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Clinton Nurseries of Md., Inc. v. Harrington (In re Clinton Nurseries, Inc.)

Clinton Nurseries of Md., Inc. v. Harrington (In re Clinton Nurseries, Inc.)

United States Court of Appeals for the Second Circuit

October 23, 2020, Argued; May 24, 2021, Decided

No. 20-1209-bk

Opinion

 [*59]  William J. Nardini, Circuit Judge:

Judicial districts in the United States fall into two categories: those in which the United States Trustee Program oversees bankruptcy administration ("UST Districts") and those in which judicially appointed bankruptcy administrators perform the same function ("BA Districts"). See Matter of Buffets, L.L.C., 979 F.3d 366, 370 (5th Cir. 2020). In 2017, Congress passed an amendment (the "2017 Amendment") [**3]  to 28 U.S.C. § 1930, the statute setting forth quarterly fees in bankruptcy cases. Id. at 371. The 2017 Amendment increased quarterly fees in UST Districts, but the Judicial Conference of the United States ("Judicial Conference") did not immediately impose a parallel increase in the BA Districts. Id. at 372. Congress later passed the Bankruptcy Administration Improvement Act of 2020, Pub. L. No. 116-325 (the "2020 Act"), which modified § 1930 to clearly mandate that UST Districts and BA Districts charge equal fees.

Debtors-Appellants Clinton Nurseries, Inc., Clinton Nurseries of Maryland, Inc., and Clinton Nurseries of Florida, Inc. (collectively, "Clinton") filed for bankruptcy in December 2017 in the District of Connecticut, which is a UST District. Clinton incurred fees in accordance with the increase set forth in the 2017 Amendment during the period after the 2017 Amendment but before the effective date of the 2020 Act, i.e., while the BA Districts were charging lower fees.

Clinton now appeals from an order of the Bankruptcy Court (James J. Tancredi, J.) entered on August 28, 2019, rejecting Clinton's constitutional challenge to the 2017 Amendment. Specifically, the Bankruptcy Court rejected Clinton's argument that, under the version of § 1930 in effect prior to the 2020 Act, the 2017 Amendment [**4]  violated the Bankruptcy Clause of the United States Constitution, which empowers Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States." U.S. Const. art. I, § 8, cl. 4 (emphasis added).

] We hold that the 2017 Amendment is a "Law[] on the subject of Bankruptcies," id., implicating the uniformity requirement of the Bankruptcy Clause. We also hold that, under the version of § 1930 in effect prior to the 2020 Act, the 2017 Amendment violated the uniformity requirement. We therefore REVERSE the decision of the Bankruptcy Court.

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998 F.3d 56 *; 2021 U.S. App. LEXIS 15330 **; 70 Bankr. Ct. Dec. 65

IN RE: CLINTON NURSERIES, INC.; CLINTON NURSERIES OF MARYLAND, INC.; CLINTON NURSERIES OF FLORIDA, INC.; TRIEM LLC, Debtors.CLINTON NURSERIES, INC.; CLINTON NURSERIES OF MARYLAND, INC.; CLINTON NURSERIES OF FLORIDA, INC., Debtors-Appellants, TRIEM LLC, Debtor, v. WILLIAM K. HARRINGTON, UNITED STATES TRUSTEE, REGION 2, Trustee-Appellee.

Subsequent History: Vacated by, Remanded by Harrington v. Clinton Nurseries, Inc., 214 L. Ed. 2d 129, 2022 U.S. LEXIS 4571, 2022 WL 6571659 (U.S., Oct. 11, 2022)

Modified by, Reinstated by, On remand at Clinton Nurseries, Inc. v. Harrington ( In re Clinton Nurseries Inc.), 2022 U.S. App. LEXIS 32677 (2d Cir. Conn., Nov. 10, 2022)

Prior History:  [**1] Appeal from the United States Bankruptcy Court for the District of Connecticut. No. 17-31897—James J. Tancredi, Judge.

Debtors-Appellants Clinton Nurseries, Inc., Clinton Nurseries of Maryland, Inc., and Clinton Nurseries of Florida, Inc. appeal from an order of the Bankruptcy Court (James J. Tancredi, J.) entered on August 29, 2018, rejecting their constitutional challenge to quarterly fees imposed during the pendency of their bankruptcy proceeding. In 2017, Congress passed an amendment (the "2017 Amendment") to the statute setting forth quarterly fees in bankruptcy cases, 28 U.S.C. § 1930. The 2017 Amendment increased quarterly fees in judicial districts in which the United States Trustee Program oversees bankruptcy administration ("UST Districts"). Judicial districts in which judicially appointed bankruptcy administrators perform the same function ("BA Districts") did not immediately adopt an equivalent fee increase. Congress later passed the Bankruptcy Administration Improvement Act of 2020, Pub. L. No. 116-325 (the "2020 Act"), which requires that UST Districts and BA Districts charge equal fees. Appellants are debtors who filed for bankruptcy in a UST District and were charged the 2017 Amendment's fee increase during a period in which BA Districts were charging [**2]  lower fees. The Bankruptcy Court rejected Appellants' argument that the 2017 Amendment violated the uniformity requirement of the Bankruptcy Clause of the United States Constitution. We hold that the 2017 Amendment is a bankruptcy law subject to the uniformity requirement of the Bankruptcy Clause. We also hold that, under the version of § 1930 in effect prior to the 2020 Act, the 2017 Amendment violated the uniformity requirement. We therefore REVERSE the decision of the Bankruptcy Court.

Clinton Nurseries, Inc. v. Harrington (In re Clinton Nurseries, Inc.), 608 B.R. 96, 2019 Bankr. LEXIS 2735, 2019 WL 4072654 (Bankr. D. Conn., Aug. 28, 2019)

CORE TERMS

Districts, fee increase, quarterly, geographically, bankruptcy court, disbursements, isolated, region, non-uniform, discrepancy, unconstitutionally, railroads, bankrupt, delayed

Constitutional Law, Congressional Duties & Powers, Bankruptcy Clause, Bankruptcy Law, Bankruptcy, Case Administration, Filing Fees, Examiners, Officers & Trustees, United States Trustee, Judicial Review, Standards of Review, Clear Error Review, De Novo Standard of Review, Case or Controversy, Standing, Elements, Governments, Courts, Authority to Adjudicate, Civil Procedure, Justiciability, Injury in Fact, Legislation, Interpretation, Copyright Law, Constitutional Copyright Protections, Copyright Clause, Copyright & Patent Clause, Appointment, Compensation