In re: JOHN Q. HAMMONS FALL 2006, LLC; ACLOST, LLC; BRICKTOWN RESIDENCE CATERING CO., INC.; CHATEAU CATERING CO., INC.; CHATEAU LAKE, LLC; CITY CENTRE HOTEL CORP.; CIVIC CENTER REDEVELOPMENT CORP.; CONCORD GOLF CATERING CO., INC.; CONCORD HOTEL CATERING CO., INC.; EAST PEORIA CATERING CO., INC.; FORT SMITH CATERING CO., INC.; FRANKLIN/CRESCENT CATERING CO., INC.; GLENDALE COYOTES CATERING CO., INC.; GLENDALE COYOTES HOTEL CATERING CO., INC.; HAMMONS OF ARKANSAS, LLC; HAMMONS OF COLORADO, LLC; HAMMONS OF FRANKLIN, LLC; HAMMONS OF FRISCO, LLC; HAMMONS OF HUNTSVILLE, LLC; HAMMONS OF LINCOLN, LLC; HAMMONS OF NEW MEXICO, LLC; HAMMONS OF OKLAHOMA CITY, LLC; HAMMONS OF RICHARDSON, LLC; HAMMONS OF ROGERS, INC.; HAMMONS OF SIOUX FALLS, LLC; HAMMONS OF SOUTH CAROLINA, LLC; HAMMONS OF TULSA, LLC; HAMMONS, INC.; HAMPTON CATERING CO., INC.; HOT SPRINGS CATERING CO., INC.; HUNTSVILLE CATERING, LLC; INTERNATIONAL CATERING CO., INC.; JQH - ALLEN DEVELOPMENT, LLC; JQH - CONCORD DEVELOPMENT, LLC; JQH - EAST PEORIA DEVELOPMENT, LLC; JQH - FT. SMITH DEVELOPMENT, LLC; JQH - GLENDALE AZ DEVELOPMENT, LLC; JQH - KANSAS CITY DEVELOPMENT, LLC; JQH - LA VISTA CY DEVELOPMENT, LLC; JQH - LA VISTA CONFERENCE CENTER DEVELOPMENT, LLC; JQH - LA VISTA III DEVELOPMENT, LLC; JQH - LAKE OF THE OZARKS DEVELOPMENT, LLC; JQH - MURFREESBORO DEVELOPMENT, LLC; JQH - NORMAL DEVELOPMENT, LLC; JQH - NORMAN DEVELOPMENT, LLC; JQH - OKLAHOMA CITY BRICKTOWN DEVELOPMENT, LLC; JQH - OLATHE DEVELOPMENT, LLC; JQH - PLEASANT GROVE DEVELOPMENT, LLC; JQH - ROGERS CONVENTION CENTER DEVELOPMENT, LLC; JQH - SAN MARCOS DEVELOPMENT, LLC; JOHN Q. HAMMONS 2015 LOAN HOLDINGS, LLC; JOHN Q. HAMMONS CENTER, LLC; JOHN Q. HAMMONS HOTELS DEVELOPMENT, LLC; JOHN Q. HAMMONS HOTELS MANAGEMENT I CORPORATION; JOHN Q. HAMMONS HOTELS MANAGEMENT II, LP; JOHN Q. HAMMONS HOTELS MANAGEMENT, LLC; JOPLIN RESIDENCE CATERING CO., INC.; JUNCTION CITY CATERING CO., INC.; KC RESIDENCE CATERING CO., INC.; LA VISTA CY CATERING CO., INC.; LA VISTA ES CATERING CO., INC.; LINCOLN P STREET CATERING CO., INC.; LOVELAND CATERING CO., INC.; MANZANO CATERING CO., INC.; MURFREESBORO CATERING CO., INC.; NORMAL CATERING CO., INC.; OKC COURTYARD CATERING CO., INC.; R-2 OPERATING CO., INC.; REVOCABLE TRUST OF JOHN Q. HAMMONS DATED DECEMBER 28, 1989 AS AMENDED AND RESTATED; RICHARDSON HAMMONS, LP; ROGERS ES CATERING CO., INC.; SGF - COURTYARD CATERING CO., INC.; SIOUX FALLS CONVENTION/ARENA CATERING CO., INC.; ST. CHARLES CATERING CO., INC.; TULSA/169 CATERING CO., INC.; U.P. CATERING CO., INC., Debtors.
No. 20-3203
UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT
October 5, 2021
PUBLISH
Debtors.
JOHN Q. HAMMONS FALL 2006, LLC; ACLOST, LLC; BRICKTOWN RESIDENCE CATERING CO., INC.; CHATEAU CATERING CO., INC.; CHATEAU LAKE, LLC; CITY CENTRE HOTEL CORP.; CIVIC CENTER REDEVELOPMENT CORP.; CONCORD GOLF CATERING CO., INC.; CONCORD HOTEL CATERING CO., INC.; EAST PEORIA CATERING CO., INC.; FORT SMITH CATERING CO., INC.; FRANKLIN/CRESCENT CATERING CO., INC.; GLENDALE COYOTES CATERING CO., INC.; GLENDALE COYOTES HOTEL CATERING CO., INC.; HAMMONS OF ARKANSAS, LLC; HAMMONS OF COLORADO, LLC; HAMMONS OF FRANKLIN, LLC; HAMMONS OF FRISCO, LLC; HAMMONS OF HUNTSVILLE, LLC; HAMMONS OF LINCOLN, LLC; HAMMONS OF NEW MEXICO, LLC; HAMMONS OF OKLAHOMA CITY, LLC; HAMMONS OF RICHARDSON, LLC; HAMMONS OF ROGERS, INC.; HAMMONS OF SIOUX FALLS, LLC; HAMMONS OF
Appellants,
v.
OFFICE OF THE UNITED STATES TRUSTEE,
Appellee,
ACADIANA MANAGEMENT GROUP, LLC; ALBUQUERQUE-AMG SPECIALTY HOSPITAL, LLC; CENTRAL INDIANA-AMG SPECIALTY HOSPITAL, LLC; LTAC HOSPITAL OF EDMOND, LLC; HOUMA-AMG SPECIALTY HOSPITAL, LLC; LTAC OF LOUISIANA, LLC; LAS VEGAS-AMG SPECIALTY HOSPITAL, LLC; WARREN BOEGEL; BOEGEL FARMS, LLC and THREE BO‘S, INC.
Amici Curiae.
Nicholas Zluticky (with Zachary H. Hemenway, Michael P. Pappas, and J. Nicci Warr on the briefs) of Stinson LLP, Kansas City and Clayton, Missouri, for Debtors-Appellants.
Jeffrey E. Sandberg (with Mark B. Stern, Ramona D. Elliott, P. Matthew Sutko, Andrew W. Beyer, and Brian M. Boynton on the brief) of the U.S. Department of Justice, Washington, District of Columbia, for Appellee.
Bradley L. Drell and Heather M. Mathews of Gold, Weems, Bruser, Sues & Rundell, Alexandria, Louisiana, on the brief for Amici Curiae.
Before BACHARACH, EBEL, and PHILLIPS, Circuit Judges.
PHILLIPS, Circuit Judge.
Appellants, seventy-six Chapter 11 debtors associated with John Q. Hammons Hotels & Resorts (Debtors), argue that they incurred more than $2.5 million of quarterly Chapter 11 disbursement fees from January 2018 through December 2020. First, Debtors fault the bankruptcy court‘s statutory interpretation, arguing that it applied the quarterly fees retroactively to pending cases against Congress‘s intent. We conclude that the presumption against retroactivity doesn‘t apply here, because Congress increased the quarterly bankruptcy fees prospectively. Second, and alternatively, Debtors fault Congress, arguing that charging different Chapter 11 disbursement fees depending on the location of the bankruptcy filing violates the uniformity requirement of the Bankruptcy Clause,
BACKGROUND
I. Historical Background
The federal judiciary is divided into ninety-four judicial districts. Nearly all judicial districts have a bankruptcy court. The Department of Justice, through its Trustee Program, administers bankruptcy proceedings for eighty-eight judicial districts.1 E.g., In re Cir. City Stores, Inc., 996 F.3d 156, 160 (4th Cir. 2021). The Judicial Conference, through its Bankruptcy Administrator Program, administers bankruptcy proceedings in the remaining six districts, located in Alabama and North Carolina. Id. (footnote omitted).
This system of dual bankruptcy programs began in 1978. See
In 1986, Congress made the program permanent in all judicial districts, but allowed Alabama and North Carolina until 1992 to join. Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986,
But in 1990, Congress extended the temporary delay until 2002. Judicial Improvements Act of 1990,
This left the country with two different bankruptcy-administration programs. Each has a separate funding source. The general judicial budget funds Bankruptcy Administrators in Alabama and North Carolina. Matter of Buffets, L.L.C., 979 F.3d 366, 383 (5th Cir. 2020); cf.
Chapter 11 debtors pay quarterly disbursement fees.
For the next seventeen years or so, Trustee and Bankruptcy Administrator districts charged the same quarterly fees. That changed with Congress‘s 2017 Amendment to
For quarters beginning on and after January 1, 2018, quarterly Chapter 11 disbursement fees increased on all large debtors in Trustee districts, even debtors whose bankruptcy cases were pending before that date. See, e.g., Buffets, 979 F.3d at 372. Bankruptcy Administrator debtors got a better deal. The Judicial Conference didn‘t increase quarterly fees for those debtors until October 2018, and then, the increase didn‘t
II. Procedural Background
In June 2016, Debtors filed Chapter 11 bankruptcy cases in the District of Kansas, a Trustee district.7 Their cases remained pending in January 2018 when the 2017 Amendment took effect. After that, their quarterly fees markedly increased. As of December 31, 2019, Debtors had paid over $2.5 million more in quarterly fees than they would have paid had they filed in a Bankruptcy Administrator district.
In the bankruptcy court, Debtors challenged the quarterly Chapter 11 disbursement-fee increase. They argued that the 2017 Amendment was unconstitutional “because it was unequally applied during the first three quarters of 2018 and because it was applied retroactively both without clear Congressional intent and only in states where the United States Trustee Program operates—excluding bankruptcy petitions filed in North Carolina and Alabama.” Debtors/Appellants’ App. vol. 71 at 9871. The bankruptcy court rejected both arguments and declined to redetermine Debtors’ quarterly disbursement fees. We review under
On appeal, Debtors maintain (1) that the bankruptcy court erred in interpreting the 2017 Amendment to require increased fees retroactively, and (2) that the 2017 Amendment violates the Constitution‘s Bankruptcy Clause by applying a bankruptcy law nonuniformly. We review these legal issues de novo, beginning with the retroactivity challenge.8 See In re Herd, 840 F.2d 757, 759 (10th Cir. 1988) (citation omitted).
I. Retroactivity
Debtors argue that applying the 2017 Amendment to their bankruptcy cases, which were pending in January 2018, is “impermissibly retroactive.” Opening Br. at 42. Specifically, they contend that the Amendment‘s fee increases apply only to bankruptcy cases filed after January 1, 2018, not to cases pending then. The Fourth and Fifth Circuits have rejected this argument. Cir. City Stores, 996 F.3d at 168–69; Buffets, 979 F.3d at 374–76. We do too.
Obviously, if Congress applies a new law to earlier events, this raises notice issues and could upset “settled expectations.” Landgraf v. USI Film Prods., 511 U.S. 244, 265 (1994) (footnote omitted). So courts apply a presumption against retroactivity when interpreting statutes. See id. at 277. Under this canon of construction, we presume that Congress didn‘t intend a statute to have a “genuinely ‘retroactive’ effect.” Id. We employ a two-step analysis in assessing whether the presumption applies. Id. at 280. First, we
Debtors contend that we should apply the presumption against retroactivity to the 2017 Amendment; that is, they argue that the 2017 Amendment‘s text is ambiguous about whether it applies to already-pending cases and that it would have an impermissible retroactive effect if applied in such cases. We interpret the 2017 Amendment as increasing fees in pending cases. Accord Cir. City Stores, 996 F.3d at 168–69; Buffets, 979 F.3d at 374–75. Under
Even so, Debtors argue that we should draw a negative inference from the 2017 Amendment‘s not more specifically applying its fee increases to pending cases. Debtors contend that whether the 2017 Amendment applies to those cases is ambiguous. Debtors contrast the 2017 Amendment‘s language to Congress‘s language in a clarifying amendment for a 1996 fee increase, which specified that it applied to pending cases. Debtors also point to amendments to Chapter 12 of the Bankruptcy Code contained in the same act as the 2017 Amendment, which did so also.
We decline to draw a negative inference. Debtors haven‘t overcome the 2017 Amendment‘s language increasing quarterly fees for all postenactment disbursements. Additionally, Debtors’ legislative examples differ. Congress intended the 1996 clarifying amendment to resolve judicial disagreement about whether a 1996 fee increase applied in pending cases. Cir. City Stores, 996 F.3d at 168 (citation omitted). By contrast, the 2017 Amendment increases all quarterly fees for disbursements made after its effective date. And when enacting the 2017 Amendment, “Congress operated under [a] widespread understanding that fee increases apply to postenactment disbursements in pending cases.” Buffets, 979 F.3d at 374 (citation omitted).
Similarly, a negative inference doesn‘t arise from the Chapter 12 amendment, because that amendment addresses a different subject from
Even if we viewed the 2017 Amendment as ambiguous, we still wouldn‘t apply the presumption against retroactivity. We conclude that the 2017 Amendment doesn‘t operate retroactively. The presumption against retroactivity applies only when “the new provision attaches new legal consequences to events completed before its enactment.” Landgraf, 511 U.S. at 269–70. As described, to have a retroactive effect, a new provision must “impair rights a party possessed when he acted, increase a party‘s liability for past conduct, or impose new duties with respect to transactions already completed.” Id. at 280. We‘ve previously ruled that an amendment increasing
Debtors can‘t refute this reasoning. Instead, they argue that “[w]hen the increased fees were applied to [their] bankruptcy cases, new legal obligations . . . were retroactively applied to their decision to file” in a Trustee district, rather than a Bankruptcy Administrator district. Opening Br. at 47. Debtors miss the mark. The issue is whether the 2017 Amendment‘s increasing of quarterly fees is retroactive. Cf. Antonin Scalia & Bryan Garner, Reading Law: The Interpretation of Legal Texts 264 (2012) (“[R]etroactivity is to be judged with regard to the act or event that the statute is meant to regulate[.]“). The 2017 Amendment imposes no new legal consequences on disbursement fees before January 2018. Thus, we reject Debtors’ retroactivity challenge to the 2017 Amendment. Even if Debtors’ expectations were unsettled, legislation isn‘t “unlawful solely because it upsets otherwise settled expectations.”9 Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 729–30 (1984) (citations omitted).
II. Bankruptcy Clause Uniformity
A. The 2017 Amendment is a Law on “the Subject of Bankruptcies”
The Bankruptcy Clause authorizes Congress to enact “uniform Laws on the subject of Bankruptcies throughout the United States,” thus requiring geographic
Every court that has addressed the Trustee‘s argument has rejected it, and for good reason. See, e.g., In re Clinton Nurseries, Inc., 998 F.3d 56, 64 (2d Cir. 2021) (“The Trustee‘s argument has been repeatedly rejected by other courts.” (collecting cases)); cf. Buffets, 979 F.3d at 377 (“The consensus view of bankruptcy courts that Chapter 11 fees are Bankruptcy Clause legislation is likely correct.“). The 2017 Amendment fits within the Supreme Court‘s broad definition of “bankruptcy” as “the subject of the relations between an insolvent or nonpaying or fraudulent debtor and his creditors, extending to his and their relief.” Ry. Lab. Execs.’ Ass‘n v. Gibbons, 455 U.S. 457, 466 (1982) (internal quotation marks and citations omitted). The Amendment concerns a statute (
We also reject the Trustee‘s argument that if every law bearing on distributions to creditors qualified as “laws on the subject of bankruptcies,” the Bankruptcy Clause would extend even to taxes and business regulations. The 2017 Amendment and
To defeat Debtors’ constitutional challenge, the Trustee argues two alternative theories: (1) that the pre-2020 Amendment versions of
1. Sections 1930(a)(6) and (7) Didn‘t Impose Uniform Quarterly Fees Across All Judicial Districts
Until the 2020 Amendment revised “may” to “shall” in
But the pre-2020 Amendment
Disregarding the plain language, the Trustee contends that the 2020 Amendment‘s amending “may” to “shall” shows Congress‘s longstanding intent that
Though this finding merits some weight, it doesn‘t control our interpretation of the earlier Congress‘s intent in enacting
Additionally, as the Second and Fifth Circuits reasoned in rejecting the Trustee‘s position, “[it] is . . . telling that the Judicial Conference itself apparently understood the 2017 Amendment as authorizing, but not requiring, it to impose a fee increase in [Bankruptcy Administrator] Districts.” Id. at 67; see Buffets, 979 F.3d at 378 n.10 (citation omitted). Thus,
2. The 2017 Amendment is Unconstitutionally Nonuniform
We hold that the 2017 Amendment is unconstitutionally nonuniform, because it allows higher quarterly disbursement fees on Chapter 11 debtors in Trustee districts than charged to equivalent debtors in Bankruptcy Administrator districts. We acknowledge that the Fourth and Fifth Circuits have upheld the Amendment against a Bankruptcy Clause challenge. Cir. City Stores, 996 F.3d at 165; Buffets, 979 F.3d at 378–79. But we agree with the Second Circuit‘s well reasoned and unanimous ruling to the contrary. See Clinton Nurseries, 998 F.3d at 69–70.
In upholding the Chapter 11 quarterly disbursement-fee increase, the Fourth and Fifth Circuits relied on Blanchette v. Connecticut General Insurance, 419 U.S. 102 (1974), which ruled that in enacting bankruptcy laws, Congress may “take into account differences that exist between different parts of the country, and . . . fashion legislation to resolve geographically isolated problems.” 419 U.S. at 159; see Cir. City Stores, 996 F.3d at 166 (comparing the quarterly-fees issue to Blanchette); Buffets, 979 F.3d at 378 (same). In Blanchette, the Supreme Court upheld legislation creating a special court and laws for bankrupt railroads in the northeast and midwest regions of the country. 419 U.S. at 108, 159–61. At the time of enactment, all the bankrupt railroads were operating there. Id. at 160. The Fourth and Fifth Circuits likened the geography-specific legislation in Blanchette to the 2017 Amendment‘s geographic distinction between the eighty-eight Trustee districts and the six Administrator districts in Alabama and North Carolina. Cir. City Stores, 996 F.3d at 166; Buffets, 979 F.3d at 378. The Trustee would have us adopt this reasoning.
But the Second Circuit rejected the analogy to Blanchette and we‘re more persuaded by that court‘s reasoning than by the Fourth and Fifth Circuit‘s. Cf. Clinton Nurseries, Inc., 998 F.3d at 68–69. As the Second Circuit reasoned, though Blanchette permitted geography-specific legislation, the challenged Act there still satisfied the Bankruptcy Clause‘s requirement that a law “apply uniformly to a defined class of debtors.”12 Gibbons, 455 U.S. at 473; see Blanchette, 419 U.S. at 159–61; see also Clinton Nurseries, Inc., 998 F.3d at 68. The Act applied uniformly to all bankrupt railroads. Blanchette, 419 U.S. at 159–61; see Clinton Nurseries, Inc., 998 F.3d at 68. And so the Act also addressed a geographically isolated problem: no members of the class of debtors existed outside the defined region, see Blanchette, 419 U.S. at 159–60; that is, “all members of the class of debtors impacted by the statute were confined to a sole geographic area,” Clinton Nurseries, 998 F.3d at 68. By contrast, the 2017 Amendment increased fees for all large Chapter 11 bankruptcy debtors in Trustee Program districts, with no showing that “members of that broad class are absent in
In so holding, we reject the Trustee‘s arguments that the relevant class of debtors is exclusively Trustee-district debtors and that the Trustee Program underfunding is a geographically isolated problem warranting geographic-specific legislation.13 No one disputes that political maneuvering, not bankruptcy-policy considerations, led to the dual bankruptcy-administration system (which we‘re not criticizing, but simply noting in analyzing uniformity). See id. at 69 (citation omitted); Buffets (Buffets Concurrence), 979 F.3d at 383 (Clement, J., concurring in part and dissenting in part). Nothing distinguishes Alabama and North Carolina from the forty-eight other states in bankruptcy
The Bankruptcy Clause precludes increasing fees based just on the location of the bankruptcy court. Cf. Buffets, 979 F.3d at 378 (“[T]he uniformity requirement forbids . . . ‘arbitrary regional differences in the provisions of the Bankruptcy Code.‘” (quoting In re Reese, 91 F.3d at 39)). That is what the 2017 Amendment does. Thus, we hold that the 2017 Amendment‘s fee disparities fail under the uniformity requirement of the Bankruptcy Clause. The Amendment imposed higher quarterly fees on large debtors in Trustee districts.14
Debtors request monetary relief for “the excess fees they paid.” Opening Br. at 50. The Trustee argues that we shouldn‘t grant that requested relief. The Trustee reasons that courts can remedy unequal treatment either by expanding or withdrawing benefits, depending on legislative intent, and that, here, Congress intended to increase quarterly fees nationwide. Though raising fees in Alabama and North Carolina might solve this problem, the Trustee recognizes that we lack authority to do that. So he asks that we declare the 2017 Amendment unconstitutional without granting further relief.
We lack authority over quarterly fees assessed in districts outside our circuit, and thus in Alabama or North Carolina. Cf. Buffets Concurrence, 979 F.3d at 384 (“The St. Angelo court had no power to force Alabama and North Carolina into the [Trustee] system, which is why the constitutional infirmity persists and we are having this debate today. We have no greater authority than our colleagues on the Ninth Circuit to remake the bankruptcy system.“). But Debtors are entitled to relief. Cf. id. (proposing reducing debtors’ fees as a remedy: “What we can do is ameliorate the harm of unconstitutional treatment. So, we should.“). The Second Circuit awarded monetary relief to remedy debtors’ harms from the 2017 Amendment. See Clinton Nurseries, 998 F.3d at 69–70 (“To the extent that [debtor] has already paid the unconstitutional fee increase, it is entitled to a refund of the amount in excess of the fees it would have paid in a [Bankruptcy Administrator] District during the same time period.“). We do so as well. Thus, we remand to the bankruptcy court for a refund of
CONCLUSION
We reverse and remand for determination of Debtors’ quarterly Chapter 11 fees and a refund of overpayment consistent with this opinion.
In re John Q. Hammons Fall, et al.
20-3203
BACHARACH, J., dissenting.
I agree with much of the majority‘s excellent opinion. In my view, however, the 2017 amendment does not violate the Bankruptcy Clause. So I respectfully dissent.
The majority points out that our nation has two separate bankruptcy systems. One system uses U.S. trustees in the bankruptcy courts in 48 states, 4 territories, and the District of Columbia. See Judicial Districts Covered by USTP Regions, Department of Justice, https://www.justice.gov/ust/judicial-districts-covered-ustp-regions (last visited September 3, 2021). By contrast, the bankruptcy courts in 2 states use bankruptcy administrators rather than U.S. trustees. Why the difference in systems? Politics. So we might reasonably question the need for separate bankruptcy systems in different states. But as the majority points out, the debtors didn‘t preserve their challenge to the dual systems. Maj. Op. at 25 n.14.
Given the failure to preserve that challenge, we must consider the constitutionality of the 2017 amendment rather than the dual system of U.S. trustees and bankruptcy administrators. Because of the dual system, districts varied in their funding needs. This difference led to a budget shortfall in districts using U.S. trustees. See H.R. Rep. No. 115-130, at 8–9 (2017).
Perhaps there shouldn‘t be two separate systems, but the debtors forfeited their challenge to the existence of two separate systems. If we put aside that forfeited challenge, we have little reason to question Congress‘s approach. The dual systems created different financial needs, and Congress decided to raise fees in the jurisdictions creating the budget shortfall. That approach wasn‘t arbitrary and didn‘t violate the Bankruptcy Clause.