In Re: H. Jason Gold
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 1:12-cv-01073-LO-TCB,09-20446-RGM. [999344815]. [13-1270]
Appeal: 13-1270
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-1270
In re:
GEOFFREY A. ROWE,
Debtor,
--------------------------------H. JASON GOLD, Chapter 7 Trustee,
Trustee – Appellant,
and
JUDY A. ROBBINS, II, U.S. Trustee,
Trustee.
---------------------------------UNITED STATES OF AMERICA,
Amicus Curiae,
NATIONAL ASSOCIATION OF BANKRUPTCY TRUSTEES,
Amicus Supporting Appellant,
JOHN J. KORZEN,
Court-Assigned Amicus Counsel.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.
Liam O’Grady, District
Judge. (1:12-cv-01073-LO-TCB; 09-20446-RGM)
Argued:
January 28, 2014
Decided:
April 28, 2014
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Before DUNCAN
Circuit Judge.
Filed: 04/28/2014
and
FLOYD,
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Circuit
Judges,
and
DAVIS,
Senior
Reversed and remanded by published opinion.
Judge Floyd wrote
the opinion in which Judge Duncan and Senior Judge Davis joined.
ARGUED: Brett Shumate, WILEY REIN LLP, Washington, D.C., for
Appellant. Patrick M. Wallace, WAKE FOREST UNIVERSITY SCHOOL OF
LAW, Winston-Salem, North Carolina, for John J. Korzen, CourtAssigned Amicus Counsel. N. Neville Reid, FOX, SWIBEL, LEVIN &
CARROLL, LLP, Chicago, Illinois, for Amicus The National
Association of Bankruptcy Trustees. ON BRIEF: Helgi C. Walker,
Rebecca L. Saitta, WILEY REIN LLP, Washington, D.C., for
Appellant.
John J. Korzen, as Court-Assigned Amicus Counsel,
Tammy C. Hsu, Third-Year Law Student, WAKE FOREST UNIVERSITY
SCHOOL OF LAW, Winston-Salem, North Carolina, for Court-Assigned
Amicus Counsel. Ramona D. Elliott, Deputy Director, P. Matthew
Sutko, Wendy L. Cox, Executive Office for United States
Trustees, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.,
for Amicus United States of America. Erik J. Ives, FOX, SWIBEL,
LEVIN & CARROLL, LLP, Chicago, Illinois; Ronald R. Peterson,
JENNER & BLOCK LLP, Chicago, Illinois, for Amicus National
Association of Bankruptcy Trustees.
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FLOYD, Circuit Judge:
There
first
is
are
two
one
of
questions
first
presented
impression:
in
this
whether,
in
appeal.
The
light
the
of
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
(BAPCPA), a bankruptcy court is required, absent extraordinary
circumstances, to compensate Chapter 7 trustees on a commission
basis.
Thus far, no circuit court of appeals has confronted
this issue, and the lower courts that have addressed it are
deeply divided.
Compare Hopkins v. Asset Acceptance LLC (In re
Salgado-Nava), 473 B.R. 911, 921 (B.A.P. 9th Cir. 2012) (holding
that,
absent
Chapter
7
extraordinary
trustees
is
to
circumstances,
be
based
on
the
the
fee
award
commission
for
rates
provided in § 326(a)), and In re Eidson, 481 B.R. 380, 384
(Bankr. E.D. Va. 2012) (“The purpose of the amendment to Section
330(a)(3), and the addition of Section 330(a)(7) to the Code in
2005,
was
to
compensation
clarify
is,
unlike
Congress’s
intent
professional
that
fees,
to
the
be
Trustee’s
commission-
based, absent extraordinary circumstances.”), with In re Brous,
370
B.R.
563,
568
(Bankr.
S.D.N.Y.
2007)
(“By
its
terms,
§ 326(a) sets a maximum limit, but does not create right to or
standard for awarding compensation.”), and In re Clemens, 349
B.R. 725, 729 (Bankr. D. Utah 2006) (asserting that, even after
the
BAPCPA
amendments,
the
bankruptcy
court
“must
still
determine the reasonableness of chapter 7 Trustee fees, but its
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inquiry should now include a consideration of the provisions in
§ 326”).
The second question presented is whether we should
remand the case to the bankruptcy court with instructions to
apply the correct legal standard after an evidentiary hearing.
The
Trustee
right
to
contends
due
that
process
the
bankruptcy
when
it
court
reduced
violated
his
his
compensation
(1) without advance notice that it thought his fee request to be
extraordinary
or
(2)
a
meaningful
opportunity
to
put
evidence to assuage the bankruptcy court’s misgivings.
forth
We have
jurisdiction over this matter pursuant to 28 U.S.C. § 158(d).
For
the
reasons
that
follow,
we
hold
that,
absent
extraordinary circumstances, Chapter 7 trustees must be paid on
a commission basis, as required by 11 U.S.C. § 330(a)(7).
we
reverse
the
district
court’s
decision
Hence,
affirming
the
bankruptcy court’s non-commission-based fee award and remand the
case
to
Trustee’s
the
district
fee
award
court
and
with
remand
instructions
the
matter
to
to
vacate
the
the
bankruptcy
court so that it can determine the proper commission-based fee
to award to the Trustee.
I.
The
requested
Trustee
a
in
trustee’s
this
fee
Chapter
of
7
case,
$17,254.61.
H.
Jason
Finding
that
Gold,
Gold
failed to properly or timely complete his duties, however, the
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bankruptcy court reduced his fee to $8,020.00.
“Specifically,
the bankruptcy judge said, ‘The Trustee is at fault for not
properly supervising this case . . . and for that reason I will
allow his compensation based on his hourly rate but not on the
compensation schedule in the code.
No.
1:12-cv-1073,
2013).
2013
WL
352654,
That’s $8020.’”
at
*1
(E.D.
In re Rowe,
Va.
Jan.
29,
Gold moved that the bankruptcy court stay its order
while on appeal to the district court, and the bankruptcy court
granted his motion.
Thereafter, the district court affirmed the
bankruptcy court’s decision, but it subsequently granted Gold’s
motion for a stay pending his appeal to this Court.
II.
Gold contends that the bankruptcy court erred in failing to
award to him a commission-based fee.
legal
court.
conclusions
of
the
bankruptcy
We review de novo the
court
and
the
district
Alvarez v. HSBC Bank USA, N.A. (In re Alvarez), 733 F.3d
136, 140 (4th Cir. 2013).
Thus, because we are called upon here
to determine the proper application of §§ 330(a)(7) and 326(a),
we review de novo “the appropriate statutory interpretation” of
those statutes.
See Johnson v. Zimmer, 686 F.3d 224, 227 (4th
Cir. 2012) (quoting Botkin v. DuPont Cmty. Credit Union, 650
F.3d
396,
398
(4th
Cir.
2011))
omitted).
5
(internal
quotation
marks
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According to Gold, he is entitled to a commission, pursuant
to § 330(a)(7), based on the percentages set forth in § 326(a).
In analyzing this claim, an overview of § 330(a) is helpful.
A.
Section 330(a)(1) provides, in relevant part, that,
After notice to the parties in interest and the United
States Trustee and a hearing, and subject to section[]
326 . . ., the court may award to a trustee . . .
reasonable compensation for actual, necessary services
rendered by the trustee . . . or attorney and by any
paraprofessional person employed by any such person;
and . . . reimbursement for actual necessary expenses.
11 U.S.C. § 330(a)(1) (formatting omitted).
Next, § 330(a)(2)
states that “[t]he court may, on its own motion or on the motion
of the United States Trustee, the United States Trustee for the
District or Region, the trustee for the estate, or any other
party
in
interest,
award
compensation
that
amount of compensation that is requested.”
is
These
less
than
the
two sections
are the same today as they were before the enactment of the
BAPCPA.
Before
enactment
of
the
BAPCPA,
§
330(a)(3)
read
follows:
In determining the amount of reasonable compensation
to be awarded, the court shall consider the nature,
the extent, and the value of such services, taking
into account all relevant factors, including—
(A) the time spent on such services;
(B) the rates charged for such services;
6
as
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(C) whether the services were necessary to the
administration of, or beneficial at the time at which
the service was rendered toward the completion of, a
case under this title;
(D) whether the services were performed within a
reasonable amount of time commensurate with the
complexity, importance, and nature of the problem,
issue, or task addressed; and
(E) whether the compensation is reasonable based on
the customary compensation charged by comparably
skilled practitioners in cases other than cases under
this title.
11 U.S.C. § 330(a)(3) (Supp. 2005) (footnote omitted).
But, the
current version of § 330(a)(3) speaks only to the compensation
of Chapter 11 trustees.
Id. § 330(a)(3) (“In determining the
amount of reasonable compensation to be awarded to an examiner,
trustee
under
chapter
11,
or
professional
person,
the
court
shall consider the nature, the extent, and the value of such
services,
taking
into
account
all
relevant
factors[.]”).
Thus, § 330(a)(3) is generally immaterial in determining the
compensation for a Chapter 7 trustee such as Gold.
Section 330(a)(4) is the same as it was before enactment of
the BAPCPA.
It proclaims, as is relevant here, that “the court
shall not allow compensation for—(i) unnecessary duplication of
services; or (ii) services that were not—(I) reasonably likely
to
benefit
the
debtor’s
estate;
administration of the case.”
omitted).
or
(II)
necessary
to
the
11 U.S.C. § 330(4)(A) (formatting
Sections 330(a)(5) and 330(a)(6) are irrelevant to
the matter before us.
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The BAPCPA added § 330(a)(7) to the Code.
instructs
that,
“[i]n
determining
the
amount
This section
of
reasonable
compensation to be awarded to a trustee, the court shall treat
such
compensation
as
a
commission,
based
on
section
326.”
According to § 326(a),
[i]n a case under chapter 7 or 11, the court may allow
reasonable compensation under section 330 of this
title of the trustee for the trustee’s services,
payable after the trustee renders such services, not
to exceed 25 percent on the first $5,000 or less, 10
percent on any amount in excess of $5,000 but not in
excess of $50,000, 5 percent on any amount in excess
of $50,000 but not in excess of $1,000,000, and
reasonable compensation not to exceed 3 percent of
such moneys in excess of $1,000,000, upon all moneys
disbursed or turned over in the case by the trustee to
parties
in
interest,
excluding
the
debtor,
but
including holders of secured claims.
B.
“We
begin,
statutes.”
as
we
must,
with
the
plain
meaning
of
the
Gilbert v. Residential Funding LLC, 678 F.3d 271,
276 (4th Cir. 2012).
“The starting point for any issue of
statutory interpretation . . . is the language of the statute
itself.”
Id. (alteration in original) (quoting United States v.
Bly,
F.3d
510
marks omitted).
453,
460
(4th
Cir.
2007))
(internal
quotation
“We have stated time and again that courts must
presume that a legislature says in a statute what it means and
means in a statute what it says there.
statute
are
unambiguous,
then,
this
8
When the words of a
first
canon
is
also
the
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last: ‘judicial inquiry is complete.’”
Bank
v.
Germain,
quotation
marks
503
U.S.
omitted).
249,
Courts
Id. (quoting Conn. Nat’l
253–54
seek
(1992))
to
(internal
“interpret
[each]
statute ‘as a symmetrical and coherent regulatory scheme,’ and
‘fit, if possible, all parts into an harmonious whole.’”
FDA v.
Brown
(2000)
&
Williamson
Tobacco
Corp.,
529
U.S.
120,
133
(citations omitted).
Section 330(a)(7) consists of two parts:
(1) a dependent
clause—“In determining the amount of reasonable compensation to
be
awarded
to
a
trustee”—and
(2)
an
independent
clause—“the
court shall treat such compensation as a commission, based on
section 326.”
In re Salgado-Nava, 473 B.R. at 916.
“In reading
this statutory directive, we think the most natural reading of
this provision is that the independent clause states a mandatory
rule, while the dependent clause states when that rule applies.”
Id.
Congress
§ 330(a)(7)
trustees.
such
chose
when
to
employ
speaking
the
term
“shall”
in
compensation
of
mandatory
for
Chapter
7
See 11 U.S.C. § 330(a)(7) (“[T]he court shall treat
compensation
as
a
commission,
based
on
section
326.”).
Yet, it used the word “may” in other portions of the statute.
See, e.g., id. § 330(a)(1) (the bankruptcy court “may” allow
reasonable compensation after certain requisites are satisfied);
id.
§
330(a)(2)
(same);
id.
§
9
326(a)
(same).
“[I]t
is
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uncontroversial
command,
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that
whereas
authorization
the
the
without
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term
‘shall’
customarily
‘may’
typically
term
obligation.”
Air
Line
connotes
a
indicates
Pilots
Ass’n,
Int’l. v. U.S. Airways Grp., Inc., 609 F.3d 338, 342 (4th Cir.
2010).
“[Y]oung children . . . . learn early on that ‘may’ is a
wonderfully
permissive
sternly mandatory.
word.
‘Shall,’
by
contrast,
is
more
And whatever the merits of believing ‘may’
means ‘shall,’ they do not apply when Congress has employed the
two
different
verbs
in
neighboring
statutory
passages.”
Sheppard v. Riverview Nursing Ctr., Inc., 88 F.3d 1332, 1338
(4th Cir. 1996).
“[W]hen the same Rule uses both ‘may’ and
‘shall’, the normal inference is that each is used in its usual
sense—the
one
act
being
permissive,
the
other
mandatory.”
Anderson v. Yungkau, 329 U.S. 482, 485 (1947).
Accordingly, we can rightly assume that Congress said what
it meant and meant what it said when it chose to include the
term “shall” in § 330(a)(7), thus making its application in the
determination
of
Chapter
7
trustee
fee
awards
mandatory.
Examining the other operative words in § 330(a)(7), we note that
a “commission” is “[a] fee paid to an agent or employee for a
particular transaction, usu[ally] as a percentage of the money
received from the transaction.”
ed. 2009).
Black’s Law Dictionary 306 (9th
And, “based upon” means “derived from.”
Grayson v.
Advanced Mgmt. Tech., Inc., 221 F.3d 580, 582 (4th Cir. 2000).
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definitions
of
the
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operative
terms
in
the
independent
clause of § 330(a)(7) lead us to the unmistakable conclusion
that, absent extraordinary circumstances, a Chapter 7 trustee’s
fee award must be calculated on a commission basis, as those
percentages are set forth in § 326(a).
C.
But,
what
extraordinary
circumstances
§ 326(a) commission rates to be reduced?
might
allow
the
The court below stated
that “extraordinary circumstances . . . include not performing
trustee
duties,
performing
them
negligently
or
inadequately.”
In re Rowe, 484 B.R. 667, 669 (Bankr. E.D. Va. 2012).
In its
Handbook for Chapter 7 Trustees, the United States Trustee has
stated that, “[e]xtraordinary factors are expected to arise only
in rare and unusual circumstances and include situations such as
where the trustee’s case administration falls below acceptable
standards
or
where
it
appears
a
trustee
has
delegated
a
substantial portion of his or her duties to an attorney or other
professional.”
2 U.S. Trustee, Handbook for Chapter 7 Trustees
Ch.
at
2-1,
39
(Apr.
2012),
available
at
http://www.justice.gov/ust/eo/ust_org/ustp_manual/docs/Volume_2_
Chapter_7_Case_Administration.pdf.
At
oral
argument,
Gold
suggested that a court may also wish to consider evidence of the
customs and practices of other Chapter 7 trustees—both locally
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and nationally—in making this determination.
that,
with
these
broad
parameters
It suffices to say
providing
guidance,
the
bankruptcy courts will be required to make the determination of
whether extraordinary circumstances exist in a Chapter 7 action
on a case-by-case basis.
It bears noting that the term “extraordinary circumstances”
is absent from the statute.
Nevertheless, its employment in the
Chapter 7 fee determination scheme appears to be an attempt to
reconcile
§ 330(a)(7)
and
§
326(a)
with
§
330(a)(1)
and
§ 330(a)(2).
As
mandatory
the
reader
rule
that
will
“the
recall,
§
330(a)(7)
court
shall
treat
sets
[the
forth
a
Chapter
7
trustee’s] compensation as a commission, based on section 326.”
Thus, reading § 330(a)(7) alongside § 330(a)(1) (“The court may
award to a trustee . . . reasonable compensation for actual,
necessary
services
rendered
by
the
trustee.”
(formatting
omitted)), Congress stated, in effect, that the commission rates
in § 326(a) are reasonable compensation for Chapter 7 trustees.
See In re Salgado-Nava, 473 B.R. at 920 (“[W]e must assume that
Congress already has approved fees set as commissions in § 326
as reasonable for the duties it has set out for such trustees
. . . .
In
effect,
Congress
has
set
both
the
duties
of
a
trustee and the ‘market’ rate for compensation related to the
delivery of those services.”).
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Nevertheless, it strains the bounds of credulity to think
that Congress would have thought those rates to be reasonable—or
meant
for
Chapter
extraordinary
7
trustees
circumstances
§ 330(a)(2) comes into play.
to
are
receive
those
present.
rates—when
This
is
when
As we noted above, § 330(a)(2)
provides that “[t]he court may, on its own motion or on the
motion of the United States Trustee, the United States Trustee
for the District or Region, the trustee for the estate, or any
other party in interest, award compensation that is less than
the amount of compensation that is requested.”
Synthesizing
§ 330(a)(7)—a
§
mandatory
330(a)(2)—a
section—leads
permissive
us
again
section—with
to
the
same
conclusion: as a general rule, the fee for Chapter 7 trustees
must
be
determined
§ 326(a).
on
a
commission
basis,
as
set
forth
in
See In re Salgado-Nava, 473 B.R. at 921 (“[A]bsent
extraordinary circumstances, chapter 7 . . . trustee fees should
be presumed reasonable if they are requested at the statutory
rate. . . . Thus, absent extraordinary circumstances, bankruptcy
courts should approve chapter 7 . . . trustee fees without any
significant
additional
review.”)
Yet,
in
extraordinary
circumstances, the bankruptcy court may reduce the fee, pursuant
to § 330(a)(2).
See 11 U.S.C. § 330(a)(2) (“The court may . . .
award compensation that is less than the amount of compensation
requested.”).
As such, § 330(a)(7) creates a presumption, but
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not a right, to a statutory maximum commission-based fee for
Chapter 7 trustees.
But still, the starting point for deciding
Chapter 7 trustee compensation is always the commission rate to
which
the
trustee
would
normally
be
entitled
had
no
extraordinary circumstances existed.
D.
Here, in determining Gold’s fee, the bankruptcy court found
that Gold “did not properly discharge his duties.
He did not
administer the estate expeditiously and in a manner compatible
to the best interests of the parties in interest.”
484 B.R. at 669.
In re Rowe,
It also found that he neglected to adequately
supervise the case.
Id. at 670.
Consequently, the bankruptcy
court based Gold’s compensation on an hourly rate, as opposed to
a commission-based rate, as dictated by § 330(a)(7).
In light
of the plain meaning of § 330(a)(7), however, this was a legal
error.
The bankruptcy court ought to have first determined what
the
maximum
statutory
pursuant to § 326(a).
decided
whether
any
commission
rate
for
this
case
was,
Only after doing that should it have
extraordinary
circumstances
existed
such
that the proper commission rate set out in § 326(a), which is
presumptively reasonable, was in fact unreasonable, and, thus,
should have been reduced.
As the In re Salgado-Nava court held,
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when confronted with extraordinary circumstances, the
bankruptcy court’s examination of the relationship
between the commission rate and the services rendered
may, but need not necessarily include, the § 330(a)(3)
factors and a lodestar analysis.
But bankruptcy
courts still must keep in mind that tallying trustee
time expended in performing services and multiplying
that time by a reasonable hourly rate ordinarily is
beyond the scope of a reasonableness inquiry involving
commissions.
473 B.R. at 921.
considers
when
Whatever factors that the bankruptcy court
reducing
the
fee,
it
should
make
detailed
findings of fact explaining the “rational relationship between
the amount of the commission and the type and level of services
rendered.”
Id.
III.
Gold also argues that we ought to vacate the bankruptcy
court’s order and remand with instructions to apply the correct
legal standard after an evidentiary hearing.
As we observed
above, Gold maintains that the bankruptcy court violated his
right to due process in reducing his compensation without either
advance
notice
that
it
harbored
reservations
as
to
the
appropriateness of his requested fee or a meaningful opportunity
to present evidence addressing the bankruptcy court’s concerns.
“When
an
appellate
court
discerns
that
a
district
court
has
failed to make a finding because of an erroneous view of the
law, the usual rule is that there should be a remand for further
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proceedings
findings.”
to
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permit
the
trial
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court
to
make
the
missing
Pullman—Standard v. Swint, 456 U.S. 273, 291 (1982).
We need not reach the second question on appeal.
In light
of our decision directing the district court to remand the case
to the bankruptcy court, Gold will be given an opportunity to
address these matters with that court in due course.
IV.
For these reasons, we reverse the district court’s decision
affirming the bankruptcy court’s non-commission-based fee award
and remand the case to the district court with instructions to
vacate the Trustee’s fee and remand the matter to the bankruptcy
court so that it can determine the proper commission-based fee
to award to the Trustee.
REVERSED AND REMANDED
16
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