In Re: Roger Evans v. Kathleen McCallister
69f4th1101
9th Cir.2023Background
- Debtors (Evans and Steedman) filed a Chapter 13 plan and began making plan payments to standing Trustee Kathleen McCallister, who deducted the statutory percentage fee from each pre-confirmation payment.
- Before the bankruptcy court could confirm the plan, the Debtors voluntarily dismissed the case.
- Debtors moved to disgorge the fees collected pre-confirmation; the bankruptcy court ordered disgorgement, the district court reversed, and Debtors appealed to the Ninth Circuit.
- Central statutory provisions: 28 U.S.C. § 586(e)(2) (trustee "shall collect such percentage fee from all payments received . . . under plans") and 11 U.S.C. § 1326(a)–(b) (pre-confirmation payments "retained" by trustee; return if plan not confirmed; §1326(b) requires trustee be paid percentage fee "before or at the time of each payment to creditors under the plan").
- The Ninth Circuit joined the Tenth Circuit (In re Doll) and held that trustees are not entitled to keep percentage fees when a Chapter 13 case is dismissed prior to plan confirmation.
Issues
| Issue | Debtors' Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether a standing Chapter 13 trustee may keep percentage fees deducted from pre-confirmation payments when the case is dismissed before confirmation | §1326(a) requires return of pre-confirmation payments if a plan is not confirmed; trustee must disgorge fees | 28 U.S.C. §586(e)(2) says trustee “shall collect” fees from payments received under plans, so trustee may keep fees upon receipt | Trustee may not retain percentage fees if the plan is never confirmed; trustee must return fees collected pre-confirmation when case dismissed |
| Proper statutory construction: interpret "collect" in §586(e)(2) in isolation or harmonize §§586 and 1326 | Read §§ together; "payments . . . under plans" in §586 refers to confirmed-plan payments; pre-confirmation payments are governed by §1326 | "Collect" means receive and keep when payments are received, regardless of confirmation | Court reads §§586 and 1326 harmoniously: §1326 controls pre-confirmation retention/return; §1326(b) and §586 apply post-confirmation |
| Whether policy considerations (trustee viability) override statutory text | N/A (Debtors emphasize statutory text/history) | Trustee argues disgorgement harms trustee system and incentivizes bad behavior | Court declines to adopt policy-based override; statutory text and structure control |
| Whether analogous provisions (Ch. 11 Subchapter V and Ch. 12) imply different result for Ch. 13 | Differences show Congress knew how to authorize fee deduction on dismissal and didn’t do so for Ch. 13, supporting Debtors | Trustee argues §586 unqualified language covers pre-confirmation receipts | Court finds analogous provisions and amendment history support reading that Ch. 13 trustees are paid only upon confirmation |
Key Cases Cited
- Bullard v. Blue Hills Bank, 575 U.S. 496 (2015) (context on Chapter 13 plan confirmation process)
- Lamie v. U.S. Trustee, 540 U.S. 526 (2004) (courts should not read absent words into statute)
- In re Doll, 57 F.4th 1129 (10th Cir. 2023) (holding trustee must return pre-confirmation payments without deducting fee; treats §586 as source of fund, §1326 as disposition rule)
- United States v. Millis, 621 F.3d 914 (9th Cir. 2010) (statutory terms read in regulatory context to harmonize provisions)
- Borden v. United States, 141 S. Ct. 1817 (2021) (court cannot delete or alter statutory language to reach preferred meaning)