606 B.R. 260
Bankr. E.D. Va.2019Background
- Circuit City and affiliates filed Chapter 11 on November 10, 2008; a liquidating plan confirmed in 2010 created a Liquidating Trust overseen by a Liquidating Trustee responsible for post-confirmation U.S. Trustee quarterly fees.
- Pre-2018 §1930 fixed quarterly fees with a $30,000 cap; Congress amended §1930(a)(6) in October 2017 (effective 2018) to raise fees (up to the lesser of 1% of disbursements or $250,000 when quarterly disbursements ≥ $1,000,000).
- The Liquidating Trust’s disbursements exceeded $1 million in each 2018 quarter; the U.S. Trustee assessed and the Trust paid increased fees during 2018.
- The Liquidating Trustee moved to determine correct fees since Jan 1, 2018, arguing (1) §1930(a)(6)(B) is unconstitutional as applied due to non-uniformity and (2) the statute cannot be applied retroactively to pending cases.
- The U.S. Trustee sought dismissal arguing the relief must proceed by adversary complaint; the court converted the contested matter to an adversary proceeding instead of dismissing and addressed the merits on cross-motions for summary judgment.
- The court held the 2018 amendment is substantively prospective (not impermissibly retroactive) but is unconstitutional as applied to pending cases because the fee increase was applied non-uniformly for the first three quarters of 2018 (BA districts were exempt for pending cases), violating the Uniformity and Bankruptcy Clauses; fees since Jan 1, 2018 must be calculated under the prior statute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper procedure: contested matter vs. adversary complaint | Liquidating Tr. proceeded by motion under Bankruptcy Rule 2020/9014 | U.S. Tr.: relief required an adversary complaint under Rule 7001 | Court refused dismissal; converted contested matter to adversary proceeding and proceeded on merits |
| Retroactivity of §1930(a)(6)(B) | Trustee: fee increase was retroactive and impermissible as to pending cases | U.S. Tr.: statute applies to pending cases and fees lawfully assessed | Court: amendment is substantively prospective (not impermissibly retroactive) following In re A.H. Robins |
| Uniformity under Article I, §8 (Uniformity Clause) | Trustee: fee increase applied unevenly for first 3 quarters of 2018 (BA districts exempt), causing geographic discrimination | U.S. Tr.: fee schedule uniformly applied in U.S. Trustee districts and JCUS later extended to BA districts | Court: fee increase was non-uniform for pending cases and unconstitutional under Uniformity Clause |
| Bankruptcy Clause uniformity | Trustee: bankruptcy laws must be geographically uniform; different treatment of pending BA cases violates clause | U.S. Tr.: (implicitly) no constitutional defect because JCUS later harmonized fees | Court: §1930(a)(6)(B) also violates Bankruptcy Clause as applied to pending cases; ordered fees since Jan 1, 2018 be calculated under prior statute |
Key Cases Cited
- Landgraf v. USI Film Prods., 511 U.S. 244 (1994) (framework for determining whether a statute has impermissible retroactive effect)
- United States v. Ptasynski, 462 U.S. 74 (1983) (test for geographic discrimination under the Uniformity Clause)
- Hanover Nat'l Bank v. Moyses, 186 U.S. 181 (1902) (Bankruptcy Clause requires geographical uniformity)
- Ry. Labor Execs.' Ass'n v. Gibbons, 455 U.S. 457 (1982) (Bankruptcy Clause requires laws to apply uniformly to a defined class of debtors)
- In re A.H. Robins Co., 219 B.R. 145 (Bankr. E.D. Va. 1998) (holding post-confirmation fee amendment was prospective and supporting comparison of increased fees to post-confirmation administrative expenses)