Henry Hobbs, Jr. v. Buffets, L.L.C., 979 F.3d 366

Background

Buffets, L.L.C. (and affiliates) filed Chapter 11 in the Western District of Texas (a U.S. Trustee district) in 2016; plan confirmed in 2017 and the case remained pending into 2018.
The Bankruptcy Judgeship Act of 2017 temporarily raised Chapter 11 quarterly fees for large debtors (fiscal years 2018–2022) to the lesser of 1% of quarterly disbursements or $250,000 when the U.S. Trustee System Fund balance fell below $200 million.
The 2017 amendment took immediate effect in Trustee districts; the Judicial Conference did not adopt parallel fee changes for Bankruptcy Administrator districts until Sept. 2018 and limited them to cases filed on/after Oct. 1, 2018.
Buffets reported >$1 million in disbursements in each of the first three quarters of 2018 and was assessed the $250,000 quarterly fee; it refused to pay and challenged (1) the definition of “disbursements,” (2) retroactive application to pending cases, and (3) constitutionality under the Bankruptcy Clause and other doctrines.
The bankruptcy court held the fee increase unconstitutional; the Fifth Circuit reversed: (a) “disbursements” includes all payments (including operating expenses), (b) the amendment applies to postenactment disbursements in pending cases (not retroactive), and (c) the fee increase does not violate the Bankruptcy Clause and survives due-process/takings challenges.

Issues

Issue	Plaintiff's Argument (Buffets)	Defendant's Argument (Trustee/Government)	Held
Scope of “disbursements” under 28 U.S.C. § 1930(a)(6)	Limit to bankruptcy‑related payments (payments under plan); exclude ordinary operating expenses	Plain meaning covers all money paid out by a debtor, including operating/postconfirmation expenses	"Disbursements" includes all payments by or on behalf of the debtor (affirmed)
Applicability to cases pending at enactment / Retroactivity	Applying the new fees to disbursements in pending cases is impermissibly retroactive and impairs vested rights	Statute applies to disbursements made in any calendar quarter beginning on/after enactment; it is prospective because it targets future payments	Fee applies to disbursements made after enactment in pending cases; not impermissibly retroactive (affirmed)
Bankruptcy Clause uniformity challenge	Fee increase is non‑uniform because it took effect immediately only in Trustee districts, disadvantaging identical debtors based on geography	Fee addresses a program‑specific funding shortfall in Trustee districts; geographic effect is incidental and not arbitrary	No uniformity violation: Congress may tailor measures to remedy geographic or programmatic disparities (reversed bankruptcy court)
Excessiveness / Due process / Takings	Increased fee is excessive, violates substantive due process and is a taking	Fee is a reasonable user fee tied to funding the Trustee Program; capped at 1% and conditionally triggered, so rationally related and not a taking	Fee survives rational‑basis review as a user fee and is not a taking (affirmed)

Key Cases Cited

St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525 (9th Cir. 1994) (held earlier geographic disparity in Trustee/Administrator implementation raised uniformity concerns)
In re Cranberry Growers Coop., 930 F.3d 844 (7th Cir. 2019) (defines “disbursements” as all payments by or on behalf of the debtor)
In re Genesis Health Ventures, Inc., 402 F.3d 416 (3d Cir. 2005) (includes postfiling operational expenses in disbursements)
In re Danny's Mkts., Inc., 266 F.3d 523 (6th Cir. 2001) (postconfirmation operating expenses count as disbursements)
Landgraf v. USI Film Prods., 511 U.S. 244 (1994) (retroactivity framework for statutes; presumption against retroactive application)
United States v. Sperry Corp., 493 U.S. 52 (1989) (user‑fee takings/reasonableness analysis)
Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980) (distinguishes takings from permissible transfers labeled as fees)
Massachusetts v. United States, 435 U.S. 444 (1978) (cent‑per‑unit fees as acceptable proxies for cost allocation)
Reg'l R.R. Reorganization Act Cases, 419 U.S. 102 (1974) (uniformity clause allows geographically tailored measures to address local problems)
Ry. Labor Execs.' Ass'n v. Gibbons, 455 U.S. 457 (1982) (Bankruptcy Clause uniformity is flexible and not an equal‑protection‑style bar)