USA SALES, INC. V. OFFICE OF THE U.S. TRUSTEE, No. 21-55643 (9th Cir. 2023)
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USA Sales, a California tobacco distributor, filed for Chapter 11 bankruptcy in 2016. As a Chapter 11 debtor in a UST district, federal law required USA Sales to pay quarterly fees to the UST. 28 U.S.C. Section 1930(a)(6). USA Sales sued for a refund of all excess fees paid, arguing that the 2017 Act violated the Bankruptcy Clause and also that the 2017 Act did not apply because USA Sales had filed for bankruptcy before the Act took effect. The district court agreed with both arguments and ordered a refund.
The Ninth Circuit affirmed the district court’s refund order, the panel held that USA Sales, Inc., was entitled to a refund for the unconstitutional statutory fees it paid as a bankruptcy debtor under the Bankruptcy Judgeship Act of 2017. The panel held that the 2017 Act applied to USA Sales’s bankruptcy proceeding, even though its case was already pending when the Act took effect. Turning to the remedy, and agreeing with other circuits, the panel held that U.S. Trustee district debtors are entitled to a refund of excess fees paid during the nonuniform period of statutory rates. Accordingly, USA Sales was entitled to a refund of the unconstitutional fees it paid in excess of those it would have paid in a Bankruptcy Administrator district from January 2018, when the 2017 Act fee provision took effect, to November 2019, when the bankruptcy court approved a structured dismissal of USA Sales’s case.
Court Description: Bankruptcy Affirming the district court’s refund order, the panel held that USA Sales, Inc., was entitled to a refund for the unconstitutional statutory fees it paid as a bankruptcy debtor under the Bankruptcy Judgeship Act of 2017.
A provision of the 2017 Act increased the quarterly statutory fees for certain Chapter 11 debtors in all but the six judicial districts in which Bankruptcy Administrators, rather than the Office of the United States Trustee, administratively manage bankruptcy proceedings. In Siegel v. Fitzgerald, 142 S. Ct. 1770 (2022), the Supreme Court held that this provision, by not including those six districts, violated the uniformity requirement of the Bankruptcy Clause.
The panel held that the 2017 Act applied to USA Sales’s bankruptcy proceeding, even though its case was already pending when the Act took effect. Turning to the remedy, and agreeing with other circuits, the panel held that U.S.
Trustee district debtors are entitled to a refund of excess fees paid during the nonuniform period of statutory rates. Accordingly, USA Sales was entitled to a refund of the unconstitutional fees it paid in excess of those it would have paid in a Bankruptcy Administrator district from January 2018, when the 2017 Act fee provision took effect, to November 2019, when the bankruptcy court approved a structured dismissal of USA Sales’s case.
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