Legal professionals have been closely following the developments following the U.S. Supreme Court’s decision in Siegel v. Fitzgerald, 142 S. Ct. 1770 (2022). The court ruled that increased U.S. Trustee quarterly fees for large Chapter 11 debtors between 2018 and 2020 under the Bankruptcy Judgeship Act of 2017 (the “2017 Act”) were unconstitutional. The Court found that the act resulted in disparate treatment of Chapter 11 debtors in Bankruptcy Administrator (“BA”) districts. Despite the clarity of this decision, Siegel left open a critical issue – the appropriate remedy for the constitutional… that this ruling rendered. As discussions and legal arguments continue to unfold, there is one question that remains central: Will the Supreme Court grant cert to address this issue?
As it stands, considering the Supreme Court’s caseload and priorities, this seems unlikely. However, this leaves the door open for lower courts and other legal professionals to determine and define the remedy. As this situation develops, it is anticipated that the lack of a Supreme Court-stipulated remedy will present an unique set of challenges and opportunities for lawyers working with Chapter 11 debtors.
This issue was first raised in discussions on JD Supra, authored by Nelson Mullins Riley & Scarborough LLP. According to them, not only does the conclusion of the Siegel case change the legal landscape for certain debtor cases, but the lack of clear direction on the appropriate remedy also instigates debate on how courts can address such constitutional disparities going forward.
While the quest for the most suitable remedy continues to take shape in the lower courts, it is imperative for legal professionals to stay informed and adept to this changing legal dynamic. How this situation unfolds will likely steer future legal strategies and tactics, particularly if the Supreme Court maintains its position to not address the issue directly. As practitioners, legal professionals are invited to draw on this discussed guidance to navigate the evolving landscape of restitution in the wake of Siegel.