MF Global Holdings Ltd. v. Harrington (In re MF Global Holdings Ltd.)

• Decision Date: 24 April 2020
• Docket Number: Case No. 16-10992 (SMB),Adv. Pro. Case No. 19-01443 (SMB),Case No. 11-15059 (MG),Adv. Pro. Case No. 19-01379 (MG)
• Citation: 615 B.R. 415
• Parties: IN RE: MF GLOBAL HOLDINGS LTD. , et al., Debtors. MF Global Holdings Ltd., as Plan Administrator, Plaintiffs, v. William K. Harrington, in his official capacity as United States Trustee for Region 2 ; Clifford J. White III, in his official capacity as Director of the United States Trustee Program; and the United States Trustee Program, Defendants. In re: SunEdison, Inc., et al., Debtors. SunEdison, Inc., et al., Plaintiff, v. United States of America, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of New York

615 B.R. 415

IN RE: MF GLOBAL HOLDINGS LTD. , et al., Debtors.

MF Global Holdings Ltd., as Plan Administrator, Plaintiffs,

v.William K. Harrington, in his official capacity as United States Trustee for Region 2 ; Clifford J. White III, in his official capacity as Director of the United States Trustee Program; and the United States Trustee Program, Defendants.

In re: SunEdison, Inc., et al., Debtors.

SunEdison, Inc., et al., Plaintiff,

v.United States of America, Defendant.

Case No. 11-15059 (MG)

Adv. Pro. Case No. 19-01379 (MG)

Case No. 16-10992 (SMB)

Adv. Pro. Case No. 19-01443 (SMB)

United States Bankruptcy Court, S.D. New York.

Dated: New York, NY April 24, 2020

JONES DAY, Attorneys for the Plaintiffs and MF Global Holdings Ltd., as Plan Administrator, 51 Louisiana Avenue, N.W., Washington, DC 20001, By: Christopher DiPompeo, Esq., -and- 250 Vesey Street, New York, NY 10281, By: Bruce Bennett, Esq., Jane Rue Wittstein, Esq., Furqaan Siddiqui, Esq.

AKERMAN LLP, Attorneys for the Plaintiffs and SunEdison, Inc., as Reorganized Debtors, 2001 Ross Avenue, Suite 3600, Dallas, TX 75201, By: David W. Parham, Esq., ( Admitted Pro Hac Vice ), -and- 420 South Orange Avenue, Suite 1200, Orlando, FL 32801, By: Esther A. McKean, Esq. ( Admitted Pro Hac Vice ), -and- 666 Fifth Avenue, 20th Floor, New York, NY 10103, BY: John P. Campo, Esq.

DEPARTMENT OF JUSTICE, EXECUTIVE OFFICE FOR UNITED STATES TRUSTEES, Attorneys for the Defendants 441 G Street, N.W., Suite 6150, Washington, DC 20530, By: Wendy Cox, Esq. ( Admitted Pro Hac Vice ), Ramona D. Elliott, Esq., P. Matthew Sutko, Esq., Beth A. Levene, Esq., Melanie D. Hendry, Esq. Sumi Sakata, Esq.

DEPARTMENT OF JUSTICE, OFFICE OF THE UNITED STATES TRUSTEE, Attorneys for the Defendants, 201 Varick Street, Room 1006, New York, NY 10014, By: William K. Harrington, Esq., Linda A. Riffkin, Esq., Benjamin J. Higgins, Esq., Brian Masumoto, Esq., Andrew Velez-Rivera, Esq.

GEOFFREY S. BERMAN, UNITED STATES ATTORNEY FOR THE SOUTHERN DISTRICT OF NEW YORK, Attorneys for the Defendants, 86 Chambers Street, 3rd Floor, New York, NY 10007, By: Peter Aronoff, Esq., Talia Kraemer, Esq.

MEMORANDUM OPINION RESOLVING CROSS-MOTIONS FOR SUMMARY JUDGMENT

STUART M. BERNSTEIN and MARTIN GLENN, UNITED STATES BANKRUPTCY JUDGES

I. INTRODUCTION ¹

This joint opinion addresses common issues of fact and law raised by the Cross-Motions for Summary Judgment (together, the "Motions") in two separate Adversary Proceedings—one pending before Judge Bernstein and the other pending before Judge Glenn. The two Adversary Proceedings were commenced in connection with the two separate post-confirmation, chapter 11 cases of SunEdison, Inc. and MF Global Holdings Ltd. (together, the "Plaintiffs"). The Defendants in these Adversary Proceedings are, for all intents and purposes, the same, and the briefs and arguments relating to the Motions are substantially the same. The MF Global plaintiffs have filed a joinder to the SunEdison plaintiffs' summary judgment briefings, and the defendants named by MF Global have filed a joinder to the summary judgment briefings submitted by the defendants named by SunEdison. Because of the common facts, issues, arguments and parties, we decide the common issues together. To be clear, however, while we reach the same resolution of the Motions, this Joint Opinion reflects the separate opinion of the each of us in our respective Adversary Proceedings. See In re Nat'l Bank of Anguilla (Private Banking Tr.) Ltd. , 580 B.R. 64, 69 (Bankr. S.D.N.Y. 2018).

The dispute centers on the increase in quarterly fees payable to the United States Trustee ("UST") under amended 28 U.S.C. § 1930(a)(6)(B). As described below, the increased fees are designed primarily to support the UST Program. They became effective for the quarter beginning January 1, 2018 and, the UST maintains, apply to pending cases, including those commenced by the Plaintiffs. The Plaintiffs argue that the increased fees are unconstitutional on various grounds and they are only liable for the pre-amendment, quarterly fee amounts applicable on the effective dates of their respective chapter 11 plans. The UST counters that the amended quarterly fee amounts are constitutionally permissible and the Plaintiffs must pay those fees. For the reasons discussed below, we conclude that the Defendants' motions for summary judgment should be GRANTED and the Plaintiffs' motions for summary judgment should be DENIED :

the quarterly fees payable pursuant to 28 U.S.C. § 1930(a)(6), as amended, are constitutional.

Particularly in light of the split in bankruptcy court decisions addressing these important issues that require a uniform result, whatever is decided here is certainly not going to be the last word on the issues. Therefore, we certify the decisions herein for immediate appeal to the United States Court of Appeals for the Second Circuit pursuant to 28 U.S.C. § 158(d)(2)(A)(i) and (ii).

II. BACKGROUND

A. MF Global's Chapter 11 Cases

Beginning on October 31, 2011 (the "MFG Petition Date"), MF Global Holdings Ltd. ("Holdings Ltd.") and certain affiliates² (collectively, the "MF Global Debtors" or "MF Global") filed voluntary chapter 11 bankruptcy petitions.³ ("MFG Facts," ECF Doc. # 15 ¶ 1.)⁴ The MF Global Debtors' cases are jointly administered under Case No. 11-15059 (MG) ("MFG Main Case") pursuant to Federal Rule of Bankruptcy Procedure 1015(b). ( Id. ¶ 4 (citing MFG Main Case, ECF Doc. ## 19, 298, 528).)

On April 5, 2013, the Court confirmed MF Global's joint plan of liquidation (the "MFG Plan") and the MFG Plan became effective on June 4, 2013 (the "MFG Effective Date"). (MFG Facts ¶¶ 11, 13.) As of the MFG Effective Date, Holdings Ltd. became the Plan Administrator under the MFG Plan. ( Id. ¶ 14.) Although MF Global's cases were consolidated for administrative purposes, the MFG Plan acknowledged that "the Plan constitutes a separate chapter 11 plan of liquidation for each Debtor." (Id. ¶¶ 7, 16.)

The MFG Plan provided that the Plan Administrator would pay quarterly fees to the United States Trustee Program (the "UST Program") under 28 U.S.C. § 1930 for each MF Global Debtor's estate until the closing of the applicable chapter 11 case pursuant to section 350(a) of the Bankruptcy Code. ( Id. ¶ 19 (citing MFG Main Case, ECF Doc. # 1382 at Art. II.A.5).)

B. SunEdison's Chapter 11 Cases

Beginning on April 21, 2016 (the "SUNE Petition Date"), SunEdison, Inc. ("SunEdison") and certain affiliates⁵ (collectively, the "SunEdison Debtors" or "SunEdison") filed voluntary chapter 11 bankruptcy petitions. ("SUNE Facts," ECF Doc. # 16 ¶ 2.)⁶ The SunEdison Debtors' cases are jointly administered under Case No. 16-10992 (SMB) ("SUNE Main Case") pursuant to Federal Rule of Bankruptcy Procedure 1015(b). ( Id. ¶ 3 (citing SUNE Main Case, ECF Doc. # 66).)

On July 28, 2017, the Court confirmed the SunEdison Debtors' joint plan of liquidation (the "SUNE Plan") which became effective on December 29, 2017 (the "SUNE Effective Date"). (Id. ¶¶ 10, 15.) Although the SunEdison Debtors' cases were consolidated for administrative purposes, each SunEdison Debtor's estate was separately preserved in the SUNE Plan, with each SunEdison Debtor's creditors being provided for in the SUNE Plan. ( Id. ¶ 11.) Pursuant to the SUNE Plan, "[t]he Reorganized Debtors shall continue to pay fees pursuant to [ 28 U.S.C. § 1930 ] until the Chapter 11 Cases are closed by entry of the Final Decree." ( Id. ¶ 18 (quoting SUNE Plan, SUNE Main Case, ECF Doc. # 3735 at Art. XIV § 14.2).) On the SUNE Effective Date, the SunEdison Debtors transferred certain assets to the GUC/Litigation Trust for the benefit of holders of general unsecured claims ( id. ¶ 16), and began operating as Reorganized Debtors. ( Id. ¶ 4.)

C. The Pre-Amendment UST Program Quarterly Fees

The UST Program, described below, operates in eighty-eight of the ninety-four districts that comprise the federal judicial system ("UST Districts"). The remaining six districts—located in Alabama and North Carolina ("BA Districts")—are administered by a Bankruptcy Administrator ("BA") who is overseen by the Judiciary. Pursuant to 28 U.S.C. § 1930(a)(6), chapter 11 debtors in UST Districts must pay quarterly fees based on their quarterly disbursements until their cases are converted or dismissed. At the time that the Plaintiffs filed their chapter 11 cases and confirmed their plans, the following quarterly fee schedule ("Pre-Amendment Schedule" or "Pre-Amendment Fees") was in effect:

                Quarterly Disbursement Range Quarterly Fee
                                  $0 to $14,999.99                       $325
                                  $15,000 to $74,999.99                  $650
                                  $75,000 to $149,999.99                 $975
                                  $150,000 to $224,999.99                $1,625
                                  $225,000 to $299,999.99                $1,950
                                  $300,000 to $999,999.99                $4,875
                                  $1,000,000 to $1,999,999.99            $6,500
                                  $2,000,000 to $2,999,999.99            $9,750
                                  $3,000,000 to $4,999,999.99            $10,400
                                  $5,000,000 to $14,999,999.99           $13,000
                                  $15,000,000 to $29,999,99.99           $20,000
                                  $30,000,000 or more                    $30,000
                

(MFG Facts ¶ 21.) Thus, the maximum quarterly fee per debtor was capped at $30,000 and only applied to disbursements of $30 million or more. ( Id. ¶ 29.)

D. Congress Increases the Quarterly Fees Payable to the UST Program Under 28 U.S.C. § 1930(a)(6)

For reasons described below, on October 26, 2017, Congress enacted and the President signed the Bankruptcy Judgeship Act of 2017 ("2017 Act"), Pub. L. No. 115-72.⁷ Section 1004(a) of the 2017 Act amended 28 U.S.C. § 1930(a)(6) to increase the quarterly fees that chapter 11 debtors were required to pay (the "2017 Amendment"). Section 1930(a)(6)(B), as amended, provides:

During each of the fiscal years 2018 through 2022, if the balance in the

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