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The U.S. Supreme Court yesterday heard oral arguments yesterday in the case of Office of the United States Trustee v. John Q. Hammons Fall 2006, LLC on whether the federal government should refund additional fees collected from bankrupt companies under a fee-hike law that was later deemed unconstitutional, WSJ Pro Bankruptcy reported. In 2017, Congress passed a law raising the fees charged in bankruptcy cases overseen by the Justice Department’s U.S. Trustee Program, which covers 48 states. Two states — Alabama and North Carolina — fund their own bankruptcy administrators through the courts’ own budgets. The Supreme Court ruled in 2022 that the fee-increase law was unconstitutional because it applied to bankruptcy cases filed in only 48 states. By that time, Congress had already amended the law, making the higher fees applicable in Alabama and North Carolina as well. But the question remained as to whether the fees that had already been collected should be returned or not. John Q. Hammons Hotels & Resorts, a privately owned Missouri-based hotel company that filed for bankruptcy protection in 2016 in Kansas City, Kan., challenged the fees it had paid while in chapter 11, arguing that the higher amount that came into effect under the 2017 law should be refunded because the statute was unconstitutional. In 2022, the U.S. Court of Appeals for the Tenth Circuit ruled that the company and its affiliates should get a refund of $2.5 million from the federal government. The Justice Department challenged that ruling. In arguments before the Supreme Court on Tuesday, Masha Hansford, a Justice Department attorney, said Congress raised the fees to fund the U.S. Trustee Program under its belief that the bankruptcy system should be self-funded at no cost to taxpayers. Forcing the government to refund fees to companies that used the bankruptcy system goes against the intent of Congress, she said. If the high court sides with the hotel company, the decision is likely to put taxpayers on the hook for returning about $326 million in fees paid in roughly 2,100 bankruptcy cases, according to a DOJ court filing. Daniel Geyser, a lawyer representing the hotel group, told the justices that his client, along with thousands of other debtors, is entitled to receive a refund for the fees collected by the government during the time the original law was in effect. Read more.

Click here to read the transcript from yesterday's oral argument in Office of the United States Trustee v. John Q. Hammons Fall 2006, LLC.

The U.S. Supreme Court declined to hear a case over whether a bankruptcy judge can certify a nationwide class of individuals who allege Citigroup Inc. willfully violated their bankruptcy discharges, Bloomberg Law reported. The high court’s order yesterday leaves in place an August ruling by the U.S. Court of Appeals for the Second Circuit that freed Citi from facing a nationwide class action claim for allegedly refusing to correct the tradelines for consumers whose credit card debts were discharged in bankruptcy. The Second Circuit held that a bankruptcy court lacks the authority to hold a creditor in contempt for violating a debt discharge injunction issued by another bankruptcy court, and thus can’t grant broad relief to a nationwide class. Petitioner Kimberly Bruce said that the justices should hear the dispute because there’s nothing in the Bankruptcy Code that prohibits certification of a nationwide class of debtors or imposes the jurisdictional limitation outlined by the Second Circuit. Moreover, the August ruling stands in conflict with First Circuit precedent, she said. Bruce, who was initially permitted by the U.S. Bankruptcy Court for the Southern District of New York to bring a civil contempt claim against Citi on behalf of a nationwide class, said there’s no need to make thousands of class members return to hundreds of bankruptcy judges “to obtain the same relief against the same defendant.” Read more.

The Supreme Court will hill oral argument today in Office of the United States Trustee v. John Q. Hammons Fall 2006, LLC to determine whether the appropriate remedy for the constitutional uniformity violation found by this court in Siegel v. Fitzgerald is to require the United States Trustee to grant retrospective refunds of the increased fees paid by debtors in U.S. Trustee districts during the period of disuniformity, or is instead either to deem sufficient the prospective remedy adopted by Congress or to require the collection of additional fees from a much smaller number of debtors in Bankruptcy Administrator districts. Click here to listen to the argument today at 10 a.m. ET.

The U.S. Supreme Court review of Purdue Pharma’s $6 billion opioid settlement could open the door for Canada’s municipalities and indigenous First Nations — the only two groups not made up of individual claimants that have opposed the deal — to seek compensation they say has been denied them, WSJ Pro Bankruptcy reported. Purdue’s bankruptcy plan would compensate thousands of individuals, healthcare providers, and U.S. state and local governments accusing the maker of the OxyContin painkiller of helping to fuel the opioid epidemic. But Canadian cities and First Nations don’t have access to the settlement money promised by the Sackler family owners. The bankruptcy plan is being challenged by the U.S. Justice Department, which contests the lifetime immunity the settlement would grant Purdue’s Sackler family owners from opioid-related lawsuits. The Supreme Court heard arguments on the challenge last month. If the Supreme Court rejects the plan, lawsuits that Canadian municipalities and First Nations have filed against Purdue and the Sacklers in Canada and New York could move forward, giving them a new opportunity to litigate their cases for compensation.

A bankruptcy attorney appeared in U.S. District Court in St. Louis on Wednesday to answer charges accusing him of defrauding the state of Missouri and lending institutions, according to DOJ press release. Michael Toscano was indicted on Dec. 20, 2023, in U.S. District Court in St. Louis on three counts of mail fraud and one count of wire fraud. He turned himself in yesterday and pleaded not guilty to the charges. The indictment alleges that from roughly April 1, 2018, though Dec. 19, 2023, Toscano devised a scheme to defraud the state of Missouri and lending institutions by falsely claiming bankruptcy filers’ vehicles had been abandoned, and then selling some through his used car dealership. Toscano also obtained referrals from other bankruptcy attorneys whose clients sought to surrender their vehicles to creditors rather than to continue to pay their vehicle car loans, according to statements made in court on Wednesday. Toscano told debtors to deliver their vehicles to his office in Creve Coeur or to a St. Charles County storage facility, the indictment says. He also picked up some vehicles that were inoperable, it says. Toscano then mailed documents to the Missouri Department of Revenue and the holders of liens on the vehicles falsely claiming that they had been abandoned and that he’d incurred towing and storage fees, the indictment says. He demanded payment, writing that he would seek an abandoned motor vehicle title or mechanic’s lien if the fees were not paid within 30 days, the indictment says. In some cases, Toscano delayed notifying lienholders for as long as 45 days, causing storage fees to exceed $2,300, the indictment says. If payment was not made, Toscano submitted false and fraudulent documents to the contract license offices of the DOR seeking the issuance of abandoned vehicle titles or mechanic lien titles and then offered the vehicles for sale through his used car dealership, the indictment says.

Former Houston bankruptcy judge David Jones has asked a federal court to toss a lawsuit that revealed his romantic relationship with a bankruptcy attorney and ultimately led to his resignation, saying he cannot be personally sued over his rulings as a judge, Reuters reported. Jones, who oversaw the complex case panel in the Southern District of Texas and was the busiest bankruptcy judge in the U.S., said in October he would resign after publicly acknowledging he had been living for years with his longtime romantic partner Elizabeth Freeman, who was a bankruptcy partner at the law firm Jackson Walker until December 2022. The firm represented many companies that filed for bankruptcy in Jones' Houston court, often acting as local counsel for larger law firms like Kirkland & Ellis. Jones acknowledged the years-long relationship in the wake of an Oct. 4 lawsuit by a McDermott International shareholder, who sued Jones over his rulings in the energy company's bankruptcy. The U.S. Court of Appeals for the Fifth Circuit initiated a misconduct complaint and said that there was probable cause to believe that Jones committed an ethical violation by failing to disclose his relationship, but the court ended its investigation when Jones resigned.