Vergos v. Gregg's Enterprises, Inc.

• Decision Date: 06 November 1998
• Docket Number: No. 97-6079,97-6079
• Citation: 159 F.3d 989
• Parties: , Bankr. L. Rep. P 77,845 Ellen B. VERGOS, United States Trustee for Region 8, Appellant, v. GREGG'S ENTERPRISES, INC.; Billy Curtis Collins; Harold G. Jones and Barbara E. Jones, doing business as H & B Properties; Barbara June Boone, doing business as B n J Grocery; Charles W. Qualls and Marilyn P. Qualls; Jule H. Nance, Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 989

159 F.3d 989

33 Bankr.Ct.Dec. 509, Bankr. L. Rep. P 77,845

Ellen B. VERGOS, United States Trustee for Region 8, Appellant, v. GREGG'S ENTERPRISES, INC.; Billy Curtis Collins; Harold G Jones and Barbara E. Jones, doing business as H & B Properties; Barbara June Boone, doing business as B n J Grocery; Charles W. Qualls and Marilyn P. Qualls; Jule H Nance, Appellees.

No. 97-6079.

United States Court of Appeals Sixth Circuit.

Argued and Submitted Sept. 18, 1998.

Decided Nov. 6, 1998.

William Kanter (briefed), H. Thomas Byron, III (argued and briefed), U.S. Department of Justice, Civil Division, Appellate Staff, Washington, D.C., for Appellant.

Michael T. Tabor (briefed), Merkel & Tabor, Jackson, TN, for Appellees.

Before: GUY, NELSON, and MOORE, Circuit Judges.

OPINION

MOORE, Circuit Judge.

The sole issue presented in this appeal of six consolidated bankruptcy proceedings is the proper interpretation of a recently amended statute, 28 U.S.C. § 1930(a)(6), which requires debtors in Chapter 11 reorganization cases to pay quarterly fees to the U.S. Trustee. The bankruptcy court and the district court held that the amended statute requires the payment of quarterly fees after plan confirmation only in those Chapter 11 cases that are converted or dismissed, but not in cases that ultimately are completed and closed. We conclude otherwise. Although the amendment results in an ambiguous provision, the text and legislative history indicate that Congress intended to extend the fee provision into the post-confirmation period for all Chapter 11 debtors, irrespective of the ultimate disposition of their cases. Accordingly, we REVERSE.

I. FACTS AND PROCEDURAL HISTORY

Seeking to enhance the U.S. Trustee's revenues, Congress made a seemingly modest amendment in 1996 to the provision that requires Chapter 11 debtors to pay quarterly fees. Prior to its amendment, the pertinent statute 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.

28 U.S.C. § 1930(a)(6) (brackets added). With an amendment that took effect on January 26, 1996, Congress deleted the five words bracketed above. Balanced Budget Downpayment Act, I, Pub.L. No. 104-99, § 211, 110 Stat. 26, 37-38 (1996). In a clarifying amendment enacted on September 30, 1996, Congress provided further that "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).

Each of the cases consolidated in the present appeal involved Chapter 11 plans that had been confirmed and were substantially completed. When the debtors moved to close these cases, the U.S. Trustee objected, arguing that post-confirmation quarterly fees were due under amended § 1930(a)(6). The bankruptcy court denied the U.S. Trustee's objections, holding that the amended statute requires the payment of post-confirmation quarterly fees only in Chapter 11 cases that are converted or dismissed, not in cases that are completed and closed. The district court affirmed the bankruptcy court's judgment, and the U.S. Trustee filed a timely appeal to this court. We have jurisdiction over the appeal pursuant to 28 U.S.C. § 158(d).

II. ANALYSIS

A. Standards of Review and of Statutory Interpretation

This appeal involves an issue of statutory interpretation, which, as a question of law, this court reviews de novo. See 255 Park Plaza Assocs. Ltd. Partnership v. Connecticut Gen. Life Ins. Co. (In re 255 Park Plaza Assocs. Ltd. Partnership), 100 F.3d 1214, 1216 (6th Cir.1996). "In all cases of statutory construction, the starting point is the language employed by Congress." Appleton v. First Nat'l Bank of Ohio, 62 F.3d 791, 801 (6th Cir.1995). Where "the statute's language is plain, 'the sole function of the courts is to enforce it according to its terms.' " United States v. Ron Pair Enter., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 61 L.Ed. 442 (1917)). The court must look beyond the language of the statute, however, when the text is ambiguous or when, although the statute is facially clear, a literal interpretation would lead to internal inconsistencies, an absurd result, or an interpretation inconsistent with the intent of Congress. See United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981); Appleton, 62 F.3d at 801.

B. Textual Analysis

As amended, § 1930(a)(6) is ambiguous. The section requires the payment of quarterly fees "in each case under chapter 11 ... until the case is converted or dismissed, whichever occurs first." As all recognize, however, a Chapter 11 case is disposed of through conversion, dismissal, or closure. ¹ Thus, some term must be implied to yield a coherent provision. We agree with the U.S. Trustee that the text of the amended statute better supports an interpretation in which closure is understood as an implied alternative disposition to conversion or dismissal; in other words, we hold that the amended section requires the payment of quarterly fees in all Chapter 11 cases, both pre- and post-confirmation, until each case is closed, converted, or dismissed.

The U.S. Trustee actually argues that there is no ambiguity in the amended section because a closed case is no longer a "case under chapter 11." It is not clear, however, that this apparently self-evident proposition is true. Section 350(a) of the Bankruptcy Code provides that a case shall be closed after it is fully administered, but § 350(b) allows for a case to be reopened in certain circumstances. Thus, it would appear that a closed case under Chapter 11 is simply that, a closed case under Chapter 11. ² Moreover, a plain reading of the section does suggest that "until the case is converted or dismissed" qualifies "each case under chapter 11," and the final phrase of this sentence, "whichever occurs first," implies that each case subject to the provision will be converted or dismissed. Thus, the grammatical structure supports the debtors' argument that cases that are ultimately completed and closed are not within the scope of "each case under chapter 11."

Agreeing with the debtors and finding the omission of the term "closure" critical, the courts below rejected the U.S. Trustee's arguments and refused to read this alternative disposition into the amended statute. This approach is even harder to square with the language and purpose of the statute, however. Before the statute was amended, quarterly fees were collected from all Chapter 11 cases that survived until confirmation, and the legislative history discussed below indicates that the purpose behind the amendment to § 1930(a)(6) was to increase fee collections. If "each case under chapter 11" is read to include only cases that ultimately are dismissed or converted, as the debtors suggest, however, the statute provides no authority for the collection of any quarterly fees from debtors whose cases ultimately are consummated and closed. That interpretation would eliminate pre-confirmation fees on ultimately successful plans and could very well result in substantially reduced fees overall. Recognizing that such an outcome would be in clear opposition to congressional intent, the district court read into the provision the authority to collect fees in all cases pre-confirmation, but to collect fees post-confirmation only in cases that ultimately are dismissed or converted. This is a plausible interpretation, and it is argued forcefully by the debtors on appeal, but it certainly does not arise from a literal reading of the statute.

The debtors' argument is, of course, further undermined by the fact that amended § 1930(a)(6) requires the payment of quarterly fees "in each case" not "in each unconsummated case." See CF & I Fabricators, 150 F.3d at 1236 (citing In re A.H. Robins, 219 B.R. at 149). More important, because Congress made no provision for refunding overcharged fees or for deferring fee payments, the debtors' interpretation would produce an internally inconsistent statute or, at the least, would create additional ambiguity. Section 1930(a)(6) provides for the collection of fees from Chapter 11 debtors at the end of the month following the quarter for which fees are owed. The debtors' interpretation would cause the collection of quarterly fees in all cases up until confirmation, but postconfirmation these fees would be assessed only in cases that ultimately are converted or dismissed. Entering the post-confirmation period, however, we cannot know which confirmed plans will succeed and which will be converted or dismissed. Therefore, to implement the system envisioned by the debtors, fees either would have to be collected in all cases each quarter and refunded to the debtors whose cases ultimately succeed and are closed, or the fees would have to be held in abeyance in all cases until the ultimate outcomes are determined. The U.S. Trustee's reading creates no such difficulties. Under the U.S. Trustee's interpretation, fees would be collected in each case, as they are collected currently, until the case is closed, dismissed, or converted. The fact that Congress did not revise the collection mechanism to account for the uncertainty surrounding the ultimate disposition of post-confirmation cases argues strongly against the debtors' interpretation. ³

C. The Legislative History

Although the legislative history pertaining to the 1996 amendment is not extensive, that history does indicate that Congress...