In re CF & I Fabricators of Utah, Inc.
| Decision Date | 05 September 1996 |
| Docket Number | Bankruptcy No. 90B-26721 to 90B-26730. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Utah |
| Parties | In re CF & I FABRICATORS OF UTAH, INC., et al., Reorganized Debtors. (Colorado & Utah Land Company) (Kansas Metals Company) (Albuquerque Metals Company) (Pueblo Metals Company) (Denver Metals Company) (Pueblo Railroad Service Co.) (CF & I Fabricators of Colo., Inc.) (CF & I Steel Corporation) (The Colorado & Wyoming Railway Co.). |
Weston L. Harris, Steven T. Waterman, Ray, Quinney & Nebeker, Salt Lake City, UT, for the Reorganized Debtors.
Peter J. Kuhn, Office of United States Trustee, Salt Lake City, UT, for U.S. Trustee.
Before the Court is the Motion Dated June 10, 1996 for Order Directing United States Trustee to Refund to the Reorganized Debtors Fees Improperly Assessed Under 28 U.S.C. § 1930(a)(6) (Motion) filed by the reorganized debtors. The United States Trustee (UST) opposed the Motion. The Motion places at issue whether the newly created post-confirmation fee provided in 28 U.S.C. § 1930(a)(6) (the Amendment or 28 U.S.C. § 1930(a)(6)) should be applied to chapter 11 cases with liquidating plans confirmed and substantially consummated before January 27, 1996. After careful consideration of the arguments of the parties and an independent analysis of applicable case law, this Court concludes the UST's fees cannot be assessed in Chapter 11 cases with liquidating plans allocating all estate assets to creditors that were confirmed and substantially consummated prior to the effective date of the Amendment.
An understanding of the history of these jointly administered cases is necessary to place in perspective the post-confirmation UST fee issue. The facts are undisputed.1 CF & I Fabricators of Utah, Inc., a vertically integrated steel manufacturer, and nine related entities (collectively the Debtors or Reorganized Debtors) filed petitions seeking relief under Chapter 11 of the Bankruptcy Code on November 7, 1990. The Debtors' venture into Chapter 11 was driven by their need to resolve a substantial pension plan shortfall, and a variety of tax and environmental issues. Creditors filed more than 1,600 proofs of claim asserting in excess of $2,000,000,000 in claims against the estates.
The Debtors were able to propose the Debtors' and Railroad Trustee's First Amended and Restated Joint Plan of Reorganization Dated December 1, 1992 (Plan). The liquidating Plan is a lengthy, complex document. As eventually confirmed by the Court, the Plan contains sixteen classes of claimants. Plan, Article III, ¶ 51. The Plan provides that the Debtors, with the exception of Kansas Metals Company and Colorado & Utah Land Company, sell the majority of their assets to New CF & I Steel, L.P., a newly created entity,2 pursuant to the terms of an Asset Purchase Agreement. Plan, Ex.B, p. 1. The consideration paid to the Debtors for the sale of their assets under the Asset Purchase Agreement is a complex mix of cash, deferred payments and stock. It consists generally of cash in an adjusted amount of approximately $18,000,000 paid at closing; a deferred stock payment of 598,400 shares of the purchaser's parent corporation with additional five-year warrants to purchase additional shares; $67,500,000 plus interest payable over 10 years; and an assumption of certain liabilities. Plan, Ex.B, p. 9-15. The assets of Kansas Metals Company and Colorado & Utah Land Company, and the remaining assets of the Debtors who are parties to the Asset Purchase Agreement are required to be used, sold or leased in an orderly manner using such methods that would obtain the highest net value from the assets within a reasonable period of time. Plan, Article IV, ¶¶ 52-53.
After a lengthy confirmation hearing, during which more than 8,000 ballots were considered, the Court confirmed the Plan by order entered February 12, 1993. Various provisions of the Plan fix the rights of creditors with impaired claims. It also fully allocates to creditors all assets in the estates, including the proceeds of the Asset Purchase Agreement and the net proceeds of any operation of any Debtor post-confirmation. Some of the more significant provisions of the Plan, in general terms, are as follows.
Class 1 of the Plan deals with the Debtors' liability for retiree benefits by providing that the Debtors pay $872,000 into a fund on the effective date, with additional substantial contributions thereafter.3 Class 11 provides for certain of the Debtors' trade creditors by allocating up to $500,000 to the class for pro-rata distribution on the effective date.4 Class 12 includes allowed unsecured creditors that would share pro-rata in a portion of the proceeds of the Asset Purchase Agreement and certain other assets.5 The Plan also establishes various appeal funds related to litigation involving the Pension Benefit Guaranty Corporation (PBGC),6 a fund to finance the Debtors' litigation against the PBGC,7 and fixes a variety of bar dates.8
The Plan defines "Reorganized Debtors" as the Debtors on or after the effective date, including representatives of the Reorganized Debtors identified in the provisions of the Plan concerning governance of the Reorganized Debtors. Plan, Article I, ¶ 43. In addition, the Plan states that, upon confirmation, assets did not vest in the Debtors, but each Debtor's estate retained all of its property free and clear of liens except as provided in the Plan, subject to each Debtor's obligations under the Plan.9 Finally, the Plan reserves the Debtors' right to amend or modify the Plan in accordance with the Bankruptcy Code. Plan, Article VII, ¶ 93.
On March 3, 1993, the effective date of the Plan, the officers and directors of the Debtors were released from their positions. The Debtors and the Official Unsecured Creditors' Committee (Creditors' Committee) agreed that the Reorganized Debtors should be governed by a committee comprised of some of the members of the former Creditors' Committee (Reorganized Creditors' Committee). Plan, Article IV, ¶ 54; Confirmation Order, p. 15 & Exhibit 2 (setting forth "Post-Effective Date Governance of the Reorganized Debtors").10
As of the effective date of the Plan, seven of the ten Debtors sold substantially all of their assets to New CF & I Steel, L.P. and ceased business operations. The three remaining Debtors continued to operate for four, five, and sixteen months, while their assets were liquidated. The last Debtor to cease business operations did so in July of 1994, and the last Debtor to substantially consummate its Plan did so almost two years ago. In the last two years, none of the ten Debtors have engaged in any business operations.
The Court has not entered an order of conversion or dismissal in any of the Debtors' cases, and none of the Debtors have requested that the Court issue a final decree. The Debtors remain under the jurisdiction of the Court to resolve claims issues, most of which involve claims of governmental entities or the PBGC, a public corporation. The United States Department of Labor and the PBGC have appeals pending to the United States District Court for the District of Utah that will probably be appealed to the United States Tenth Circuit Court of Appeals, and possibly, petitions for certiorari may be filed with the United States Supreme Court.11 The Reorganized Debtors estimate that the Debtors' cases will continue under the jurisdiction of this Court, without dismissal, conversion or a final decree, for approximately four years to come.
On January 26, 1996, Congress passed an Amendment12 to 28 U.S.C. § 1930 which provides that the UST may collect quarterly fees in a Chapter 11 case until conversion or dismissal of the case. In April of 1996, the Office of the UST assessed nine of the ten Reorganized Debtors fees of $250.00 each, and the tenth Reorganized Debtor, Reorganized CF & I Steel Corporation, fees of $3,750. Each of the Reorganized Debtors paid the UST the amount assessed. The Reorganized Debtors estimate that they may pay as much as $100,000 to the UST before seeking final decrees. The Reorganized Debtors were unable to identify which of the liquidated Debtors' assets have been used to satisfy the assessments that have been paid to the UST thus far.
The Reorganized Debtors filed their Motion asserting that the clear language of the Amendment makes it inapplicable to the Reorganized Debtors, (although conceding that the Reorganized Debtors are the same entities that filed the petitions in November of 1990) and that the Amendment is impermissibly retroactive. The UST filed a response to the Motion, arguing that the Reorganized Debtors misconstrue the principles of retroactivity, that the clear legislative intent of the Amendment supports the collection of the fees in these cases, and that the Amendment satisfies constitutional requirements.13 Neither party has addressed the propriety of the relief requested by the Reorganized Debtors that seeks return of the fees previously paid to the UST. The UST has not raised as a defense that the claim asserted in the Motion is not property of the estate as set forth in 11 U.S.C. § 541(a)(7) entitled to be recovered pursuant to 11 U.S.C. § 549(a), nor that recovery is procedurally improper pursuant to Fed.R.Bankr.P. 7001.14 Nor has the UST asserted 11 U.S.C. § 106 as a defense against the imposition of an order requiring the return of the fees. This Court has jurisdiction to resolve the issues pursuant to the Plan, Article IV, ¶ 66 and Article VI, ¶ 86.15 However, such resolution must be consistent not only with the Bankruptcy Code and case law, but with the procedural requirements of the Bankruptcy Rules.
Should the Amendment to 28 U.S.C. § 1930(a)(6) be...
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