US Supreme Court holds increased fees unconstitutional in some bankruptcy cases News
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US Supreme Court holds increased fees unconstitutional in some bankruptcy cases

The US Supreme Court Monday held unanimously in Siegel v. Fitzgerald that Congress’ enactment of a significant Chapter 11 bankruptcy fee increase in 48 states, exempting some debtors in two states, violated the Bankruptcy Clause’s uniformity requirement.

This case originated because increased fees for Chapter 11 debtors in Trustee Program districts in 2017. The 2017 Act stated, “the fee raise would become effective in the first quarter of 2018, would last only through 2022, and would be applicable to currently pending and newly filed cases.” However in Alabama and North Carolina’s Administrator Program districts, which use different procedures, the fees were only applicable to new cases and not pending ones.

Based on this discrepancy, Alfred Siegel, the trustee overseeing tech-retailer Circuit City’s 2008 bankruptcy case, filed for relief and contended “that the fee increase was nonuniform across Trustee Program districts and Administrator Program districts, in violation of the Constitution’s Bankruptcy Clause.” The Bankruptcy Clause’s uniformity requirement “empowers Congress to establish ‘uniform Laws on the subject of Bankruptcies throughout the United States[.]'” 

The justices unanimously agreed that Congress’ enactment did not identify “any material difference between debtors across” the two states exempted from the fee increase the remaining 48 states would be subjected to, so the uniformity requirement applies to Congress’s 2017 fee increase.  Additionally, due to the 2017 Act’s fees being applied differently in different US regions, the court concluded that the Bankruptcy Clause “does not permit Congress to treat identical debtors differently based on artificial distinctions Congress itself created.”

 

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