ABI - National Bankruptcy Review Commission

National Bankruptcy Review Commission



First Organizational Meeting
Friday, October 20, 1995, Washington, D.C.
Continued, Wednesday, November 1, 1995, New Orleans, Louisiana

Friday, October 20, 1995
Federal Judicial Center, Education Center
Thurgood Marshall Building
Washington, D.C.

Commission Members Present:

Mike Synar, Chairman
Judge Robert E. Ginsberg, Vice Chairman
Jay Alix
M. Caldwell Butler
Babette A. Ceccotti
John A. Gose
Jeffrey A. Hartley
Judge Edith Hollan Jones
Jim I. Shepard

Commission Staff Present:

Jarilyn Dupont, Executive Director/General Counsel
Carmelita Pratt, Administrative Officer

Also Present:

Calvin Snowden, General Services Administration
Professor Elizabeth Warren

Public Attending:

Approximately 25 members of the general public and governmental agencies attended including representatives from the U.S. Senate and House of Representatives, the Department of Justice, the Administrative Office of the U.S. Courts, trade associations, interest groups and the media.

Chairman Synar called the meeting to order at 10:02 a.m.

Preliminary comments were made by the Chairman welcoming everyone. Each Commission Member introduced her/himself and stated her/his background and general expectations for the Commission. Chairman Synar indicated that he had asked Judge Ginsberg to fill in for him when he was unable to attend meetings.

At 10:16 a.m., Chairman Synar called for the meeting to be closed and the closed session continued until approximately 12:10 p.m.

Closed Session

During the closed session, the Commission discussed internal personnel matters including the approval of Chairman Synar’s appointment for the Executive Director of the Commission; the rules and regulations applicable to the Commission with respect to ethics, conflicts of interest, salary and travel reimbursements, and additional personnel for the Commission. The Commission approved Jarilyn Dupont as the Executive Director. The Commission also unanimously approved Judge Ginsberg as Vice-Chair.

The meeting was recessed for lunch and reconvened at 1:07 p.m. by Vice Chairman Ginsberg (acting as Chairman in the absence of Chairman Synar).

Vice Chairman Ginsberg announced the decision taken during the closed session and then moved on to the next agenda item, the approval of the Bylaws.

Discussion of Bylaws

John Gose suggested that Bylaw I (Role of Chair), section (A), be amended by adding at the end of section (A), before the period, the phrase or in his absence the Vice-Chair ; deleting section (B) and redesignating section (C) as (B). There was agreement with the amendment.

He continued with an amendment to Bylaw II (Meetings and Hearings), section (A), to add in the first sentence after the word Chair , the phrase or the Vice Chair, if the Chair is unavailable . There was agreement with the amendment.

The third amendment by John Gose was to Bylaw III, (Quorum and Voting), section (B). He suggested that the whole Commission might want to determine if there would be a lesser quorum for the purpose of holding hearings. After discussion by the Members as to how hearings would be handled, however, it was agreed that this section should remain unamended.

The fourth amendment suggested by John Gose was to Bylaw IV (Administrative Authority), section (B), and would delete the section as it was unnecessary. There was discussion as to whether it was necessary to retain this section detailing the authority of the Chair to designate a Vice-Chair since it was no longer relevant as the Vice-Chair already was selected and approved. There was a concern that the Chair always should retain the authority but that any choice should be subject to a vote. After discussion of another section, the Members agreed to change section (B) to leave the authority with the Chair to designate a Vice-Chair with subsequent approval by the Commission.

Judge Jones suggested that Bylaw IV (Administrative Authority), section (A), should be amended by striking the last sentence. There was discussion as to the authority of the Chair to fix the compensation level of personnel and whether the statute permitted the action. Jay Alix suggested that instead of striking the sentence simply change the word Chair to Commission in the last sentence. Vice Chairman Ginsberg suggested that the entire section (A) be stricken since the Commission could rely on the implementing statute. That suggestion was agreed to by the Commission.

Babette Ceccotti posed a question relating to Bylaw II (Meetings and Hearings), section (A), as to the last sentence of section (A) and whether the time period was necessary to comply with statutory notice or was for personal notice to the Members. Executive Director Dupont explained that the notice would be sent to the Members subsequent to discussion with the Commission Members of a suitable and convenient date and it was a confirmation of the meeting date before any other public notice date. With that understanding no change was made to the section.

Babette Ceccotti raised a question on Bylaw III (Quorum and Voting), section (C), concerning the presence of a Member at a meeting through the use of a telephone. After an intervening discussion of another issue, it was agreed that a Member was present if participating by telephone and that the section would be amended by adding the phrase either in person or by telephone in the second sentence after the word present .

Caldwell Butler suggested that Bylaw III (Quorum and Voting), section (C), be amended to strike proxy voting as indicated in the last two sentences of section (C). This amendment was agreed to by the Members
Jay Alix raised a question as to Bylaw III, section (C), as to whether there was a need to specify the issues which required a vote. After discussion by the Members as to the ability of the Commission to decide those issues requiring a vote as raised, no change was made.

John Gose raised a question as to Bylaw IV (Administrative Authority), section (C), as to who is a designee as the term is used throughout the section. Vice Chairman Ginsberg indicated it was whoever was designated by the Chairman. A question was then raised as to the availability of reports indicating expenditures by the Commission. It was explained that the monthly budget reports would be provided by the General Services Administration (GSA) starting with the date of the official agreement with GSA so that the first one probably would be available at the end of October. It was requested that these be circulated to the Members.

John Gose proposed an amendment to Bylaw IV (Administrative Authority), section (D), that the amount not requiring approval of the Commission for consultants be set at $5,000 instead of $10,000 because of the short budget cycle in Fiscal Year 1997. Vice Chairman Ginsberg suggested the amount be set at $7,500 and it was agreed to by the Members.

Babette Ceccotti proposed that Bylaw IV (Administrative Authority), section (C), should include expense reimbursement in addition to travel . This was agreed to by the Members.

Judge Jones raised several questions as to Bylaw V (Travel and Representation by Commission Members), section (A). Discussion was held on the matter of Commission Members speaking at functions either on behalf of the Commission or as individuals. Vice Chairman Ginsberg noted that as long as the Member was not seeking reimbursement from the Commission, section (B) allowed the Member to speak as s/he wished. John Gose suggested that even if the Member spoke individually it would be a good idea to inform the Chair or Vice-Chair. Vice Chairman Ginsberg agreed, indicating each Member should make an effort to keep the Executive Director or Chair informed of meetings at which the Member spoke. Judge Jones suggested that the last sentence of section (B) concerning approval was redundant. After discussion, it was agreed that these sentences belonged in section (A) and that the 10 day notice should be in (A), subject to waiver by the Chair.

Judge Jones suggested that each Member who spoke at a meetings should do a short memo on the speech and circulate it to the other Members. Vice Chairman Ginsberg suggested that a draft bylaw should be circulated so that any Member who spoke on behalf of the Commission would do a report. John Gose said it should also apply to speeches as individuals. Discussion ensued as to whether the Commission could require that of the Members. Jay Alix indicated he felt that for groups he spoke to as an individual before appointment to the Commission, and continued to speak to, he should not have to account to the Commission for these meetings. Judge Jones suggested that Members could do it informally such as through a message on e-mail. Jay Alix also questioned whether all the Members would feel comfortable with one person speaking for the Commission and whether there should be some guidelines to assist the Commissioners. It was agreed that Bylaw V (Travel and Representation by Commission Members) would be redrafted to work in guidelines including a good faith requirement suggested by Jim Shepard.

John Gose raised an question concerning Bylaw VI (Travel and Representation by Commission Staff), section (A) as to whether designee should be stricken and Vice Chair substituted. After discussion on the coverage of this section and the type of meetings it included, it was agreed that this Bylaw would be redrafted.

Caldwell Butler suggested an amendment to Bylaw VII (Ethical Requirements for Commission Members and Staff), section (A), to insert in the second sentence after the phrase special government employees the phrase except legislative appointees shall not be required to comply with the financial disclosure requirements . This was seconded by John Gose and approved by the Members.

John Gose raised a question as to Bylaw VIII (Amendments to Bylaws) as to why the notice period was 21 days and not 30 days. After discussion as to the need for time to be aware of the agenda and time for notice to the Federal Register, it was agreed that the Bylaw would be amended to strike 21 days and insert 15 days or such lesser time as the Commission may set in the first sentence.

Judge Jones proposed that Bylaw IX (Parliamentary Procedure) be stricken as there was no need to use Robert’s Rules of Order. After discussion of the procedure to use and agreement to try doing without specific rules for a time, it was agreed that Bylaw IX was to be stricken.

Vice Chairman Ginsberg made a motion to approve the bylaws as amended except for those agreed to be redrafted (Bylaw V and Bylaw VI). This was seconded and approved.


Vice Chairman Ginsberg moved on to the next item on the agenda, approval of the budget. There was initial discussion of items included in the summary figures. Explanation was provided by the Executive Director Dupont concerning the basis of the equipment/furniture costs, the expectation that furniture would be obtained for free; the costs for communications and the possibility that long distance may or may not be included in the rent waiver by the Administrative Office of the U.S. Courts. An explanation was given of the printing costs and the requirement that the report be printed through the Government Printing Office. Discussion was held concerning the number of meetings the Commission should hold and how the budget could accommodate additional meetings.

Caldwell Butler made a motion to move the amount allocated for a deputy counsel position to the categories for travel, meetings and consultants to increase these amounts. The motion was seconded and discussion was held on the motion. Vice Chairman Ginsberg suggested that the motion be postponed until the next meeting to allow the Executive Director to provide the rationale for the deputy counsel position and to provide job descriptions. After further discussion, on the relationship of the timline and budget, it was agreed that the issue and motion be deferred until the afternoon. Further discussion was held on costs including the cost of court reporters and the cost of services from the GSA. Vice Chairman Ginsberg suggested that approval of the entire budget be deferred until later in the afternoon and this suggestion was accepted.

Jay Alix raised the issue of the lack of funds allocated for the Commission and the possibility of seeking funds from other sources. He suggested that he start an active effort to get funding or in-kind support. Vice Chairman Ginsberg accepted it as a motion and it was seconded by Jim Shepard. Jim Shepard raised the problem of groups unable to assist in funding a meeting and the fact that those groups needed to be included in the Commission’s consideration and meetings. Jay Alix agreed he would gather the information only and not commit the Commission to any action until the Commission could consider the information and potential offers of assistance. The motion was approved by the Commission.

Consultant Contract

Vice Chairman Ginsberg moved to the next agenda item, the consultant contract with Professor Elizabeth Warren. Babette Ceccotti made a motion to enter into a consultant contract with Professor Warren which was seconded by Jay Alix. Discussion on the contract commenced with Professor Warren joining the Commissioners to answer questions concerning her experience, her role with the Commission and the terms of the consulting contract. Professor Warren described her role for the Commission as promoting discussion on the issues for the Commission to consider, assist in focussing the Commission and bringing the information on the issues to the Commission. The ultimate responsibility would be to ensure that the final report was the best possible report that could be written.

John Gose raised questions concerning Professor Warren’s position on Chapter 11 bankruptcies and her critical analysis of the proposals. Jim Shepard raised questions concerning whether she could work with tax experts and others in a field not considered her expertise. Professor Warren assured the Commission that she could. Judge Jones raised questions regarding her abilities with respect to draft legislation and the individuals she would consult with in proceeding with Commission work. Professor Warren provided the names of a number of experts she had talked with on a preliminary basis and a number of individuals and experts she anticipated working with if the contract was approved. Discussion also was had concerning her role in advising the Commission on matters she disagreed with and her ability to bring in experts in various areas to work with her as well as law clerks and interns. She noted her experience as a Reporter for the National Bankruptcy Conference and her work for the Conference concerning Chapter 11 noting that she does not agree with all of the conclusions in that report. She noted that her view was that the ultimate power lay with the Commission to decide what was in the report or not in the report. She indicated that she would inform the Commission if she disagreed so that the Members could consider the position. Jay Alix raised a number of technical questions with respect to the contract and requested that some additions and changes to the contract be made. These included the fact that the Commission was her client; a provision for termination by either party; expand the definition of the work product; confidentiality of private conversations, circulations of materials. It was also agreed that Professor Warren would endeavor to inform the Commission if other projects on which she was working were in conflict with Commission proposals for the Commission. Professor Warren also agreed she would provide a disclaimer in which she would indicate that she is not necessarily representing the Commission’s views with respect to any speeches or article she gives or writes during her work as the Reporter/Advisor.

The Commission Members approved a motion to approve Professor Warren’s consulting contract with the amendments agreed to by the Members. The meeting was recessed at 3:16 p.m. and reconvened at 3:36 p.m.

Workplan for the Commission

Vice Chairman Ginsberg requested that the next agenda item for discussion should be the workplan for the Commission. He suggested that since the range and amount of work would affect the timeline it would be best to first get started on the workplan. Initial discussion concerned the scope of the Commission’s responsibilities and just how broad a review was anticipated under the statutes. The consensus was the scope was the entire code and other items affecting the code. Vice Chairman Ginsberg then suggested that Professor Warren would help in suggesting issues and idea.

Professor Warren began by providing some background information concerning bankruptcies. The number of bankruptcies in 1994 were 832, 829 of which non-business filings were 93.7%; business filings were 6.3% of all filings; 70% of the business filings were in Chapter 7 and Chapter 11 filings were about 1.5% of all filings. There has been a generally upward trend in bankruptcy filings since 1984 with a dip in 1993 and 1994. Business filings alone peaked in 1987 and has been on a downward trend since then. Chapter 11 cases, since a peak in 1986, are down by 40%. Publicly traded companies constitute one one hundreth of one percent (.001%) of all bankruptcy filings. In 1994, 70 publicly traded companies filed for Chapter 11. These filings are down 53% since a peak in 1986. Public Chapter 11 filings in 1994 involved a total of 8.336 billion dollars in assets. The average public company in bankruptcy in Chapter 11, in 1994, had assets of 250 million dollars. These assets, however, are down by 90% since 1990.

Discussion ensued as to the import of the statistics. John Gose wanted to know whether the statistics indicated the relative importance of the issues. Jay Alix believed that the statistics indicated that the bankruptcy system affected a lot of lives but also queried whether the Chapter 11 statistics were an anomaly because of the big LBOs’ going in and out of the system in the 1980s with large amounts of assets. Professor Warren stated she wanted the statistics to show the diversity of a system that handles both a company such as LTV Steel and a single consumer Mary Smith and the fact that the Commission did have to be careful in analyzing the data. Judge Jones indicated that Chapter 11 could not be minimized because that formed the backdrop for any troubled business.

Professor Warren the suggested that the system be looked at from the perspective of different categories or baskets. She identified several: consumers, small business, small business, big business. Jim Shepard suggested government since it is a participant in almost every bankruptcy. Vice Chairman Ginsberg suggested that the effort was to identify user groups and government was a creditor. Agriculture was included as a user group.

John Gose raised the question of international impact and Vice Chairman Ginsberg identified the issue as transnational. Professor Warren identified a new category as procedure and put transnational in that category. Under procedure, the Members provided suggestions to include such issues as the structure of the courts (Article I versus Article III), workload distribution; access to the courts; is it too expensive for all involved; and, user fees. It was then suggested that these issues were the debtor issues and creditor issues should be explored more.

Creditors were identified as a category or basket and Members suggested different groups. Involuntary creditors such as employees and other unsecured creditors were mentioned. Jay Alix suggested that these were too broad since, for example, under the category of unsecured creditors, there are financial creditors with financial instruments such as bond holders and there are trade creditors. Employees include both those represented by collective bargaining agreements and those not so represented. Caldwell Butler suggested tort victims were unsecured creditors. Ex-employees and retirees were added. Some discussion was had as to whether to add executory contracts or simply add landlords as claimants.

Cost was raised as an issue and discussion was had as to whether this meant something different between consumer and business bankruptcies. Jay Alix pointed out that fees, as a percentage of assets, were lower in large business bankruptcies than small business bankruptcies. John Gose raised delay as a cost. Jim Shepard mentioned resources lost in litigation, including court fees, lawyers’ fees, accountants’ fees, consultants fees and appraisers’ fees. Judge Jones felt that the problem was that the bankruptcy system had become too adversarial as compared to before 1978 and that the complexity of the Bankruptcy Code led to part of the problem. Judge Jones also noted the differing exemptions in the nation and suggested that all exemptions perhaps should be federalized.

Professor Warren led the discussion back to the groups identified and asked the Members to detail the problems associated with these particular groups. Starting with consumer bankruptcies, she suggested the issue raised by Judge Jones concerning exemptions. John Gose raised the issue of the U.S. Trustee and the oversight of Chapter 13 Trustees and whether the Chapter 13 Trustees were cost effective since they are self-supporting in terms of the assets they deal with in bankruptcy. These were considered to be procedural problems. A question was raised by Judge Jones as to the number of no-assets Chapter 7 cases. Professor Warren indicated she knew of one particular study from Richmond, Virginia which indicated that in that district that 94% of all Chapter 7s were no assets.

Babette Ceccotti questioned whether the premise for the discussion should be that the Commission assume that the result is to make the system easier for all of the users identified. Professor Warren agreed that such a question had to be considered since the present system had created a situation in which a bankruptcy case, depending on where it was filed, could produce markedly different results. Jeffrey Hartley pointed out that forum shopping also leads to abuse. Vice Chairman Ginsberg raised the problem of special interest additions since the 1978 Act noting that there were originally 6 non-dischargeable debts and now there were 17 or 18 which effectively denied Chapter 7 to certain groups of filers.

Serial filing and fraudulent filings were raised as issues by Jim Shepard. A discussion ensued as to the definition and scope of fraudulent filings. Trying to determine when it a filing is a bad faith or a fraudulent filing was raised as problem. Filing to stop foreclosure was mentioned and Professor Warren pointed out that such filings are common for a large number of filers under several chapters but does that constitute fraud? The problem in California identified with numerous filings to stop evictions was discussed as well as tag team filings by family members. Vice Chairman Ginsberg noted that his district had a number of filings with addresses in California. He raised the question of whether the bankruptcy system should be responsible or should the criminal law system be responsible for such fraud in the bankruptcy system. Jay Alix pointed out that often the filing itself was not a fraud but a tool in a larger fraud scheme. Vice Chairman Ginsberg noted the 1994 amendments solution to the problem of involving petition preparers petition preparers involved in fraudulent filings was to make the actions subject to criminal penalties under Title 18 and not leave the solution to the bankruptcy courts. Judge Jones suggested another solution might be to suspend the effectiveness of the stay until there is proof that the debtor is legitimate.

The problem of persons filing under correct names but hiding assets and the lack of follow-up was raised. Discussion of the issue indicated that certain creditors concluded that it is not worth the expense or time for the creditor to pursue a claim or suit because the pursuit would outweigh the benefit. Babette Ceccotti raised a question about the level of creditor participation in consumer bankruptcy. Vice Chairman Ginsberg indicated that such participation was virtually non-existent. The presumption is that a creditor who is sufficiently interested will seek a lift from a stay and when there is a determination of whether a Chapter 13 plan is feasible, the stay should be lifted. In Chapter 7, there are no committees since there is no provision to pay the committee any fees. Jeffrey Hartley suggested that the burden of proof maybe should shift a bit to put the burden back on the debtor. Jim Shepard indicated that the issue of the stay should be looked at since it is a very powerful tool in bankruptcy proceedings.

Professor Warren raised the question of whether consumer bankruptcies are too expensive for a lot of people. She noted that a pilot project on in forma pauperis was being conducted but was that a concern to the Members. Judge Jones indicated that she was wiling to wait for the results of the pilot project, but that in Houston there seemed to be an availability of $50 bankruptcies from the number of local advertisements. Jay Alix indicated in Chapter 7 debtors are not paying for lawyers and in Chapter 13 fees are paid out of the distributions. Costs were discussed as reducing the value of the assets for the creditors. Jim Shepard noted that the argument is that creditors under Chapter 13 are better off by contributing to the costs because the creditors get a greater return then they would have otherwise.

The issue of variability in the system was raised and discussed. The variance in exemptions among States was noted as well as the variance in procedure. For example, debtors in the Middle District of Tennessee have a greater chance of being in Chapter 13 than debtors in the Middle District of Illinois. Vice Chairman Ginsberg noted that there was great deal of variety in what he termed the common law of Chapter 13. -- the amount of attorney’s fees, the percentage the debtor must pay, the time to cure a default. These factors influence the choices made in each district. Judge Jones raised the study from the FJC (Federal Judicial Center) about the percentage of dismissals in Chapter 13. The figure was stated to be about 66% are dismissed -- a 30 to 40% success rate. Jim Shepard stated he believed that Chapter 13s should be encouraged as there is a fast rate return to the economy and creditors have approved.

Jeffrey Hartley noted that the lack of uniformity among districts also raises the issue of stare decisis. Vice Chairman Ginsberg stated that it also raised a constitutional question as to the original intent for a uniform system. Jeffrey Hartley indicated that it should be raised in the context of the appeals process and particularly how it applies to Chapter 13 since very few Chapter 13 debtors will be able to appeal cases because of the cost.

Judge Jones raised the issue that the most represented creditors in consumer bankruptcies are taxing authorities and credit card companies. Professor Warren indicate it also probably included mortgage lenders as about 50% of debtors are homeowners

Discussion then centered on how to divide large bankruptcies. Vice Chairman Ginsberg suggested an historical viewpoint of equity owners identical with management versus large business where equity is separated from management. He also queried whether it would be appropriate to think of a system where small businesses and small business debtors were equated in Chapter 13 terms. A dollar separation was considered too difficult since the system could have owner operated businesses with over 100 million dollars in assets and public companies with only 10 million dollars assets.

The effort was to determine if there are the same problems for small businesses as they are for large businesses. Judge Jones suggested that the possibility of reorganization should be the dividing line. John Gose suggested that for both groups the issues of cost, delay and complexity were relevant. A common criticism is that the system does not render to creditors what should be rendered. Jim Shepard indicated he believed the system was a form of employment for an entire industry, given the industry that has grown up around bankruptcy.

Professor Warren suggested that the effort was to identify specific problems in the areas and groups mentioned. John Gose said the system was not serving either the debtor or creditor well because of the delay in procedure. Vice Chairman Ginsberg queried the scope of procedure and whether it encompassed the overall system. Judge Jones stated she believed that the things that cause delay in business bankruptcy are the stay, the extension of exclusivity, fighting over ordinary course of business, fighting over fees and the plan process often takes too long. Vice Chairman Ginsberg believed that there were areas in the 1978 Code that were anticipated to be decided by adversarial process and others that were not, but that other areas have developed a different impact on the process. Voting for the confirmation plan was considered a problem because many creditors do not bother with the notices and time is spent trying to recontact creditors. A phenomenon in Chapter 7 was the effort to get people to cash the checks distributed. Given the time and money involved in the effort to track down these people, the checks are eventually canceled and the funds deposited to the U.S. Treasury.

Judge Jones stated that these were problems given the magnitude of the system. Additional costs are built into credit costs and there is also a systematic cost. Judge Jones stated that the cost of administering cases is a cost that could be pared down.

Professor Warren questioned whether the issue was a problem for small business bankruptcy -- if the creditors are uninterested does that constitute a problem? The discussion continued with questions of small Chapter 11's obtaining discharges and re-opening under a new name. Judge Jones suggested that if the debtor was not able to file in Chapter 11, state law remedies could be pursued. Jim Shepard suggested there also was a perceived lack of value in pursuing the cases because of the roadblocks. Jay Alix stated he believed the Code was devoid of any discussion about the economic value of how creditors are treated and how preferences are treated. The question was just how economic was it for the creditor to pursue the claim if they had to hire a lawyer and was this cost simply the price of having a bankruptcy system? There was discussion of whether small business Chapter 11s should be treated in the same manner as Chapter 13s.

The discussion then centered around additional issues to consider. Jay Alix mentioned utilities and the potential problems with the effort to deregulate the industry and possible resulting bankruptcies. Jeffrey Hartley tied the discussion in to the possible problems arising under Chapter 9 bankruptcies because of the connection with utilities and municipal ownership. Insurance, as a potential issue for the Commission to consider, was raised and Judge Jones indicated this should not be considered because of McCarran-Ferguson and because insurance companies were regulated by state regulatory agencies. Jay Alix pointed out that utilities are regulated by public rate commissions. Banks also were mentioned as a potential issue for discussion. Judge Jones indicated that the case for expansion of bankruptcy jurisdiction would have to be made before such expansion into areas such as insurance. Jeffrey Hartley pointed out that in a number of areas it was possible that Congress wanted the Commission to look ahead to determine what future problems may arise.

Babette Ceccotti noted that overall issue was the interaction of bankruptcy with other federal laws. Environmental issues and pensions were two areas mentioned. The problem in the environmental area is one of trustee liability and how these obligations under federal laws fit in with notions under bankruptcy law such as claims and dischargeability. Jim Shepard noted that similar conflicts occur with tax liability. While there are civil and criminal penalties under state law for failure to pay taxes, the federal bankruptcy law can release the obligation.

Professor Warren then asked for a discussion of specific cases and issues. Babette Ceccotti raised labor law obligations, collective bargaining agreements and obligations for retiree health benefits. Pension and ERISA obligations also are concerns. Originally, the notion was that these relationships existed outside of bankruptcy and now bankruptcy changes these relationships. Sections 1113 and 1114 were cited as attempts to deal with these issues. Professor Warren questioned whether or how sections 1113 and 1114 have answered the problems or have these sections created greater problems. Babette Ceccotti noted that under the system the employer has more ability to change employee contracts than the employees and have new conditions imposed on the employee groups. The problem was considered to be a balance of power issue -- too much in the hands of the debtor -- too little in the hands of organized labor -- and perhaps too much power in the courts. John Gose framed the question as a whether it is good for the body politic to be proceeding in this manner or is it not good. Unorganized employees also were mentioned as having even a more difficult time in bankruptcy proceedings since these employees had no representations did union employees.

Jim Shepard brought up a problem with environmental claims in that the public interest was not represented in bankruptcy. Professor Warren asked whether the problem should be defined as debtors walking away from the problem or a problem of the cleanup costs outweighing the value of the asset. The discharge of the individual debtors liability was considered to be the problem.

Wrap Up

Vice Chairman Ginsberg requested that the Commission move on to other issues and suggested that this meeting be continued until November 1, 1995 in New Orleans on an emergency basis. The additional time would allow a reworking of the timeline and allow time for a job description to be provided for the deputy counsel position. Caldwell Butler requested a budget based on his motion made in the earlier discussion on the budget to eliminate the deputy counsel position and transfer this money to more meetings. A discussion was held concerning the agenda for November and Vice Chairman Ginsberg suggested the workplan, timeline and budget. If there was time, the Bylaws would be considered. It was agreed to continue the meeting until the following week.

The meeting was then concluded at 5:42 p.m. to be continued in New Orleans on Wednesday November 1, 1995 at 9:00 a.m.