United States Trustee Region 21 v. Bast Amron LLP

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[PUBLISH]

In the

United States Court of Appeals

For the Eleventh Circuit

____________________

No. 20-12547

____________________

IN RE: MOSAIC MANAGEMENT GROUP, INC.,

Debtor.

___________________________________________________

UNITED STATES TRUSTEE REGION 21,

Plaintiff-Appellee

Cross-Appellant,

versus

BAST AMRON LLP,

Defendant-Appellant

Cross-Appellee.

____________________

Appeal from the United States District Court

for the Southern District of Florida

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2 Opinion of the Court 20-12547

D.C. Docket No. 16-bk-20833-EPK

____________________

Before JORDAN, BRASHER, and ANDERSON, Circuit Judges.

ANDERSON, Circuit Judge:

In this appeal after remand from the Supreme Court, we ad-

dress the appropriate remedy for the constitutional violation iden-

tified in Siegel v. Fitzgerald, 596 U.S. __, 142 S. Ct. 1770 (2022). We

received supplemental briefing and held another oral argument on

the remedy issues.

I.

In 2008, Debtors Mosaic Management Group, Inc., Mosaic

Alternative Assets, Ltd., and Paladin Settlements, Inc. filed for

Chapter 11 bankruptcy in the Southern District of Florida, a “UST

district” in which the U.S. Trustee program operates. In June 2017,

the bankruptcy court confirmed a joint Chapter 11 plan, under

which most of the Debtors’ assets were transferred to an Invest-

ment Trust managed by an Investment Trustee.

In September 2019, the Investment Trustee filed a motion

requesting a determination of the Investment Trust’s quarterly fee

liability and seeking a reimbursement of its overpayment of those

fees. Among other arguments, the Investment Trustee argued

that Congress violated constitutional tax and bankruptcy uni-

formity requirements when it passed the Bankruptcy Judgeship Act

of 2017 (the “2017 Amendment”), which temporarily increased

fees for the largest debtors in Chapter 11 cases in UST districts. The

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20-12547 Opinion of the Court 3

purpose of the 2017 Amendment was to address a dwindling U.S.

Trustee program budget resulting from declining bankruptcy fil-

ings and to fund bankruptcy judgeships. Bankruptcy Judgeship Act

of 2017, Pub. L. No. 115-72, sec. 1004(a), § 1930(a)(6), 131 Stat.

1224, 1232; H.R. Rep. No. 115-130, at 7–9 (2017), as reprinted in 2017

U.S.C.C.A.N. 154, 159. From 2018 through 2022, if the U.S. Trustee

System Fund had a balance of less than $200 million in the prior

fiscal year, the 2017 Amendment provided that the “quarterly fee

payable for a quarter in which disbursements equal or exceed

$1,000,000 shall be the lesser of 1 percent of such disbursements or

$250,000.” Pub. L. No. 115-72, sec. 1004(a), § 1930(a)(6), 131 Stat.

at 1232. Otherwise, the existing fee schedule remained. In contrast

to this amendment to 11 U.S.C. § 1930(a)(6) governing fees in the

UST districts, the 2017 Amendment did not explicitly amend 11

U.S.C. § 1930(a)(7) which governs fees in the six Bankruptcy Ad-

ministrator (“BA districts”) in Alabama and North Carolina. Sec-

tion 1930(a)(7) provided that “the Judicial Conference of the United

States may require the debtor in a case under chapter 11 of title 11

to pay fees equal to those imposed by paragraph (6) of this subsec-

tion.” 11 U.S.C. § 1930(a)(7). Thus, the Act did not explicitly re-

quire a comparable increase of the fees in the six BA districts that

are not part of the U.S. Trustee program. The Judicial Conference,

which oversees the BA districts, did not impose in the BA districts

the increased quarterly fee provision until September 2018 and

then only for cases filed on or after October 1, 2018.

Although the bankruptcy court denied most of the motion,

it held that the 2017 Amendment created a partial uniformity

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4 Opinion of the Court 20-12547

problem because 2% of the fees collected in the UST districts were

to be paid to the general U.S. Treasury fund, which would offset

the cost of a temporary bankruptcy judgeship in a BA district. The

court ordered the U.S. Trustee to credit the Investment Trustee a

sum equal to 2% of the quarterly fees paid since January 1, 2018.

The court rejected the Investment Trustee’s other challenges to the

increased quarterly fees.

The parties 1 received authorization to file a direct appeal to

this Court and we issued an opinion affirming in part and reversing

in part. In re: Mosaic Mgmt. Grp., Inc., 22 F.4th 1291 (11th Cir. 2022),

vacated sub nom. Bast Amron LLP v. United States Trustee Region 21, 142

S. Ct. 2862 (2022). We held that the 2017 Amendment properly

applied to a case that was pending and confirmed prior to the Act’s

enactment because Congress clearly expressed its intent to this ef-

fect. We also held that the 2017 Amendment does not violate sub-

stantive due process and is not a tax subject to the Tax Uniformity

Clause. Finally, we held that the 2017 Amendment presents no vi-

olation of the Bankruptcy Uniformity Clause.

Subsequently, the Supreme Court addressed the Amend-

ment and held that it violated the uniformity requirement of the

1 The law firm Bast Amron was substituted for the Investment Trustee before

we issued our first opinion in this case. Bast Amron thus stands in the shoes

of the Investment Trustee, who in turn stood in the shoes of the Debtors in

this bankruptcy case. To avoid confusion with the U.S. Trustee, the appellee

in this case, we will hereafter refer to the appellant parties to this appeal as the

Debtors, which also better describes their capacity in this bankruptcy case.

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20-12547 Opinion of the Court 5

Bankruptcy Clause, abrogating our opinion to the extent it held

that there had been no violation of the Bankruptcy Uniformity

Clause. Siegel v. Fitzgerald, 596 U.S. __, 142 S. Ct. 1770 (2022). How-

ever, the Court reserved decision on the issue of the appropriate

remedy, commenting that the parties raised “a host of legal and

administrative concerns with each of the remedies proposed, in-

cluding the practicality, feasibility, and equities of each proposal;

their costs; and potential waivers by nonobjecting debtors.” 142 S.

Ct. at 1783. Several days later, the Supreme Court granted the

Debtors’ petition for writ of certiorari in this case, vacated our

judgment, and remanded for further consideration in light of

Siegel. Bast Amron LLP v. U.S. Tr. Region 21, 142 S. Ct. 2862 (2022).

II.

The issue before us is the appropriate remedy for the consti-

tutional violation the Supreme Court found in Siegel. The Debtors

in this case—being debtors in a U.S. Trustee district—have been re-

quired to pay higher fees than a comparable debtor in one of the

six BA districts in Alabama or North Carolina. We now know, from

the Supreme Court decision in Siegel, that the differential treatment

of comparable debtors constituted a violation of the uniformity re-

quirement of the Bankruptcy Clause. Debtors in this case seek a

refund of the differential between what they have paid and the

lesser amount that a comparable debtor in one of the BA districts

paid. That differential persisted during 2018 and thereafter until

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6 Opinion of the Court 20-12547

Congress, becoming aware of the problem, enacted the 2020 Act 2

which presumably ended the different treatment. Thus, the issue

before us is whether the Debtors are entitled to such a refund, and

if not, what remedy is appropriate. 3

III.

When a statute unconstitutionally confers a benefit on one

class over another, courts have two options. First, they can declare

the statute “a nullity and order that its benefits not extend to the

class that the legislature intended to benefit” Sessions v. Morales-San-

tana, 582 U.S. 47, 72 (2017) (quoting Califano v. Westcott, 443 U.S. 76,

89 (1979)). As a second option, the court “may extend the coverage

of the statute to include those who are aggrieved by exclusion.” Id.

Generally, extension of the benefit, rather than its nullification, is

the proper course. Id. at 74. Because the statute at issue in this case

imposes a burden instead of providing a benefit, the two options in

this case are: 1) nullify the burden (the fee increase); or 2) extend

the burden (the fee increase) to those initially excluded (the BA dis-

tricts). Although the right for equal treatment is rooted in the Con-

stitution, the remedy for its violation is not found there. Id. at 73.

2 The Bankruptcy Administration Improvement Act of 2020 (“2020 Act”) was

enacted by Congress, effective January 12, 2021. Pub. L. 116-325, 134 Stat.

5086. It effectively mandated that the fee increases that had been enacted in

the 2017 Amendment shall apply not only in the U.S. Trustee districts, but also

in the BA districts. Id. sec. 3(d)(2).

3 At oral argument the government expressly disavowed sovereign immunity,

so we need not address that matter.

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It is well established that in formulating the remedy for con-

stitutional violations like this one, courts should be guided by con-

gressional intent. Id. at 73 (“The choice between these outcomes

is governed by the legislature’s intent . . . ”); Levin v. Com. Energy,

Inc., 560 U.S. 413, 426–427 (2010) (“On finding unlawful discrimina-

tion, . . . courts may attempt, within the bounds of their institu-

tional competence, to implement what the legislature would have

willed had it been apprised of the constitutional infirmity.”); Ayotte

v. Planned Parenthood of N. New Eng., 546 U.S. 320, 330 (2006) (“the

touchstone for any decision about remedy is legislative intent”);

United States v. Booker, 543 U.S. 220, 246 (2005) (“We answer the re-

medial question by looking to legislative intent.”); Heckler v.

Mathews, 465 U.S. 728, 739 n.5 (1984) (“the court should not, of

course, ‘use its remedial powers to circumvent the intent of the

legislature’”) (quoting Westcott, 443 U.S. at 94 (Powell, J., concur-

ring in part)); Welsh v. United States, 398 U.S. 333, 366 (1970) (Harlan,

J., concurring) (observing that there is good reason for courts to

make necessary statutory repairs without impairing the legislative

goals). 4

4 This analysis has been applied to guide the remedy whether the underlying

infringement was a violation of the Equal Protection clause (Iowa-Des Moines

Nat’l Bank v. Bennett, 284 U.S. 239 (1931), and Mathews); a violation of the uni-

formity of tax treatment as between local and interstate commerce, as implied

in the Commerce Clause (McKesson Corp. v. Div. of Alcoholic Beverages & To-

bacco, 496 U.S. 18 (1990)); a violation of the First Amendment (Barr v. Am. Ass’n

of Pol. Consultants, 140 S. Ct. 2335 (2020)); or a violation of the Sixth Amend-

ment right to a jury trial (Booker).

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8 Opinion of the Court 20-12547

When determining which remedy the legislature would

have chosen, courts are to make two additional assessments. Mo-

rales-Santana, 582 U.S. at 75 (citing Welsh, 398 U.S. at 365). The first

is the court should “measure the intensity of commitment” to the

“main rule, not the exception.” Id. The second is that they should

“consider the degree of potential disruption of the statutory

scheme that would occur by extension as opposed to abrogation.”

Id. In Morales-Santana, the Court was faced with a statute’s dispar-

ate treatment of the residency requirements of unwed mother and

unwed fathers when passing citizenship to their children born

abroad. Unwed citizen mothers were only required to have one

year of residence in the United States while all other parents were

required to have five. In deciding whether to extend the benefit of

a shorter residency period required of unwed citizen mothers to

unwed citizen fathers, the Court examined other portions of the

citizenship law, and noted the congressional recognition of the

longstanding importance of physical presence in citizenship law as

the indicator of attachment to a country. Id. The Court also stated

that the “potential for ‘disruption of the statutory scheme’ is large.”

Id. Because both factors pointed against extending the shorter res-

idency exception, the Court nullified the favorable treatment for

unwed mothers.

IV.

Debtors in this case argue that they are entitled to a refund

of the increased portion of the trustee fees—i.e. the difference be-

tween the fees charged to them and the fees charged to comparable

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debtors in the BA districts—that they have been required to pay

throughout 2018 and thereafter until Congress equalized the fees

in the 2020 Act. They argue that strong Supreme Court precedent

supports such refunds as the appropriate remedy. For this proposi-

tion, Debtors rely upon Iowa-Des Moines National Bank v. Bennett,

284 U.S. 239 (1931), as representative of a long line of Supreme

Court cases holding that a state’s unequal taxation of comparable

and competing taxpayers violates the Equal Protection Clause, and

holding that the taxpayer who was required to pay the higher, dis-

criminatory tax is entitled to a refund. Although acknowledging a

state court could have removed the discrimination “by collecting

the additional taxes from the favored competitors,” id. at 247, the

Bennett Court held that the taxpayer who paid the higher taxes was

entitled to a refund. The Court held:

But it is well settled that a taxpayer who has been sub-

jected to discriminatory taxation through the favor-

ing of others in violation of federal law cannot be re-

quired himself to assume the burden of seeking an

increase of the taxes which the others should have

paid. Nor may he be remitted to the necessity of

awaiting such action by the state officials upon their

own initiative.

Id. at 247 (citations omitted).

Disagreeing with the Debtors, the U.S. Trustee’s primary ar-

gument is that refunds are not the appropriate remedy in this case

because Congress has already provided prospective relief in the

2020 Act. The U.S. Trustee argues that Congress, in the 2020 Act,

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10 Opinion of the Court 20-12547

has already chosen the remedy option of extending the burden (the

fee increase) to the previously excluded BA districts, thus rejecting

the other option which would have nullified the burden (the fee

increase) and warranted the refunds which Debtors seek.5 The U.S.

Trustee asserts that this remedial option is the one which will im-

plement the very clear congressional intention all along that the

2017 fee increase was intended to apply to all federal judicial dis-

tricts, including the BA districts. 6

Recognizing that its primary argument—i.e. prospective re-

lief only—fails to remedy the inequality that would remain during

the time between 2018 and January 12, 2021 (the effective date of

the 2020 Act, which cured the inequality prospectively), the U.S.

Trustee makes a secondary, alternative argument, as follows. The

alternative argument: even if retroactive relief were appropriate,

5 The U.S. Trustee thus relies on the above-described framework that the

Supreme Court has established for the determination of the appropriate rem-

edy for constitutional violations like this. As noted above, a reviewing court

should choose between two options: nullify the burden (the fee increase) or

extend the burden (the fee increase) to those previously excluded (the BA dis-

tricts), the choice to be guided by congressional intent.

6 In support of this congressional intention, the U.S. Trustee refers to the ev-

idence of this congressional intention as recited in this Court’s first opinion in

this case, In re Mosaic, 22 F.4th at 1310-19, as well as the 2020 Act itself which

chose to extend the fee increase to the BA districts, see Pub. L. 116-325, sec.

3(d)(2), § 1930, 134 Stat. 5086, 5088, and its legislative finding, see id. at 5086

(Congress explicitly “confirm[ed] the longstanding intention of Congress that

quarterly fee requirements remain consistent across all federal judicial dis-

tricts.”).

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the remedy should not be refunds to comparable debtors in the U.S.

Trustee districts like the Debtors here, but rather should be retro-

active collections from comparable debtors in the BA districts who

failed to pay the increased fees during 2018-2021 (i.e. what the par-

ties here refer to as the “clawback”).

We address first the U.S. Trustee’s alternative argument be-

cause it is readily rejected. This Court does not have the authority

to “claw back” additional fees from comparable debtors in the BA

districts. Neither those debtors nor the BA Administrators who

would prosecute the “clawback” are parties before this Court; thus

we have no jurisdiction over them. Nor is the Judicial Conference—

which would have the authority to order such “clawbacks”—a

party before this Court. And some of the BA districts are located

outside the Eleventh Circuit. Thus, the simple fact is that we can-

not implement this alternative resolution suggested by the U.S.

Trustee. And, as noted above, the Supreme Court in Bennett and

several other cases have made it clear that the party “who has been

subjected to [discrimination] through favoring others in violation

of federal law cannot be required himself to assume the burden of

seeking an increase of the taxes which other should have paid.” 284

U.S. at 247. Of course, Congress or the Judicial Conference might

have authority to order such “clawbacks,” but there is no sugges-

tion that either has moved to do so, or intends to do so. Indeed, as

noted, Congress in the 2020 Act was aware of the constitutional

violations and did choose the remedy of extending the burden (the

increased fee) to the BA districts. However, Congress remedied the

problem only prospectively and did not order such “clawbacks.”

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And, in Bennett, we are instructed that parties like the Debtors here

“may [not] be remitted to the necessity of awaiting such action by

the state officials upon their own initiative.” Id. Moreover, it is al-

together unclear whether, or to what extent, even Congress or the

Judicial Conference could effect such “clawbacks” in light of the

fact that, by now, the relevant bankruptcy estates have probably

made substantial distributions or undergone other substantial

change, or even closed.

Having rejected the U.S. Trustee’s alternative argument, we

turn to address its primary argument—i.e. that prospective-only re-

lief is appropriate. The U.S. Trustee attempts to distinguish the

Bennett decision and the other state tax cases upon which Debtors

rely. The U.S. Trustee argues that in those cases, the taxpayers seek-

ing refunds had been forced to pay the tax initially; they had no

“meaningful opportunity to withhold payment and to obtain a pre-

deprivation determination of the tax assessment’s validity.”

McKesson Corp., 496 U.S. at 38. The U.S. Trustee argues that this

case is in sharp contrast: here the debtors could have challenged the

constitutionality of the increase—employing either routine motion

or adversary proceeding—before the first installment became due

in the first quarter of 2018. They rely upon the dicta in McKesson

suggesting that the refunds ordered in that case and the long line

of Supreme Court cases upon which McKesson (and the Debtors

here) rely were dependent upon the fact that no meaningful pre-

deprivation remedy was available. See id. at 38 n.21 (“In contrast,

if a State chooses not to secure payments under duress and instead

offers a meaningful opportunity for taxpayers to withhold

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contested tax assessments and to challenge their validity in a pre-

deprivation hearing, payments tendered may be deemed ‘volun-

tary.’ The availability of a predeprivation hearing constitutes a pro-

cedural safeguard against unlawful deprivations sufficient by itself

to satisfy the Due Process Clause, and taxpayers cannot complain

if they fail to avail themselves of this procedure. Where voluntary

payment of a tax is knowingly made pursuant to an illegal demand,

recovery of that payment may be denied”) (citation and quotation

marks omitted).

Thus, the U.S. Trustee argues that the appropriate remedy

in this case is a prospective-only remedy, which remedy Congress

has already provided in the 2020 Act. It argues that there is prece-

dent for such a prospective-only remedy, citing Morales-Santana,

582 U.S. at 77, and that this is the remedy that would implement

congressional intent.

The U.S. Trustee’s argument based on the McKesson dicta

and the availability of a predeprivation remedy has been squarely

rejected by the Supreme Court. In Reich v. Collins, 513 U.S. 106

(1994), the State of Georgia had exempted from the state income

tax retirement benefits paid by the state but not retirement benefits

paid by the federal government or any other employer. After the

Supreme Court in Davis v. Michigan Department of Treasury, 489 U.S.

803 (1989), held that such a tax scheme violated the constitutional

intergovernmental tax immunity doctrine, Georgia repealed its ex-

emption for state retirees, but did not allow refunds for federal re-

tirees for the open years before Davis during which the differential

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14 Opinion of the Court 20-12547

in tax had existed. A federal retiree challenged that unequal tax

treatment, relying on the same cases on which the Debtors here

rely, including McKesson and Bennett. In rejecting the federal re-

tiree’s claim for refunds, the Georgia Supreme Court held that

McKesson, Bennett, and similar cases that required refunds would

not apply and refunds would not be required if Georgia law pro-

vided a meaningful opportunity to litigate the validity of the chal-

lenged tax in a predeprivation process. Concluding that Georgia

provided “ample” predeprivation procedures, the Georgia Su-

preme Court denied the refunds sought by the federal retiree. The

Supreme Court granted certiorari and reversed the Georgia Su-

preme Court:

The Georgia Supreme Court is no doubt right that,

under McKesson, Georgia has the flexibility to main-

tain an exclusively predeprivation remedial scheme,

so long as that scheme is “clear and certain.” . . . In

this regard, the Georgia Supreme Court’s reliance on

Georgia’s predeprivation procedures was entirely be-

side the point (and thus error), because even assum-

ing the constitutional adequacy of these proce-

dures—an issue on which we express no view—no

reasonable taxpayer would have thought that they

represented, in light of the apparent applicability of

the refund statute, the exclusive remedy for unlawful

taxes.

513 U.S. at 111-12 (emphasis in original).

In Newsweek, Inc. v. Florida Department of Revenue, 522 U.S.

442 (1998), the Court again rejected the same argument based on

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20-12547 Opinion of the Court 15

the McKesson dicta and the availability of a predeprivation remedy.

The Florida statutes exempted newspapers but not magazines

from its sales tax. The Florida Supreme Court held that the differ-

ential tax treatment violated the First Amendment. However, the

Department of Revenue rejected Newsweek’s claim for refund, and

the Florida District Court of Appeals agreed, holding that

“McKesson is distinguishable because that holding was expressly

predicated upon the fact that the taxpayer had no meaningful pre-

deprivation remedy.” Newsweek, Inc. v. Dept. of Rev., 689 So.2d 361,

363 (Fla. Dist. Ct. App. 1997). Concluding that in Florida, adequate

predeprivation remedies were available to the taxpayer, the District

Court of Appeals denied the refund. In vacating the judgment of

the District Court of Appeals, and granting access to the refund

procedure, the Supreme Court held: “a State has the flexibility to

maintain an exclusively predeprivation remedial scheme, so long as

that scheme is clear and certain.” Id. at 444 (quotations and cita-

tions omitted; emphasis added).

Thus, in both Reich and Newsweek the Supreme Court clari-

fied McKesson, ruling that, in cases of differential tax treatment of

comparable taxpayers, the state can remedy the constitutional vio-

lation by choosing to extend the burden (the tax) to the previously

favored group. However, because the relevant law and available

procedures permitted both predeprivation and postdeprivation

process, both courts held that due process would not permit the

state to insist on the predeprivation remedy to the exclusion of the

postdeprivation refund remedy unless the exclusivity of the pre-

deprivation remedy was clear such that reasonable persons would

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16 Opinion of the Court 20-12547

not be misled. In other words, except in the unusual context of a

clear, exclusive predeprivation remedy, the past inequality must be

accounted for and the disfavored taxpayer is entitled to appropriate

refunds.

Thus, the Supreme Court has squarely rejected the U.S.

Trustee’s distinction of McKesson, Bennett, and the other state tax

cases on which Debtors here rely. Just as in Reich and Newsweek, in

this case also, routine bankruptcy procedures—whether simple

motion or adversary proceeding—were available both predepriva-

tion or postdeprivation. That is, Debtors here could have chal-

lenged the increased fee before paying same in early 2018 (predepri-

vation) and those same routine procedures were available postdep-

rivation, as actually utilized by Debtors in this case. In any event,

it certainly was not clear that the available predeprivation process

was exclusive. Thus, Reich and Newsweek squarely reject the U.S.

Trustee’s primary support for prospective relief only—i.e. that

McKesson-based distinction of the Debtors state tax cases requiring

refunds in a similar context.

The significance of Reich and Newsweek for the instant case

is not limited to their express rejection of the U.S. Trustee’s primary

argument in support of prospective-only relief. These decisions

also provide significant guidance for this case in that they came to

the Supreme Court in precisely the same posture that this case

comes to us. As both Reich and Newsweek came to the Supreme

Court, the constitutional violation had previously been

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established. 7 In both cases, it had already been determined that the

constitutional violation should be remedied by extending the bur-

den (the tax) to the previously favored group. 8 In both cases, the

state courts had denied the refunds that were claimed by the tax-

payers who had been discriminated against and had had to pay the

higher taxes during the open years before the tax scheme was

equalized by extending the tax to the previously favored group. 9

In other words, in both Reich and Newsweek, the state law

had chosen to cure the constitutional violation by prospectively ex-

tending the burden (the tax) to the previously favored group, but

7 In Reich, the Supreme Court had already determined in Davis v. Michigan

Department of Treasury, 489 U.S. 803 (1989), that Georgia’s differential treat-

ment of state retirees and federal retirees violated the Constitution. Reich, 513

U.S. at 108. In Newsweek, the Florida Supreme Court had already held that

Florida’s exemption from its sales tax of newspapers but not magazines vio-

lated the Constitution. Newsweek, 522 U.S. at 442; see also Dept. of Rev. v. Mag-

azine Publishers of Am., 604 So.2d 459 (Fla. 1992).

8 In Reich, the Georgia legislature had repealed the exemption from tax for

newspapers. See Reich, 513 U.S. at 108; see also Reich v. Collins, 422 S.E.2d 846,

847 (Ga. 1992) (noting that after the Supreme Court in Davis determined that

Georgia’s differential treatment of state retirees and federal retirees was un-

constitutional, the Georgia legislature repealed the exemption for state retir-

ees). In the Newsweek case, the Florida Supreme Court held that Florida’s ex-

emption for tax for newspapers but not magazines was unconstitutional, and

held that the proper remedy was to strike the exemption for newspapers. See

Magazine Publishers, 604 So.2d at 463-64.

9 See Reich, 513 U.S. at 108 (noting that Georgia repealed the exemption for

state retirees, but denied refunds for federal retirees). See Newsweek, 522 U.S.

at 443 (noting that the Florida court had denied refunds for the magazines).

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18 Opinion of the Court 20-12547

had denied refunds to the taxpayers who had been discriminated

against. In short, the state law had provided prospective-only relief.

The Supreme Court reversed, and held that due process required

refunds.10

The instant case comes to us in precisely the same posture

that Reich and Newsweek had come to the Supreme Court:

• As in Reich and Newsweek, the fact of the constitutional vio-

lation in this case has been established. See Siegel, 142 S. Ct.

at 1789.

• As in Reich and Newsweek, Congress has chosen to cure the

constitutional violation by prospectively extending the bur-

den (the fee increase) to the previously favored group (the

BA districts). See the 2020 Act, Pub. L. 116-325, 134 Stat.

5086.

• As in the state court stage of the Reich and Newsweek cases,

the U.S. Trustee urges us to approve a prospective-only rem-

edy and deny refunds to the Debtors in this case.

We conclude that we should follow the guidance of the Su-

preme Court decisions in Reich and Newsweek and Bennett (and the

other state tax cases upon which the Debtors rely). We conclude

that the prospective-only relief urged upon us by the U.S. Trustee

is not appropriate in this case.

10 Indeed, the long line of state tax cases mentioned above involved the same

posture and the same result. See, e.g., McKesson, 496 U.S. at 31 (“The question

before us is whether prospective relief, by itself, exhausts the requirements of

federal law. The answer is no”).

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20-12547 Opinion of the Court 19

We acknowledge the strong evidence of congressional in-

tention preferring the maintenance of the increased level of fees.

However, we note that the legislative intention in Reich and

Newsweek was the same. In Reich, the Georgia legislature had re-

pealed the exemption for state retirees, indicating its preference for

the tax over the exemption. The legislative intent was the same,

but even clearer, in Newsweek. There, the Florida Supreme Court

had already—well before the U.S. Supreme Court’s Newsweek deci-

sion in 1998—expressly held that the legislative intent preferred the

tax over the exemption. See Magazine Publishers, 604 So.2d at 463

(“Section 212.21 makes it clear that as between the imposition of

the tax or the granting of an exemption, the tax shall prevail.”).

Notwithstanding this legislative intent, the Supreme Court held

that due process required refunds.

Of course the result in Reich and Newsweek—and the result

in this case since we follow Reich and Newsweek—partially imple-

ments the legislative intent in that the tax was to be maintained in

the future. Although the refunds ordered by the Supreme Court in

Reich and Newsweek may have been in tension with the legislative

intent, such legislative intent cannot overcome the requirements

of due process. See Newsweek, 522 U.S. at 445 (“due process pre-

vents [the Department of Revenue] from applying this require-

ment to taxpayers, like Newsweek, who reasonably relied on the

apparent availability of a postpayment refund”). Thus, the results

in Reich and Newsweek allow implementation of as much of the leg-

islative intent as due process would permit. Similarly, in the instant

case, our result—requiring refunds, but recognizing future

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20 Opinion of the Court 20-12547

application of the fee increase, as mandated by Congress in the 2020

Act—implements as much of the congressional intent as due pro-

cess permits.

The only other support offered by the U.S. Trustee for the

prospective-only relief that it advocates is its citation to Morales-

Santana, 582 U.S. at 77, which did provide prospective-only relief

in a very different context. 11 For several reasons, we conclude that

we should be guided by Reich, Newsweek, Bennett, and the other

analogous state tax cases, rather than by Morales-Santana. First, the

Court in Morales-Santana merely concludes at the end of the opin-

ion that its ruling “should apply, prospectively, to children born to

unwed U.S.-citizen mothers.” 582 U.S. at 77. There is no explana-

tion on the basis of which we could be sure of a governing principle

of law defining when prospective application is appropriate. Sec-

ond, and significantly, the instant case is closely analogous to Reich

and Newsweek, for the reasons fully discussed above, but is very dif-

ferent from the Morales-Santana case. The right to citizenship issue

in Morales-Santana is very different from the inequality in trustee

fees at issue in this case. As Justice Thomas, joined by Justice Alito,

said in his concurring opinion, it is far from clear whether any

court, even the Supreme Court, has the power to confer or

11 The U.S. Trustee also cites the plurality opinion in Barr v. American Associa-

tion of Political Consultants, 591 U.S. __, 140 S. Ct. 2335, 2355 n.12 (2020), which

also suggests prospective-only relief. However, like Morales-Santana, the plu-

rality provides no explanation. Moreover, the prospective-only relief appears

to have been supported only by the two concurring Justices, plus possibly Jus-

tice Sotomayor (i.e. a total of only four Justices).

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20-12547 Opinion of the Court 21

withdraw citizenship on a basis other than as prescribed by Con-

gress. Id. at 78. Moreover, retrospective application of the Court’s

ruling would have been extremely harsh. That is, it is virtually un-

thinkable for the Court to have withdrawn the citizenship from

children of unwed mothers already born and who had already qual-

ified for citizenship under the previous one-year residency rule.

A third and significant reason prompting us to follow the

guidance of Reich, Newsweek, and Bennett is that we are also follow-

ing the “normal rule of retroactive application” of Supreme Court

decisions. Harper v. Va. Dept. of Taxation, 509 U.S. 86, 97 (1993); see

also id. at 94 (acknowledging “fundamental rule of retrospective op-

eration that has governed judicial decisions for near a thousand

years.”)(cleaned up). This is especially true in this case because the

rule identified in Siegel was not even a “new” rule which might in

some circumstances have warranted prospectively-only relief. 12

12 The risk of this constitutional violation of the Bankruptcy Uniformity

Clause has been apparent since the Ninth Circuit so ruled. See St. Angelo v.

Victoria Farms, Inc., 38 F.3d 1525 (9th Cir. 1994), amended by 467 F.3d 969 (9th

Cir. 1995). That ruling prompted the Judicial Conference and Congress to act

to avoid this risk. That led to the 2000 legislation which Congress intended to

ensure that uniform trustee fees would apply in all federal judicial districts—

both US Trustee and BA districts. See discussion in our earlier opinion in this

case, 22 F.4th at 1310-19; see also the congressional finding in the 2020 Act

(“confirm[ing] the longstanding intention of Congress that quarterly fee re-

quirements remain consistent across all federal judicial districts”). Thus, Con-

gress has been aware of the constitutional risks of differential trustee fees in

the IUS Trustee districts, as compared to the BA districts, for more than two

decades. Accordingly, the Supreme Court’s holding in Siegel did not announce

a “new” rule.

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22 Opinion of the Court 20-12547

Finally, in so holding we reach the same result reached by

every court to have addressed this issue. The Second Circuit13 and

the Tenth Circuit14 have ordered refunds for debtors in precisely

the same context as the Debtors in this case. Although the Second

Circuit provided no rationale at all, and although the Tenth Circuit

only noted that it lacked authority over the fees in the BA districts

and that the Second Circuit had already so ruled, we suspect that

our sister circuit courts probably were thinking along the lines of

the analysis we set out in this opinion. The only other court that

has addressed this issue is In re Circuit City Stores, Inc., 2022 WL

17722849 (Bankr. E.D. Va. Dec. 15, 2022). The bankruptcy judge

in that case followed the Second and Tenth Circuits and granted

refunds to debtors comparable to the Debtors in this case. The

bankruptcy judge distinguished the Morales-Santana decision and

relied on the same long line of state tax cases upon which we too

rely (e.g. Bennett, etc.).

The U.S. Trustee offers no analysis or briefing to explain why prospec-

tive-only relief would be appropriate in this case. See Harper, 509 U.S. at 94-

102; James B. Beam Distilling Co. v. Georgia, 501 U.S. 529 (1991); Richard S. Kay,

Retroactivity and Prospectivity of Judgments in American Law, 62 AM. J. COMP. L.

37 (2014). Thus, we follow the “normal” rule and apply the Siegel holding

retroactively, subject of course to any independent defense—e.g. statutes of

limitation or sovereign immunity.

13 In re: Clinton Nurseries, Inc., 53 F.4th 15, 29 (2d Cir. 2022), amending and rein-

stating 998 F.3d 56, 69-70 (2d Cir. 2021).

14 In re John Q. Hammons Fall 2006, LLC, No. 20 3203, 2022 WL 3354682 (10th

Cir. Aug. 15, 2022), reinstating 15 F.4th 1011, 1025-26 (10th Cir. 2021).

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20-12547 Opinion of the Court 23

For the foregoing reasons,15 we conclude that Reich,

Newsweek, Bennett, McKesson, and the long line of similar state tax

cases are closely analogous to the instant case and provide strong

precedent supporting the refund remedy urged upon us by the

Debtors. Accordingly, we hold that the appropriate remedy in this

case for the constitutional violation identified in Siegel is the refunds

that the Debtors in this case seek. The judgment of the court below

is vacated, and this case is remanded for further proceedings not

inconsistent with this opinion.

VACATED and REMANDED.

15 The U.S. Trustee suggest no other defense or bar to the refunds that Debt-

ors seek—e.g. statute of limitations or sovereign immunity. As noted, the U.S.

Trustee at oral argument affirmatively disavowed any sovereign immunity

bar.

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20-12547 BRASHER, J., Concurring 1

BRASHER, Circuit Judge, concurring:

I respectfully concur with the bottom-line result of the ma-

jority opinion, although I cannot agree with all of its reasoning.

When this appeal was last before us, I wrote separately to

make two points. First, I explained that “the substantial variance in

fees as between the Trustee and Bankruptcy Administrator districts

amounts to an unconstitutional lack of uniformity.” In re Mosaic

Mgmt. Grp., Inc., 22 F.4th 1291, 1328 (11th Cir. 2022) (Brasher, J.,

concurring). Second, I concluded that the investment trustee’s “re-

quested remedy—a refund of the higher fees, which were imposed

in 94% of the districts—is inappropriate because it is demonstrably

at odds with Congress’s intent.” Id. The Supreme Court reached

the same conclusion as me on the first issue and remanded for us

to consider the second issue. See Bast Amron LLP v. United States Tr.

Region 21., 142 S. Ct. 2862 (2022), and Siegel v. Fitzgerald, 142 S. Ct.

1770 (2022).

When a statute creates an unconstitutional disparity in treat-

ment, “there exist two remedial alternatives.” Califano v. Westcott,

443 U.S. 76, 89 (1979) (cleaned up) (quoting Welsh v. United States,

398 U.S. 333, 361 (1970) (Harlan, J., concurring in result)). A court

can level up by extending the favorable treatment to everyone or

level down by treating everyone like the disfavored class. A court’s

choice between the two remedies must be guided by legislative in-

tent. See Sessions v. Morales-Santana, --- U.S. ---, 137 S. Ct. 1678, 1699

(2017). An intent to level up is the default presumption, but an in-

tent to level down may be inferred where the favorable treatment

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2 [BRASHER, J., Concurring] 20-12547

was meant to be an “exception” to the “general rule . . . applicable

to a substantial majority.” Id. at 1701.

As I explained last time, it is obvious that Congress’s intent

supports the conclusion that we must level down. See Mosaic Mgmt.

Grp, 22 F.4th at 1329−30 (Brasher, J., concurring). The favorable

treatment here was a tiny exception to an otherwise comprehen-

sive scheme, and it was an accidental exception at that. Id. As a mat-

ter of equal treatment law, that is where the inquiry ends. We

should level down, even if such leveling down results in a prospec-

tive-only remedy or requires joining other parties. I therefore can-

not agree with the majority’s attempt to distinguish equal treat-

ment cases, such as Sessions v. Morales-Santana, from this one.

That said, however, I have since “acquired new wisdom” or

“more critically, have discarded old ignorance” that leads me to

change my bottom-line conclusion. Ring v. Arizona, 536 U.S. 584,

611 (2002) (Scalia, J., concurring). Specifically, the investment trus-

tee has identified a due process problem with a prospective-only

remedy, and I believe that the trustee’s due process argument has

merit.

When a person has been compelled by law to pay a tax or

fee, then that person has been deprived of property. To justify that

deprivation, the government must “satisfy the commands of the

Due Process Clause.” McKesson Corporation v. Division of Alcoholic

Beverages and Tobacco, 496 U.S. 18, 36 (1990). In a case like this one,

the due process clause commands that the government provide

“meaningful backward-looking relief ” if it has placed a taxpayer

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20-12547 BRASHER, J., Concurring 3

(or, here, a feepayer) “under duress promptly to pay a tax when

due” without the opportunity to fully litigate its legality. Id. at 31.

Despite my views of the proper equal treatment remedy, I

think the investment trustee has a due process right to a refund.

This is so for two reasons.

First, the government provided an opportunity to challenge

the legality of the fee, and the investment trustee took advantage

of it. The investment trustee challenged the imposition of the fee

at the earliest opportunity in the very bankruptcy case in which the

fee was imposed—this one. Having lost that challenge in the bank-

ruptcy court, the investment trustee was under a legal obligation

to pay the fee. This fact—that the investment trustee availed itself

of a process to challenge the fee—distinguishes it from someone

who belatedly seeks a refund of a fee that he never contested. It

would be inconsistent with due process to deny a backwards-look-

ing remedy when the investment trustee challenged the fee at an

early opportunity and then paid it under protest.

Second, a level-up refund remedy is our only option because

there is no lawful way to implement a backward-looking level-

down remedy. The creditors and debtors in the favored class of

bankruptcy cases have their own due process rights that prevent us

from retroactively assessing higher fees in those cases. Although

the imposition of a retroactive tax “does not necessarily deny due

process to those whose taxes are increased,” there is “some tem-

poral point” beyond which “the retroactive imposition of a signifi-

cant tax burden may be ‘so harsh and opposed as to transgress the

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4 [BRASHER, J., Concurring] 20-12547

constitutional limitation.’” Id. at 40 n.23 (quoting Welch v. Henry,

305 U.S. 134, 147 (1938)). I think we have reached that point. Even

though only a small number of bankruptcy cases would be affected

by a retroactive fee, too much time has passed to increase the fees

consistent with due process. This is especially true of bankruptcy

cases that have already been closed and the estate’s assets distrib-

uted or reorganized.

For these reasons, I respectfully concur in the result.