Back in June of 2022 we discussed the Tenth Circuit’s post-Sigel decision in John Q. Hammons Fall 2006 LLC v. U.S. Trustee (In re John Q. Hammons Fall 2006 LLC), 15 F.4th 1011 (10th Cir. Oct. 5, 2021), which held that the government must pay a refund to a chapter 11 debtor of the amount over what the debtor would have paid over the same time were the case in a Bankruptcy Administrator district. In the first opinion, the Tenth Circuit mandated a refund in part because the appeals court had no jurisdiction over the two states with Bankruptcy Administrators and thus could not require debtors in those states to pay the higher fees. See Post Siegel Ruling: Tenth Circuit Orders Refunds for Overpayment of U.S. Trustee Fees.

            We followed that post up earlier this month with a discussion of the Second Circuit’s recent decision in In re Clinton Nurseries, Inc., 53 F.4th 15, 29 (2d Cir. 2022) which joined the Tenth Circuit in ordering a refund of the overpayment of fees paid to the U.S. Trustee. See Post Siegel Ruling: Second Circuit Joins the Tenth Circuit in Ordering Refunds for Overpayment of U.S. Trustee Fees.

            Now, the United States Bankruptcy Court for the Eastern District of Virginia, considering Siegel on remand from the Fourth Circuit, has likewise joined the Second and Tenth Circuits in ordering refunds for overpayments of U.S. trustee fees. See In re Cir. City Stores, Inc., No. 08-35653-KRH, 2022 WL 17722849, at *3 (Bankr. E.D. Va. Dec. 15, 2022).

            The bankruptcy court’s decision in Circuit City is particularly noteworthy as it provides the most comprehensive analysis so far on the appropriate remedy. There, the court rejected the argument by the government “that correcting the assessments on a going-forward basis is sufficient in and of itself to provide adequate relief. Prospective relief alone, the court found, provides no relief. Prospective relief, by itself, would serve instead to cement the unconstitutional treatment.”  Id.  In so doing the court noted that “[i]t is a core duty of the federal courts to provide remedies for legal injuries.” Id.at *7.  This decision is now on appeal to the United States District Court for the Eastern District of Virginia.

            These decisions are particularly good news for the class action plaintiffs in the Court of Federal Claims in Acadiana Management Group LLC v. U.S., 19-496 (Ct. Cl.). The suit seeks a refund on behalf of all chapter 11 debtors around the country who paid the increase.

            Originally, the Court of Claims sided with the government and dismissed the suit, believing there was no constitutional violation. The decision in Siegel was rendered while the class plaintiffs’ appeal was pending in the Federal Circuit. In September of 2022, the Federal Circuit vacated the lower court’s decision and remanded for further proceedings in light of Siegel.

            On remand, the class plaintiffs had filed a motion for partial summary judgment, asking the Court of Claims to rule that class members are entitled to refunds. Like the defendants in the Circuit City case, the government filed a cross motion to dismiss, contending there is no relief available. 

We will continue to monitor these rulings and provide updates as they are available.