352 F.

3d 671

In re: AQUATIC DEVELOPMENT GROUP, INC., Debtor.

Carolyn S. Schwartz, Appellant,
v.
Aquatic Development Group, Inc., Appellee.
Docket No. 02-5059.

United States Court of Appeals, Second Circuit.

Argued: August 28, 2003.
Decided: December 17, 2003.

COPYRIGHT MATERIAL OMITTED Eric D. Miller, Attorney,

Appellate Staff, Civil Division, United States Department of Justice,
Washington, DC (Robert M. Loeb, Attorney, Appellate Staff, Civil
Division, United States Department of Justice, Robert D. McCallum, Jr.,
Assistant Attorney General, Civil Division, United States Department of
Justice, and Glenn T. Suddaby, United States Attorney for the Northern
District of New York, on the briefs; Carolyn S. Schwartz, United States
Trustee for the Northern District of New York, Kim F. Lefebvre,
Assistant United States Trustee for the Northern District of New York,
and Paul Bridenhagen, Trial Attorney, Executive Office for United States
Trustees, of counsel), for Appellant.
Terence J. Devine, DeGraff, Foy, Kunz and Devine, LLP, Albany, N.Y.
(Ralph W. Bandel, Esq., Cohoes, NY, on the brief) for Appellee.
Before: MINER, STRAUB and WESLEY, Circuit Judges.
Judge STRAUB concurs in a separate opinion.
MINER, Circuit Judge.

In this appeal, we are asked to decide whether the United States Bankruptcy
Court for the Northern District of New York (Littlefield, B.J.) was both acting
within its statutory authority and properly exercising its discretion when,
relying on its equitable powers, it entered a nunc pro tunc order in December
2000 that retroactively closed the bankruptcy estate of debtor-appellee Aquatic

Development Group, Inc. ("ADG") as of December 1996. The effect of the

Bankruptcy Court's order was to relieve ADG of its obligation to pay certain
statutory fees that had been billed by appellant Carolyn Schwartz, the United
States Trustee for the Northern District of New York ("Trustee"), prior to the
effective date of the nunc pro tunc order. In the Trustee's appeal from the
Bankruptcy Court's order, the United States District Court for the Northern
District of New York (Scullin, C.J.) concluded that the Bankruptcy Court had
acted within its statutory authority and had not abused its discretion in granting
the nunc pro tunc relief requested by ADG.
2

For the reasons set forth below, we find that the Bankruptcy Court did abuse its
discretion in granting nunc pro tunc relief here. In light of this conclusion, we
decline to reach the issue of whether Congress has divested bankruptcy courts
of the equitable authority to enter nunc pro tunc orders retroactively relieving
debtors of their obligations to pay statutory bankruptcy trustee fees.
Accordingly, we vacate the judgment of the District Court and remand the case
for further proceedings consistent with this opinion.

BACKGROUND
I. Proceedings in Bankruptcy Court
3

In September 1995, ADG and several of its affiliates filed voluntary petitions in
the Bankruptcy Court for relief under Chapter 11 of the federal Bankruptcy
Code. The Bankruptcy Court subsequently consolidated these cases and, in
February 1996, confirmed a reorganization plan. The confirmed reorganization
plan provided, in relevant part, that the Bankruptcy Court would retain
jurisdiction "until there [was] substantial consummation of the plan," and the
order confirming the plan stated that "substantial confirmation" would be
achieved "only when all payments to the holders of general unsecured claims
under the plan [had] been made."1 The confirmation order also directed ADG,
in conformity with 28 U.S.C. 1930(a)(6), to pay all fees then owed to the
Trustee within ten days and, from that point forward, to pay all fees due to the
Trustee on a timely basis.

While this case was pending in the Bankruptcy Court, the Trustee submitted
quarterly bills to ADG, pursuant to 1930(a)(6). Section 1930(a)(6) was
amended on January 26, 1996 eight days after the confirmation hearing on
ADG's reorganization plan, but almost three weeks before the Bankruptcy
Court entered its final order confirming ADG's reorganization plan. Prior to this
amendment, the statute required debtors to pay quarterly fees to the Trustee
"until a plan [was] confirmed or the case [was] converted or dismissed." 28

U.S.C. 1930(a)(6) (1994) (emphasis added). The current version of the statute
no longer contains the underscored text quoted above and thus requires debtors
to pay fees to the United States Trustee "for each quarter ... until the case is
converted or dismissed."2 28 U.S.C. 1930(a)(6) (2000).
5

In September 1996, Congress enacted an additional statutory provision to

clarify the meaning and effect of the January 1996 amendment. The clarifying
legislation provided that, "notwithstanding any other provision of law, the fees
under 28 U.S.C. 1930(a)(6) shall accrue and be payable from and after
January 27, 1996, in all cases (including, without limitation, any cases pending
as of that date), regardless of confirmation status of their plans." Pub.L. No.
104-208, 109(d), 110 Stat. 3009, 3009-19 (1996).

In February 1996, the Trustee mailed pro forma notices to all debtors in
pending bankruptcy cases including ADG3 to inform them of the
statutory change the previous month. The notices stated, in relevant part:
"Effective January 27, 1996, all cases with confirmed reorganization plans
which are pending before the Bankruptcy Court will be required to make
quarterly fee payments based on disbursements until the case is converted to
another chapter of the Code, dismissed by the Court, or closed by Court
order."4 In June 1996, the Trustee sent ADG a bill for $11,000 for fees due
since the inception of the case. Two months later, ADG paid the bill. In a cover
letter accompanying this payment, ADG's attorney wrote: "I understand there
will be some additional fees." Thereafter, the Trustee sent ADG a bill every
quarter, but ADG made only two more fee payments, the last of which was in
November 1996.

On August 21, 1996, in accordance with the confirmed reorganization plan, the
required cash payments were made and preferred stock was issued directly to
ADG's secured creditors and to its bankruptcy counsel on behalf of its
unsecured creditors. In early December 1996, ADG completed the postconfirmation financing on which its reorganization plan was contingent. At that
point, its plan had been substantially consummated. ADG continued to receive
bills from the Trustee in 1997. As directed by the instructions printed on each
bill, ADG consulted with counsel to determine whether the quarterly fees
should be paid. Counsel advised ADG that it was "out of bankruptcy," and,
based on this advice and the fact that there was no follow-up by the Trustee as
to the status of the reorganization plan or its implementation, ADG believed
that all matters pertaining to its bankruptcy had been concluded. Accordingly,
ADG did not pay the Trustee's bills.

In or about June 1999, after reviewing her records, the Trustee discovered that

ADG's bankruptcy estate apparently was still open and that none of the
quarterly bills that she had sent to ADG had been paid since November 1996.
After making three written inquiries to ADG's counsel regarding the status of
ADG's reorganization plan, the Trustee in September 1999 moved in the
Bankruptcy Court for an order compelling ADG to pay approximately
$110,000 in overdue fees and for a status report regarding the consummation of
ADG's reorganization plan. In response, ADG moved for an order nunc pro
tunc closing the case as of December 5, 1996, on the ground that the
reorganization plan had been substantially consummated as of that date, thereby
relieving ADG of its obligation to pay any subsequent quarterly Trustee fees.
9

In a fifteen-page, unpublished memorandum decision and order dated

December 21, 2000, the Bankruptcy Court entered a nunc pro tunc order
granting the relief requested by ADG. In its decision granting this relief, the
Bankruptcy Court evaluated ADG's motion under the framework of our
decision in Cushman & Wakefield of Connecticut, Inc. v. Keren Limited
Partnership (In re Keren Limited Partnership), 189 F.3d 86 (2d Cir.1999) (per
curiam). In particular, the Bankruptcy Court quoted from In re Keren's
statement that "[n]unc pro tunc approval should only be granted in narrow
situations and requires that (i) if the application had been timely, the court
would have authorized the [relief], and (ii) the delay in seeking [the relief
requested] resulted from extraordinary circumstances." Id. at 87. The
Bankruptcy Court concluded that both of these requirements had been satisfied.
First, the Bankruptcy Court found that it could have entered a final decree if it
had been asked to do so in December 1996, even though an adversary
proceeding was pending at that time. The Bankruptcy Court rejected the
Trustee's argument that, because the reorganization plan and confirmation order
defined "substantial confirmation" as requiring payments to the holders of
general unsecured claims, the fact that those cash payments were not completed
until January 2000 meant that the requirements of the plan were not satisfied
until that time. In rejecting this contention, the Bankruptcy Court noted that, in
August 1996, ADG had transferred stock intended for the unsecured creditors
to its counsel, who, the court concluded, had been acting as the agent of the
unsecured creditors; therefore, the Bankruptcy Court concluded, the stock
transfer to ADG's counsel had satisfied the payment requirement.

10

Second, the Bankruptcy Court, relying on the text and Advisory Committee
Notes to Federal Rule of Bankruptcy Procedure 3022,5 concluded that it would
have closed ADG's bankruptcy case in December 1996 if it had been asked to
do so, since by "that time the confirmation order had become final because the
refinancing had been completed; the deposits had been paid, the stocks and
cash had been transferred to the agents of the creditors[,] the payments had

commenced ... [,and ADG] had assumed management of the business."

11

Furthermore, the Bankruptcy Court concluded that ADG's failure to seek a final
decree in December 1996 was due to extraordinary circumstances, which
included "the prolonged nature of this plan and the timing of the amendment of
... 1930; the consequences of that change; and the failure of the parties to
adequately monitor the progress of this case." In particular, the Bankruptcy
Court determined that payment of the fee to the Trustee would not have been
equitable and would not have "serve[d] the Code's underlying purposes of
providing deserving debtors a free start," especially since the continued
accumulation of fees had not been possible under the version of 1930 in effect
at the time the reorganization plan had been filed. Moreover, the Bankruptcy
Court found that ADG's failure to respond to the bills it had received from the
Trustee was excusable because the Trustee had "not contact[ed] the Debtor for
payment of the fees." II. Proceedings in the District Court

12

The Trustee timely appealed the Bankruptcy Court's order. In its appeal to the
District Court, the Trustee argued that the Bankruptcy Court had abused its
discretion in granting ADG's application for nunc pro tunc relief, because (i)
the clear language of 1930 required the payment of quarterly Trustee fees in
all pending cases and thus the Bankruptcy Court lacked the statutory authority
to grant the equitable relief sought by ADG; and (ii) even if the Bankruptcy
Court had the authority to grant the equitable relief requested by ADG, the
Bankruptcy Court erred in concluding that ADG had met the requirements for
nunc pro tunc relief. In an unpublished, sixteen-page memorandum decision
and order dated July 25, 2002, the District Court affirmed the Bankruptcy
Court's order.

13

First, the District Court rejected the Trustee's argument that 1930 divested the
Bankruptcy Court of its equitable authority to grant the nunc pro tunc relief
requested by ADG. In particular, the District Court relied on In re Rhead, 232
B.R. 175, 181 (Bankr.D.Ariz.1999), where the bankruptcy court concluded that
the debtor had not sufficiently alleged the extraordinary circumstances required
for nunc pro tunc relief but did not explicitly find that it lacked the authority to
grant such equitable relief. Moreover, the District Court also relied on the
language in Section 105(a) of the Bankruptcy Code, 11 U.S.C. 105(a), which
provides that a bankruptcy court "may issue any order, process, or judgment
that is necessary or appropriate to carry out the provisions of [the Code]," in
concluding that the Bankruptcy Court had the authority to grant the equitable
relief requested by ADG.

14

Second, the District Court concluded that the Bankruptcy Court had not abused

its discretion in concluding that ADG had satisfied the requirements for nunc
pro tunc relief. In particular, the District Court agreed with the reasons
provided by the Bankruptcy Court in support of the latter's conclusions that (i)
it could and would have granted a request for a final decree had ADG made one
in December 1996, and (ii) ADG had successfully shown that extraordinary
circumstances existed to justify nunc pro tunc relief. Final judgment was
entered shortly after the issuance of the District Court's decision, and this
timely appeal followed.
DISCUSSION
15

In this appeal, the Trustee offers the same alternative bases to set aside the
District Court's judgment as previously put forth by her when she asked the
District Court to set aside the Bankruptcy Court's order, i.e., (i) that 1930
divested the the Bankruptcy Court of authority to grant the equitable relief
sought by ADG; and (ii) even if the Bankruptcy Court had the authority to
grant such relief, ADG has not met the requirements for nunc pro tunc relief.
For the reasons set forth below, we conclude that the Bankruptcy Court abused
its discretion in concluding that ADG was entitled to nunc pro tunc relief.
Consequently, we need not and do not decide whether Congress' 1996
amendment of 1930 strips bankruptcy courts of their equitable authority to
grant nunc pro tunc relief where doing so would allow debtors to avoid paying
quarterly trustee fees that the debtors would otherwise be required to pay.

16

As noted above, our decision in In re Keren provides a yardstick against which

we may measure whether a bankruptcy court should have granted nunc pro
tunc relief. There, we articulated a two-pronged test for determining the
"narrow" circumstances under which such relief should be granted: (i) if the
application for relief had been timely made, the bankruptcy court would have
granted the relief requested; and (ii) the delay in seeking relief resulted from
"extraordinary circumstances." 189 F.3d at 87. Moreover, "[w]e review a
bankruptcy court's decision regarding such approval for abuse of discretion," id.
at 88, which we have defined as (i) a decision "rest[ing] on an error of law
(such as application of the wrong legal principle) or a clearly erroneous factual
finding," or (ii) a decision that, "though not necessarily the product of a legal
error or a clearly erroneous factual finding[,] cannot be located within the range
of permissible decisions," Zervos v. Verizon N.Y., Inc., 252 F.3d 163, 169 (2d
Cir.2001).

17

Turning to the first prong of the In re Keren test, we agree with the District
Court that the Bankruptcy Court did not abuse its discretion in concluding that
the latter could and would have granted a request to close the bankruptcy case

had ADG made such a request in December 1996. Notwithstanding the

adversary proceeding that was pending and the fact that ADG's unsecured
creditors had not received from the bankruptcy estate all the payments that the
estate was required to make under the reorganization plan as of December
1996, the Bankruptcy Court could have ordered dismissal and closure at that
time. As both the Bankruptcy Court and the District Court correctly noted, we
have permitted a bankruptcy court to retain jurisdiction over an adversary
proceeding after it has dismissed the bankruptcy case. See Porges v. Gruntal &
Co., Inc. (In re Porges), 44 F.3d 159 (2d Cir. 1995). Moreover, even though the
confirmation order defined "substantial consummation" as occurring when "all
payments to be made to the holders of general unsecured claims . . . have been
made," the Bankruptcy Court concluded that this requirement had been satisfied
when, in August 1996, ADG issued stock to its counsel, who was acting as the
agent for ADG's unsecured creditors. Again, we agree with the District Court
that the Bankruptcy Court's interpretation of the term "payments" in its
confirmation order was not an abuse of discretion. See Casse v. Key Nat'l Bank
Ass'n (In re Casse), 198 F.3d 327, 333 (2d Cir.1999) ("The bankruptcy court
[is] in the best position to interpret its own orders.") (internal quotation marks
omitted).6
18

Turning to the second prong of In re Keren, we part company with the District
Court and conclude that the Bankruptcy Court abused its discretion in
concluding that ADG's failure to seek an order closing the bankruptcy case in
December 1996 resulted from extraordinary circumstances. As discussed
above, the Bankruptcy Court identified three circumstances that it characterized
as being both extraordinary and the cause of ADG's delay in seeking to have
the case closed: (i) the unusual length of time required to consummate the
reorganization plan; (ii) the timing of the effective date of the amendment to
1930 and the financial consequences of the amendment; and (iii) the parties'
failure to monitor the progress of the case. We address each of these
circumstances seriatim.

19

First, the unusual length of time required to consummate the reorganization

plan (due to the fact that ADG was not scheduled to begin redeeming stock
from its unsecured creditors until 2000) may well have been extraordinary, but
there is no evidence in the record that the time required to consummate the plan
caused ADG to delay its request to close the bankruptcy case. Indeed, as noted
above, the Bankruptcy Court would have been acting well within its discretion
if had closed the case in December 1996.

20

Second, both the timing of the amendment to 1930(a)(6) and its attendant
financial consequences may also have been extraordinarily unfortunate as

they had the potential to add unforeseen thousands of dollars of quarterly

Trustee fees to the transaction costs of ADG's reorganization plan but the
amendment and the financial consequences flowing from it can in no way be
characterized as a cause of ADG's delay in moving to close the case. Indeed,
the unique provisions of the reorganization plan, coupled with the amendment
to 1930(a)(6), should have stirred ADG to act diligently in seeking closure.
21

Finally, we turn to the parties' failure to monitor the closure of the case.
Granting nunc pro tunc relief on this basis constituted an abuse of discretion for
two reasons. First, "[s]imple neglect" on the part of a debtor in failing to take
timely action does not constitute the "extraordinary circumstances" necessary to
justify nunc pro tunc relief. Land v. First Nat'l Bank of Alamosa (In re Land),
943 F.2d 1265, 1268 (10th Cir.1991).7 Thus, the dilatory conduct of both the
Trustee and ADG in monitoring the progress of this case can only tenuously be
characterized as an extraordinary circumstance. As the Bankruptcy Court noted,
the Trustee merely let this case "slip[] through the cracks." ADG, on the other
hand, regularly received substantial bills over a period of three years and, on
the advice of counsel, simply ignored them. While it may be the case (as ADG
argues on appeal) that ADG "took every step that it could possibly take to carry
out its reorganization plan," the relevant inquiry in deciding whether to grant
nunc pro tunc relief is not whether ADG was diligent in consummating its
reorganization plan but rather whether ADG exercised diligence in closing a
case that was costing it approximately $35,000 a year to keep open. Plainly, by
allowing the Trustee's bills to pile up for several years before taking any action
whatsoever, ADG failed to exercise reasonable diligence. Second,
characterizing ADG's neglectful conduct as an extraordinary circumstance
justifying nunc pro tunc relief mistakes cause for effect ADG's failure to act
was itself the delay, rather than a "circumstance" leading to it.

22

In sum, the record does not support the Bankruptcy Court's conclusion that
ADG's delay "resulted" from any circumstances sufficiently extraordinary to
justify the rare and powerful relief of retroactive closure. Accordingly, the nunc
pro tunc relief granted by the Bankruptcy Court "cannot be located within the
range of permissible decisions" granting such relief, Zervos, 252 F.3d at 169,
and the decision to grant such relief here was an abuse of discretion.

CONCLUSION
23

For the foregoing reasons, we vacate the judgment and remand the case to the
District Court for further proceedings consistent with this opinion.

Notes:
1

In particular, the reorganization plan provided for ADG to pay its creditors with
cash and a series of newly issued preferred stock to be redeemed from a
percentage of ADG's after-tax net income. The redemption payments to ADG's
unsecured creditors were not scheduled to begin until May 15, 2000 (almost
five years after the confirmation date)

The amount of the fee is a function of the disbursements paid out of the
bankruptcy estate, with the minimum fee being $250 for each quarter during
which disbursements total less than $15,000 and the maximum fee being
$10,000 for each quarter during which disbursements from the estate total
$5,000,000 or moreSee 28 U.S.C. 1930(a)(6) (2000). These fees bear no
relation to particular services performed by the Trustee. Indeed, the legislative
history of the amendment to 1930 makes clear that the fees are used to offset
other expenditures in the federal budget and that the amendment was added to
increase the revenue raised from these fees:
The [requested increase in legal staff] is paid for by a proposed change in the
law which, if enacted, would require chapter 11 debtors to continue to make
quarterly payments based on disbursements until a case is converted or
dismissed. The proposed change is a logical extension of the Program's present
funding mechanism. Currently, chapter 11 debtors are only assessed quarterly
fees until a reorganization plan is confirmed by the bankruptcy court, making
post confirmation debtors the only entities in the bankruptcy process who are
exempt from fees. There is no rational basis for such an exemption and the
proposed amendment will close a loophole that allows cases to languish
without paying for Program services.
U.S. Trustees v. Boulders on the River, Inc. (In re Boulders on the River, Inc.),
218 B.R. 528, 534 (D.Or.1997) (quoting Fiscal Year 1996 Budget
Justifications, United States Trustee Fund, Salaries and Expenses, Summary
Statement, Fiscal Year 1996, at 12-13 (1995)); see also id. ("`The additional
fees will be deposited as offsetting collections to the United States Trustee
System Fund and will provide the resources necessary to ensure adequate postconfirmation oversight and supervision of Chapter 11 cases.'") (quoting
H.R.Rep. No. 104-196, at 16-17 (1995)).

ADG has no record of ever having received this notice

Although the statute does not specifically state that the closing of a bankruptcy
case cuts off the accrual of the Trustee's fees, courts interpreting the statute
have uniformly held that "closure of a case after entry of a final decree is also
an event that terminates quarterly fees because the existence of a case is a
statutory precondition to the assessment of such fees."See, e.g., In re Boulders
on the River, 218 B.R. at 537. Neither the Trustee nor ADG disagrees with this
interpretation of the statute.

Bankr.R. 3022 states: "After an estate is fully administered in a chapter 11

reorganization case, the [bankruptcy] court, on its own motion or on a motion
of a party in interest, shall enter a final decree closing the case." The Advisory
Committee Notes provide, in relevant part:
Entry of a final decree closing a chapter 11 case should not be delayed solely
because the payments required by the plan have not been completed. Factors
that the [bankruptcy] court should consider in determining whether the estate
has been fully administered include: (1) whether the order confirming the plan
has become final; (2) whether the deposits required by the plan have been
distributed; (3) whether the property proposed by the plan to be transferred has
been transferred; (4) whether the debtor or successor of the debtor under the
plan has assumed the business or management of the property dealt with by the
plan; (5) whether payments under the plan have commenced; and (6) whether
all motions, contested matters, and adversary proceedings have been fully
resolved.

The Trustee does not appear to challenge on appeal the Bankruptcy Court's and
the District Court's conclusion that the Bankruptcy Court would have entered
an order closing the case in December 1996, assuming that it could have done
so

See also Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147, 151, 104 S.Ct.
1723, 80 L.Ed.2d 196 (1984) ("One who fails to act diligently cannot invoke
equitable principles to excuse that lack of diligence."); In re Jarvis, 53 F.3d
416, 421 (1st Cir.1995) ("if the category of extraordinary circumstances were
expanded to include mere oversight, the modifying adjective `extraordinary'
would be completely emptied of its meaning"); In re Ark. Co., Inc., 798 F.2d
645, 650 (3d Cir.1986) (holding that extraordinary circumstances did not
include "the mere neglect of the professional who was in a position to file a
timely application").

24

STRAUB, Circuit Judge, concurring.

25

I agree fully with the majority's application of the In re Keren test to the facts of

25

I agree fully with the majority's application of the In re Keren test to the facts of
this case. But I write separately because I also conclude that the Bankruptcy
Court lacked authority to utilize equitable powers to issue the nunc pro tunc
closure order in the first instance, and thus, fundamentally, application of the In
re Keren factors is both inappropriate and unnecessary.

26

As the majority points out, Congress amended the quarterly fee statute, 28
U.S.C. 1930(a)(6), in January 1996 to mandate the payment of postconfirmation fees until a Chapter 11 case is closed, converted, or dismissed.
See Balanced Budget Downpayment Act, I, Pub.L. No. 104-99, Title II, 211
(1996). Because Congress eliminated plan confirmation as one of the events
terminating liability for continued fee payments, "uncertainty developed as to
whether the amendment applied retroactively to already pending cases with
confirmed plans." In re Jamko, Inc., 240 F.3d 1312, 1315 n. 4 (11th Cir.2001).
To define the scope of 1930(a)(6), Congress enacted a clarifying provision in
September 1996, explicitly stating that: "notwithstanding any other provision of
law, the fees under 28 U.S.C. 1930(a)(6) shall accrue and be payable from
and after January 27, 1996, in all cases (including, without limitation, any cases
pending as of that date), regardless of the confirmation status of their plans."
Omnibus Consolidated Appropriations Act for Fiscal Year 1997, Pub.L. No.
104-208, 109(d) (1996) (emphasis added). Given the plain language of the
clarifying provision, I do not understand how Congress could have made its
intention to mandate the payment of quarterly fees in all pending Chapter 11
cases any more clear or explicit than with the singularly broad phrase,
"notwithstanding any other provision of law."

27

Of course, it is axiomatic that bankruptcy courts are "courts of equity,

empowered to invoke equitable principles to achieve fairness and justice in the
reorganization process." In re Momentum Mfg. Corp., 25 F.3d 1132, 1136 (2d
Cir.1994). Specifically, section 105(a) of the Bankruptcy Code grants
bankruptcy courts the "equitable power to `issue any order, process, or
judgment that is necessary or appropriate to carry out the provisions of this
title.'" In re Dairy Mart Convenience Stores, Inc., 351 F.3d 86, 91 (2d Cir.2003)
(quoting 11 U.S.C. 105(a)). Nonetheless, this Court has repeatedly cautioned
that 105(a) "does not `authorize the bankruptcy courts to create substantive
rights that are otherwise unavailable under applicable law, or constitute a
roving commission to do equity.'" Id. (quoting United States v. Sutton, 786 F.2d
1305, 1308 (5th Cir.1986)). While perhaps expansive, "[t]he equitable power
conferred on the bankruptcy court by section 105(a) is the power to exercise
equity in carrying out the provisions of the Bankruptcy Code" not the broader
power to invoke equity "to further the purposes of the Code generally, or
otherwise to do the right thing." Id. (emphasis in original); see also In re
Barbieri, 199 F.3d 616, 620-21 (2d Cir.1999) (warning that the "equitable

powers emanating from 105(a) ... are not a license for a court to disregard the
clear language and meaning of the bankruptcy statutes and rules") (alteration in
original; internal quotation marks omitted).
28

29

Thus, the general grant of equitable power contained in section 105(a) cannot
trump specific provisions of the Bankruptcy Code, but must instead be
exercised within the parameters of the Code itself. See generally Norwest Bank
Worthington v. Ahlers, 485 U.S. 197, 206, 108 S.Ct. 963, 99 L.Ed.2d 169
(1988) ("[W]hatever equitable powers remain in the bankruptcy courts must
and can only be exercised within the confines of the Bankruptcy Code"); see
also In re Dairy Mart Convenience Stores, Inc., 351 F.3d at 92, 2003 WL
22860275 at *5. In this case, Congress has specifically provided that Chapter
11 debtors pay fees under 1930(a)(6) until the bankruptcy case is closed,
converted, or dismissed, "notwithstanding any other provision of law." Pub.L.
No. 104-208 109(d) (1996). Plainly, the grant of equitable power contained in
105(a) is another "provision of law." Accordingly, the clarifying provision to
1930(a)(6) must be read as mandating the payment of quarterly fees,
irrespective of the confirmation status of a Chapter 11 case, "notwithstanding"
the bankruptcy court's usual power to issue equitable relief in the form of a
nunc pro tunc order. Here, the Bankruptcy Court was indisputably issuing the
nunc pro tunc closure order not to effectuate the terms of the fee statute, but to
relieve the debtor from the burdens of the statute's application, an exercise of
equitable power that contradicts the express terms of the clarifying provision to
1930(a)(6) and inappropriately construes the breadth of 105(a)'s grant of
equitable authority.1
In addition, while I agree with the majority that ADG fails to satisfy the
requirements for nunc pro tunc closure even assuming that the Bankruptcy
Court had the power to issue such equitable relief I am substantially troubled
by the Bankruptcy Court's suggestion that the Trustee's diligence, or lack
thereof, in monitoring the progress of a particular bankruptcy case should
somehow factor into the analysis of whether a debtor is entitled to equitable
relief from fees. As the majority notes, 1930(a)(6) assesses fees according to
a graduated scale based on the amount of quarterly disbursements paid to
creditors, and "[t]hese fees bear no relation to [the] particular services
performed by the Trustee." The purpose of amending 1930(a)(6) to mandate
post-confirmation fee payments was to raise revenue, not to charge debtors for
the Trustee's monitoring services. By issuing nunc pro tunc relief, the
Bankruptcy Court was not only circumventing the congressional mandate that
fees be assessed in all pending Chapter 11 cases, but also disturbing the
detailed statutory fee schedule specifically chosen by Congress. Whatever
powers bankruptcy courts may otherwise exercise, "[c]ourts of equity cannot, in

their discretion, reject the balance that Congress has struck in a statute" or
override legislative policy judgments by independently weighing the
advantages and disadvantages of fully enforcing a statute. United States v.
Oakland Cannabis Buyers' Coop., 532 U.S. 483, 497-98, 121 S.Ct. 1711, 149
L.Ed.2d 722 (2001).
30

In sum, I believe the Bankruptcy Court lacks legal authority to grant equitable
relief to exempt a debtor from quarterly fees under 1930(a)(6). Moreover, the
kind of fact specific analysis that the majority undertakes in applying the In re
Keren test for issuing nunc pro tunc relief looks to factors that are wholly
extraneous to the statutory fee scheme imposed by 1930(a)(6), for Congress
could have chosen to make an "extraordinary circumstances" exception to the
payment of quarterly fees, yet it chose not to. For all of these reasons, I concur
in the ultimate judgment, but would directly hold that the Bankruptcy Court
exceeded its authority in this case in clear contradiction of the statute.

Notes:
1

Significantly, ADG has only directed the court to one other decision where a
bankruptcy court has issued a similar nunc pro tunc orderSee In re Junior Food
Mart of Ark., Inc., 201 B.R. 522, 524-25 (Bankr.E.D.Ark. 1996) (closing a
Chapter 11 case retroactively to permit the debtor to avoid quarterly fees).
However, In re Junior Food Mart is of little precedential value, as it was
decided before Congress enacted the clarifying provision to 1930(a)(6),
reaffirming that the fee statute would apply to all pending Chapter 11 cases
regardless of confirmation status.