Mosaic Management Group, Inc., 614 B.R. 615

Background

June 2017 confirmed chapter 11 plan transferred virtually all debtor assets to the Mosaic Investment Trust; Margaret J. Smith is Investment Trustee managing post-confirmation administration.
A 2017 amendment to 28 U.S.C. § 1930 (effective Oct. 26, 2017) raised quarterly U.S. Trustee (UST) fees for large disbursements made on or after Jan. 1, 2018 (to the lesser of 1% of disbursements or $250,000).
During the Amendment's effective period, 98% of the increased fee funds the UST system/reserve but 2% is paid to the U.S. Treasury for general federal purposes.
Bankruptcy administrator districts (six districts in AL and NC) did not initially impose the increased fees for pending cases, creating a district-by-district disparity in fees charged for identical debtors.
The Trust paid $174,566.70 for 2018 and the first two quarters of 2019—$125,816.69 more than pre-Amendment—and sought a declaration that it is not liable for the Amendment-driven increase and a refund or credit for amounts overpaid.
The Court granted relief in part: the Trust must pay 98% of the fee required by the Amendment going forward; the Trust is entitled to a refund or credit equal to 2% of fees paid on/after Jan. 1, 2018 (calculated as $3,491.33 for the periods claimed); the past-refund is subject to § 2414 certification by the Attorney General, but the 98% rule is immediately effective.

Issues

Issue	Investment Trustee's Argument	U.S. Trustee's Argument	Held
Procedural posture: contested matter vs adversary	Motion may be resolved as a contested matter or converted to adversary; legal issues only	Relief (declaratory and money recovery) must be pursued by adversary complaint	Although rule 7001 would ordinarily require an adversary, court resolved the purely legal dispute in the contested matter without opening an adversary proceeding
Retroactivity / Due process	Amendment is retroactive to pending cases and violates due process because parties lacked notice of major cost increase	Amendment applies only to post-enactment disbursements (not retroactive); even if retroactive it is constitutional (legitimate purpose, rational means)	Amendment applies to disbursements on/after Jan 1, 2018; not retroactive in constitutional sense and does not violate due process
Uniformity (tax and bankruptcy clauses)	Amendment causes unconstitutional non-uniformity because identical debtors pay different fees depending on district (UST vs bankruptcy administrator districts)	Fees are user fees and/or laws on bankruptcies that are uniform on their face; disparity can be remedied by requiring nationwide adherence	The Amendment as applied across UST districts is uniform, but the 2% portion paid to Treasury is non-uniform (serves national purposes) and violates constitutional uniformity to that extent
Remedy / enforcement	Seek refund/credit for overpaid amounts and prospective relief	If unconstitutional, remedy should be nationwide equalization; any refund should await exhaustion of appeals under §2414	Court ordered repayment or credit of 2% of fees paid on/after Jan 1, 2018 (specified amount $3,491.33 for period claimed); past-refund is not enforceable until AG certifies no appeal, but the 98% prospective payment rule is immediately enforceable

Key Cases Cited

In re Buffets, LLC, 597 B.R. 588 (Bankr. W.D. Tex. 2019) (held Amendment unconstitutional)
In re Circuit City Stores, Inc., 606 B.R. 260 (Bankr. E.D. Va. 2019) (held Amendment unconstitutional)
In re Life Partners Holdings, Inc., 606 B.R. 277 (Bankr. N.D. Tex. 2019) (held Amendment unconstitutional)
In re Clinton Nurseries, Inc., 608 B.R. 96 (Bankr. D. Conn. 2019) (upheld Amendment)
In re Exide Techs., 611 B.R. 21 (Bankr. D. Del. 2020) (upheld Amendment; analysis on retroactivity and due process adopted by this court)
United States v. Ptasynski, 462 U.S. 74 (U.S. 1983) (uniformity principles applied to fees/taxes)
Landgraf v. USI Film Prods., 511 U.S. 244 (U.S. 1994) (retroactivity analysis)
Reg'l Rail Reorganization Act Cases, 419 U.S. 102 (U.S. 1974) (geographic uniformity principle)