Supreme Court to Decide If Bankruptcy Fee Hike Constitutional

Jan. 10, 2022, 2:36 PM

The U.S. Supreme Court will decide whether a temporary disparity in government fees charged to companies in Chapter 11 bankruptcy violates the Constitution.

Monday’s decision to hear the case will resolve a circuit split, which prompted both parties in the case to request the justices’ review.

The issue involves a temporary hike in the quarterly fees payable to the U.S. Trustee’s Office, the Justice Department’s bankruptcy watchdog. The fees were raised starting in 2018 from a maximum of $30,000 to a maximum of $250,000.

The increase didn’t apply in Alabama and North Carolina until later that year. The six districts in those states operate under the eyes of a bankruptcy administrator rather than the U.S. Trustee.

The Tenth and Second circuits held that the lack of uniformity in the temporary fee hike violates the Constitution. The Fourth and Fifth circuits ruled otherwise.

Alfred Siegel, the Circuit City liquidating trustee, sought Supreme Court review of the U.S. Court of Appeals for the Fourth Circuit decision. The U.S. Trustee’s Office would have had to pay more than $100 million in refunds to debtors if the justices invalidated the fees, the trustee said in his petition.

The U.S. Trustee’s Office joined the request for high court review, seeking resolution of the circuit split despite prevailing in the lower court.

The case is Siegel v. Fitzgerald, U.S., No. 21-441, cert. granted 1/10/22.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bloomberglaw.com

To contact the editors responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com; Roger Yu at ryu@bloomberglaw.com

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