Government asks Supreme Court to review fight against $ 324 million bankruptcy charges

The sun sets over the United States Supreme Court building in Washington on November 29, 2021. REUTERS / Leah Millis

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(Reuters) – The U.S. Department of Justice’s bankruptcy watchdog is urging the U.S. Supreme Court to take up a dispute over bankruptcy fees. Chapter 11 debtors are required to pay the government which has divided the main appellate courts in the country.

Solicitor General Elizabeth Prelogar said Wednesday in a brief on behalf of the US Trustee program that the High Court should reconsider the issue to resolve confusion over the fees created by the conflicting rulings. She also argued that the court should find that a 2017 law increasing government fees that many Chapter 11 debtors must pay complies with the bankruptcy clause of the U.S. Constitution, which requires bankruptcy laws to be uniforms.

The statutory imposition of higher fees in most, but not all, U.S. bankruptcy courts has raised uncertainty about the legal status of approximately $ 324 million in fees imposed under the 2017 law, according to the law. the American trustee.

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The dispute stems from a lawsuit filed by Alfred Siegel, the administrator who oversaw Circuit City’s liquidation process. He says the law violated the uniformity requirement by increasing U.S. trustee fees for Chapter 11 debtors in most states, but failed to do the same for two states that use a different government entity, known as the Bankruptcy Administrator Program, to perform similar tasks overseeing large corporate bankruptcies.

Siegel argued in a September petition to the Supreme Court that the alleged disparity was forcing the Circuit City liquidation trust to pay significantly higher fees than in previous years, while Chapter 11 debtors in North Carolina and in Alabama, the states with the alternative program, have gone several months without being subject to the same rate increases.

North Carolina and Alabama opted for the Administrator program in 1986.

As the US Trustee opposes Siegel’s view on the law, he agrees that the Supreme Court should revisit the case. The law was challenged in several districts with conflicting results – the US 4th and 5th Circuit Courts of Appeal upheld the law while the 2nd and 10th Circuits ruled it unconstitutional.

The government argued that the requirement for uniformity of the constitution does not restrict the ability of Congress to change the fees of U.S. directors. Additionally, he said, the bankruptcy clause gives Congress the flexibility to create new laws that govern the administration of bankruptcy courts.

“There is no basis for concluding that any of these administrative variations are unconstitutional,” the government said in Wednesday’s filing.

The case is Alfred Siegel v. John Fitzgerald III, United States Supreme Court, No. 21-441.

For the liquidating trustee of Circuit City: Jeffrey Pomerantz, Andrew Caine and Robert Feinstein of Pachulski Stang Ziehl & Jones and Daniel Geyser and Ben Mesches of Haynes and Boone

For the US Trustee: Solicitor General Elizabeth Prelogar, Acting Deputy Attorney General Brian Boynton, Attorneys for DOJ Mark Stern and Jeffrey Sandberg, US Attorney General Ramona Elliott, Deputy Legal Counsel Matt Sutko, Trial Prosecutors Beth Levene and Wendy Cox

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Circuit City trustee asks Supreme Court to reconsider bankruptcy fee hikes

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Janet E. Fishburn