615 B.R. 415
Bankr. S.D.N.Y.2020Background
- Two post-confirmation chapter 11 debtors (MF Global and SunEdison) sued to avoid payment of increased quarterly U.S. Trustee (UST) fees enacted in the Bankruptcy Judgeship Act of 2017 (amending 28 U.S.C. § 1930(a)(6)(B)), arguing the increases do not apply to their pending cases and are unconstitutional.
- The 2017 Amendment: for 2018–2022, if the UST Fund balance is below the statutory threshold, quarterly fees for quarters with disbursements ≥ $1,000,000 become the lesser of 1% of disbursements or $250,000 (previous maximum was $30,000 for very large disbursements).
- Plaintiffs’ constitutional theories: (1) impermissible retroactivity; (2) Due Process violation; (3) Fifth Amendment Takings Clause; and (4) non-uniform law in violation of the Bankruptcy Clause (because BA Districts implemented differently).
- Government/UST defenses: Congress intended the amendment to apply to ongoing cases, CBO PAYGO scoring assumed fees would apply to pending chapter 11 cases, the increase is a legitimate user fee to fund the UST Program and temporary judgeships, and any BA District implementation differences do not render the statute non-uniform.
- Decision: the bankruptcy courts granted the UST’s summary judgment motions and denied the plaintiffs’ motions — holding the amended quarterly fees apply to pending cases and are constitutional; the courts certified the rulings for immediate appeal to the Second Circuit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability / Retroactivity of §1930(a)(6)(B) | 2017 Amendment should not apply to cases filed/confirmed before enactment; applying it to pending cases is retroactive | Congress (and CBO PAYGO) assumed fee would apply to ongoing cases; statute’s terms and legislative context support application to disbursements after Jan 1, 2018 | Amendment applies to pending cases and is not constitutionally retroactive because it governs future disbursements, not vested rights |
| Due Process | Retroactive application and lack of notice deprive plaintiffs of due process | Retroactive civil legislation passes if rationally related to legitimate legislative purpose (here, funding UST Program and judgeships) | No Due Process violation: fee increase has a rational legislative purpose and is rationally related to that purpose |
| Takings Clause | Dramatic, unanticipated fee increases amount to an unconstitutional taking or excessive user fee | Quarterly fees are user fees for government services; no identified property interest is appropriated; fees are a reasonable approximation of cost | No taking: not a per se taking (monetary exaction from fungible funds) and not a regulatory taking because fees are reasonable, serve legitimate aims, and do not strip all economic use |
| Bankruptcy Clause Uniformity | Different timing/application in BA Districts (delayed and prospective-only there) makes the law non-uniform | §1930(a)(6) targets a UST-district funding problem and applies uniformly within that class; BA Districts’ later implementation does not invalidate the statute | Law is "on the subject of bankruptcies" and is uniform as applied to the defined class (UST districts); BA implementation choices do not render the statute unconstitutional |
Key Cases Cited
- Landgraf v. USI Film Prods., 511 U.S. 244 (1994) (two-step retroactivity test and framework for analyzing whether statute applies to pending cases)
- Vartelas v. Holder, 566 U.S. 257 (2012) (retroactivity analysis where statute’s effect was tied to pre-enactment conduct)
- Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717 (1984) (retroactive civil legislation requires only a rational legislative purpose for Due Process)
- United States v. Sperry Corp., 493 U.S. 52 (1989) (user-fee takings analysis—reasonable approximation of cost suffices; excessive fee inquiry)
- Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (2013) (unconstitutional-conditions doctrine and when monetary exactions implicate takings principles)
- Ry. Labor Execs.’ Ass’n v. Gibbons, 455 U.S. 457 (1982) (Bankruptcy Clause uniformity analysis and when a law is "on the subject of bankruptcies")
- Eastern Enters., Inc. v. Apfel, 524 U.S. 498 (1998) (plurality and concurrence on retroactive liabilities and Takings/Due Process interplay)
- Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005) (distinguishing per se takings from regulatory takings; relevant takings analysis categories)