CF & I Fabricators of Utah, Inc., In re, 97-4079

• Decision Date: 30 June 1998
• Docket Number: No. 97-4079,97-4079
• Parties: 40 Collier Bankr.Cas.2d 510, 32 Bankr.Ct.Dec. 1001, Bankr. L. Rep. P 77,731, 98 CJ C.A.R. 3569, 15 Colo. Bankr. Ct. Rep. 276 In re CF & I FABRICATORS OF UTAH, INC., Reorganized Debtor. UNITED STATES TRUSTEE, Appellee, v. CF & I FABRICATORS OF UTAH, INC.; Pueblo Metals Company; Pueblo Railroad Service Company; Colorado & Wyoming Railway Company; Denver Metals Company; Colorado & Utah Land Company; CF & I Fabricators of Colorado, Inc.; Kansas Metals Company; Albuquerque Metals Company; CF & I Steel Corporation, collectively "debtors", Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1233

150 F.3d 1233

40 Collier Bankr.Cas.2d 510, 32 Bankr.Ct.Dec. 1001,

Bankr. L. Rep. P 77,731, 98 CJ C.A.R. 3569,

15 Colo. Bankr. Ct. Rep. 276

In re CF & I FABRICATORS OF UTAH, INC., Reorganized Debtor UNITED STATES TRUSTEE, Appellee, v. CF & I FABRICATORS OF UTAH, INC.; Pueblo Metals Company Pueblo Railroad Service Company; Colorado & Wyoming Railway Company; Denver Metals Company; Colorado & Utah Land Company; CF & I Fabricators of Colorado, Inc.; Kansas Metals Company; Albuquerque Metals Company; CF & I Steel Corporation, collectively "debtors", Appellants.

No. 97-4079.

United States Court of Appeals Tenth Circuit.

June 30, 1998.

Weston L. Harris (Elaine A. Monson, with him on the briefs), Ray, Quinney & Nebeker, Salt Lake City, Utah, for Appellants.

Bruce G. Forrest (Martha L. Davis, General Counsel, Paul Bridenhagen, and William Kanter, with him on the briefs), Appellate Staff, Department of Justice, Washington, DC, for Appellee.

Before PORFILIO, McKAY, and TACHA, Circuit Judges.

JOHN C. PORFILIO, Circuit Judge.

In this case, we are asked to determine the effect of Congress' amendment of 28 U.S.C. § 1930(a)(6) which governs the imposition of quarterly fees for the United States Trustee (UST) in certain Chapter 11 bankruptcy reorganizations. Because it could find no clear congressional intent to impose the fee retroactively and determined the fee would impermissibly require modification of a confirmed and substantially consummated plan of reorganization, the bankruptcy court held the UST could not assess the fees. The district court disagreed, and we now affirm.

In 1990, CF & I Fabricators of Utah, Inc. and nine related entities (Debtors) filed a petition for Chapter 11 reorganization primarily because they could not fund their employer-sponsored pension plans. The bankruptcy proceedings culminated in a reorganization plan (Plan) which the bankruptcy court confirmed on February 12, 1993. From the date of filing through confirmation, and, indeed, through substantial consummation of the Plan, § 1930(a)(6) provided:

In addition to the filing fee paid to the clerk, a quarterly fee shall be paid to the United States trustee, for deposit in the Treasury, in each case under chapter 11 of title 11 for each quarter (including any fraction thereof) until a plan is confirmed or the case is converted or dismissed, whichever occurs first.

(emphasis added).

Mirroring the statute in effect at the time, the Plan provided for payment of UST fees until confirmation. In addition, the Plan established numerous deadlines for filing additional claims, including a specific deadline for filing "Administrative Claims"--a term defined to include the UST fees. Pursuant to the statute, the UST charged and collected its quarterly fee until the Plan was confirmed at which time the UST no longer assessed the fees.

On January 26, 1996, long after all deadlines for filing additional claims had passed and after the Plan had been substantially consummated, Congress amended § 1930(a)(6) deleting the phrase "a plan is confirmed or." Balanced Budget Downpayment Act, I, Pub.L. No. 104-99, § 211, 110 Stat. 26, 37-38 (1996). Hence, because of the amendment, a debtor's obligation to pay quarterly UST fees no longer terminated upon confirmation. The Conference Report stated:

The conference agreement includes section 111 as proposed in the House and Senate bills, which extends the quarterly fee payments for debtors under Chapter 11 of the Bankruptcy Code to include the period from when a reorganization plan is confirmed by the Bankruptcy Court until the case is converted or dismissed. The conferees intend that this fee will apply to both pending and new cases.

H.R. Conf. Rep. No. 104-378 (1995).

In response to the amendment, the UST assessed the next quarterly fee against Debtors. Although they paid the fee, Debtors subsequently moved for an order directing the UST to refund the fees. The bankruptcy court granted Debtors' motion reasoning, "[t]he UST essentially asserts claims arising after the expiration of all applicable bar dates, against funds already allocated to creditors with allowed claims." In re CF & I Fabricators, Inc., 199 B.R. 986, 991 (Bankr.D.Utah 1996). The court believed the UST was seeking a modification to an already confirmed reorganization plan. The court noted only proponents of the plan or the reorganized debtor may modify a confirmed plan and only before substantial consummation. ¹ See 11 U.S.C. § 1127(b). Finally, the court stated Congress had not shown a clear intent the fees be applied retroactively.

Three weeks later, Congress enacted a further clarification of § 1930(a)(6):

Section 101(a) of Public Law 104-91, as amended by section 211 of Public Law 104-99, is further amended by inserting ": Provided further, That, notwithstanding any other provision of law, the fees under 28 U.S.C.1930(a)(6) shall accrue and be payable from and after January 27, 1996, in all cases (including, without limitation, any cases pending as of that date), regardless of confirmation status of their plans...."

Omnibus Consolidated Appropriations Act, 1997, Pub.L. No. 104-208, § 109(d), 110 Stat. 3009, 3009-19 (1996).

On appeal, the district court reversed the bankruptcy court's decision holding "[t]he clarifying amendment leaves no doubt, if there was any before, that Congress intended that § 1930(a)(6) apply to all pending Chapter 11 cases, including those with plans confirmed prior to the effective date of the statute." In re CF & I Fabricators, 214 B.R. 16, 18 (D.Utah 1997). The court also held the UST was not seeking a postconfirmation modification of the Plan because "[t]he fees that the debtors must pay are 'administrative expense[s] attendant to an open case.' " Id. at 19 (quoting In re McLean Square Assocs., 201 B.R. 436, 441 (Bankr.E.D.Va.1996)). From this order, Debtors have appealed.

I.

Debtors first argue, under the express language of § 1930(a)(6), they do not owe the UST any fees. They maintain § 1930(a)(6) only requires payment of fees if a case is "converted or dismissed." This case, they insist, will neither be converted nor dismissed; instead, it will likely be closed upon successful completion of the Plan. Hence, Debtors conclude, no fees are due.

In support of their argument, Debtors rely primarily upon In re Gryphon, 204 B.R. 460 (Bankr.W.D.Pa.1997), a case reversed on other grounds after submission of briefs in this appeal. The bankruptcy court in In re Gryphon stressed what it viewed as the ambiguity Congress created when it amended § 1930(a)(6):

As now enacted, § 1930(a)(6) requires payment of the quarterly fee until the case is converted or dismissed. Many chapter 11 cases are neither converted nor dismissed but are closed in the ordinary course after entry of a final decree....

....

The current version's language lends itself to the interpretation that the quarterly fee is due in perpetuity if the case is not converted or dismissed. Another interpretation is that Congress intended to have no fee paid when a case is closed without having been converted or dismissed after the chapter 11 plan was confirmed.

Id. at 468. We do not find this dicta particularly puissant and instead espouse the reasoning of another court confronted with the same argument.

The Court next finds that payment of UST fees in the instant case will terminate upon closing of the case.... The Court does not find convincing the argument that quarterly UST fees are payable only in "aborted" or "unsuccessful" Chapter 11 cases, i.e., cases that have been converted or dismissed.... First, the Amendment plainly states that quarterly fees "shall be paid to the United States trustee, for deposit in the Treasury, in each case under chapter 11 ..." 28 U.S.C. § 1930(a)(6) (emphasis added). Because the Amendment requires payment of quarterly fees "in each case," and does not read "in each unsuccessful or aborted case," the Court finds that the Amendment is applicable to successful and unsuccessful Chapter 11 cases alike.... In addition, because a "case" no longer exists once it is closed, the Court finds that the obligation to pay UST fees terminates upon closure, dismissal, or conversion of a Chapter 11 case, and will not be paid ad infinitum.

In re A.H. Robins Co., 219 B.R. 145, 149 (Bankr.E.D.Va.1998); see also In re Harness, 218 B.R. 163, 165 (D.Kan.1998) ("If a case is closed, we submit it is unreasonable to consider it a 'case under chapter 11.' "); In re McLean, 201 B.R. at 443 ("The logical conclusion is that when a case is closed, the obligation to pay quarterly fees terminates because the possibility of conversion or dismissal no longer exists. There is no ambiguity here, Congress simply did not state the obvious.").

Moreover, when Congress amended § 1930(a)(6), it intended to increase revenues collected through UST fees. In re Richardson Serv. Corp., 210 B.R. 332, 335 (Bankr.W.D.Mo.1997) ("Congress intended the amendment would result in collection of additional revenues in order to support the self-funded administration of bankruptcy cases."). Under the former § 1930(a)(6) the UST could collect fees until either a plan was confirmed or a case was converted or dismissed. It would be absurd to conclude when Congress amended § 1930(a)(6) to broaden its reach it intended to eliminate UST fees if a case successfully closed. Id.("The interpretation of the amendment given by the [CF & I bankruptcy court] would frustrate congressional intent by narrowing the category of debtors required to pay quarterly fees and would interfere with the ability of the U.S. Trustee Program to fund itself with respect to administration of confirmed plans.").

We believe § 1930(a)(6) applies to this case. We also believe Congress intended debtors pay UST fees until a case is converted, dismissed, or closed leaving no open docket in which to assess the fees.

II.

Debtors next argue, post-confirmation, "[t]he Bankruptcy Court's jurisdiction in...