Oral arguments happened on January 9, 2024, at the U.S. Supreme Court in U.S. Trustee v. Hammons. Here is a link to the transcript of those arguments.
The Hammons question is this:
- what’s the proper remedy for unconstitutionality of lesser fees charged by bankruptcy courts in Alabama and North Carolina than in bankruptcy courts everywhere else.
The big surprise from the oral arguments is this: prospective-relief-only is a viable possibility.
- Until reading the oral arguments transcript, prospective-relief-only seemed to be the least-likely result.
I’ll try to explain.
Three Available Remedies
Three different remedies are available:
- collecting under-paid fees from bankruptcy debtors in Alabama and North Carolina;
- requiring U.S. taxpayers to refund over-payments to debtors in all other bankruptcy courts; or
- requiring only that equal fees be charged in future bankruptcy cases.
Rulings to Date
Thus far, courts below the U.S. Supreme Court have adopted, almost uniformly, the remedy that requires U.S. taxpayers to refund over-payments, which involves amounts exceeding $300 million.
That’s because, according to such courts:
- collecting fees from Alabama and North Carolina debtors is problematic; and
- requiring only future uniformity, without retrospective relief:
- is unfair to those injured; and
- presents constitutional problems.
Oral Arguments—Focus on Prospective-Relief-Only
Comments and questions from the Justices during oral arguments, however, contain a strong focus on the prospective-relief-only remedy.
Here are some representative comments and questions.[Fn. 1]
JUSTICE JACKSON: . . . the government is saying really the best remedy here is to just look forward and say, from now on, everybody has to pay the same fee. [at 22]
JUSTICE KAGAN: . . . you acknowledge that this prospective-only solution is one that depends on whether the party has been given a meaningful pre-deprivation remedy. Is that correct? . . . So would you be able to apply the prospective-only solution to them? . . . If you were given a pre-deprivation remedy, you didn’t take it, you now arrive at this situation, we don’t really care if you overpaid. [at 25 & 26]
JUSTICE JACKSON: I guess I don’t understand why the government is conceding what Justice Kagan said about the prospective-only remedy depending on whether there has been a meaningful pre-deprivation . . . that comes from McKesson and the tax cases, but are those cases really on all fours with what’s happening here? . . . Have we ever applied those cases and that concept outside of the tax scenario? [at 28-29]
JUSTICE SOTOMAYOR: . . . Nobody stopped you from getting prospective relief. You’ve gotten the treatment of equality that you sought. You came in and said, I’m being treated unequally . . . and I want to be treated equally. And the government’s saying you’re right, you were treated unequally, now everybody has to pay the same fee. You don’t like that answer, but you got a remedy. [at 36]
JUSTICE JACKSON: . . . the problem was that the higher fee level that Congress implemented in the statute wasn’t being applied to everyone. . . . But you’re asking now for a refund for that period of time so that the remedy is to make your client pay less, and that’s how we’re going to make it equal. And I’m just saying I don’t see anything in the legislative history . . . that would suggest that that’s what Congress would have intended. [at 40]
JUSTICE KAGAN: . . . Congress . . . wanted higher and equalized fees, and . . . a program which is entirely self-funded and which does not impose burdens on the taxpayer. . . . Congress never wants to impose burdens on the taxpayer with respect to bankruptcy, . . . it thinks that the people who use bankruptcy should pay for bankruptcy. [at 42-43]
JUSTICE SOTOMAYOR: . . . Why do we care? Why do you care? I mean, you cared about being treated unequally. You’re being told you’ll be treated equally. That someone else may get a pass, why is that hurting you? [at 44]
JUSTICE KAVANAUGH: You want perfection, though, in how this is all going to work out. But, even under your approach, there’s not going to be perfection . . . Not even close to perfection. . . . if the bankruptcy administrators in Alabama and North Carolina had followed the standing order and collected the proper fees back in 2018, you would have paid the same amount that you paid, correct? . . . Presumably because it’s 326 million and that would be inconsistent with the usual principle that bankruptcy pays for itself. [at 52-53, 54-55 & 58]
JUSTICE JACKSON: . . . how do you square your answer about the requirement of meaningful backward-looking relief in this situation with the cases like Morales-Santana, where they didn’t get backward-looking relief? . . . they are Supreme Court cases. . . . I’m just trying to understand why we couldn’t rely on something like Morales-Santana and the fact that, if it’s hard to do or impossible to do, then we can just go prospective. [at 61 & 62]
JUSTICE JACKSON: . . . I’m wondering if it matters that there are individual rights at issue in some of these equal protection cases. . . . is there something to the notion of we’re not going to necessarily worry about a meaningful backward-looking monetary remedy for a violation that is really about limiting Congress’s power and has been remedied because Congress has changed the statute now and everybody’s being treated equally going forward? [at 66-67]
Conclusion
I’m not making any predictions.
All I’m saying is this:
- comments and questions from the justices suggest that a prospective-relief-only remedy is a viable option; and
- that’s a surprise.
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Footnote 1. The citation in brackets after each question/comment is to the page(s) of the oral arguments transcript from which it is taken.
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MEDIATBANKRY 
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