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The Security National Bank of Sioux City, IA v. Vera T. Welte Testamentary Trust

Summarizing by Amir Shachmurove

In Re: Mosaic Management Group, Inc.,

Case Type:
Case Status:
Affirmed in part and Reversed in part
20-12547 (11th Circuit, Jan 14,2022) Published
The difference in Chapter 11 quarterly fees collected in UST versus Bankruptcy Administrator (BA) districts following the Bankruptcy Judgeship Act of 2017 did not violate the uniformity requirement of the Bankruptcy Clause of the US Constitution. The difference in fees collected between UST and BA districts arose because the Judicial Conference failed to act quickly to require BA districts to collect the same fees as were collected in UST districts. Further, that 2% of the quarterly fees collected in UST districts were paid to the general fund of the US Treasury does not violate uniformity.
Procedural context:
Following the bankruptcy court's decision requiring the US Trustee to credit 2% of the quarterly Chapter 11 fees collected from an Chapter 11 "investment trust," the successor-in-interest to the investment trust and the UST filed a direct appeal in the district court pursuant to 28 U.S.C. § 158(d)(2)(A) and Fed. R. Bankr. P. 8006(c). The United States Court of Appeals for the Eleventh Circuit authorized the direct appeal.
Mosaic Management Group, Inc. and its affiliates filed Chapter 11 petitions in 2008. In 2017, a Chapter 11 plan was confirmed. The plan created an "investment trust" for the benefit of investors and creditors. A few months after confirmation, Congress enacted the Bankruptcy Judgeship Act of 2017 (the 2017 Amendment). The 2017 Amendment mandated increases in Chapter 11 quarterly fees to address dwindling resources for the US Trustee program and to fund bankruptcy judgeships. The 2017 Amendment directed the Judicial Conference to require districts with Bankruptcy Administrators (i.e., the judicial districts in Alabama and North Carolina) to collect the increased fees, too. However, the Judicial Conference did not do so for about nine months. The trustee for the investment trust filed a motion requesting the bankruptcy court to determine whether the 2017 Amendment was retroactive, requiring already-filed Chapter 11 cases to pay quarterly fees at the higher rates imposed by the 2017 Amendment. The trustee for the investment trust also asked the bankruptcy court to find that the 2017 Amendment was unconstitutional because it violated the uniformity provision of the Bankruptcy Clause of the US Constitution (Art. I, § 8, cl. 1). The US Trustee opposed the motion. The bankruptcy court ruled that (1) the 2017 Amendment did not violate the uniformity provision of the Bankruptcy Clause; but (2) the fact that 2% of the collected quarterly Chapter 11 fees received by the UST in UST districts were sent to the US Treasury's general fund to offset the cost of a temporary bankruptcy judgeship in a BA district did violate the uniformity provision of the Bankruptcy Clause. The bankruptcy court ordered the UST to credit the investment trustee the 2% collected after the effective date of the 2017 Amendment.
Jordan, Brasher, and Anderson

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