the
law “attaches new legal consequences to events completed before its
enactment.” Id. at 269–70. As Justice Story put it, a law is retroactive only
if it “affect[s] vested rights and past transactions.” Society for the Propagation
of the Gospel v. Wheeler, 2 Gall. 105, 22 F. Cas. 756, 767 (No. 13,156) (C.C.
N.H. 1814). The fee increase does neither. It applies only to future
disbursements, which are triggered by a debtor’s conduct—making
payments—occurring after the law’s effective date. F.D.I.C. v. Faulkner, 991
F.2d 262, 266 (1993) (noting that date of the conduct is the relevant inquiry).
That means the 2017 Amendment is prospective. It does not “impair
rights” that debtors like Buffets had when they filed for bankruptcy or had
their plans confirmed, “increase [their] liability for past conduct, or impose
new duties with respect to transactions already completed.” Landgraf, 511
U.S. at 280. Of course, the Amendment increases the amount of quarterly
changes that does not exist with the quarterly fee statute. The Chapter 12 legislation added
a new section to the Code that expanded the scope of Chapter 12 discharge. See In re MF
Global Holdings Ltd., 615 B.R. 415, 430 (Bankr. S.D.N.Y. 2020). Congress had a need, then,
to clarify that the amendments did not apply to cases with preexisting discharge orders to
preserve parties’ vested rights. Such clarification is not needed for yet another change to
the more-than-two-decade-old quarterly fee statute. Id.
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fees that large Chapter 11 debtors anticipated paying, but they always
expected to pay some of those fees. The mere upsetting of their expectations
as to amounts owed based on future distributions does not make for a
retroactive application. Id. at 269–70. Nor does it encumber vested property
rights under confirmed plans, see 11 U.S.C. § 1141, as some degree of
“variability in the final amount available to plan distributees” is expected in
complex bankruptcies. In re CF & I Fabricators of Ut., Inc., 150 F.3d 1233,
1239 (10th Cir. 1998).
Most bankruptcy courts agree. In re John Q. Hammons Fall 2006,
2020 Bankr. LEXIS 2116, at *17–18 (Bankr. D. Kan. July 27, 2020) (sixth
court to agree). They consider the Amendment “more akin to taxes arising
post[-]confirmation, or any similar post-confirmation expenses,” which are
not retroactive even though changes in those expenses may disrupt the
debtor’s expectations. In re Circuit City Stores, Inc., 606 B.R. 260, 268–69
(Bankr. E.D. Va. 2019) (quotations omitted). The only two courts that have
disagreed sidestepped the threshold retroactivity question: Do the
Amendment’s negative effects on debtors stem from “events completed
before its enactment”? Landgraf, 511 U.S. at 270; see Life Partners, 606 B.R.
at 285 (adopting Buffets’ reasoning); In re Buffets, 597 B.R. 588, 596–97
(Bankr. W.D. Tex. 2019). Because the Amendment applies only to
disbursements made after its enactment, the answer is no. Just as a
homeowner must honor property tax laws enacted after she purchases a
home, Buffets must abide by the statutory fee schedule enacted after the
court confirmed its plan.6 See Landgraf, 511 U.S. at 269 n.24 (describing a
6
Even if the fee increase were to apply retroactively, it would not necessarily
violate due process. Bank Markazi v. Peterson, 136 S. Ct. 1310, 1324–25 (2016). A
retroactive law need only be “supported by a legitimate legislative purpose furthered by
rational means.” United States. v. Carlton, 512 U.S. 26, 30–31 (1994) (quotations omitted).
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“new property tax or zoning regulation” as “uncontroversially
prospective”).
IV.
Our conclusion that the 2017 Amendment is prospective brings us to
the main event: whether its fee increase violates constitutional uniformity
requirements.
The Constitution grants Congress the power to establish “uniform
Laws on the subject of Bankruptcies throughout the United States.” U.S.
Const. art. I, § 8, cl. 4.7 The Bankruptcy Clause “might win” a “contest
for least-studied part” of Article I’s congressional powers. Stephen J.
Lubben, A New Understanding of the Bankruptcy Clause, 64 CASE W. RES. L.
REV. 319, 319 (2013). Although disputes over debtor-creditor relations were
an impetus for the Constitutional Convention, the Bankruptcy Clause
received “meager” attention in Philadelphia.8 Ry. Labor Execs. Ass’n v.
7
The bankruptcy court relied on a different part of the Constitution in concluding
that that increased fees’ lack of uniformity makes them unconstitutional. That different
uniformity provision relates to taxes: Congress may “lay and collect [t]axes . . . ; but all
Duties, Imposts, and Excises shall be uniform throughout the United States.” U.S.
Const. art. I, § 8, cl. 1. Perhaps the confusion stemmed from the fact that this limit on
the tax power is called the Uniformity Clause. Circuit City, 606 B.R. at 269. There is one
other mention of uniformity in the Constitution. In the same clause where it grants
Congress power to enact “uniform” bankruptcy laws, Article I grants Congress the power
“To establish a uniform Rule of Naturalization.” U.S. CONST. art. I, § 8, cl. 4.
Despite the bankruptcy court’s grounding its holding in the tax-based Uniformity
Clause, on appeal both parties focus on the Bankruptcy Clause, as have most other
bankruptcy courts that have considered challenges to the 2017 Amendment. See, e.g.,
Circuit City, 606 B.R. at 269 (explaining that the different clauses depend on whether the
increased Chapter 11 fees are deemed user fees or taxes). As we explain later, the increased
fees are user fees, see infra pp. 19–20, which means they are not general taxes to which the
Uniformity Clause applies.
8
Near the end of the Convention, Charles Pinckney proposed the Bankruptcy
Clause along with the Full Faith and Credit Clause. Judith Schenck Koffler, The Bankruptcy
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Gibbons, 455 U.S. 457, 471 (1982). And the federal bankruptcy power is
directly mentioned in only one of 85 essays that make up The Federalist
Papers. Randolph J. Haines, The Uniformity Power: Why Bankruptcy Is
Different, 77 Am. Bankr. L.J. 129, 169 (2003) (citing The Federalist
No. 42, at 217 (James Madison)). Even then, Madison mentions the
Bankruptcy Clause briefly and notes that “the expediency of it seems not
likely to be drawn into question.” Id.
Paradoxically, the uncontroversial nature of the Bankruptcy Clause at
its inception has led to uncertainty about its meaning today. See, e.g., Lubben,
supra, at 319 (rejecting courts’ assumptions that the Bankruptcy Court is
“the bankruptcy counterpart to the much better-known Commerce
Clause”). Uniformity in particular “has defied principled interpretation
since its adoption and continues to be a source of analytical confusion.”
Koffler, supra, at 22; see also Haines, supra, at 165–72 (arguing against the
view that uniformity is a limitation); Note, Reviving the Uniformity
Requirement, 96 Harv. L. Rev. 71, 73–75 (1982) (discussing different
possible meanings of uniformity).
The Trustee says we do not have to delve into the uniformity morass.
He contends that the fee statute is not a law “on the subject of
Bankruptcies.”9 It is akin, in his view, to the different local bankruptcy rules
that districts apply or the Bankruptcy Appellate Panels that only some
Clause and Exemption Laws: A Reexamination of the Doctrine of Geographic Uniformity, 58
N.Y.U. L. Rev. 22, 35–36 (1983) (citing 2 The Records of the Federal
Convention of 1787, at 447 (M. Farrand ed. 1911)). Roger Sherman raised the only
doubt about the Bankruptcy Clause, expressing concern because “in England, some
bankrupts were sentenced to death.” Id. (citing 2 The Records of the Federal
Convention of 1787, at 489).
9
Of course, that means there must be some other constitutional source for the fee
statute. The Trustee says it is a lawful exercise of the Necessary and Proper Clause.
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circuits use. And no court has held that those differences in bankruptcy
procedure present a uniformity problem. But every bankruptcy court dealing
with a challenge to the 2017 Amendment has rejected the analogy. E.g.,
Clayton, 2020 Bankr. LEXIS 842, at *20–21. Some note that the statue
governs only bankruptcy cases, though the same could be said for Bankruptcy
Appellate Panels. Id. More persuasive is the point that, unlike the varying
procedures that only indirectly might lead to different outcomes, the fee
increase has a direct effect on what creditors receive—less than before. Life
Partners, 606 B.R. at 288 (explaining that because fees have administrative-
claim status in bankruptcies, increases in charged fees decrease distributions
to “lower-priority creditors”). The subject of bankruptcies, after all, is
“nothing less than the subject of the relations between an insolvent or
nonpaying or fraudulent debtor, and his creditors, extending to his and their
relief.” Wright v. Union Cent. Life Ins. Co., 304 U.S. 502, 513–14 (1938)
(quotations omitted).
The consensus view of bankruptcy courts that Chapter 11 fees are
Bankruptcy Clause legislation is likely correct. But we need not decide the
question because, even assuming it is, we find no uniformity problem.
Although the Supreme Court has treated the uniformity requirement
as a limit on congressional power, it has also recognized that it “is not a
straightjacket that forbids Congress to distinguish among classes of debtors.”
Gibbons, 455 U.S. at 469. Nor does it bar every law that allows for a different
outcome depending on where a bankruptcy is filed. Stellwagen v. Clum, 245
U.S. 605, 613 (1918). Bankruptcy laws that use state law to decide which
property is exempt from creditors, often an issue of great consequence, are
permissible. Id; Hanover Nat’l Bank v. Moyses, 186 U.S. 181, 188 (1902). So
was a Depression-era law that established a three-year stay for certain
foreclosures but allowed bankruptcy courts to lift the stay sooner based on
16
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economic conditions “in its locality.” Wright v. Vinton Branch of Mountain
Tr. Bank, 300 U.S. 440, 463 & n.7 (1937).
As a result of the “flexibility inherent in the constitutional provision,”
Reg’l R.R. Reorganization Act Cases, 419 U.S. 102, 158 (1974), only once has
the Supreme Court held that a bankruptcy law failed for lack of uniformity.
Gibbons, 455 U.S. at 473. The infirm law applied only to one debtor, making
it essentially a bill of attainder. Id.
Aside from prohibiting such “private bankruptcy bills,” which does
not describe the fee increase, the uniformity requirement forbids only
“arbitrary regional differences in the provisions of the Bankruptcy Code.”
In re Reese, 91 F.3d 37, 39 (7th Cir. 1996) (Posner, C.J.). Buffets relies on this
concept of “geographic uniformity.” Vanston Bondholders Protective Comm.
v. Green, 329 U.S. 156, 172 (1946) (Frankfurter, J., concurring); see also
Moyses, 186 U.S. at 188. Its problem is that only “arbitrary” geographic
differences are unconstitutional. Reese, 91 F.3d at 39. “The uniformity
provision does not deny Congress power to take into account differences that
exist between different parts of the country, and to fashion legislation to
resolve geographically isolated problems.” Reg’l R.R. Reorganization Act
Cases, 419 U.S. at 159. Indeed, the Supreme Court has never held that a law
violated the Bankruptcy Clause because of arbitrary geographic distinctions.
It allowed Congress to set up a special court and laws for bankrupt railroads
in the northeast and midwest, as those were the only parts of the country with
the problem. See id.; see generally John Minor Wisdom, Views of a Friendly
Observer, 133 U. Pa. L. Rev. 63 (1984) (discussing his service on the Special
Railroad Court with Judge Friendly).
Just as it did in addressing the failure of railroads in the industrial
heartland, Congress confronted the problem of an underfunded Trustee
Program where it found it: in the Trustee districts. It drew a program-specific
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distinction that only indirectly has a geographic dimension. It does make it
more expensive for a debtor in Texas than a debtor in North Carolina to go
through bankruptcy, but that is not an arbitrary distinction based on the
residence of the debtor or creditors; it is a product of the Texas debtor’s use
of the Trustee. By increasing fees for large debtors in those districts,
Congress sought to remedy a shortfall in the program’s funding. Only
debtors in Trustee Districts use trustees, so Congress could “solve ‘the evil
to be remedied’” with a fee increase in just the underfunded districts. Reg’l
R.R. Reorganization Act Cases, 419 U.S. at 160–61.10
A quarter century ago, the Ninth Circuit concluded that the
establishment of Trustee and Administrator Districts was an “irrational and
arbitrary” distinction for which Congress gave “no justification.” 11 See St.
Angelo, 38 F.3d at 1532. In the recent temporary fee increase for large
Chapter 11 debtors, Congress provided that justification: a need to ensure
10
The Trustee contends there is not a uniformity problem for another reason: The
fee increase could have automatically applied in the six Non-Trustee Districts from the
beginning. But that ignores that section 1930(a)(7) says the Judicial Conference “may
require” Chapter 11 debtors in Administrator districts “to pay fees equal to those
imposed” in Trustee districts. 28 U.S.C. § 1930(a)(7) (emphasis added). So while the
Trustee is correct that our analysis should focus on what Congress has passed rather than
how the law is later administered, Congress required the new fees in the Trustee Districts
but only allowed for their possibility in the Administrator Districts. The Judicial
Conference’s delayed implementation of the fee increase highlights the difference between
“may” and “shall.” But see Clinton Nurseries, 608 B.R. at 114–17 (accepting the Trustee’s
argument on this point).
11
The dissent contends that the justification asserted in St. Angelo was the same
one asserted here: the need to provide “different fees because different programs.”
Dissenting Op. 3. But the focus in St. Angelo was on the underlying creating of the two
programs. Without a funding shortfall, there would be no apparent justification for higher
fees in one of the programs. That shortfall exists now. The 2017 statutory amendment is
not a law in which “Congress failed to provide an explanation for its decision.” St. Angelo,
38 F.3d at 1532.
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that the Trustee Program remains funded by users of the bankruptcy court
rather than taxpayers. That justification passes constitutional muster. 12
The partial dissent cannot dispute the government’s interest in
replenishing the depleted coffers of the Trustee program. So it focuses on
the rationale, or lack thereof, for creating separate systems in the first place.
It concludes that nothing more than “political influence” resulted in the dual
systems. Dissenting Op. 5. Maybe so, but that is answering a question we
are not being asked (and thus did not receive briefing about). The Plaintiffs
do not ask us to “hold that the permanent division of the country into UST
districts and BA districts violates the Bankruptcy Clause.” 13 Id. Our normal
12
Again, most bankruptcy courts addressing the issue agree. On the uniformity
question, the score is 5-3 in favor of constitutionality. Compare John Q. Hammons Fall
2006, 2020 Bankr. LEXIS 2116, at *19–23 (uniform); MF Global, 615 B.R. at 446–48
(same); Mosaic, 614 B.R. at 623–25 (same but excepting 2%); Clayton, 2020 Bankr. LEXIS
842, at *27 (same); and Exide, 611 B.R. at 36–38 (same), with Life Partners, 606 B.R. at 286–
88 (non-uniform); Circuit City, 606 B.R. at 269–70 (same); and Buffets, 597 B.R. at 594–95
(same).
13
Unlike this case, the debtor in St. Angelo was challenging the creation of the
separate systems. 38 F.3d at 1529. In particular, the court held unconstitutional a 1990 law
extending to October 1, 2002 the deadline for North Carolina and Alabama to join the
Trustee program. Id. at 1531–32. In holding the 1990 extension unconstitutional, Judge
Reinhardt’s opinion would have subjected those two states to the Trustee Program. Id. at
1533, 1535. Because its remedy was to bring North Carolina and Alabama into the Trustee
system, the Ninth Circuit actually applied the fees that Congress established for the
Trustee Program. Id. at 1535.
While otherwise purporting to follow St. Angelo, the dissent assumes the remedy
for a lack of uniformity would be to remove the new fees in Trustee Districts. But if the
problem is the existence of the two systems, why not follow the St. Angelo’s remedy of
bringing North Carolina and Alabama into the Trustee System? The trustee makes a
similar argument here, contending that if there is a uniformity problem, then the remedy
should be to immediately apply the increased fees in all districts. Trustee’s Br. 30 (citing
Sessions v. Morales-Santana, 137 S. Ct. 1678, 1698 (2017). We need not decide what a proper
remedy would be because we find no constitutional violation. We only note the potential
disconnect between the infirmity the dissent finds and the remedy Buffets seeks.
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reluctance to hold unconstitutional a decades-old feature of federal
bankruptcy law should grow into a refusal when no party is asking us to do
so.14 See Nw. Austin Mun. Util. Dist. No. One v. Holder, 557 U.S. 193, 204
(2009) (recognizing that “judging the constitutionality of an Act of Congress
is ‘the gravest and most delicate duty” that federal courts are asked to
perform) (quoting Blodgett v. Holden, 275 U.S. 142, 147–48 (1927) (Holmes,
J., concurring))).
The issue presented to us is much narrower: whether a recent, short-
term change in fees for Trustee districts is unconstitutional because it lacks a
reasonable justification. As one bankruptcy court explained, “The Plainitffs
do not challenge the dual UST/BA system as unconstitutional, and as long
as the two regimes co-exist, they will face funding problems that may be
unique to only one of them.” MF Global Holdings, 615 B.R. at 447–48. It is
reasonable for Congress to have those who benefit from the Trustee Program
fill the hole in its finances.15
14
The partial dissent argues that we are viewing Buffets’ argument too narrowly as
just a challenge to the 2017 fee increase. Dissenting Op. 4. But the proof is in the briefing.
Neither side addresses the decision more than three decades ago to create two separate
systems. Nor was the original 1986 law addressed in the bankruptcy court decision in this
case or in the seven other bankruptcy court rulings deciding a uniformity challenge to the
2017 fee increase. See supra note 12. As the parties have not litigated the question, we
should not decide the case on a question that did not benefit from the adversarial process—
especially when the dissent’s view would undo a longstanding feature of bankruptcy
practice.
15
What about the 2% of the new fees that goes to the Treasury’s general fund rather
than the Trustee Program? See In re Mosaic Mgmt. Grp., Inc., 614 B.R. 615, 623–25 (Bankr.
S.D. Fla. 2020) (distinguishing the 2% as non-uniform). That small amount primarily funds
18 new judgeships, 17 of which are in Trustee Districts. MF Global, 615 B.R. at 448; see
H.R. Rep. No. 115-130, at 7–9. The “de minimis” amount that Trustee District debtors
contribute to funding one Administrator District judge (at most, $278 per $250,000) does
not render the law unconstitutional given the “flexibility inherent” in the uniformity
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V.
Buffets’ final arguments challenge not the uniformity of the new fees
but their size and relationship to the funding shortfall. These arguments
would mean the new fees are unconstitutional even after both Trustee and
Administrator districts apply them.
A.
Buffets appears to raise a due process challenge to the excessiveness
of the new fee separate from its already-rejected retroactive argument.
Buffets recognizes the law must lack a rational basis to offend substantive due
process. The difficulty of doing that is revealed by Buffet’s reliance on cases
that have retroactive application, see United States v. Sperry Corp., 493 U.S.
52, 64 (1989), or even that apply the Export Clause, which requires
heightened scrutiny of user fees, see United States v. U.S. Shoe Corp., 523 U.S.
360, 367–69 (1998). It cites no case refusing to enforce a court fee as
excessive under a general substantive due process analysis.
The fee increase easily survives rational basis review. It addresses a
shortfall in the U.S. Trustee System Fund. The fee increase is directly tied
to the deficit, kicking in only if the balance is below $200 million and expiring
by 2022. It is reasonable to have large debtors shore up the system’s finances
as their cases typically place greater burdens on the system. In re Kindred
Healthcare, Inc., 2003 Bankr. LEXIS 1308, at *13–14 (Bankr. D. Del. Oct. 9,
2003). And the increase caps the fees at 1% of disbursements, 16 which is a
much lower percentage than some small debtors pay. See 28 U.S.C.
provision. Reg’l R.R. Reorganization Act Cases, 419 U.S. at 158; see MF Global, 615 B.R. at
443,448.
16 Buffets did not pay close to the 1% as it paid the $250,000 cap, which amounted
in the first quarter of 2018 to less than half a percent of disbursements.
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§ 1930(a)(6)(A) (setting fees of $650 when disbursements total $15,000, a
4.33% fee).
B.
Similar reasoning defeats the takings claim. Taxes and user fees are
not takings under the Fifth Amendment. Koontz v. St. John’s River Water
Mgmt. Dist., 570 U.S. 595, 615 (quoting Brown v. Legal Found. of Wash., 538
U.S. 216, 243 n.2 (Scalia, J., dissenting)). Those exceptions cannot swallow
the important rule that the government must pay just compensation when it
appropriates property, so the “fee” label is not enough. Sperry, 493 U.S. at
62 & n.8 (noting that the government cannot appropriate property and then
“label[] the booty as a user fee” (citing Webb’s Fabulous Pharmacies, Inc. v.
Beckwith, 449 U.S. 155, 162–64 (1980) (holding that county’s taking the
interest earned on interpleader funds was a taking)). A user fee is not a taking
when it is a “reasonable” amount “imposed for the reimbursement of the
cost of government services.” Id. at 63. That is what we have here.
For the fee increase to be reasonable, it just needs to be a “fair
approximation of the cost of benefits supplied” to the debtors. Id. at 60
(quoting Massachusetts v. United States, 435 U.S. 444, 463 n.19 (1978)). It
need not be “precisely calibrated” to the debtor’s use of the Trustee
Program. See id. An exact calibration would be an administrative nightmare
given the number of debtors using the system.
Acknowledging that reality, the Supreme Court has allowed
percentage-based fees to serve as a proxy for how much a party uses the
service. See id. at 62 (approving 1.5% fee of awards made by the Iran–United
States Tribunal in exchange for the Tribunal’s services); see also
Massachusetts, 435 U.S. at 468 (approving certain cent-per-gallon fees on
aircraft expenses). An expected—and accepted—byproduct of this system
is that debtors like Buffets may pay “more or less than [they] would under a
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perfect user-fee system.” Sperry, 493 U.S. at 61. Debtors’ actual use of the
program therefore need not drive the fees; the program’s availability for their
use is enough.17 Id. at 63–64.
How much is too much when it comes to user fees? One reference
point is Sperry, in which the Court approved a 1.5% fee on awards for a party’s
use of the Iran–United States Claims Tribunal. See id. at 62–64. There is no
indication that 1.5% is near the outer reaches of reasonableness, but we need
not explore the question further. Section 1930(a)(6)’s fee schedule maxes
out at 1% for the largest Chapter 11 debtors.
Other features of the 2017 Amendment strongly refute the notion that
it is a taking masquerading as a user fee. The fee increase lasts for only a few
years, and even during that short tenure applies only when the fund falls
below $200 million. That trigger ties the fee to the availability of the services
it is supporting.
Buffets counters that 2% of the fees go to the Treasury’s general fund
and the higher fees as a whole create a “surplus” in the U.S. Trustee System
Fund. Thus, in its eyes, the user fees are not related to the services debtors
receive. But as we discussed earlier, just about all of the money from the fees
going to the general fund support court services in Trustee districts (in the
form of new judges). And even if the statute creates a “surplus” in the Fund,
the government may offset user-fee revenue “surplus” in one year “against
actual deficits of past years and perhaps against projected deficits of future
years.” Massachusetts, 435 U.S. at 470 n.25.
17
This dooms Buffets’ argument that its diminished use of the Trustee Program
postconfirmation makes the user fee excessive. The argument reflects disagreement with
the 1996 amendment to section 1930, which extended the application of quarterly fees to
postconfirmation cases. Exide, 611 B.R. at 32.
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Fees that strengthen the program debtors benefit from are not
takings.18
***
Buffets’ had disbursements exceeding $1 million for each of the first
three 2018 quarters. The fee increase applies to those disbursements even
though the case was pending before the increase became law. And the fee
increase is constitutional. We therefore REVERSE the judgment and
remand for modification of the fee orders.
18
Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), on which Buffets relies, does
not counsel otherwise. That case held that provisions of the Coal Act requiring employers
to fund the health benefits of retired miners were a regulatory taking. Id. at 522–38. The
Eastern Enterprises law looked nothing like a user fee. The government did not even make
that argument as the amounts the mining company owed were not tied to any government
services the company was receiving.
24
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Edith Brown Clement, Circuit Judge, concurring in part and
dissenting in part:
The Constitution authorizes Congress to establish “uniform Laws
on the subject of Bankruptcies throughout the United States.” U.S. Const.
art. I, § 8. We currently have two systems, one of which is more expensive
than the other, and the sole factor that determines into which system a
debtor is placed is the state in which the debtor files for bankruptcy. Those
two systems are not a uniform law on the subject of bankruptcies, so I
respectfully dissent from Part IV of the opinion. I concur, however, with
Parts I, II, III, and V.
The Bankruptcy Clause permits wide flexibility. The Supreme Court
has explained that the “uniformity requirement of the Bankruptcy Clause is
not an Equal Protection Clause for bankrupts.” Ry. Lab. Execs. Ass’n v.
Gibbons, 455 U.S. 457, 470 n.11 (1982). Indeed, as our colleagues on the
Seventh Circuit explained, it “forbids only two things. The first is arbitrary
regional differences in the provisions of the bankruptcy code. The second is
private bankruptcy bills . . . or the equivalent.” In re Reese, 91 F.3d 37, 39
(7th Cir. 1996).
The majority explains that the difference between the fees charged to
Buffets and the lower fees that an identically situated debtor in Alabama or
North Carolina would be required to pay is adequately explained by the
different programs that administer bankruptcies in this country. In two
states, the Bankruptcy Administrator (“BA”) program oversees
bankruptcies; in the other forty-eight, the United States Trustee (“UST”)
Program is used. If there is a shortfall in the UST Program fund, the
majority reasons, it’s not arbitrary or irrational to increase fees only in UST
districts.
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However, the majority’s analysis ends too soon. The majority
explains that the higher fees for “a debtor in Texas” are “a product of the
Texas debtor’s use of the Trustee,” but fails to address why the Texas
debtor is required to use the Trustee in the first place, when Alabama and
North Carolina debtors get to use less-expensive Administrators. In other
words, the opinion relies on a flawed tautology: Congress can justify
treating bankrupts differently because it has chosen to treat them differently
(higher fees because different programs).
To address the question: the sole reason states are treated differently
is regional political influence (of course). The UST Program was originally
intended to be a uniform, nationwide program, but “well[-]connected and
motivated trustees and judges” convinced North Carolina’s senators to
resist expanding the UST Program. Because the program was phased in,
Congress could easily put the states that were most resistant—Alabama and
North Carolina—at the end of the line. When they continued to resist, they
were given extensions to adopt the UST Program. Eventually, a North
Carolina congressman tucked a permanent exemption from the UST
Program into an unrelated bill during the November 2000 lame duck
session. Nothing about North Carolina or Alabama distinguishes them
from any other states in terms of whether BA or UST is a better fit—the
distinction is an arbitrary political relic.
Grouping debtors into UST and BA districts is itself an arbitrary
regional difference. It results in Buffets’ being required to pay substantially
higher fees to the trustee overseeing its bankruptcy than an otherwise
identically situated debtor in North Carolina or Alabama would.
Our colleagues on the Ninth Circuit correctly identified this
constitutional infirmity in St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525,
1533 (9th Cir. 1994), amended by 46 F.3d 969 (9th Cir. 1995). The majority
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distinguishes St. Angelo by mischaracterizing the problem in that case as a
“differing fee structure . . . for which Congress gave ‘no justification.’”
Here, the majority avers, Congress’s justification is that it needed to fund a
different program differently.
First, the majority is factually mistaken. The same justification
(different fees because different programs) existed in St. Angelo. Second, if
the constitutional infirmity was unexplained unequal fees, the Ninth Circuit
could have simply required equal fees (by reducing the fees owed by the
litigant before them). They didn’t do that.
The St. Angelo court’s purported solution did not directly touch on
fees at all. The court expressly “decline[d] to invalidate all of section 1930
[the section addressing fees] or any other part of the statutory scheme
governing the U.S. Trustee system.” St. Angelo, 38 F.3d at 1533. Instead,
the Ninth Circuit held that the “constitutional infirmity in question may be
remedied by simply striking down section 317(a) [of the Judicial
Improvements Act of 1990].” Id. Section 317(a)—“the basis for the
existence today of a different statutory scheme governing the relationship
between debtors and creditors in Alabama and North Carolina”—was
solely an extension of the deadline for Alabama and North Carolina to join
the UST system. Id. Striking down Section 317(a) could have had no other
effect than to force North Carolina and Alabama into the UST system, only
indirectly affecting fees in those states. In short, the constitutional infirmity
that the Ninth Circuit identified and sought to correct was not dissimilar
fees, but the arbitrary use of two dissimilar systems.
Congress may have removed the harm to debtors by equalizing fees
after St. Angelo, but it did not fix the underlying constitutional infirmity of a
dis-uniform law on the subject of bankruptcies. Now that the Judicial
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Conference has chosen to treat debtors in BA districts better than Congress
chose to treat UST district debtors, the problem is once again causing harm.
The majority questions why I would grant the remedy Buffets
seeks—reducing its fees—rather than impose the remedy the St. Angelo
court offered. That the question can even be asked should also answer it:
The St. Angelo court had no power to force Alabama and North Carolina
into the UST system, which is why the constitutional infirmity persists and
we are having this debate today. We have no greater authority than our
colleagues on the Ninth Circuit to remake the bankruptcy system. What we
can do is ameliorate the harm of unconstitutional treatment. So, we should.
This may also explain how the majority is able to mistake Buffets’s
argument as a narrow challenge to the fee structure with no bearing on the
underlying dis-uniform systems. Buffets, understandably, focuses on how
the unconstitutional system hurts it—the system results in Buffets being
charged higher fees. That is, Buffets focuses on the harm more than it does
on the underlying infirmity.
But I fear the majority relies on an excessively uncharitable reading
of Buffets’s arguments to escape the constitutional question. That Buffets
relies heavily on St. Angelo tells us that they challenge the structure of the
law, and not just the effects. Buffets clearly challenged “the statute, as
amended” for failing to satisfy constitutional standards, Buffets Br. at 7, and
ably explained that the problem stemmed from the interplay between the
two systems, see Buffets Br. at 28 (“Sections 1930(a)(6)(B) and 1930(a)(7)
impose different standards based on geography, and are, by their terms,
non-uniform.”); id. at 31–32 (arguing based on overall unconstitutional
structure of the statute); Buffets Sur-Reply at 16 (“Simply put, Congress
cannot create a geographically isolated problem by implementing a more
costly bankruptcy system in certain parts of the country, and then claim the
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Constitution allows it to exact higher fees from debtors in the applicable
geographic area.” (citing St. Angelo, 38 F.3d 1525). The Government also
fully briefed its position on the scope of “uniformity” in the Bankruptcy
Clause (effectively: none) and whether two systems were constitutionally
acceptable. To say that the harm alone was briefed, but the cause of the
harm was not, requires an unreasonably narrow reading. Where prudent, we
should avoid constitutional questions; but we should not actively avert our
eyes where, as here, a party asks us to rectify a harmful constitutional
violation.
For no better reason than political influence, debtors in two states
enjoy a system subject to lower fees than those in the other forty-eight
states. “This is the type of ‘regionalism’ the Uniformity Clause was
intended to prevent.” In re Circuit City Stores, Inc., 606 B.R. 260, 270
(Bankr. E.D. Va. 2019); see also Dan J. Schulman, The Constitution,
Interest Groups, and the Requirements of Uniformity: The United States
Trustee and The Bankruptcy Administrator Programs, 74 Neb. L. Rev. 91,
103 (1995) (“Uniformity, however defined, can be seen as an attempt . . . to
prevent the federal government from acting or being employed to harm or
advantage one region over another region.”). Two laws are not a uniform
law, so I would hold that the permanent division of the country into UST
districts and BA districts violates the Bankruptcy Clause and would order
Buffets to pay the lower fee.
Although I respectfully dissent from the majority’s analysis of the
uniformity issue in Part IV, I concur with the majority’s analysis of the
other important issues raised in this appeal, including the scope of the term
“disbursements,” how best to read 28 U.S.C. § 1930(a)(6)(B), and
Buffets’s retroactivity and takings arguments in Parts I, II, III, and V.
29