June 14, 2024

Supreme Court Decides Office of the U.S. Trustee v. John Q. Hammons Fall 2006, LLC, et al.

On June 14, 2024, the U.S. Supreme Court decided Office of the U.S. Trustee v. John Q. Hammons Fall 2006 LLC, holding that the remedy for overpayments resulting from the unconstitutional 2018 increase in fees paid by Chapter 11 debtors to the U.S. Trustee System is prospective parity, not a refund or retrospective raising of fees.

In Siegel v. Fitzgerald, 596 U. S. 464 (2022), the Supreme Court held that the 2018 increase in fees paid by Chapter 11 debtors to the U.S. Trustee System violated the Bankruptcy Clause’s uniformity requirement because it was not immediately applicable in the two states with Bankruptcy Administrators rather than U.S. Trustees. In Office of the U.S. Trustee, the Court was asked to determine the remedy for that constitutional violation. The Tenth Circuit held that the appropriate remedy was a refund so that the fees equaled the lower fees the debtors would have paid had their case been filed in a Bankruptcy Administrator district.

The Supreme Court noted that the nature of the violation determines the scope of the remedy. And that the constitutional violation identified in Siegel created a monetary disparity in bankruptcy fees that was short lived and small. Focusing on congressional intent, the Court held that faced with the constitutional violation identified in Siegel, Congress would have wanted prospective parity, not a refund or retrospective raising of fees. The Court premised its holding on Congress’s commitment to raising fees in U. S. Trustee districts, the extreme disruption a refund would cause to the bankruptcy system, and Congress’s own decision to remedy the wrong by imposing equal fees going forward.

Justice Jackson delivered the opinion of the Court, in which Chief Justice Roberts and Justices Alito, Sotomayor, Kagan, and Kavanaugh joined. Justice Gorsuch filed a dissenting opinion, in which Justices Thomas and Barrett joined.

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