McCallister v. Evans
| Decision Date | 08 February 2022 |
| Docket Number | Case No. 4:20-cv-00112-DCN |
| Citation | 637 B.R. 144 |
| Parties | Kathleen A. MCCALLISTER, Appellant, v. Roger A. EVANS and Lori A. Steedman, Appellees. |
| Court | U.S. District Court — District of Idaho |
Jeffrey Philip Kaufman, Office of Kathleen A. McCallister, Chapter 13 Trustee, Kathleen A. McCallister, Meridian, ID, Mahesha P. Subbaraman, Pro Hac Vice, Subbaraman PLLC, Minneapolis, MN, for Appellant.
Alexandra O. Caval, Caval Law Office, P.C., Twin Falls, ID, for Appellees.
This matter comes before the Court on appeal from the bankruptcy court. Dkt. 11. Appellant Kathleen McCallister seeks this Court's review of Judge Joseph M. Meier's Order Sustaining Objection to Trustee's Final Order entered February 13, 2020, in the underlying bankruptcy case. Bankruptcy Case No. 19-40193-JMM, Dkts. 40, 41.1
On November 8, 2021, this Court held oral argument. For the reasons outlined below, the Court REVERSES and REMANDS.
McCallister (the "Trustee") is a chapter 13 bankruptcy standing trustee in the District of Idaho. In that position, she received payments from Roger Evans and Lori Steedman (the "Debtors") according to their chapter 13 debt repayment plan. However, before the plan was confirmed, the Debtors voluntarily dismissed their chapter 13 case.
Up until the dismissal, the Trustee had collected a percentage fee from the plan payments as compensation for her work. The issue now is whether the Trustee keeps the fee or must return it to the Debtors. This dispute boils down to differing statutory interpretations of 28 U.S.C. § 586(e)(2), the statute governing the Trustee's collection of the fees; and 11 U.S.C. § 1326(a), the statute governing the return of payments.
The bankruptcy court concluded that the Trustee must return the percentage fee in this case and in another case where the same issue was raised, In re Harmon , No. 19-01424-TLM, 2020 WL 6037759 (Bankr. D. Idaho June 23, 2020).2 In both cases, McCallister was the Trustee. She appealed In re Harmon to the Bankruptcy Appellate Panel of the Ninth Circuit (the "Ninth Circuit BAP"). The BAP reversed the bankruptcy court, holding that § 586(e)(2) unambiguously provides that the Trustee keeps the percentage fee for herself even though the plan was not confirmed. In re Harmon , 2021 WL 3087744 (9th Cir. BAP July 20, 2021).
The BAP decision is not binding on this Court. Bank of Maui v. Estate Analysis, Inc. , 904 F.2d 470, 472 (9th Cir. 1990). That said, this Court benefits from the BAP's analysis of this issue.
An appellant may petition the district court for review of a bankruptcy court's decision. Fed. R. Bankr. P. 8013. The applicable standard of review is the same as that which circuit courts of appeal apply when reviewing district court decisions: "Factual determinations are reviewed under the clearly erroneous standard, while determinations of law are reviewed de novo." In re Andrews , 155 B.R. 769, 770 (9th Cir. BAP 1993).
Below are the two statutes at issue. The first, § 586(e)(2), explains that the Trustee collects a percentage fee from payments made pursuant to bankruptcy plans, and the second, § 1326(a), explains that the Trustee must return to the Debtor payments made if the chapter 13 bankruptcy plan is not confirmed:
[The Trustee] shall collect such percentage fee from all payments received by such individual under plans in the cases under subchapter V of chapter 11 or chapter 12 or 13 of title 11 for which such individual serves as standing trustee. Such individual shall pay to the United States trustee, and the United States trustee shall deposit in the United States Trustee System Fund [the statutory required amounts].
28 U.S.C. § 586(e)(2).
11 U.S.C. § 1326(a).
The issue is whether § 1326(a) ’s instruction to return the payments includes the percentage fee collected under § 586(e)(2). The practice of standing trustees is to keep the percentage fee; however, upon challenges to that practice, some courts have decided that the trustees should refund the fee. See, e.g. , In re Doll , 2021 WL 5768991 (D. Colo. Dec. 6, 2021) ; In re Lundy , 2017 WL 4404271 (Bankr. N.D. Ohio Sept. 29, 2017) ; In re Dickens , 513 B.R. 906 (Bankr. E.D. Ark. 2014) ; In re Acevedo , 497 B.R. 112 (Bankr. D.N.M. 2013) ; In re Rivera , 268 B.R. 292 (Bankr. D.N.M. 2001), aff'd sub nom., Skehen v. Miranda (In re Miranda) , 285 B.R. 344 (table), 2001 WL 1538003 (10th Cir. BAP Dec. 4, 2001). Meanwhile, other courts, including the Ninth Circuit BAP, have affirmed the practice of standing trustees keeping the percentage fee. See, e.g. , In re Harmon , 2021 WL 3087744, at *3 (9th Cir. BAP July 20, 2021) ; Nardello v. Balboa (In re Nardello) , 514 B.R. 105 (D.N.J. 2014) ; In re Soussis , 624 B.R. 559 (Bankr. E.D.N.Y. 2020), aff'd sub nom., Soussis v. Macco , 2022 WL 203751 (E.D.N.Y. Jan. 24, 2022).
This Court joins those courts that have held that chapter 13 standing trustees may keep the percentage fee pursuant to the plain language of § 586(e)(2) even if the plan is not confirmed.
When interpreting a statute, a court's first step is to "determine whether the language at issue has a plain and unambiguous meaning." Robinson v. Shell Oil Co. , 519 U.S. 337, 340, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997). Where the statutory language is unambiguous, the court's inquiry is at an end. Nat'l Ass'n of Mfrs. v. Dep't of Def. , ––– U.S. ––––, 138 S.Ct. 617, 631, 199 L.Ed.2d 501 (2018) () (cleaned up). "The plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." Robinson , 519 U.S. at 341, 117 S.Ct. 843 (citations omitted).
The bankruptcy court concluded that § 586(e)(2) is ambiguous, "especially when construed together" with § 1326(a). The Debtors argue in their appellee brief that § 586(e)(2) is ambiguous in that there are three possible interpretations, or constructions, of § 586(e)(2) : First, under what the parties refer to as the "mandatory construction," the Trustee keeps the percentage fee because the statute obligates the trustee to collect fees from all payments whether or not the plan is confirmed. Second, under the "collect and hold construction," the Trustee collects and hold the percentage fees until confirmation at which point the Trustee disburses the payments to the creditors and the fee to herself as directed by § 1326(a) and § 586(e). And third, under the "responsibility and source construction," the statute's purpose is only to identify the Trustee as the party responsible for collecting the percentage fee and to identify the plan payments as the source for collection, but the statute does not answer the question of when the fee is paid and collected.
The Trustee meanwhile argues that § 586(e)(2) is unambiguous and that the mandatory construction is the plain meaning of the statute. Emphasizing four phrases—(1) "shall collect," (2) "from all payments," (3) "under plans," and (4) "serves as the standing trustee"—the Trustee argues that § 586(e)(2) prescribes the who, what, when , and how of the percentage fee. Debtors make payments to the Trustee under the proposed chapter 13 plan, whether or not it is confirmed yet. Upon receipt of the payments, the Trustee takes a percentage fee for her work as the standing trustee. Upon review, each of the four phrases emphasized by the Trustee supports the mandatory construction.
The first phrase is "shall collect." "Collect" conveys something final. There is no condition or exception—collect it and its yours. The definition of "collect" is "to receive payment." Black's Law Dictionary 238 (5th ed. 1979); see also Webster's Encyclopedic Unabridged Dictionary 403 (1996) (same).
Collectors are not in the business of returning payments. And Congress knows this. Thus, when Congress has wanted collection to be conditional or reversible, it has specified. See, e.g. , 28 U.S.C. § 576(a) () (emphasis added); id. § 1914(b) (); 23 U.S.C. § 605(b) (). Here, Congress has not conditioned collection.
What's more, Congress has required that excess percentage fees, those fees which the Trustee does not personally get to keep, be deposited in the United States Trustee System Fund rather than be returned to the debtors. 28 U.S.C. § 586(e). And once the fee is deposited there, the money "can only be withdrawn by an appropriation by law." Knote v. United States , 95 U.S. 149, 154, 24 L.Ed. 442 (1877). That the excess percentage fees are not returned to the Debtor but rather collected in this fund is only further evidence that the remainder of the percentage fees should not be returned either.
The second phrase the Trustee emphasizes is "from all payments." "[T]he burden is heavily on the suitor who would subject the word ‘all’ with its...
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