Kathryn R. Montgomery 

(Va. Bar No. 42380) 

Department of Justice

Office of the United States Trustee

701 East Broad Street, Suite 4304 

Richmond, Virginia 23219 

(804) 771-2310 

Fax: (804) 771-2330 

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF VIRGINIA 

(Richmond Division)

In re:

CIRCUIT CITY STORES, INC., et al.,

Debtors. 

Consolidated 

Adv. No. 19-03091 (KRH) (lead)

Adv. No. 19-03060 (KRH)

Case No. 08-35653 (KRH) 

Chapter 11 

(Jointly Administered)

DEFENDANTS’ REPLY IN SUPPORT OF THEIR MOTION TO DISMISS

 

RAMONA D. ELLIOTT

Deputy Director/General Counsel 

P. MATTHEW SUTKO

Associate General Counsel

BETH A. LEVENE

Trial Attorney

Department of Justice

Executive Office for 

 United States Trustees

441 G Street, N.W., Suite 6150 

Washington, DC 20530 

(202) 307-1399 

Fax: (202) 307-2397

JOHN P. FITZGERALD, III

Acting United States Trustee, Region 4 

KATHRYN R. MONTGOMERY 

Assistant United States Trustee

Department of Justice

Office of the United States Trustee

701 East Broad Street, Suite 4304 

Richmond, Virginia 23219 

(804) 771-2310 

Fax: (804) 771-2330 

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TABLE OF CONTENTS

TABLE OF AUTHORITIES ....................................................................................................... ii

I. Congress Manifestly Would Not Choose to Effectively Repeal the 2017 Act’s Fee 

Increase. .............................................................................................................................. 1

II. Congress’s Chosen Prospective-Only Remedy Is Constitutionally Sufficient................... 3

III. Even if Retrospective Relief Were Appropriate, Plaintiff Is Not Entitled to a 

Retrospective Fee Decrease. ............................................................................................... 6

IV. At a Minimum, a Retrospective Remedy Is Unavailable for the First Three Quarters 

of 2018. ............................................................................................................................... 9

CONCLUSION ............................................................................................................................. 9

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TABLE OF AUTHORITIES

Page(s)

Cases

Allegheny Pittsburgh Coal Co. v. Cnty. Comm’n of Webster Cnty.,

488 U.S. 336 (1989)...................................................................................................................5

Ameur v. Gates,

759 F.3d 317 (4th Cir. 2014) .....................................................................................................3

Barr v. AAPC,

140 S. Ct. 2335 (2020)..................................................................................................... passim

Egbert v. Boule,

142 S. Ct. 1793 (2022)...............................................................................................................3

Finlator v. Powers, 

902 F.2d 1158, 1163 (4th Cir. 1990) .........................................................................................5

Fulton Corp. v. Faulkner,

345 N.C. 419 (1997), on remand from 516 U.S. 325 (1996).....................................................6

Heckler v. Matthews,

465 U.S. 728 (1984)...........................................................................................................4, 5, 6

Iowa-Des Moines Nat. Bank v. Bennett,

284 U.S. 239 (1931)...................................................................................................................5

McKesson Corp. v. Div. of Alc. Bev. & Tobacco,

496 U.S. 18 (1990).....................................................................................................................5

In re Mosaic Mgmt. Grp., Inc.,

22 F.4th 1291 (11th Cir.) (Brasher, J., concurring in result), cert. granted, 

judgment vacated sub nom. Bast Amron LLP v. U.S. Tr. Region 21, 142 S. Ct. 

2862 (2022)........................................................................................................................1, 3, 6

Sessions v. Morales-Santana,

137 S. Ct. 1678 (2017)..................................................................................................... passim

Siegel v. Fitzgerald,

142 S. Ct. 1770 (2022)...............................................................................................................1

St. Angelo v. Victoria Farms, Inc.,

38 F.3d 1525 (9th Cir. 1994), amended, 46 F.3d 969 (9th Cir. 1995)...............................3, 4, 6

United States v. Nordic Village, Inc.,

503 U.S. 30 (1992).....................................................................................................................3

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Statutes

28 U.S.C. § 1930(a)(6).....................................................................................................................7

28 U.S.C. § 1930(a)(7).................................................................................................................1, 7

Bankruptcy Administration Improvement Act of 2020, Pub. L. No. 116-325 

(2021), 134 Stat. 5088................................................................................................................2

Other Authorities

Fed. R. Evid. 201(b).........................................................................................................................8

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As Plaintiff’s response concedes, Resp. at 3, regardless of the relief requested, courts

“must adopt the remedial course Congress likely would have chosen ‘had it been apprised of the 

constitutional infirmity.’” Sessions v. Morales-Santana, 137 S. Ct. 1678, 1701 (2017).

This case thus presents two questions: What remedy would Congress choose? And does 

that remedy entitle Plaintiff to his requested relief? Because Congress plainly would choose

uniformly increased fees, Plaintiff is not entitled to the refund he seeks.

I. Congress Manifestly Would Not Choose to Effectively Repeal the 2017 Act’s Fee 

Increase.

Congress instituted quarterly fees over thirty years ago to ensure that the Program’s costs

would not fall on taxpayers. See Defendant’s Motion to Dismiss (“MTD”) at 2. For decades it 

has stayed true to that goal, periodically increasing the fees as necessary. See Siegel v. 

Fitzgerald, 142 S. Ct. 1770, 1777 (2022).

In 2017, Congress determined that another fee increase was required to avoid potentially

imposing a financial burden on taxpayers. See MTD at 3-4. And through consultation with the 

Congressional Budget Office, it ensured that the fee increase also enabled it to fund new 

bankruptcy judgeships. Id.

When it passed the 2017 Act, Congress’s “manifest intent [was] to raise the fees in all 

districts.” In re Mosaic Mgmt. Grp., Inc., 22 F.4th 1291, 1330 (11th Cir.) (Brasher, J., 

concurring in result), cert. granted, judgment vacated sub nom. Bast Amron LLP v. U.S. Tr. 

Region 21, 142 S. Ct. 2862 (2022); see also Siegel, 142 S. Ct. at 1782 n.2. It had enacted section 

1930(a)(7) expressly to provide uniform fees in BA districts, and the Judicial Conference’s 2001 

Standing Order required equal fees. See MTD at 3. 

The 2021 Act hammers home the point. Congress included an express legislative 

statement that it had always intended the fees to “remain consistent across all Federal judicial 

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districts.” 2021 Act § 2(a)(4)(B). And it amended the statutory language to ensure the Judicial 

Conference would not again collect lower fees. Id. § 3(d)(2).

Congress could hardly have spoken more plainly. In 2017, it wanted and expected 

quarterly fees to increase in all districts. In 2021, it reiterated that fact.

Plaintiff argues that because the 2021 Act did not expressly command collecting the 2017 

fee increase in BA districts, Congress must not have wanted that. Resp. at 3. But Plaintiff 

ignores the flip side of this coin: Congress also did not direct a multi-million-dollar refund to 

erase the fee increase in Program districts. 

Instead, after some courts had found the 2017 Act unconstitutionally non-uniform, 

Congress chose to provide a prospective-only remedy in the 2021 Act. The Constitution requires 

nothing more. See infra 3-6; MTD at 8-12. 

And there is no evidence that—if forced to choose a retrospective remedy—Congress 

would opt to repay the millions it raised through the 2017 Act. Requiring the United States to 

return those funds—potentially over $300 million—would eviscerate this congressional 

enactment, undermine Congress’s goal to raise revenue, and once again threaten to impose costs 

of the bankruptcy system on taxpayers.

Further, contrary to Plaintiff’s argument, Resp. at 7, the presumption is in favor of the 

“main rule, not the exception.” Morales-Santana, 137 S. Ct. at 1700; accord Barr v. AAPC, 

140 S. Ct. 2335, 2350 (2020). Where “the discriminatory exception consists of favorable 

treatment for a discrete group . . . striking the discriminatory exception [] leads . . . to extending”

the less favorable rule—here the higher fees—“to cover the previously favored group.” 

Morales-Santana, 137 S. Ct. at 1699. As Judge Brasher explained, “the remedy that most 

accords with Congress’s intent would be for the Judicial Conference to apply the general rule—

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the higher fee—in the Bankruptcy Administrator districts.” Mosaic, 22 F.4th at 1330 (Brasher, 

J., concurring in result).

Faced with this incontestable evidence of legislative intent, Plaintiff resorts to hyperbolic 

speculation, see infra 7-8, regarding the difficulty of collecting increased fees in BA districts. 

But Congress’s first-choice prospective-only remedy entails no collection. And Plaintiff cites no 

authority for his contention that—if a retrospective remedy is required—this Court may impose 

one at odds with congressional intent based on his concerns. If anything, the difficulties he 

suggests support providing prospective-only relief—as Congress already has done.

II. Congress’s Chosen Prospective-Only Remedy Is Constitutionally Sufficient.

Congress’s choice in the 2021 Act to provide prospective-only relief is constitutionally 

valid. Plaintiff is entitled to no more. 

“[M]oney damages are not an automatic entitlement anytime that constitutional rights 

have been violated.” Ameur v. Gates, 759 F.3d 317, 326 (4th Cir. 2014) (internal quotation 

marks omitted). See also MTD at 9. Indeed, for constitutional violations, retrospective 

monetary relief is rarely available. A plaintiff can obtain “affirmative monetary recovery” from 

the United States only if Congress has expressly waived sovereign immunity. United States v. 

Nordic Village, Inc., 503 U.S. 30, 33-35 (1992). Likewise, Congress has never authorized 

damages awards against individual federal officials for constitutional violations, and such a 

remedy generally cannot be judicially implied. See Egbert v. Boule, 142 S. Ct. 1793, 1802-04 

(2022).

Precedent confirms the propriety of providing a prospective-only remedy here. See MTD

at 8-11 (discussing AAPC, Morales-Santana, and St. Angelo v. Victoria Farms, Inc., 38 F.3d 

1525 (9th Cir. 1994), amended, 46 F.3d 969 (9th Cir. 1995)). 

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Plaintiff’s attempt to distinguish these cases as seeking only prospective or non-monetary 

relief, Resp. at 9, fails. The Morales-Santana respondent sought a ruling that he was a United 

States citizen from birth, not purely prospective relief. 137 S. Ct. at 1687. And the Court’s 

holding expressly applied only “prospectively.” Id. at 1701. While the AAPC respondents 

sought only declaratory relief, the result would not have been different had they sought to 

invalidate money judgments against them. Further, the Court expressly held that its decision did 

not create monetary liability for calls that pre-dated its decision, leaving the past unequal 

treatment unchanged. AAPC, 140 S. Ct. at 2355 n.12 (plurality op.); see id. at 2363 (Breyer, J., 

concurring in judgment with respect to severability).

And, of course, the Ninth Circuit’s refusal to order a quarterly-fee refund in Victoria 

Farms is precisely on point, MTD at 10—which is perhaps why Plaintiff fails to mention it. 

Plaintiff’s argument is further refuted by Heckler v. Matthews, 465 U.S. 728, 739 (1984). 

There, the Supreme Court affirmed legislation that, like the 2021 Act, provided prospective relief 

but left past unconstitutional inequality in place, id. at 739, despite the existence of a “monetary 

injury,” Resp. at 6. The statute upheld in Heckler prospectively corrected unconstitutional 

discrimination in federal-benefits payments but continued the discriminatory payments for five 

years past the legislative fix. 465 U.S. at 732-33. The Court explained: “We have recognized, in 

a number of contexts, the legitimacy of protecting reasonable reliance on prior law even when 

that requires allowing an unconstitutional statute to remain in effect for a limited period of time.” 

Id. at 746. 

Here, too, there is no constitutional barrier to Congress’s provision of prospective-only

relief. The transitional three-year lack of uniformity is of shorter duration than that permitted in 

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Heckler. And Plaintiff himself argues that the 2021 Act did not require fee collection in BA 

districts to avoid “upset[ting] settled expectations.” Resp. at 3.

The Fourth Circuit likewise has approved a prospective-only remedy without requiring a 

retrospective elimination of unconstitutionally unequal treatment. In Finlator v. Powers, the 

court enjoined as unconstitutional a sales-tax exemption for Bibles but not other sacred texts 

without any discussion of whether the state should (or could) collect the sales taxes from past 

Bible sales. 902 F.2d 1158, 1163 (4th Cir. 1990).

The cases on which Plaintiff relies to insist that prospective-only relief is impermissible

are inapposite, most importantly because in none of them had Congress already legislated 

prospective-only relief as it has here. These cases do not support imposing retrospective relief 

plainly inconsistent with congressional intent. 

Moreover, as already explained, see MTD at 11-12, this case does not implicate the dueprocess requirements for state-tax disputes at issue in most of the cases Plaintiff cites.

1

 See

Resp. at 7-12 (citing Reich v. Collins, 513 U.S. 106 (1994), Harper v. Virginia Dep’t of Tax’n, 

509 U.S. 86 (1993), McKesson Corp. v. Div. of Alc. Bev. & Tobacco, 496 U.S. 18 (1990), and 

Atchison, T. & S.F. Ry. Co. v. O’Connor, 223 U.S. 280 (1912)).

Instead, those cases support prospective-only relief here. See MTD at 11-12. Plaintiff’s 

claim of duress from the “threat” of dismissal, Resp at 12, ignores both the hearing rights 

accorded before dismissal and the facts of this case. Not only was no such motion filed, but 

1 Nor does this case involve a competitive injury that would not be redressed absent a refund, as 

in McKesson and Iowa-Des Moines Nat. Bank v. Bennett, 284 U.S. 239 (1931), or an attempt to 

burden Plaintiff with the task of seeking payments from others as in Bennett and Allegheny 

Pittsburgh Coal Co. v. Cnty. Comm’n of Webster Cnty., 488 U.S. 336 (1989). And Allegheny

recognized—consistent with Heckler—that a “transitional delay . . . resulting in inequalities” is 

permissible. Id. at 344 (holding ten years was more than “transitional”).

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Plaintiff actually stopped paying the fee increase, opting instead to seek pre-deprivation 

declaratory relief. That Plaintiff chose not to seek injunctive relief against the Judicial 

Conference to equalize the BA fees does not entitle him to a monetary remedy inconsistent with

what Congress would have willed. See Mosaic, 22 F.4th at 1330 (Brasher, J., concurring in 

result).

III. Even if Retrospective Relief Were Appropriate, Plaintiff Is Not Entitled to a 

Retrospective Fee Decrease.

Just as it is clear that Congress actually chose prospective-only relief, it is equally clear 

that if forced to choose a retrospective remedy, it would increase the fees across the board, as it 

originally expected would happen. See supra 1-3; MTD at 12-15.

Seeking to deflect from the fatal fact that the only retrospective remedy consistent with 

congressional intent is to increase BA fees, Plaintiff focuses on hypothesized barriers to 

collecting them. But whether an effort to collect fees in BA districts would be successful is not 

relevant to the level-up/level-down inquiry. Plaintiff cites no authority that the Court may flout 

legislative intent based on such feasibility concerns. To the contrary, there is ample authority 

finding that legislative intent dictated eliminating a favorable exception although past inequality 

was not corrected.

2

 See supra 3-5 (discussing Morales-Santana, AAPC, Victoria Farms,

Heckler, and Finlator); MTD at 8-11.

Plaintiff’s unsupported speculation—that collecting the increased fees in BA districts is 

either legally or practically impossible—is wrong.3

2 See also Fulton Corp. v. Faulkner, 345 N.C. 419, 424 (1997) (severing unconstitutional tax 

deduction, holding legislature could determine whether to forgive broadened tax), on remand 

from 516 U.S. 325 (1996).

3 Plaintiff’s assertion that the Tenth Circuit’s not-yet-final order precludes other courts from 

reaching a different conclusion, Resp. at 21, is legally unsupportable. The Tenth Circuit’s 

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First, Plaintiff posits that there is no legal authority to collect the increased fees. But the 

authority derives from the Constitution itself. “The Court’s power and preference to partially 

invalidate an [unconstitutional] statute . . . has been firmly established since Marbury v. 

Madison.” AAPC, 140 S. Ct. at 2350. The Court thus may invalidate the unconstitutional

exception that allowed lower fees in BA districts. 

Further, section 1930(a)(7) authorizes the Judicial Conference to assess the fees 

established section 1930(a)(6). Nothing in the statute prohibits it from reconsidering its belated

decision to collect lower fees. Nor is there any reason to think the Judicial Conference would 

flout either a Fourth Circuit or Supreme Court decision holding that collecting those fees is the 

proper remedy. 

Second, Plaintiff offers a strawman argument that increased BA fee assessments would 

create a “nightmare scenario,” Resp. at 5, requiring the clawback of distributions under 

confirmed plans. Plaintiff has not identified a single case where either the Program or a BA 

forced such a redistribution of payments to collect unpaid fees. That is because unpaid fees in 

closed cases are referred to Treasury for collection—which occurs completely outside of any 

plan process. See MTD at 16. If a debtor has dissolved or a liquidating trust has made all its 

distributions, then collection may not be successful—but that’s par for the course; even in 

ordinary circumstances, there is not a 100% success rate in collecting quarterly fees. See, e.g., In 

re US Airways, Inc., Case No. 04-13819, Dkt. Nos. 2754 at 27-28, 3193, Claim 3-1 (Bankr. E.D. 

Va.) (plan and confirmation order providing $5,000 payment on proof of claim for $50,500 in 

unpaid quarterly fees). 

decision does not bind courts in other circuits. If necessary, the Supreme Court can resolve a 

circuit split.

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Assessments in BA districts thus will not result in “hundreds or thousands of actions.” 

Resp. at 14. In fact, there are relatively few BA cases even potentially at issue. We estimate 

about 500 chapter 11 cases were pending in BA districts from January 1, 2018, through 

September 30, 2018, compared to about 17,000 chapter 11 cases in Program districts.

4

 Only a 

fraction of those would have had large enough disbursements between January 1, 2018, and 

March 31, 2021, to be subject to the 2017 Act’s fee increase. In Program districts, about 12 

percent (approximately 2,100) had such disbursements. If, as in Program districts, 12% of BA 

chapter 11 cases were subject to the fee increase, that would be only about 60 cases. 

The undeniable fact is that neither retrospective remedy would produce perfect 

uniformity. But because the number of cases in BA districts is a tiny fraction of those in 

Program districts, the scale of both any remaining disuniformity and the hypothesized difficulties 

in administering the remedy would be exponentially smaller from increasing the fees in BA 

districts. To the extent retrospective uniformity is required, the most feasible way to achieve it is 

by equalizing the fees in the fraction of cases that the Judicial Conference unilaterally excepted 

from Congress’s fee increase.

4 The Program maintains data regarding cases filed in Program districts but not BA districts. The 

estimate of BA cases is based on data available at https://www.fjc.gov/research/idb/bankruptcycases-filed-terminated-and-pending-fy-2008-present. This estimate is consistent with data 

showing 3% of nationwide chapter 11 filings from January 1, 2018, through September 30, 2018 

were in BA districts, see https://www.uscourts.gov/statistics-reports/caseload-statistics-datatables, as 500 is about 3% of 17,500. The Court may take judicial notice of the publicly 

available data. Fed. R. Evid. 201(b). Because this is a motion to dismiss, the United States 

Trustee has not submitted a declaration, but stands ready to do so. 

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IV. At a Minimum, a Retrospective Remedy Is Unavailable for the First Three Quarters

of 2018. 

Contrary to Plaintiff’s argument, the Supreme Court expressly did not determine the 

remedy issue, and a fortiori did not determine if there were remedy considerations specific to the 

first three quarters of 2018. As previously explained, see MTD at 17, the Judicial Conference’s

2001 Standing Order renders a retrospective remedy for that period both legally and factually 

unwarranted. 

CONCLUSION

 For these reasons, this Court should dismiss both adversary proceedings. 

Date: October 25, 2022

RAMONA D. ELLIOTT

Deputy Director/General Counsel 

P. MATTHEW SUTKO

Associate General Counsel

BETH A. LEVENE

Trial Attorney

Department of Justice

Executive Office for 

 United States Trustees

441 G Street, N.W., Suite 6150 

Washington, DC 20530 

(202) 307-1399 

Fax: (202) 307-2397

Respectfully submitted,

By: /s/ Kathryn R. Montgomery

JOHN P. FITZGERALD, III

Acting United States Trustee, Region 4 

KATHRYN R. MONTGOMERY 

Assistant United States Trustee

Department of Justice

Office of the United States Trustee

701 East Broad Street, Suite 4304 

Richmond, Virginia 23219 

(804) 771-2310 

Fax: (804) 771-2330 

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