Siegel v. Fitzgerald – How to Remedy the Impacts of an Unconstitutional Law
On June 6, 2022, the U.S. Supreme Court issued its opinion in Siegel v. Fitzgerald, in which the Court held that the Bankruptcy Judgeship Act of 2017, Pub. L. 115-72, Div. B, 131 Stat. 1229 (the “2017 Act”) was unconstitutional. The 2017 Act required a significant, temporary increase of the fee rates paid into the United States Trustee System Fund (the “UST Fund”) by debtors in large chapter 11 cases. Underlying the Court’s holding is the Bankruptcy Clause of the Constitution (Article I) which gives Congress the power “to establish… uniform laws on the subject of bankruptcies throughout the United States.” The Court held that the 2017 Act was unconstitutional because the fees were not uniformly applied. Perhaps most interestingly, the Court did not decide on a remedy. Instead, it remanded the proceeding back to the Fourth Circuit Court of Appeals alongside a $325 million question: “Now what?”
Originally, bankruptcy judges handled the administrative duties of bankruptcy cases. This intertwining of administrative and judicial tasks resulted in an extensive workload as well as the appearance of bias with bankruptcy judges overseeing the trustees they had appointed. To address these concerns, Congress created the United States Trustee Program (the “Trustee Program”) in 18 of the 94 federal judicial districts. After eight years, Congress expanded the Trustee Program to nearly every district, excepting only the six districts in North Carolina and Alabama. For those two states, Congress temporarily permitted the judiciary to continue judicial oversight of administrative tasks under the Bankruptcy Administrator Program (the “Administrator Program”). Eventually, Congress made the Administrator Program permanent.
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National Law Review by Justin Cloyd. Published June 15, 2022.