Amicus Curiae Brief — Office of the United States Trustee, Petitioner v. John Q. Hammons Fall 2006, LLC, et al.

No. 22-1238

IN THE

Supreme Court of the United States

OFFICE OF THE UNITED STATES TRUSTEE,

Petitioner,

v.

JOHN Q. HAMMONS FALL 2006, LLC, ET AL.,

Respondents.

On Writ Of Certiorari

To The United States Court Of Appeals

For The Tenth Circuit

BRIEF FOR AMICUS CURIAE

MF GLOBAL HOLDINGS LTD.,

AS PLAN ADMINISTRATOR,

IN SUPPORT OF RESPONDENTS

JANE RUE WITTSTEIN

JONES DAY

250 Vesey Street

New York, NY 10281

CHRISTOPHER DIPOMPEO

Counsel of Record

JONATHAN DEWITT

JONES DAY

51 Louisiana Ave., NW

Washington, DC 20001

(202) 879-3939

cdipompeo@jonesday.com

Counsel for Amicus Curiae

i

TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE ........................... 1

INTRODUCTION & SUMMARY OF

ARGUMENT .................................................... 3

ARGUMENT .............................................................. 5

I.

II.

THE GOVERNMENT’S “PROSPECTIVEONLY” REMEDY SHOULD NOT PERMIT

THE GOVERNMENT TO PROSPECTIVELY

ENFORCE PAYMENT OF INVALID

FEES ................................................................ 5

A.

Many Debtors—Like MF Global—Have

Already Obtained Full or Partial Relief

By Withholding the Unconstitutional

Fees........................................................ 5

B.

The Government’s “Prospective-Only”

Remedy Cannot Require Enforcement

of Unconstitutional Fees That Have

Not Yet Been Paid................................. 8

THE ONLY PROPER REMEDY FOR

PAYMENT OF UNCONSTITUTIONAL

FEES IS A REFUND ..................................... 12

A.

The Government Must Provide

Meaningful Backward-Looking Relief

Because It Actively Opposed

Predeprivation Remedies ................... 12

B.

The Government’s Practical Concerns

Are Undermined By the Fact that

Many Debtors Most Likely to Request

A Refund Have Already Withheld

Fees...................................................... 15

ii

C.

III.

Retroactively Imposing Fees on BA

Debtors Is Neither Constitutional Nor

Workable ............................................. 17

DENYING A REMEDY FOR

NONUNIFORMITY WILL REIGNITE

OTHER CONSTITUTIONAL CHALLENGES

TO THE 2017 ACT ....................................... 18

CONCLUSION ......................................................... 20

iii

TABLE OF AUTHORITIES

Page(s)

CASES

Bowen v. Georgetown Univ. Hosp.,

488 U.S. 204 (1988) .............................................. 17

In re Clinton Nurseries, Inc.,

998 F.3d 56 (2d Cir. 2021) ..................................... 2

In re Clinton Nurseries, Inc.,

53 F.4th 15 (2d Cir. 2022) ...................................... 2

In re Clinton Nurseries, Inc.,

No. 19-03014-JJT

(Bankr. D. Conn. Mar. 28, 2023) ........................... 8

In re John Q. Hammons Fall 2006,

LLC,

No. 20-3203, 2022 WL 3354682

(10th Cir. Aug. 15, 2022) ....................................... 3

In re MF Glob. Holdings Ltd.,

615 B.R. 415 (Bankr. S.D.N.Y. 2020), ............... 2, 8

In re MF Glob. Holdings Ltd.,

No. 19-01379-MG

(Bankr. S.D.N.Y. Oct. 22, 2019) .................. 5, 6, 13

In re Mosaic Mgmt. Grp., Inc.,

71 F.4th 1341 (11th Cir. 2023) ............................ 17

Landgraf v. USI Film Prod.,

511 U.S. 244 (1994) .............................................. 17

iv

McKesson Corp. v. Division of Alcoholic

Beverages & Tobacco,

496 U.S. 18 (1990) ............................................ 4, 20

Newsweek, Inc. v. Florida Dep’t of

Revenue,

522 U.S. 442 (1998) ........................................ 13, 14

Reich v. Collins,

513 U.S. 106 (1994) .............................................. 13

Robertson v. Baldwin,

165 U.S. 275 (1897) .............................................. 10

Siegel v. Fitzgerald,

596 U.S. 464 (2022) .................................... 2, 3, 8, 9

United States v. Sperry Corp.,

493 U.S. 52 (1989) .................................... 18, 19, 20

STATUTES

U.S. Const., amend V ................................................ 20

28 U.S.C. § 1930 .......................................................... 2

Bankruptcy Judgeship Act of 2017,

Pub. L. No. 115-72, 131 Stat. 1224

(Oct. 26, 2017) ........ 1, 2, 3, 4, 12, 14, 16, 18, 19, 20

Consolidated Appropriations Act, 2019,

Pub. L. No. 116-6, 133 Stat. 13........................ 7, 13

OTHER AUTHORITIES

United States Courts Statistics and

Reports, Table F-2 ................................................ 19

v

United States Trustee Program: FY

2021 Performance Budget

Congressional Submission ............................. 16, 19

1

INTEREST OF AMICUS CURIAE 1

Amicus curiae MF Global Holdings Ltd. is the Plan

Administrator (“MF Global”) in the jointly

administered chapter 11 cases of MF Global Holdings

Ltd. and certain affiliates under a Plan of Liquidation

confirmed in April 2013. MF Global has been winding

down its assets under a plan confirmed years before

the 2017 amendments to the chapter 11 quarterly fee

statute were passed. See Bankruptcy Judgeship Act of

2017, Pub. L. No. 115-72, § 1001, § 1004, 131 Stat.

1224, 1232 (October 26, 2017) (the “2017 Act”). Yet it

was subjected to a substantially higher quarterly fee

regime under the 2017 Act than if its cases were

pending in BA districts. 2 Since 2018, MF Global has

incurred over $1 million more in quarterly fees than a

similarly situated debtor in a judicial district where

the increased fees did not apply.

MF Global paid $423,785 of these increased fees

from Q1 2018 through Q2 2019 when it commenced its

Adversary Proceeding challenging the 2017 Act.

Beginning in Q3 2019, however, MF Global took the

position that it was not required to pay the

unconstitutional excess fees, and instead began

withholding all fees as a set-off to reduce the refund

that would be owed if it won its case. By 2023, MF

Global had fully refunded all overpaid excess fees, and

began to make full payments in accordance with the

1 No counsel for any party authored this brief in any part,

and no person or entity other than amicus or amicus’s counsel

made a monetary contribution to fund its preparation or submission.

2 Capitalized terms not defined herein have the meaning set

forth in the Brief for the Respondents (“Resp. Br.”).

2

increased fee schedule under the 2020 Act (while

reserving all rights). Many other UST debtors

similarly used a set-off or escrowed unpaid fees rather

than pay the unconstitutional fees.

MF Global’s challenge to the 2017 Act is currently

pending in the Bankruptcy Court for the Southern

District of New York, having been remanded to that

Court by the Second Circuit following the favorable

decision in In re Clinton Nurseries, Inc., 998 F.3d 56

(2d Cir. 2021), amended and reinstated, In re Clinton

Nurseries, Inc., 53 F.4th 15, 29 (2d Cir. 2022). See In

re MF Glob. Holdings Ltd., 615 B.R. 415 (Bankr.

S.D.N.Y. 2020), vacated and remanded, ECF No. 100,

No. 20-3863 (2d Cir. Sept. 23, 2020). The Second

Circuit also (like all other Circuits to have considered

the question) held in Clinton Nurseries that a refund

of overpaid fees was the appropriate remedy to

redress the constitutional violation for the period the

2017 Act was in effect (January 1, 2018 through

March 31, 2021). 998 F.3d at 70; 53 F.4th at 29.

Here, the Government advocates for a prospectiveonly remedy, but the Government is not clear how

that remedy would apply to debtors like MF Global

who withheld fees and therefore do not need a refund.

MF Global therefore files this brief to explain why (1)

debtors who withheld the unconstitutional fees should

not be required to pay them now; (2) a refund is, in

any event, the only appropriate remedy for all debtors

who were subjected to the higher fees; and (3) if the

Court rules that a refund is not the appropriate

remedy, the result will likely be additional litigation

under the Takings Clause.

3

INTRODUCTION & SUMMARY OF ARGUMENT

In Siegel, this Court held that the 2017

amendments to 28 U.S.C. § 1930(a)(6)—which

dramatically increased the fees payable by chapter 11

debtors in some, but not all, federal judicial districts—

violated the Bankruptcy Clause of the Constitution.

Siegel v. Fitzgerald, 596 U.S. 464, 480 (2022). The

Court, however, left open the question of the proper

remedy. Id. at 480-81.

Following Siegel, several Courts of Appeals have

examined the remedy question. All of them, including

the Tenth Circuit here, concluded that “a refund of

overpayment” was the proper remedy. See In re John

Q. Hammons Fall 2006, LLC, No. 20-3203, 2022 WL

3354682, at *1 (10th Cir. Aug. 15, 2022); see also Resp.

Br. at 9–10 (collecting cases holding the same).

MF Global agrees with Respondents that these

cases correctly held that a refund is the only

constitutionally appropriate remedy. But even beyond

Respondents’ arguments, there are several other

reasons why debtors like MF Global cannot be

subjected to the unconstitutional fees.

First, unlike Respondents—who were unable to

withhold fees because they had not yet achieved

confirmation of their chapter 11 plan—MF Global did

withhold payment of the unconstitutional fees after

commencing its challenge to the 2017 Act, and also

set-off legitimate fees to recover the invalid excess fees

previously paid. As a result, MF Global does not need

any further relief from this Court. Although the

Government is not at all clear how its proposed

“prospective-only remedy” would apply to debtors who

do not need a refund, there are several reasons why it

4

is inappropriate for the Government to prospectively

enforce the unconstitutional fees against debtors who

have not paid them. Indeed, to the extent the

Government insists on enforcing the invalid fees going

forward, that only shows that its proposed “remedy” is

actually a license to violate the Constitution.

Second, MF Global agrees with Respondents that

due process requires “meaningful backward-looking

relief ” in the form of a refund of unconstitutional fees.

McKesson Corp. v. Division of Alcoholic Beverages &

Tobacco, 496 U.S. 18, 31 (1990).

And the

Government’s response that due process does not

require a refund because debtors could have pursued

a predeprivation remedy is misplaced. In MF Global’s

case, the Government actively opposed MF Global’s

attempt to pursue a predeprivation remedy

(withholding and set-off). The Government’s “bait and

switch” cannot deprive debtors of the meaningful

relief due process requires. Moreover, because many

debtors (like MF Global) have already withheld the

unconstitutional fees, the practical impact of a ruling

requiring refunds is far less than the Government

assumes. And Respondents persuasively show that

there is no legal or practical way to remedy the harm

by imposing retroactive fees on BA debtors. See Resp.

Br. 28-43.

Finally, if the Court rules that no refund is

available to remedy the nonuniformity concerns, it

will likely mean the resumption of additional

constitutional challenges to the 2017 Act. Because

some of those challenges are based in the Takings

Clause—which requires “just compensation” in the

form of a monetary remedy—a decision here that the

uniformity problems do not require a refund will not

5

resolve the litigation, but simply refocus it on different

challenges to the 2017 Act.

ARGUMENT

I.

THE GOVERNMENT’S “PROSPECTIVEONLY” REMEDY SHOULD NOT PERMIT

THE GOVERNMENT TO PROSPECTIVELY

ENFORCE PAYMENT OF INVALID FEES

A. Many Debtors—Like MF Global—Have

Already Obtained Full or Partial Relief

By Withholding the Unconstitutional

Fees

MF Global filed its chapter 11 case in October

2011. It emerged from bankruptcy two years later

when its chapter 11 plan of liquidation was confirmed

in April 2013. But because MF Global’s plan of

liquidation required it to make distributions during

the subsequent years, it continued to incur U.S.

Trustee quarterly fees even after plan confirmation.

When the new quarterly fee regime was imposed

in Q1 2018, MF Global began paying the higher fees,

and it paid the increased fees until Q2 2019. In these

five quarters, MF Global paid $423,785 in

unconstitutional quarterly fees above what it would

have paid if it were a debtor in a BA District.

In October 2019, however, MF Global filed a

complaint challenging the new quarterly fee regime as

unconstitutional, including because it violated the

uniformity requirement of the Bankruptcy Clause.

See In re MF Glob. Holdings Ltd., No. 19-01379-MG

(Bankr. S.D.N.Y. Oct. 22, 2019), ECF No. 1. At that

point, MF Global decided—over the Government’s

6

objection—to begin withholding all quarterly fees

owed and setting legitimately owed fees off against

the $423,785 in excess fees it had already paid.

Eventually, by 2023, MF Global was able to recoup all

of the excess fees it had previously paid to the

Government. MF Global has thus already effectively

received a refund of all overpaid fees, and will not

require any additional remedy from the U.S. Trustee

System Fund, or anywhere else.

Notably, the Government opposed this practice

when MF Global initially stated its intention.

Specifically, in its complaint challenging the

unconstitutional fees, MF Global sought a declaration

and injunction that it was entitled to take a set-off of

overpaid fees against future fees until it obtained a

full refund. See Complaint at *16–19, In re MF Glob.

Holdings Ltd., No. 19-01379-MG (Bankr. S.D.N.Y. Oct.

22, 2019), ECF No. 1. The Government sought

summary judgment on these counts on the ground

that “[u]nder federal law, the government does not pay

judgments until they are final and unappealable.”

U.S. Trustee’s Memorandum of Law in Support of

Motion for Summary Judgment at *44, In re MF Glob.

Holdings Ltd., No. 19-01379-MG (Bankr. S.D.N.Y. Nov.

21, 2019), ECF No. 13 ¶ 96; see also id. at ¶¶ 11, 96114.

And it said that “[t]he US Trustee will

voluntarily pay MF Global through the U.S. Trustee

Program’s standard refund procedure if MF Global

obtains a final and unappealable judgment

establishing its right to a refund.” Id. at ¶ 96. 3

3 The Government did argue—consistent with its position

here—that the appropriate remedy for the nonuniformity would

be to require debtors in BA districts to pay the increased fees,

7

In particular, the Government argued and advised

the court that:

“MF Global does not need setoff or

injunctive relief in any event because the

statute appropriating funds to the

United

States

Trustee

Program

addresses refunds. See Consolidated

Appropriations Act, 2019, Pub. L. 116-6,

133 Stat. 13, 103-04 . . . That statute

permits refunds from the U.S. Trustee

System Fund at Treasury according to

standard procedures . . . Should MF

Global prevail on its claim that the

quarterly fees were unlawful and that it

is entitled to a monetary remedy through

all levels of review, the government will

refund any overpayments to MF Global.

Congress authorized payments of

refunds from (1) deposits to the System

Fund and (2) annual appropriations for

the necessary expenses of the United

States Trustee Program, in its most

recent annual appropriation law. Id. . .

. The US Trustee does not anticipate any

dispute about the amount MF Global

might recover if the quarterly fees were

held to be unlawful and if a monetary

remedy were ultimately ordered.”

and thus no refund is appropriate. See In re MF Glob. Holdings

Ltd., No. 19-01379-MG (Bankr. S.D.N.Y. Nov. 21, 2019), ECF No.

13 ¶¶ 54-55. MF Global’s response to that argument is below.

The Government did not suggest, however, that if requiring BA

districts to impose fees was an unacceptable remedy, a refund

would not be available.

8

Id. ¶¶ 111-12.

Many other debtors who challenged the

unconstitutional fee regime also withheld fees after

challenging them. See, e.g., In re MF Global Holdings

Ltd., 615 B.R. at 423 (noting that SunEdison also

withheld quarterly fees that were “in dispute”); Siegel,

596 U.S. at 472, (noting bankruptcy court’s direction

that excess fees be withheld and that “from January

1, 2018, onward, the trustee pay the rate in effect prior

to the 2017 Act”); Order Directing Escrow Agent to

Disburse Escrow Funds and Directing United States

Trustee to Issue Refund of Quarterly Fees Paid by

Debtors, In re Clinton Nurseries, Inc., No. 19-03014JJT (Bankr. D. Conn. Mar. 28, 2023), ECF No. 91.

Respondents apparently were not among these

debtors because (unlike MF Global) they had not yet

obtained confirmation of their plan, and such

confirmation would have been impossible without

paying all fees charged by the US Trustee. See Resp.

Br. 6, 26-28. Indeed, Respondents’ payment of the

unconstitutional fees rather than risking dismissal of

their bankruptcy case makes particular sense in light

of the Government’s well-stated position at the time

that a refund was available after final judgment.

B. The Government’s “Prospective-Only”

Remedy Cannot Require Enforcement of

Unconstitutional Fees That Have Not Yet

Been Paid

The Government now argues that a refund is not

required. It advocates for “prospective-only relief ” in

the form of “declaring that the disuniform fees were

unlawful (as this Court did in Siegel) and that fees

9

must be uniform going forward (as Congress has

already provided in the 2020 Act).” Govt. Br. 20.

The Government, however, does not explain how

its proposed “prospective-only” remedy would apply to

debtors like MF Global who have withheld fees and/or

taken a set-off to recover previously paid

unconstitutional fees—that is, debtors who effectively

have not yet paid the unconstitutional fees. Perhaps

the Government does not intend to enforce the

unconstitutional fees against these debtors. After all,

there are several reasons why it would be

inappropriate

and

unconstitutional

for

the

government to now collect the invalid fees from

debtors who have not yet paid them. But to the extent

the Government does intend to enforce such fees, it is

simply another reason for the Court not to accept the

Government’s proposed “remedy.”

1. First, the Government’s proposed remedy—“a

mandate of equal, increased fees in UST and BA

districts going forward,” Govt. Br. 11—does not seem

to require or contemplate trying to collect past

unconstitutional fees from debtors who have not paid

them. That is, if the Government were correct (it is

not) that constitutionally sufficient relief requires

only a declaration that the fees were previously

unconstitutional and a mandate that they be uniform

going forward, the fact that some debtors did not

actually pay the unconstitutional fees would not

undermine the completeness of that relief in any way.

The Government’s proposed “prospective-only”

remedy would be fully effective regardless of whether

all UST debtors paid the higher fees.

10

2. Second, although the question as framed by

the Government is one of remedy—“[w]hether the

appropriate remedy for the constitutional uniformity

violation found by this Court in Siegel, supra, is to

require the United States to grant retrospective

refunds of the increased fees paid by debtors in United

States Trustee districts . . . .”, Govt. Br. Question

Presented (emphases added)—the same question is

not presented for debtors like MF Global. MF Global

does not need a “remedy” from this Court. It has

already obtained full relief by refusing to pay the

unconstitutional fees and obtaining a ruling by this

Court that the withheld fees were unconstitutionally

charged. MF Global does not need any further relief.

Rather, the question for debtors like MF Global is

one of prospective enforcement—whether the

Government can now enforce payment of a fee that

has already been declared by this Court to be

unconstitutional. It should be axiomatic that the

Government cannot enforce an unconstitutional

mandate without violating the Constitution. See, e.g.,

Robertson v. Baldwin, 165 U.S. 275, 297 (1897) (“No

court is bound to enforce, nor is any one legally bound

to obey, an act of congress inconsistent with the

constitution.”). And so debtors who have not yet paid

the unconstitutional fees cannot possibly be required

to pay those fees now. Such a requirement would put

the Government in the untenable position of having to

enforce an invalid and unconstitutional payment

requirement.

3. Third, the Government’s practical concerns

about the impact on taxpayers and the (supposed)

unavailability of a refund from the U.S. Trustee

System Fund are not present with respect to debtors

11

like MF Global. See Govt. Br. 35-37. Because MF

Global does not require a refund, there will be no

impact on the U.S. Trustee System Fund or the

Judgment Fund if MF Global is permitted to retain

the unconstitutional fees. And the Government has

not suggested (nor could it suggest) that the failure to

collect unconstitutional fees from MF Global and

similar debtors will harm it in any material way.

4. Finally, to the extent the Government

disagrees and states an intention to collect withheld

unconstitutional fees, that is just one more reason its

proposed remedy should not be adopted by this Court.

Such an attempt would make the Government’s

remedy “prospective” in name only.

While the

Government (who created the unconstitutional law)

would not be required to provide a retrospective

refund for debtors who paid unconstitutional fees, it

would be permitted to enforce a retrospective

obligation on debtors who have not yet paid. This

turns the Constitution on its head, and cannot be

what due process requires.

At bottom, it is one thing to say that the

Government need not provide refunds to debtors who

have already paid unconstitutional fees. That is

wrong for all of the reasons in Respondents’ brief. But

it is quite another thing to say that debtors who have

not already paid the unconstitutional fees must do so

now. For those debtors the Government’s prospectiveonly remedy would actually become a prospective-only

requirement to pay an unconstitutional fee.

12

II. THE ONLY PROPER REMEDY FOR PAYMENT OF UNCONSTITUTIONAL FEES IS A

REFUND

Even setting aside the question whether debtors

like MF Global can now be charged for payment of the

unconstitutional fees, Respondents are correct that a

refund is the only appropriate remedy for all debtors.

A. The Government Must Provide Meaningful Backward-Looking Relief Because It

Actively Opposed Predeprivation Remedies

As Respondents persuasively argue, due process

requires “meaningful backward-looking relief ” when

the Government imposes an unconstitutional

monetary exaction. Resp. Br. 22-28. And such relief

must remain available unless a predeprivation

remedy was the exclusive means for protecting against

the unconstitutional charge. Id.

Yet the Government argues that due process does

not require it to provide such meaningful backwardlooking relief because debtors could have pursued a

predeprivation remedy. That argument fails as a legal

matter for all the reasons in Respondents’ brief. See

Resp. Br. 22-28. But the Government’s argument is

also misplaced for an additional reason:

The

Government

actively

opposed

predeprivation

remedies when debtors like MF Global attempted to

pursue them, and instead insisted that a

postdeprivation refund was available if the

nonuniformity persisted through a final judgment.

Specifically, in MF Global’s case, the Government

expressly opposed MF Global’s request for

authorization to withhold allegedly unconstitutional

13

fees while the litigation was pending. Supra at 6-7.

It instead expressly represented that “[t]he US

Trustee will refund any overpaid fees due in

accordance with U.S. Trustees Program’s standard

refund procedures,” if MF Global succeeded in its

challenge to the 2017 Act and convinced the court that

charging higher fees in BA districts was not

appropriate. U.S. Trustee’s Memorandum of Law in

Support of Motion for Summary Judgment at ¶ 11, In

re MF Glob. Holdings Ltd., No. 19-01379-MG (Bankr.

S.D.N.Y. Nov. 21, 2019), ECF No. 13 (emphasis

added). And it further stated that “notwithstanding

any other provision of law, deposits to the United

States Trustee System Fund and amounts herein

appropriated shall be available in such amounts as

may be necessary to pay refunds due depositors[.]” Id.

at ¶ 111 (quoting Consolidated Appropriations Act,

2019, Pub. L. 116-6, 133 Stat. 13, 103-04)).

In other words, the Government told MF Global

that a refund would be available if it succeeded in its

challenge to the nonuniform fees (at least as long as

charging higher fees in BA districts was not

appropriate). Supra at 6-7. And it did so while

opposing efforts to pursue a predeprivation remedy

(withholding of fees). Yet now the Government’s lead

argument is that no refund is necessary (or even

possible from the U.S. Trustee System Fund) because

prospective-only relief will suffice. And it criticizes

Respondents for failing to protect themselves through

predeprivation remedies. Govt. Br. 28-34.

As

Respondents

explain,

however,

the

Government’s position is at odds with this Court’s

decisions in Newsweek and Reich that parties may

pursue a “postdeprivation remedy, regardless of the

14

[Government’s] predeprivation remedies,” unless the

law makes a predeprivation remedy “the exclusive

remedy” for a claim. Reich v. Collins, 513 U.S. 106,

113 (1994); see also Newsweek, Inc. v. Florida Dep’t of

Revenue, 522 U.S. 442, 444 (1998); Resp. Br. 24.

The Government’s positions in this case are

precisely the sort of “‘bait and switch’” that even the

Government says is prohibited by this Court’s

precedents. Govt. Br. 33 (citing Newsweek, 522 U.S.

at 444–45, and Reich, 513 U.S. at 110–11); see also

Resp. Br. 25–26. The Government cannot now argue

that it does not need to provide “meaningful

backward-looking relief ” because debtors should have

pursued a predeprivation remedy that it actively

opposed at the time debtors were paying the fees.

Indeed, the Government’s opposition to MF

Global’s effort to withhold and set-off fees meant that

withholding fees was not without risk; MF Global had

no assurance that the Government would not seek to

impose penalties for late payment if its challenge to

the 2017 Act was unsuccessful.

And, indeed,

withholding the unconstitutional fees was simply not

an option for some debtors, including Respondents,

who could not risk their entire reorganization on

nonpayment of quarterly fees before plan

confirmation. See Resp. Br. 26-28.

Thus, as Respondents persuasively show, this is

not a situation where a predeprivation remedy was

“‘clear and certain.’” Resp. Br. 22 (quoting Newsweek,

522 U.S. at 443-44). Rather, the Government’s

opposition made such remedies risky and inherently

uncertain. Due process therefore requires meaningful

backward looking relief in the form of a refund.

15

B. The Government’s Practical Concerns

Are Undermined By the Fact that Many

Debtors Most Likely to Request A Refund

Have Already Withheld Fees

In addition to the legal and factual points above,

the fact that many debtors who challenged the

unconstitutional fees—like MF Global—will not

actually need a refund also diminishes the likely

practical burden to the Government from a ruling that

refunds are required.

Indeed, although the Government says that it

could be facing an obligation to pay up to $326 million

in refunds, see Govt. Br. 35, that amount appears to

be overstated. Among other things, the estimate does

not take account of the fact that many of the debtors

who have already challenged the unconstitutional

fees—and are thus most likely to ask for a refund—

have already withheld fees or refunded themselves

through set-offs. Supra at 8. Likewise, to the extent

debtors who still have open cases paid the

unconstitutional fees while they existed and did not

take a set-off, those debtors can still do so going

forward until their cases close. For these debtors also,

an actual refund may never be required.

Meanwhile, debtors whose chapter 11 cases have

already concluded without having challenged the fees

are extremely unlikely to go through the

administrative burden and cost of reopening their

cases to seek a refund.

The maximum

unconstitutional fees paid by any one debtor is only

$2.86 million (i.e., $250,000 per quarter multiplied by

the 13 quarters between Q1 2018 and Q2 2021 during

which the fees were unconstitutionally nonuniform,

16

reduced by the $30,000 per quarter payable under the

prior fee regime).

The few debtors 4 who had

disbursements high enough to trigger the maximum

fees in more than one quarter, and whose cases have

since closed, are extremely unlikely to go through the

cost and administrative burden of reopening their

cases to recover at most $2.86 million of fees. Indeed,

the fact that it could be costly and burdensome to seek

a refund and ultimately could delay MF Global’s case

closing was a main reason MF Global decided to take

a set-off rather than seek a refund after the litigation

concluded.

Respondents are among the small number of

debtors who were unable to take a set-off before their

cases closed but who still challenged the

unconstitutional fees at the time they were in place.

That a refund may be required in those few cases is

not a reason to force all debtors to pay an

unconstitutional fee.

4 The U.S. Trustee has stated that during the first year after

the 2017 Act’s fee increase, “[o]nly about 130 cases per quarter

ha[d] been subject to the maximum amended quarterly fee rate

and only about 35 cases were billed the maximum amount for

each of the first four quarters after the fee increase.” United

States Trustee Program: FY 2021 Performance Budget Congressional Submission at 9 n.9, available at https://www.justice.gov/d9/pages/attachments/2020/02/09/ustp_narr_fy21_2-720_submission.pdf.

17

C. Retroactively Imposing Fees on BA Debtors Is Neither Constitutional Nor Workable

The Government’s alternative proposal to cure the

unconstitutional nonuniformity by having this Court

impose the fees retroactively on BA debtors is not a

serious proposal, for several reasons.

First, as Judge Brasher recognized in In re Mosaic

Mgmt. Grp., Inc., “there is no lawful way to implement

a backward-looking level-down remedy” on BA debtors,

because they “have their own due process rights that

prevent us from retroactively assessing higher fees in

those cases.” 71 F.4th 1341, 1355 (11th Cir. 2023)

(Brasher, J., concurring). Imposing such fees in

bankruptcy “cases that have already been closed and

the estate’s assets distributed or reorganized” would

be “so harsh” as “to transgress the constitutional

limitation.” Id. And because the leveling-down option

is a non-starter, the only valid option remaining is

that UST debtors have “a due process right to a

refund.” Id.

Second, as Respondents persuasively show, the

Government’s proposed remedy effectively overrides

the Court’s decision in Landgraf that because

“‘[r]etroactivity is not favored in the law’ . . .

‘congressional enactments and administrative rules

will not be construed to have retroactive effect unless

their language requires this result.’” Landgraf v. USI

Film Prod., 511 U.S. 244, 264 (1994) (quoting Bowen

v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988)).

Here, Congress expressly declined to impose fees

retroactively on BA debtors when it made those fees

prospectively mandatory in the 2020 Act. Yet the

18

Government asks the Court to disregard this

legislative choice and impose a fee of its own making

on BA debtors for activities done years ago.

Finally, as Respondents demonstrate, the

practical implications of the Government’s alternative

remedy are staggering. It is not at all clear how the

Government could retroactively calculate fees owed

under the Court-imposed fee schedule and then collect

those fees from BA debtors whose cases have already

closed. And even if the Government could in theory

determine and collect all amounts owed from BA

debtors, the unforeseen consequences and disputes

that would arise from imposition of an unanticipated

fee, years after decisions were made based on funds

thought to be available, is inestimable.

The Court should decline the Government’s

invitation to open that can of worms, and should

instead confirm that the appropriate remedy for

having collected an unconstitutional fee is a return of

the money taken.

III. DENYING

A

REMEDY

FOR

NONUNIFORMITY

WILL

REIGNITE

OTHER CONSTITUTIONAL CHALLENGES

TO THE 2017 ACT

Finally, the Government’s effort to avoid a remedy

for its unconstitutional fees, if successful, will not be

the end of these disputes. This is because there are

other constitutional challenges to the 2017 Act that

would be reignited if a refund is not allowed.

Among these challenges is a claim—brought by

MF Global and others—that the fees are an excessive

user fee in violation of the Takings and Due Process

Clauses of the Constitution. Specifically, as the Court

19

held in United States v. Sperry Corp., 493 U.S. 52

(1989), although “a reasonable user fee is not a

taking,” an exaction is not a constitutionally bona fide

user fee unless it is “a fair approximation of the cost

of benefits supplied.” Id. at 60, 63 (cleaned up). Here,

the benefit comes nowhere near the cost.

Chapter 11 cases make up only 1.5% of the

bankruptcy cases filed in a year. 5 Yet the quarterly

fees charged to chapter 11 debtors account for about

80% of the U.S. Trustee’s total funding. See United

States Trustee Program: FY 2021 Performance Budget

Congressional Submission at 10, available at

https://www.justice.gov/d9/pages/attachments/2020/0

2/09/ustp_narr_fy21_2-7-20_submission.pdf.

This

funding pays for all of the U.S. Trustee’s activities

across chapter 11 and non-chapter 11 cases alike. Id.

And, indeed, the U.S. Trustee spends significant

amounts of its time on non-chapter 11 matters (i.e.,

cases under chapters 7, 12, and 13). Id. at 3.

In fact, because the 2017 Act’s new fee regime

applied only to debtors with quarterly disbursements

over $1 million, only about 1,000 debtors in any

calendar quarter paid the increased fees (out of a total

of 1.5 million debtors with cases pending in the

bankruptcy system). Id. at 3, 9 n.9. The effect of this

is that, under the 2017 Amendment, a tiny fraction of

debtors (about 0.07%) supported the majority of the

cost of the U.S. Trustee’s operations through their

5 See United States Courts Statistics and Reports, Table F-2,

Bankruptcy Filings (December 31, 2018) (noting 7,095 total

chapter 11 filings and 773,418 “total all chapters”), available at

https://www.uscourts.gov/statistics/table/f/bankruptcy-filings/

2018/12/31.

20

quarterly fees. And these quarterly fees bear no

relation to the time spent by the U.S. Trustee on these

cases or the benefits received by these debtors. Put

simply, the quarterly fees were not a “fair

approximation of the cost of benefits supplied” and

were thus unconstitutional under the Takings Clause.

Sperry, 493 U.S. at 63.

Importantly, because this excess user fee

challenge is based in the Takings Clause, which

requires

a

backward-looking

remedy—“just

compensation”—the Government cannot plausibly

argue that a refund would not be required. U.S.

Const., amend V. As a result, if the nonuniformity

challenges to the 2017 Act prove not to result in a

refund, the effect will be that parties will simply bring

Takings Clause actions against the Government,

leading to continued litigation over these issues. Of

course, that can (and should) be avoided by reaching

the common-sense and legally required conclusion

that when an unconstitutional law causes financial

harm, the Constitution requires “meaningful

backward-looking relief ” to redress the wrong.

McKesson, 496 U.S. at 31. That is the rule the Court

should adopt here.

CONCLUSION

This Court should affirm the judgment of the Tenth

Circuit.

21

December 18, 2023

Respectfully submitted,

JANE RUE WITTSTEIN

JONES DAY

250 Vesey Street

New York, NY 10281

CHRISTOPHER DIPOMPEO

Counsel of Record

JONATHAN DEWITT

JONES DAY

51 Louisiana Ave., NW

Washington, DC 20001

(202) 879-3939

cdipompeo@jonesday.com

Counsel for Amicus Curiae