Segel v. Fitzgerald

"[T]he Bankruptcy Clause offers Congress flexibility, but does not permit the arbitrary, disparate treatment of similarly situated debtors based on geography.”

Petitioner filed Chapter 11 bankruptcy in a U.S. Trustee district, and was required to pay quarterly fees in 2010 to the U.S. Trustee, not to exceed $30,000, until all Chapter 11 cases were closed or converted. In 2017, Congress raised the fee rates for large Chapter 11 cases, only in U.S. Trustee districts, to address a Trustee funding shortage, causing Petitioner to pay $632,542 in fees over three quarters. Fee rates remained the same in two states which maintained the previous Judicial Administrator Program. Petitioner was granted relief in in the Bankruptcy Court of the Eastern District of Virginia, arguing the fee increase was in violation of the uniformity requirement of the Constitution’s Bankruptcy Clause. The Fourth Circuit reversed, holding the distinction was based on the separate U.S. Trustee and Administrator program systems, and was therefore not arbitrary. On appeal, the Supreme Court held the fee increase violated the uniformity requirement. The Bankruptcy Clause affords Congress flexibility in crafting different rules to fit regionally limited problems, but does not allow for arbitrary, non-uniform funding mechanism burdens to be placed on otherwise identical classes of debtors, distinct only because of the dual system created by Congress itself. REVERSED and REMANDED.