592 B.R. 325
Bankr. W.D. Wis.2018Background
- Cranberry Growers Cooperative (CranGrow) filed Chapter 11 on Sept. 25, 2017, and obtained court‑approved postpetition DIP financing from CoBank consisting of a roll‑up and a revolver.
- Collections from sales were swept to CoBank as "Direct Revolver Payments," which reduced prepetition revolver balances and were then re‑advanced (less fees/interest) back to CranGrow for operations; total revolving indebtedness did not meaningfully decrease during the period at issue.
- Congress amended 28 U.S.C. § 1930 effective Oct. 26, 2017; increased quarterly UST fees apply to "disbursements" on or after Jan. 1, 2018; for CranGrow the fee is the lesser of 1% of quarterly disbursements or $250,000.
- The central dispute: whether the Direct Revolver Payments (collections swept to CoBank and re‑advanced) constitute "disbursements" subject to UST quarterly fees.
- CranGrow asserts the payments are part of a cash‑management/roll‑up that merely converts prepetition debt into postpetition debt (no economic reduction of debt) and that treating the transfers as disbursements causes double fees and undue hardship; the UST argues the term "disbursement" should be given a broad/plain meaning to include any estate fund transfer (favoring fee assessment).
Issues
| Issue | Plaintiff's Argument (UST) | Defendant's Argument (CranGrow) | Held |
|---|---|---|---|
| Whether Direct Revolver Payments are "disbursements" under 28 U.S.C. § 1930(a)(6) | "Disbursement" should be read broadly to include any transfer of estate funds (including payments to a revolver), so the swept receipts are disbursements subject to fees | The sweeps are part of a cash‑management roll‑up that immediately re‑advances funds back to the debtor; economically the estate did not expend funds, so counting them as disbursements would double‑charge fees | Court rejected a blanket application of the UST's broad rule: certain Direct Revolver Payments that merely convert prepetition to postpetition debt and are immediately re‑advanced are not disbursements for fee purposes |
| Whether counting such payments would cause impermissible "double fees" / undue hardship and undermine Chapter 11 policies | UST implicitly: fees are statutory and apply where transfers occur; broad application supports system funding | CranGrow: treating the recycled receipts as disbursements causes a fee‑on‑fee cycle (need to draw to pay fees, then be charged on the swept receipts), harming reorganizability and creditors, and is inequitable | Court found counting these recycled Direct Revolver Payments would result in double‑dipping and undue hardship in the circumstances presented, so a portion of such payments are not fee‑able disbursements |
Key Cases Cited
- In re Fabricators Supply Co., 292 B.R. 531 (Bankr. D.N.J. 2003) (treated repayments on a postpetition revolving line as disbursements where sweeps repaid postpetition borrowing)
- St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525 (9th Cir. 1994) (defined disbursements as payments from the bankruptcy estate)
- In re HSSI, Inc., 176 B.R. 809 (Bankr. N.D. Ill. 1995) (intercompany deposits to pooled accounts were not disbursements; payments from pooled account to lender were)
- Office of United States Trustee v. Hays Builders, Inc., 144 B.R. 778 (W.D. Tenn. 1992) (broad reading of disbursements to include third‑party payments on behalf of debtor)
- In re Wernerstruck, Inc., 130 B.R. 86 (D.S.D. 1991) (defined disbursements as transfers by a debtor for expenses until plan confirmation)