Bankruptcy Uniformity: How the 2017 Fee Increase Litigation Applies to the Dual Bankruptcy System
ABSTRACT
The Constitution grants Congress the power to create “uniform” bankruptcy laws. In 2017, Congress amended the existing bankruptcy law governing quarterly fees to increase fees paid by large Chapter 11 debtors. The problem: this law only applied to large debtors in U.S. Trustee Program districts and did not apply to large debtors in Bankruptcy Administrator Program districts in North Carolina and Alabama. Debtors in the Trustee districts sued, claiming that the increase violated the constitutional uniformity requirement imposed on Congress. The litigation from several district courts made its way to four circuit courts, and the Supreme Court recently settled the emergent circuit split in the case of Siegel v. Fitzgerald.
The Court unanimously agreed that the fee increase did, in fact, violate the Constitution. Below the surface of the fee increase issue lurks another constitutional problem: that the existence of the dual bankruptcy system itself is likely non-uniform—an argument that won the day in the Ninth Circuit almost three decades ago. The Supreme Court, in Siegel, chose not to answer the underlying uniformity question directly. Nevertheless, the opinion does help to solidify our understanding of uniformity and how it could bear on the dual system. This article applies the new learning generated by the 2017 fee increase litigation and argues that the only practical solution to cure the constitutional infirmity of the dual system is to require North Carolina and Alabama to adopt the Trustee Program.