The Supreme Court heard oral argument on April 18 in a case to resolve a circuit split and decide whether the increase in fees payable to the U.S. Trustee system in 2018 violated the uniformity aspect of the Bankruptcy Clause of the Constitution because it was not immediately applicable in the two states that have Bankruptcy Administrators rather than U.S. Trustees, Rochelle’s Daily Wire reported today. See Siegel v. Fitzgerald, 21-441 (Sup. Ct.) (cert. granted Jan. 10, 2022). The government conceded at oral argument that the fees were up to seven times higher for several months in the two states with Bankruptcy Administrators. Still, the government contended that the fees were not substantive but were procedural and therefore did not offend the uniformity aspects of the Bankruptcy Clause. If the Court were to decide there was a constitutional violation, the government argued that the proper relief would not be refunds to the debtors in 48 states who paid more. Rather, the government contended that the proper relief would require debtors in the two states to reopen their cases and pay the higher fees by requiring disgorgement from creditors who had been paid more because the fees were lower.
Section 547(c)(2)(A) of the Bankruptcy Code, often referred to as the “subjective OCB defense,” provides a defense to a preference suit if the defendant can show that the challenged payments made during the 90-day preference period are sufficiently consistent with the historical payments made by the debtor to the defendant.