In a 6-3 opinion issued on June 14, 2024, in Office of the United States Trustee v. John Q. Hammons Fall 2006, LLC, the Supreme Court of the United States (SCOTUS) refused to require the federal government to refund bankruptcy fees charged corporate debtors on the grounds it would cost taxpayers $326 million and cause “extreme disruption” to bankruptcy courts across the United States.
The decision follows an earlier opinion in 2022 in Siegel v. Fitzgerald where the SCOTUS ruled that Congress violated the uniformity requirement of the U.S. Constitution when it increased Chapter 11 bankruptcy fees for large companies. However, the increased fees did not apply to debtors filing in Alabama and North Carolina.
When the law was enacted in 2017, North Carolina and Alabama, the only two states that have opted out of the U.S. Trustee program, declined to impose a matching fee increase in their bankruptcy courts, causing the disparity in the fees charged.
In Siegel, the SCOTUS concluded that the disparity in the fees was impermissible and violated the constitutional mandate that bankruptcy laws be applied uniformly throughout the United States.
In its recent opinion, the SCOTUS tackled what remedy was appropriate in view of the problem created by Congress. John Q. Hammons Fall 2006, LLC filed for bankruptcy in a high-fee district. It sought a refund of $3 million in fees it would not have paid if subject to the Alabama/North Carolina fee schedule.
SCOTUS concluded the proper remedy was enforcing uniformity by charging equal fees in all districts going forward, rather than refunding fees paid by corporate debtors in higher fee districts, particularly given that the disparity impacted a limited number of corporate debtors between 2018 and 2021.