Pidcock v. United States (In re ASPC Corp.)
| Decision Date | 13 July 2021 |
| Docket Number | Case No. 18-52736,Adv. Pro. No. 19-2120 |
| Parties | IN RE: ASPC CORP., f/k/a AcuSport Corp., Debtor. John B. Pidcock, not individually but as Trustee of the ASPC Creditor Trust, Plaintiff, v. The United States of America, Defendant. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio |
Thomas R. Fawkes, Tucker Ellis LLP, Chicago, IL, Douglas L. Lutz, Cincinnati, OH, for Plaintiff.
Jeremy Shane Flannery, Mary Anne Wilsbacher, USDOJ - Office of the U.S. Trustee, Columbus, OH, for Defendant.
This adversary proceeding arises in the Chapter 11 case of ASPC Corp. (the "Debtor"). The plaintiff is John B. Pidcock ("Pidcock") in his capacity as the trustee of the creditor trust established by the Debtor's confirmed Chapter 11 plan, and the defendant is the United States of America. Pidcock challenges the constitutionality of the federal statute under which the United States Trustee assessed quarterly fees against the Debtor. As a result of an amendment to the statute, the Debtor paid much higher quarterly fees than it would have paid under the pre-amendment version of the statute. More to the point, the Debtor paid much higher quarterly fees than it would have paid if it had filed its bankruptcy case in one of the six districts that are not part of the United States Trustee Program. In his motion for summary judgment, Pidcock contends that this differential between what the Debtor paid and what it would have paid in certain other districts means that the amendment violates the Tax Uniformity Clause and the Bankruptcy Clause, two provisions of the United States Constitution requiring that federal laws be uniform throughout the United States. Pidcock also argues that the difference between what the Debtor paid and what it would have paid in other districts, when combined with the purportedly excessive amount of the quarterly fees charged under the amendment, means that the statute violates the Federal Constitution's Takings Clause. In its motion for summary judgment, the United States contends that the amendment does not violate the Federal Constitution.
Because the quarterly fees assessed against the Debtor are user fees—rather than a tax or similar charge—the Tax Uniformity Clause does not apply to the amendment. And the Bankruptcy Clause raises no constitutional concerns for two reasons. First, just as Congress may enact legislation that addresses geographically isolated problems without violating constitutional uniformity requirements, it is also constitutionally permissible for it to resolve a problem that was only present in the districts overseen by United States Trustees—the underfunding of the United States Trustee System Fund. Second, the lower amount of quarterly fees that the Debtor would have paid in districts outside the United States Trustee Program is the result of uneven implementation of the statute, not an unconstitutional lack of uniformity. Finally, the Court concludes that the Takings Clause does not apply and that, even if it did, the quarterly fees assessed against the Debtor are not so excessive that they give rise to a violation of the Takings Clause. The Court therefore denies Pidcock's request for summary judgment and grants summary judgment in favor of the United States.
The Court has jurisdiction to hear and determine this adversary proceeding under 28 U.S.C. § 1334(b) and the general order of reference entered in this district in accordance with 28 U.S.C. § 157(a). This is a core proceeding. See 28 U.S.C. § 157(b)(2)(A) & (O). Because a dispute over quarterly fees "stems from the bankruptcy itself," the Court also has the constitutional authority to enter a final order in this matter. Stern v. Marshall , 564 U.S. 462, 499, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011).
The Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on May 1, 2018. The Court entered an order confirming the Debtor's Chapter 11 plan on January 28, 2019. The order confirming the plan provides in relevant part that the:
Debtor shall pay to the United States Trustee all fees required pursuant to 28 U.S.C. § 1930(a)(6) ("UST Fees") prior to or on the Effective Date. Any UST Fees accruing after the Effective Date shall be paid by the Creditor Trust. The Creditor Trustee shall continue to make timely payments to the [United States Trustee] pursuant to 28 U.S.C. § 1930(a)(6) for all periods up to the date the Chapter 11 Case is converted, dismissed, or closed by Final Order of the Court. The Creditor Trust and Creditor Trustee shall also provide the [United States Trustee] with post-confirmation quarterly reports that shall include all of their respective quarterly disbursements.
Case No. 18-52736, Doc. 510 ¶ 5.
By the complaint initiating this adversary proceeding, Pidcock seeks a determination regarding "the Debtor's true liability for quarterly fees payable to the [United States Trustee] pursuant to 28 U.S.C. § 1930(a)(6), and to the extent that th[e] Court determines that the Debtor made overpayments to the [United States Trustee] ... an order requiring the [United States Trustee] to remit any such overpayments to the Creditor Trust." Compl. ¶ 1. The United States filed a motion for summary judgment with a memorandum of law in support (the "United States Memorandum") (Doc. 21), and Pidcock also filed a motion for summary judgment (Doc. 23) and memorandum of law in support (the "Pidcock Memorandum") (Doc. 24). The United States filed an objection (Doc. 26) to Pidcock's motion, and Pidcock filed an objection (Doc. 27) to the United States' motion. Each of the parties responded with a reply to the other party's objection (Doc. 29 and Doc. 30). The United States also submitted several notices of supplemental authority (Docs. 34, 37, 40, 41, 42, 43 & 44). The Court heard oral argument on the motions for summary judgment and took the matter under advisement.
A court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) (). "On a motion for summary judgment, facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts." Ricci v. DeStefano , 557 U.S. 557, 586, 129 S.Ct. 2658, 174 L.Ed.2d 490 (2009) (internal quotation marks omitted). The parties agree that there are no material facts in dispute in this proceeding. See United States Mem. at 12; Pidcock Mem. at 10.
The administration of bankruptcy cases across most of the country is overseen by United States Trustees working within the United States Trustee Program, a component of the executive branch's United States Department of Justice. See Clinton Nurseries of Md., Inc. v. Harrington (In re Clinton Nurseries, Inc.) , 998 F.3d 56, 59 (2d Cir. 2021). Out of the 94 districts that make up the federal judicial system, United States Trustees oversee administrative functions in 88 districts (the "UST Districts"), id ., including the Southern District of Ohio. The administrative functions in the six districts located in Alabama and North Carolina (the "BA Districts"), however, are handled by administrators working within the United States Bankruptcy Administrator Program. Id . at 59–60. The bankruptcy administrators are overseen by the judicial branch's Administrative Office of the United States Courts, which in turn is supervised by the Judicial Conference of the United States (the "Judicial Conference"). See In re Buffets, L.L.C. , 979 F.3d 366, 370 (5th Cir. 2020) ; MF Glob. Holdings Ltd. v. Harrington ( ) , 615 B.R. 415, 426 (Bankr. S.D.N.Y. 2020), abrogated on other grounds by Clinton Nurseries , 998 F.3d at 56 ; Acadiana Mgmt. Grp., LLC v. United States , 151 Fed. Cl. 121, 124 (Fed. Cl. 2020). It has been this way since 1986, when Congress launched the United States Trustee Program in every state other than Alabama and North Carolina.1 Those two states received an exemption from participating in the United States Trustee Program as part of what has been described as "an arbitrary political relic," Buffets , 979 F.3d at 383 (Clement, J., concurring in part and dissenting in part), and the "result of successful lobbying by bankruptcy judges and senators [in] the six federal judicial districts in North Carolina and Alabama," In re John Q. Hammons Fall 2006, LLC , 618 B.R. 519, 522 (Bankr. D. Kan. 2020).
In addition to being housed in different branches of the federal government, the two programs are separately funded. From its inception, the United States Trustee Program was funded through annual appropriations that are offset by fees paid by debtors, including fees paid by Chapter 11 debtors based on the disbursements2 they make each quarter. See Buffets , 979 F.3d at 371. These "quarterly fees," which are deposited into the United States Trustee System Fund, are paid under 28 U.S.C. § 1930(a)(6). Id . Section 1930(a)(6)(A) provides that "a quarterly fee shall be paid to the United States trustee ... in each case under chapter 11 of title 11 ... for each quarter (including any fraction thereof) until the case is converted or dismissed, whichever occurs first." 28 U.S.C. § 1930(a)(6)(A) (emphasis added).3 "In creating the United States Trustee System Fund and mandating quarterly fees, Congress sought to ensure the trustee program would be paid for ‘by the users of the bankruptcy system—not by the taxpayer.’ " Clinton Nurseries , 998 F.3d at 60 (quoting H.R. Rep. No. 99-764 at 22).
The United States...
To continue reading
Request your trial