In Re: Roger Evans v. Kathleen McCallisterIn Re: Roger Evans v. Kathleen McCallister
FOR PUBLICATION
Appeal from the United States District Court for the District of Idaho
David C. Nye, Chief District Judge, Presiding
OPINION
Opinion by Judge Milan D. Smith, Jr.
SUMMARY*
Bankruptcy
The panel reversed the district court‘s judgment reversing the bankruptcy court‘s order requiring a standing Chapter 13 trustee to return her percentage fee when the case was dismissed prior to confirmation.
Joining the Tenth Circuit, the panel held that the trustee was not entitled to a percentage fee of plan payments as compensation for her work in the Chapter 13 case.
The panel held that, reading these statutes together, “payments . . . under plans” in
* This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.
COUNSEL
Alexandra O. Caval (argued), Caval Law Office P.C., Twin Falls, Idaho, for Appellants.
Mahesha Subbaraman (argued), Subbaraman PLLC, Minneapolis, Minnesota; Jeffrey P. Kaufman, Office of Kathleen McCallister, Meridian, Idaho; for Appellee.
Tara Twomey, National Consumer Bankruptcy Rights Center, San Jose, California; Matthew D. Resnik, RHM Law LLP, Encino, California; for Amici Curiae National Consumer Bankruptcy Rights Center and National Association of Consumer Bankruptcy Attorneys.
Henry E. Hildebrand III, Office of the Chapter 13 Trustee, Nashville, Tennessee, for Amicus Curiae the National Association of Chapter Thirteen Trustees.
M. SMITH, Circuit Judge:
In this case we decide whether a standing trustee in a Chapter 13 bankruptcy is paid her percentage fee when a case is dismissed prior to confirmation. For the reasons explained in this opinion, we join the Tenth Circuit in holding that she is not.
STATUTORY FRAMEWORK
Chapter 13 bankruptcies provide debtors receiving a regular income an opportunity to pay off their debts while retaining their property. Bullard v. Blue Hills Bank, 575 U.S. 496, 498 (2015). To commence this type of bankruptcy, a debtor must file a petition with the court and—either at that time, or fourteen days thereafter—a proposed plan that outlines how he will pay off debts using his future income. Id.;
terms of the plan.
In most federal judicial districts, there is a “standing trustee” who supervises all the Chapter 13 cases in the district and plays a critical role in shepherding petitions through the bankruptcy process. See
First,
[The trustee] shall collect such percentage fee from all payments received by such individual under plans in the cases under subchapter V of chapter 11 or chapter 12 or 13 of title 11 for which such individual serves as standing trustee.
Second,
(a)(1) Unless the court orders otherwise, the debtor shall commence making payments not later than 30 days after the date of the filing of the plan or the order for relief, whichever is earlier, in the amount—
(A) proposed by the plan to the trustee; . . . .
(2) A payment made under paragraph (1)(A) shall be retained by the trustee until confirmation or denial of confirmation. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan as soon as is practicable. If a plan is not confirmed, the trustee shall return any such payments not previously paid and not yet due and owing to creditors pursuant to paragraph (3) to the debtor after deducting any unpaid claim allowed under section 503(b).2
Finally,
(b) Before or at the time of each payment to creditors under the plan, there shall be paid[] . . . (2) if a standing trustee appointed under section 586(b) of title 28 is serving in the case, the percentage fee fixed for such standing trustee under section 586(e)(1)(B) of title 28.
FACTUAL BACKGROUND AND PRIOR PROCEEDINGS
In this case, Roger Evans and Lori Steedman (Debtors) filed a Chapter 13 bankruptcy plan. The plan provided that the fees of the standing trustee, Kathleen McCallister (Trustee), would be “governed and paid as provided by
After Debtors dismissed their case, they filed a “motion to disgorge fees,” arguing that Trustee was obligated to return to them any fees she had collected because
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction pursuant to
ANALYSIS
The question presented by this case is a matter of first impression in our circuit.3 It requires us to interpret the previously described statutes using principles of statutory construction. “Statutory construction ‘is a holistic endeavor,’ and, at a minimum, must account for a statute‘s full text, language as well as punctuation, structure, and subject matter.” U.S. Nat‘l Bank of Or. v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 455 (1993) (quoting United Sav. Assn. of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 371 (1988)).
I. Plain Text
We begin with the statutory text. See United States v. Pacheco, 977 F.3d 764, 767 (9th Cir. 2020). “The plain meaning of the text controls unless it is ambiguous or leads to an absurd result.” Id.
A. Trustee and Debtors’ Interpretations
The parties both argue that a proper interpretation of the word “collect” in
According to Trustee, Section 586 directs her to collect—and keep—fees from payments made by debtors as she receives them, whether pre- or post- plan confirmation. For support, she argues that the word “collect” means “to receive payment.” Collect, BLACK‘S LAW DICTIONARY (5th ed. 1979). Trustee also notes other laws where Congress qualified the word “collect” and argues that it purposely did not do so here. See, e.g.,
Debtors argue that if “collect” is read the way Trustee suggests—i.e., “irrevocably collect“—a conflict results between
confirmed. To avoid this conflict, Debtors urge us to adopt the bankruptcy court‘s interpretation. Under that reading,
Trustee and Debtors’ interpretations suffer from the same basic flaw: they both require us to add words to the statute that are not there.5 Trustee wants us to read “collect” as “irrevocably collect.” Debtors want us to read “collect” as “collect and hold.” We decline the invitation to do either. See Lamie v. U.S. Tr., 540 U.S. 526, 538 (2004) (declining to “read an absent word into the statute“); Doll, 57 F.4th at 1144 (noting that trustee‘s argument amounted to “reading the word ‘irrevocable’ into the statute as an adjective defining ‘collect‘” and refusing to do so). The word
“collect,” in isolation, does not answer the question in this case.
B. NCBRC‘s Interpretation
The better approach, as proposed by amicus National Consumer Bankruptcy Rights Center and National Association of Consumer Bankruptcy Attorneys (NCBRC), is to read
Unlike Section 586, which refers to “payments . . . under plans,” Section 1326(a)(1)(A) refers to payments ”proposed by the plan.” And it instructs the debtor to commence making “payments . . . in the amount[] . . . proposed by the plan” no later than thirty days after the date of filing of the plan or the order for relief, whichever is earlier.
Accordingly, prior to confirmation, a trustee does not “collect” or “collect and hold” fees under Section 586, but instead “retains” payments “proposed by the plan” pursuant to Section 1326(a)(2). See
not confirmed, Section 1326(a) requires return of “any such payments“—again referring to payments “proposed by the plan“—to the debtor, after deducting amounts previously paid and due and owing to creditors.
Plan confirmation triggers one last and important provision, Section 1326(b). According to NCBRC, if a plan is confirmed—and only if a plan is confirmed—does 1326(b) require that the trustee “be paid” her percentage fee “[b]efore or at the time of each payment to creditors under the plan.” Because payments are made “to creditors under the plan” only once a plan is confirmed,
We generally agree with NCBRC‘s construction of the relevant statutes, which renders harmonious an otherwise fragmented scheme. See United States v. Millis, 621 F.3d 914, 917 (9th Cir. 2010) (“[W]ords must be read in their context, with a view to their place in the overall regulatory scheme, and to ‘fit, if possible, all parts into an harmonious whole.‘“) (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000)). The plain text of Section 1326(b) unambiguously shows that it is the specific provision governing when a trustee “shall be paid“: “before or at the time of each payment to creditors under the plan,” which necessarily means post-confirmation of a plan.6
Section 1326(a) only governs disposition
Moreover, NCBRC‘s interpretation is consistent with the opinion of the only other circuit to reach this issue. In Doll, the Tenth Circuit read Section 586 as “only address[ing] the source of funds that may be accessed to pay standing trustee fees,” while reading Section 1326 as “address[ing] Chapter 13 payments and what happens to that money, including . . . what happens to such payments if a Chapter 13 plan is not confirmed.” 57 F.4th at 1140 (emphasis added). Like our sister circuit, we conclude that a trustee is not paid her percentage fee if a plan is not confirmed.7 Id. at 1141. In this case, because a plan was never confirmed, Trustee must return the fees she collected prior to dismissal.
II. Other Sources of Meaning
To the extent doubt remains about the meaning of Sections 586 and 1326, statutory canons of construction, such as the rule against superfluities, and the provisions’ amendment history, confirm our reading.
“[T]he rule against superfluities instructs courts to interpret a statute to effectuate all its provisions, so that no part is rendered superfluous.” Hibbs v. Winn, 542 U.S. 88, 89 (2004). Debtors argue that the difference between Section 1326(a) in Chapter 13 and analogous provisions that govern trustee payments in Chapter 12 and Chapter 11, Subchapter V bankruptcies reveals that Congress intended for trustees in Chapter 13 bankruptcies to return their fees in the event of dismissal.
(a) Payments and funds received by the trustee shall be retained by the trustee until confirmation or denial of confirmation of a plan. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan. If a plan is not confirmed, the trustee shall return any such payments to the debtor, after deducting—
. . .
(2) if a standing trustee is serving in the case, the percentage fee fixed for such standing trustee.
(a) Retention and distribution by trustee.—Payments and funds received by the trustee shall be retained by the trustee until confirmation or denial of confirmation of a plan. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan. If a plan is not confirmed, the trustee shall return any such payments to the debtor after deducting—
. . .
(3) any fee owing to the trustee.
The analogous provisions in Chapter 12 and Chapter 11, Subchapter V, are evidence in Debtors’ favor. They show that Congress knew how to explicitly require payment of trustee fees in the event of non-confirmation—by requiring “deduct[ion]” of such fees—and suggest that it intentionally chose not to require the same in the Chapter 13 context. Cf. Hamilton v. Lanning, 560 U.S. 505, 514 (2010) (“[W]e need look no further than the Bankruptcy Code to see that when
Congress wishes to mandate simple multiplication, it does so unambiguously—most commonly by using the term ‘multiplied.‘“).
The amendment history of these provisions also supports Debtors’ and NCBRC‘s interpretation. Congress has amended various provisions governing Chapter 13 payments and trustee fees several times. For example, in 1994, Congress amended Section 1326(a)(2) to require payments to creditors to begin “as soon as [] practicable” after confirmation. Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 307, 108 Stat. 4106. In 2005, Congress amended Section 1326(a)(2) once more by, inter alia, adding the words “not previously paid and not yet due and owing to creditors pursuant to paragraph (3).” Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 309, 119 Stat. 23.
Congress thus has had numerous opportunities to add language explicitly permitting a trustee to receive her fees even if a plan is not confirmed. Its failure to do so strongly evinces its intent not to require payment of trustee fees when a plan is not confirmed. See Guerrero-Lasprilla v. Barr, 140 S. Ct. 1062, 1071–72 (2020); Lindh v. Murphy, 521 U.S. 320, 330 (1997) (“[N]egative implications raised by disparate provisions are strongest when the portions of a statute treated differently had already been joined together and were being considered simultaneously when the language raising the implication was inserted.“).
III. Policy
Finally, the parties make several policy arguments. Trustee insists that this dispute risks ruining the “the financial survival of Chapter 13 trustees throughout the Ninth Circuit.” According to her, permitting those debtors
who voluntarily dismiss their case prior to confirmation to avoid paying trustee fees “diminishes the total funds available to Chapter 13 trustees to help all debtors.” Fee avoidance, Trustee argues, will unfairly shift fees onto the remaining Chapter 13 debtors as a result. Moreover, Trustee argues that holding in Debtors’ favor would incentivize trustees to violate their duty to object to plans prior to confirmation, knowing that they only get paid if a plan is confirmed.
In response, Debtors argue that Trustee overstates the stakes of this case. They note that, in practice, standing trustees had not been paid until plan confirmation from 1998 to 2012. See DOJ., Exec. Office for the U.S. Tr., Handbook for Chapter 13 Standing Trustees 11-2 (1998) (“Percentage fees are to be paid to the standing trustee‘s expense account at the time of disbursements under the plan and not at the time of receipts of the payments by the standing trustee . . . .“). This policy was only changed recently, first in 2012 to permit fee collection prior to confirmation, and then in 2014 to permit collection of fees upon receipt of payment. See Martha Hallowell, Successful Projects in 2014 Include Training, Percentage Fee Policy and Unsecured Claims Review,
reversal . . . .” DOJ, Exec. Office for the U.S. Tr., Handbook for Chapter 13 Standing Trustees 2-4 (2012).8
There is no doubt that standing trustees perform important work in Chapter 13 bankruptcies. But “[i]t is hardly this [c]ourt‘s place to pick and choose among competing policy arguments . . . selecting whatever outcome seems to us most congenial, efficient, or fair. Our license to interpret statutes does not include the power to engage in . . . judicial policymaking.” United States v. Nishiie, 996 F.3d 1013, 1028 (9th Cir. 2021) (citing Pereida v. Wilkinson, 141 S. Ct. 754, 766–67 (2021)), cert. denied, 142 S. Ct. 2653 (2022). Trustee‘s policy arguments are not enough to overcome the plain language and context of the relevant statutory provisions, which indicate that standing trustees are only to be paid once a plan is confirmed.
CONCLUSION
For the foregoing reasons, the district court‘s judgment is REVERSED.
MILAN D. SMITH, JR.
UNITED STATES CIRCUIT JUDGE