930 F.3d 844
7th Cir.2019Background
- Cranberry Growers Cooperative (CranGrow) filed Chapter 11 in Sept. 2017 and obtained postpetition revolving financing (a "roll-up") from CoBank: customer receipts were paid directly to CoBank to reduce prepetition debt and CoBank advanced funds for operations under an approved budget.
- CranGrow excluded direct customer payments to CoBank from its quarterly U.S. Trustee fees calculation under 28 U.S.C. § 1930(a)(6); the Trustee disagreed and assessed additional fees.
- The Bankruptcy Court held those customer payments were not "disbursements," treating the arrangement as a cash-management/recycling mechanism and citing concerns about double fees and debtor viability.
- The Trustee appealed directly to the Seventh Circuit; the Seventh Circuit reviewed de novo whether those payments are "disbursements" for § 1930(a)(6) fee purposes.
- The court also considered (and declined) CranGrow’s belated arguments seeking waiver of fees under § 1930(f)(3) and a constitutional challenge to fee nonuniformity under the Bankruptcy Clause, finding those issues either unsupported or forfeited.
Issues
| Issue | CranGrow's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether customer payments made directly to the debtor’s postpetition lender are "disbursements" under 28 U.S.C. § 1930(a)(6) | These payments are not disbursements because funds never were received into a debtor-in-possession account and were immediately recycled as postpetition advances | Payments are "money paid out" on behalf of the debtor to a creditor and thus are disbursements | Held: Payments are disbursements; broad ordinary meaning controls and precedent supports inclusion |
| Whether quarterly fees may be waived under 28 U.S.C. § 1930(f)(3) | A waiver is permissible under § 1930(f)(3) given the economic hardship and equitable circumstances | No authority or Judicial Conference policy supports waiving quarterly fees here | Held: Denied—CranGrow cited no controlling authority or Judicial Conference policy to permit waiver |
| Whether application of the amended fee schedule violated the Bankruptcy Clause (uniformity) | The staggered implementation (UST districts effective Jan 2018; BA districts adopted later and prospectively) produced nonuniform treatment and a constitutional violation | The constitutional argument was forfeited by CranGrow for failing to raise it below; also the issue was not adequately vetted | Held: Court declined to reach the constitutional challenge as CranGrow forfeited the issue and it was inappropriate to consider for the first time on appeal |
Key Cases Cited
- Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011) (use ordinary meaning where statute lacks a definition)
- Perrin v. United States, 444 U.S. 37 (1979) (textualist approach to statutory meaning)
- Grogan v. Garner, 498 U.S. 279 (1991) (bankruptcy goal of fresh start)
- In re Celebrity Home Entm’t, Inc., 210 F.3d 995 (9th Cir. 2000) ("disbursement" is expansive)
- Cash Cow Servs. of Fla., LLC v. United States Trustee, 296 F.3d 1261 (11th Cir. 2002) (definition of disbursement as "to expend" or "to pay out")
- St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525 (9th Cir. 1994) (Uniformity Clause analysis of Trustee fee system)
- In re Fabricators Supply, Inc., 292 B.R. 531 (Bankr. D.N.J. 2003) (customer payments applied to revolver constitute disbursements)
- In re Wernerstruck, Inc., 130 B.R. 86 (D.S.D. 1991) (payments to revolving credit treated as disbursements)