Justia Summary

Under the Trustee Program, administrative functions previously handled by bankruptcy judges are handled by U.S. Trustees, within the Department of Justice. Six judicial districts in North Carolina and Alabama opted out of the Trustee Program; those bankruptcy courts continue to appoint bankruptcy administrators. Both programs handle the same administrative functions. The Trustee Program is funded entirely by user fees, largely paid by Chapter 11 debtors, 28 U.S.C. 589a(b)(5). The Administrator Program is funded by the Judiciary’s general budget. Under a Judicial Conference standing order, all districts nationwide charged similarly-situated debtors uniform fees. A 2017 fee increase was made applicable to currently pending and newly-filed cases in the Trustee Program and only to newly-filed cases in Administrator Program districts. Reversing the bankruptcy court, the Fourth Circuit held that the fee increase did not violate the Bankruptcy Clause uniformity requirement.

A unanimous Supreme Court reversed, holding that the enactment of a significant fee increase that exempted debtors in two states violated the uniformity requirement. Nothing in the Bankruptcy Clause suggests a distinction between substantive and administrative laws; its language, embracing “laws on the subject of Bankruptcies,” is broad. Congress cannot evade the affirmative limitation of the uniformity requirement by enacting legislation pursuant to other grants of authority such as the Necessary and Proper Clause. The 2017 Act does not confer discretion on bankruptcy districts to set regional policies based on regional needs but exempts debtors in two states from a fee increase that applied to debtors in 48 states, without identifying any material difference between debtors across those states. The Bankruptcy Clause does not permit arbitrary geographically disparate treatment of debtors.