NEW YORK, June 14 (Reuters) - The U.S. Supreme Court on Friday ruled that
bankrupt companies are not entitled to be reimbursed to make up for a
disparity in bankruptcy fees that lasted from 2018 to 2020, saying that
U.S. taxpayers should not be on the hook for refunds that would add up to
hundreds of millions of dollars.
The court ruled in a 6-3 opinion that Congress had intended to raise rates
uniformly, and had already addressed the disparity by raising rates in two
states that briefly charged lower fees. Giving refunds to every debtor in
the other 48 states � where 98% of large bankruptcies were filed � would
cost taxpayers $326 million and cause "extreme disruption" to bankruptcy
courts across the U.S., Justice Ketanji Brown Jackson wrote for the
majority.
The dispute stems from a 2017 law that increased the quarterly fees that
large companies pay to fund the U.S. Trustee, the U.S. Department of
Justice's bankruptcy watchdog. After the law went into effect, however,
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 a disparity that the Supreme Court ruled
unconstitutional in 2022.
The Supreme Court's earlier ruling did not address whether any fees should
be refunded as a result of the disparity, but several courts of appeals
have ruled that debtors are entitled to refunds, which led the Justice
Department to seek Supreme Court review of a $2.5 million refund awarded
to John Q. Hammons Hotels & Resorts. Hammons, a bankrupt hotel company,
filed for Chapter 11 protection in 2016 in Kansas and paid the higher
bankruptcy fees after 2017.
Justice Neil Gorsuch, joined by Justices Clarence Thomas and Brett
Kavanaugh, wrote a dissenting opinion, saying that the disparate fees were
unconstitutional and that "refund is the traditional remedy for unlawfully
imposed fees."
"What�s a constitutional wrong worth these days? The Court�s answer today
seems to be: not much," Gorsuch wrote.
The case is Office of the United States Trustee v. John Q. Hammons Fall
2006 LLC, U.S. Supreme Court, No. 22-1238
For the U.S. Trustee: Masha Hansford of the U.S. Department of Justice
For Hammons: Daniel Geyser of Haynes and Boone
Read more:
US Supreme Court justices balk at $326 mln bankruptcy fee refund demand
U.S. Supreme Court finds 2017 bankruptcy fee increase was unconstitutional
Courts require repayment of Trustee Program bankruptcy fees deemed
unconstitutional by Supreme Court
https://www.reuters.com/legal/government/us-supreme-court-rejects-bankruptcy-refund-that-would-have-cost-326-million-2024-06-14/
US Supreme Court rejects bankruptcy refund that would have cost $326 million