On June 6, 2022, the Supreme Court issued a unanimous ruling in Siegel v. Fitzgerald, 142 S. Ct. 1770 (U.S. June 6, 2022) that the increase in fees payable to the U.S. Trustee system in 2018 violated the uniformity aspect of the Bankruptcy Clause of the Constitution because it was not immediately applicable in the two states with Bankruptcy Administrators rather than U.S. Trustees.
In Siegel, the Court said that the Uniformity Clause “is not a straightjacket: Congress retains flexibility to craft legislation that responds to different regional circumstances that arise in the bankruptcy system.” The Court then remanded for lower courts to determine the proper remedy.
Although the Court pointedly said that its opinion “does not today address the constitutionality of the dual scheme of the bankruptcy system itself,” some of the language could be read to imply that the dual system is constitutionally questionable.
On August 15, 2022, the Tenth Circuit, the first appeals court to rule following Siegel, adhered to its original decision in John Q. Hammons Fall 2006 LLC v. U.S. Trustee (In re John Q. Hammons Fall 2006 LLC), 15 F.4th 1011 (10th Cir. Oct. 5, 2021), by holding that the government must pay a refund to a chapter 11 debtor based on what the debtor would have paid over the same time were the case in a Bankruptcy Administrator district. In the first opinion, the Tenth Circuit mandated a refund in part because the appeals court had no jurisdiction over the two states with Bankruptcy Administrators and thus could not require debtors in those states to pay the higher fees.
This decision is important for former chapter 11 debtors throughout the country inasmuch as a class action is pending in the Court of Federal Claims in Washington, D.C. See Acadiana Management Group LLC v. U.S., 19-496 (Ct. Cl.). If the class action holds up and the Court of Claims and the Federal Circuit follow the Tenth Circuit, chapter 11 debtors countrywide would be entitled to refunds.