Episode description

Welcome to Supreme Court Opinions. In this episode, you’ll hear the Court’s opinion in United States Trustee v John Q. Hammons Fall 2006.

In this case, the court considered this issue: Must the U.S. Trustee issue refunds for the extra fees paid by debtors in certain districts to address the lack of uniformity identified in Siegel v Fitzgerald?

The case was decided on June 14, 2024.

The Supreme Court held that refunds are not required; rather, prospective parity—i.e., requiring equal fees for otherwise identical Chapter 11 debtors going forward—is the appropriate remedy for the short-lived and small disparity created by the fee statute held unconstitutional in Siegel v Fitzgerald. Justice Ketanji Brown Jackson authored the 6-3 majority opinion of the Court.

To determine the appropriate remedy, the Court considers what Congress would have intended had it known about the constitutional problem. Congress has demonstrated a strong commitment to keeping the U.S. Trustee program self-funded through user fees, as evidenced by the 2017 fee increase and the 2021 Act maintaining elevated fees. Providing refunds would significantly disrupt the statutory scheme by transforming the self-funded U.S. Trustee program into a $326 million bill for taxpayers. It would also likely exacerbate the existing fee disparity. Moreover, Congress chose not to impose higher fees retroactively on Bankruptcy Administrator districts when it amended the fee statute in 2021, indicating it did not intend such a remedy. Thus, Congress would have wanted prospective fee parity, which is what Congress itself implemented in the 2021 Act.

Justice Neil Gorsuch authored a dissenting opinion, in which Justices Clarence Thomas and Amy Coney Barrett joined, arguing that the Court’s decision undermines the importance of constitutional remedies and may have far-reaching negative consequences beyond the bankruptcy context. Justice Gorsuch would conclude that under traditional remedial principles, Hammons should receive a refund for the unconstitutional fees it paid.

The opinion is presented here in its entirety, but with citations omitted. If you appreciate this episode, please subscribe. Thank you.