Virginia Lawyers Weekly VA Lawyers Weekly
Where the confirmed plan made the liquidating trustee the party responsible for the quarterly fee payments in the stead of the debtors, directed the liquidating trustee to make the payments and the plan received creditor approval, the liquidating trustee was required to pay the quarterly fees to the US trustee.
Background
Richard Arrowsmith, in his capacity as the liquidating trustee of the HDL liquidating trust, argues the liquidating trust is not liable for the payment of quarterly fees under 28 U.S.C. § 1930(a)(6) for distributions to creditors in the third quarter of 2021 and in all subsequent quarters.
Analysis
Section 1930(a) begins with the instruction that “[t]he part[y] commencing a case under title 11 shall pay” a filing fee. Sub-subsections (a)(1)-(5) then list a series of the filing fees applicable to the various chapters under which a bankruptcy case can be commenced. Sub-subsection (a)(6) follows the itemized list of filing fees applicable to commencing a case. It commands, albeit in the passive voice, that “in addition to the filing fee paid to the clerk, a quarterly fee shall be paid to the United States trustee.”
While Congress may have intended for the quarterly fees to be assessed against the estate, that intent can find no purchase in the statutory text. The only actor identified as liable for the payment of such fees is the “part[y] commencing a case under title 11.”
But any conflict that may exist between the statutory text and its intended meaning is of no moment here. As the debtors commenced the bankruptcy cases, the debtors were the parties required to pay the quarterly fees to the US trustee under § 1930. But the confirmed plan, which is binding upon all parties in interest in these bankruptcy cases, intervened.
The confirmed plan served to substantively consolidate the bankruptcy estates. All the debtors’ assets were transferred to the liquidating trust. The liquidating trustee became “the successor of the Debtors … for all purposes.” The creditors were recast as liquidating trust beneficiaries, with all distributions to be made to such creditors from the liquidating trust. The plan removed from the debtors the unequivocal obligation that they had to pay the quarterly fees and transferred that obligation to the liquidating trustee.
The language of the plan is not ambiguous on this point. It not only makes the liquidating trustee the party responsible for the quarterly fee payments in the stead of the debtors, but it also directs the liquidating trustee to make the payments. The plan having received creditor approval, the US trustee is entitled to the benefit of the bargain it negotiated with the debtors.
The liquidating trustee argues that the plan does not require him to pay quarterly fees on payments he makes to the beneficiaries of the liquidating trust. He contends that distributions of moneys he holds in trust to the beneficiaries of the trust are not disbursements because the beneficiaries are the equitable owners of the trust’s assets.
While the term “disbursements” is undefined in the statute, the court’s analysis of this issue is controlled by In re A.H. Robins Co., 219 B.R. 145 (Bankr. E.D. Va. 1998), which held that disbursements included all post confirmation distributions made from the bankruptcy estate to creditors. The majority of courts that have considered this issue agree. The court concludes that the liquidating trustee is required to pay quarterly fees on the distributions he makes to the trust beneficiaries.
The court declines the liquidating trustee’s invitation to eliminate his obligation to pay quarterly fees by invoking an exception included in § 6.5(c)(18) of the plan. Finally, the liquidating trustee relies on the recent opinion in In re Paragon Offshore, PLC, 629 B.R. 227 (Bankr. D. Del. 2021) in support of the relief sought in the motion. While the decision in that court is not binding here, it is also factually distinguishable.
The decision in Paragon was based on a concern that the US trustee was “double-dipping” in that case by charging the parent corporation a quarterly fee when it paid the money into the Paragon trust and then again charging Paragon trust a quarterly fee when the trust distributed the settlement proceeds to Paragon’s creditors. No such concern presents here.
In re: Health Diagnostic Laboratory Inc., Case No. 15-32919, Jan. 4, 2023. EDVA Bankr. at Richmond (Huennekens). VLW No. 023-4-001. 9 pp.
