Legislation Committee Meeting Minutes
2007 Annual Spring Meeting
The Honorable David
Houston and R. Scott Williams were present and co-chaired the
Legislative Committee Meeting. The meeting
served as a follow-up to ABI's plenary session on Congressional
activities. At the beginning of the meeting
it was announced that Mr. Williams will be rotating off his
co-chairmanship of the committee and that the Honorable George Paine
will be taking over as Co-Chair. Judge
Houston and Mr. Williams led a round table discussion among members of
the Committee regarding pending legislative proposals and prospects for
action in the current session of Congress. Of particular interest were discussions of the recent proposal
put forward by a consortium of consumer oriented professionals regarding
modifications to the Bankruptcy Code and legislative changes concerning
subprime lending. A presentation of these
proposals was made by ABI Director John Rao of the
2006 Winter Leadership Conference
At the ABI Winter Leadership Conference were R. Scott Williams, Co-Chair of the Legislative committee, Co-Chair David Houston was unable to attend at this Committee meeting.
The Legislation Committee meeting was a joint meeting with the Court Administration Committee represented by Lynn Tavener.
The presentation by the Legislation Committee was jointly given by Scott Williams and Judge Gregg.
The Chairs gave presentations on the process of the appointment of bankruptcy judgeships and related practical considerations. As well, the historical and statutory background related to the appointed of judgeships was discussed.
The Court Administration Committee discussed issues upcoming consideration of revised bankruptcy rules, as well as, the current ABI rules survey.
The Committee meeting ended with open discussion with participants concerning changes expected in the new Congress and upcoming legislative priorities.
Attached hereto as Exhibit A is a list of legislation committee attendees who signed up during the course of the meeting.
2006 Annual Spring Meeting
A joint meeting of the Legislative and Pensions/Benefits Committees was held at the Annual Spring Meeting. R. Scott Williams of Haskell Slaughter Young & Rediker, LLC opened the meeting with an update on the current status of legislation in Congress, including pension legislation. He advised that Congress missed their self-imposed deadline of April 15th for a reconciliation of the bills passed by the House and Senate. Further, debate is ongoing and Congress hopes for a final resolution of this legislation before adjourning in the fall.
Judy Thompson of Poyner & Spruill and Ray Warner, Professor of Law and Director of the LLM Program in Bankruptcy at St. John’s University School of Law, co-chairs of the Pension/Benefits Committee, introduced the new Pensions/Benefits Committee leadership to the membership:
*Carol Connor Flowe –
Terrence Deneen, Director of Insurance Programs at the Pension Benefit Guaranty Corporation and Carol Connor Flowe of Arent Fox gave an eye-opening overview of the current status of pension/benefit issues with particular attention to the impact of business bankruptcies on the PPGC. Ms. Flowe pointed out that PBGC is currently operating with a deficit of $23 billion, with the total rising daily. She noted that PBGC estimates that there is an additional $450 billion in potential liability not yet asserted. The huge deficits come from the few, very large Chapter 11 cases. Current deficits come 53% from companies in primary metals and 15% from air transport, with the rest spread across various industries. Looking into the crystal ball, she predicted that the current troubles in the auto industry promise an ever greater burden on retirees and the PBGC.
Mr. Deneen and Ms. Flowe then presented an overview of PBGC issues in bankruptcy, focusing on minimum funding contributions, pension plan terminations, and the amount and priority of PBGC’s claims. Mr. Deneen emphasized that the agency believes that the decisions in US Airways and United Air Lines, which upheld the use of PBGC’s discount rate for calculating its claims after rejecting several older decisions that reached the contrary result, will be followed in future cases. This will mean much larger PBGC claims.
Members of the audience were encouraged to become involved with the new Pensions/Benefits Committee. The co-chairs announced that there are multiple opportunities for persons to write for the various publications on Pensions/Benefits issues and invited anyone interested to contact them. The Pension Benefits Committee is currently preparing a program for the Winter Leadership Meeting in December ’06.
The Legislative Committee is continuing to monitor various legislative efforts regarding bankruptcy currently pending before Congress. Further, at this time, it appears highly unlikely that any substantial bankruptcy revisions will pass before the end of the legislative session.
The committee met on Saturday, April 17, 2004, at the J.W. Marriott Hotel, Washington, D.C., in conjunction with the ABI 2004 Annual Spring Conference. An excellent crowd attended the program organized by the committee which consisted of the following:
The moderators for the Legislative Committee presentation were Judge David W. Houston III (U.S. Bankruptcy Court, N.D. Miss.) and Judge George C. Paine (U.S. Bankruptcy Court, M.D. Tenn.). The committee will next present a program at the 2004 Winter Leadership Conference.
A panel presentation focusing on bankruptcy reform legislation that might be considered in the 108th Congress was presented by Susan Jensen, counsel to Chairman James Sensenbrenner, House Judiciary Committee; David Lachmann, House Judiciary Subcommittee on Commercial and Administrative Law; and Ed Pagano, counsel to Senator Patrick Leahy, Senate Judiciary Committee. Judge David W. Houston III, U.S. Bankruptcy Court for the Northern District of Mississippi, served as moderator for the panel.
Susan Jensen indicated that H.R. 975 had passed the House of Representatives on March 19, 2003, by an overwhelming vote. This bill is identical to the Conference Report adopted by the Senate and House Conferees in the 107th Congress on July 25, 2002, omitting, however, the compromise language, negotiated by Sen. Charles Schumer (D-N.Y.) and Rep. Henry Hyde (R-Ill.), which created an additional exception to discharge for fines, penalties and other debts resulting from clinic violence or civil disobedience protests. This provision has become commonly known as the "abortion clinic protest" exception to discharge. It is considered a potential "poison pill" for the passage of the bankruptcy reform legislation in the House. The House bill has been forwarded to the Senate, where it will be handled by Sen. Orin Hatch (R-Utah), Chairman of the Senate Judiciary Committee. Sen. Hatch has not decided whether to bring the bill directly to the Senate floor or whether he will alternatively refer it for consideration to the Senate Judiciary Committee.
Ed Pagano indicated that the House bill could be subject to several Senate amendments, either in committee or on the floor. One potential amendment could address the homestead exemption "cap" adopted in last year's Conference Report. Another could obviously be the aforementioned Schumer-Hyde compromise language which was intentionally omitted from the House bill.
Since there is now a Republican majority in the Senate, the real question appears to be whether the sponsors of the legislation can obtain a 60-vote "filibuster proof" majority to pass the reform legislation without the Schumer-Hyde compromise language. The uncertainty of the number of votes is apparently a factor delaying the introduction of the bill in the Senate.
A lively discussion relative to several provisions in the legislation was enjoyed by those attending. The sincere gratitude of the ABI Legislative Committee is extended to the Senate and House staff whose participation made this an exceptional and informative program.
The ABI Legislative Committee presented a panel discussion concerning the status of the 2002 Bankruptcy Reform Legislation at the ABI Winter Leadership Conference at Tucson, Ariz., on Friday, Dec. 5, 2002. The following individuals participated on the panel: Philip S. Corwin, Butera & Andrews, Washington, D.C.; Dianne C. Kerns, Chapter 13 Trustee, Tucson, Ariz.; Bankruptcy Judge George C. Paine, Middle District of Tennessee; and Bankruptcy Judge David W. Houston III, Northern District of Mississippi.
Judge Houston opened the presentation with a discussion of the fate of the bankruptcy reform legislation in the 107th Congress. The Legislative Conference Report, which had been adopted on July 25, 2002, after protracted negotiations between the Senate and House Conferees, failed to pass the House on Nov. 15, 2002, on a procedural vote with 172 voting for and 243 voting against the passage of the House Rule, which was necessary prior to bringing the Report to the House floor for a vote. The primary issue of contention was the effect of compromise language, negotiated by Senator Charles Schumer (D-N.Y.) and Congressman Henry Hyde (R-Ill.), relative to an amendment offered by Sen. Schumer and passed by the Senate, which created an additional exception to discharge for fines, penalties and other debts resulting from civil disobedience protests at abortion clinics and other related facilities. An unlikely coalition of conservative Republicans and liberal Democrats joined forces to defeat the Rule during the "lame duck" session of Congress, which was convened shortly after the November elections. The House subsequently passed a version of the Bankruptcy Reform Legislation without the Schumer/Hyde compromise language and also without the provisions authorizing twenty-seven new bankruptcy judgeships, but this proposal was never considered by the Senate before adjournment.
Philip Corwin, a Washington lobbyist who has been actively involved for several years in supporting the passage of the reform legislation, fleshed out in detail the movement of the bill in the latest Congressional session. He then discussed the political makeup of the 108th Congress and described the efforts that might likely be undertaken to reintroduce and pass the legislation. While he did not believe that passage would be automatic or immediate, he thought that the legislation could be realistically enacted by the 2003 August Congressional recess. Corwin candidly described his reactions, as he observed from the House Gallery, to an effort led by Republican Representatives Chris Smith (R-N.J.) and Joseph Pitts (R-Pa.), that resulted in a decision by House Majority Leader Dick Army (R-Texas) and House Majority Whip Tom Delay (R Texas), just prior to the August recess, to defer a vote on the Conference Report until after the November elections. Corwin's "hands-on" experience and knowledge contributed significantly to the panel's presentation.
Dianne Kerns offered several insightful comments about the reform legislation from her perspective as a chapter 13 trustee. Most notably, she observed that while the stated intent of the legislation was to channel more debtors into chapter 13, that the opposite result, that is, more debtors actually filing for chapter 7 relief, would likely occur. The two primary driving forces supporting her conclusion were the proposed treatment for automobile loans in chapter 13 cases and the further erosion of the chapter 13 "super-discharge."
Judge Paine and R. Scott Williams, Haskell Slaughter, Birmingham, Ala., former counsel to Senator Howell Heflin (D-Ala.) and one of the drafters of the 1994 Bankruptcy Amendments, offered comments on the failure of the 2002 reform legislation, as well as the prospects for passage of a bill in 2003.
The committee co-chairs solicited assistance from the members present in order to prepare and disseminate a committee e-newsletter. This solicitation will be further extended to all members of the ABI Legislative Committee with the anticipation that periodic e-newsletters can be provided to the membership describing significant legislative events.
At the meeting of the ABI Legislative Committee held on December 1, 2001, at the La Costa Resort, Carlsbad, California, a panel discussion was presented addressing the future of bankruptcy law reform. The following individuals participated in the presentation:
The panel initially discussed the status of the current bankruptcy reform legislation which has passed the Senate, S. 420, and the House, H.R. 333. A conference committee has been appointed to address the legislation that will carry the House designation for the bill, H.R. 333. The chairman of the conference is Congressman James Sensenbrenner (R-Wis.). The committee is comprised of the following:
The conferees were initially scheduled to meet on Sept. 12, 2001, but this meeting was cancelled as a result of the terrorists attacks occurring one day earlier. The conferees met for the first time on Nov. 14, 2001, but made no headway on negotiations. The House conferees did send their Senate counterparts a list of provisions on which they indicated a willingness to compromise. However, there are still major differences in the two bills, some of which are identified as follows:
There are approximately 40 substantive differences between the House and Senate versions of the legislation, but most are not as significant as those noted hereinabove.
Without question, the two most significant events that have affected the movement of the bankruptcy reform legislation are the terrorist attacks of Sept. 11, and the shift in the control of the Senate from a Republican majority to a Democratic majority.
Phillip Corwin, a Washington lobbyist who has had extensive experience with the bankruptcy reform legislation, offered significant political insights into the legislative processes affecting the legislation. Corwin indicated that while passage of bankruptcy reform legislation is doubtful for this first session of Congress, that the legislation should not be pronounced "dead." Corwin's analysis of the political effects of the differences in the two bills was particularly informative.
Karen Cordry, National Association of Attorneys General, commented on the provisions pertaining to support for women and children. She indicated that placing the support obligations in a third tier priority category would be much more practical than placing these obligations in the first tier priority where they currently are located in both the House and Senate versions. She indicated that no Senator or Congressman wanted to take the initiative in lowering the priority because of the potential political fallout when, in actuality, such a maneuver would be better for all concerned.
There was discussion of a possible "mini-bill," which has been addressed by the General Practice Section of the American Bar Association. This section has proposed a resolution to the following effect:
Karen Cordry indicated that if the priority alignment issue could be resolved that she would like to see the provisions related to support obligations included in the "mini-bill."
An excess capacity crowd attended a very spirited and energetic meeting of the committee. The committee co-chairs were very grateful for the participation of Phillip Corwin and Karen Cordry, whose realistic insights concerning the prospective success of the bankruptcy reform legislation were invaluable.
The Legislative Committee presented a panel discussion of the bankruptcy reform legislation currently pending in the U.S. Senate and House. The following persons participated on the panel:
Initially, the panel discussed the current status of H.R. 333 and S. 420,, the two bankruptcy reform bills that have respectively passed the House and Senate. Several of the differences in the two versions were mentioned:
The panelists discussed the current impasse in forming a conference committee since the Senate Republicans and Democrats cannot agree on the Senate membership for the conference. At one point, it was rumored that the Senate conferees would be split 50/50 along party lines, in keeping with the current membership composition of the Senate, with Senate Majority Leader Trent Lott (R-Miss.) casting any tie-breaking votes among the Senate conferees. This potential agreement has not materialized.
The question was asked as to whether the House would accede to the Senate version and pass the Senate bill without the benefir of a conference. The panelists thought that this would not occur because of the significant differences in the two versions, particularly the homestead exemption provisions.
Since the Senate is now evenly divided, the question was raised as to what might happen to the Senate version is there were a shift in the Senate majority from the Republicans to the Democrats. The consensus thought that the completion of this legislation could likely change should this occur.
The panel addressed numerous questions that were posed by members of the audience. The Congressional staf panelists indicated that they would welcome any comments and suggestions about the legislation. Indeed, some of the suggestions that had been submitted to both Senate and House staff by Judges Eugene Wedoff (N.D. Ill.) and William Brown (W.D. Tenn.) had been incorporated into the Senate version. The staff panelists indicated that the legislation is now so mature that only true "technical" connections had any significant prospects for consideration. The committee meeting, which was well attended, was adjourned only because the allotted time period expired.
On behalf of ABI, the co-chairs of the committee wish to thank Mr. Pagano, Ms. Jensen-Conklin and Mr. Lachmann for their candid assessments of the legislation, as well as for their excellent presentations.
The committee discussed the status of S. 625 and H.R. 833, as well as Department of Justice comments, and discussed the consumer, business and small business provisions and the differences between the House and Senate version. Judge Houston informed the group that the biggest obstacle to passageof a bankruptcy reform bill has been unrelated provisions that were added to the Senate version (S. 625) that would raise the minimum wage and cut taxes levied on small businesses. Susan Jensen Conklin, who staffs the House Judiciary Committee's Subcommittee on Commercial and Administrative Law, indicated that although formal conferees have not been appointed, informal conferees have been working on the bill for several weeks. Gary Klein (director, National Consumer Law Center; Boston) offered extremely informative comments concerning the statistical effect of means-testing and the safe-harbor protections. Martha Davis (general counsel, Executive Office for U.S. Trustees; Washington) indicated that the EOUST would likely be responsible for screening and approving qualified credit counselors, as well as for developing guidelines for acceptable counseling. The discussion then turned to the areas of lien-stripping and cramdown in chapter 13 cases, as well as the elimination of the chapter 13 Ñsuper-discharge.æ Judge Steen and Judge Houston advised the committee that assistance was needed in analyzing the proposed legislation, and several participants volunteered to assist in this endeavor.
Since the status of the passage of bankruptcy reform legislation is still somewhat uncertain, the Legislation and Consumer Bankruptcy Committees thought that a joint presentation discussion the various versions of the legislation would be helpful. Consequently, Bankruptcy Judges William H. Brown (W.D. Tenn.), Eugene Wedoff (N.D. Ill.), Wesley Steen (S.D. Texas) and David W. Houston III (N.D. Miss.) jointly presided over an open forum discussion of H.R. 833, the bankruptcy reform bill that passed the U.S. House of Representatives on May 5, 1999, and S. 625, which is currently pending in the U.S. Senate. As a part of the program, chapter 13 Trustee Henry Hildebrand (M.D. Tenn.) discussed the results of a study undertaken through the auspices of the National Association of Chapter 13 Trustees concerning the impact of the reform legislation on bankruptcy filings. The first part of the bifurcated presentation focused on the likelihood of the passage of reform legislation, particularly on recent developments in the Senate. Judge Houston reported that Senate Majority Leader Trent Lott (R-Miss.) had filed a petition for cloture to curtail debate on S. 625 just prior to the congressional recess. The petition is returnable to Jan. 25, 2000, the second day after the Senate reconvenes. The success of the cloture petition will, in large part, be dependent on negotiations and compromises reached by Republicans and Democrats who are interested in this legislation, either directly or tangentially.
One of the principal issues of concern in the reform legislation is the concept of "needs-based bankruptcy," or "means testing." Judge Wedoff discussed the differences in the respective approaches to means testing taken by the House and Senate. A critical component of means testing is the use of Internal Revenue Service guidelines to calculate a debtor's reasonable living expenses. Although the stated purpose of the reform legislation is to compel more debtors to file chapter 13 bankruptcies as opposed to chapter 7 liquidations, the second segment of the presentation focused on some of the modifications to chapter 13 that would be considered disincentives to file under that chapter. The discussion focused on (a) the "anti-cramdown" provisions that would be applicable to debts secured by automobiles and other personal property; (b) the expanded exceptions to dischargeability that would be incorporated into chapter 13; (c) the treatment that would be required for alimony and support obligations, particularly as conditions of confirmation and discharge; (d) credit counseling as a condition of bankruptcy eligibility, and debt management education as a condition of discharge; and (e) the expanded role required of panel and standing trustees in monitoring debtor eligibility.
The Legislation Committee was well attended. Of particular note, participating in the meeting were Senator Charles Grassley's (R-Iowa) staff person, John McMickle, and Congressman Jerrold Nadler's (D-N.Y.) staff person, David Lachmann. A brief review of the legislation that was enacted during the previous Congress took place; specifically discussed were the tithing bill and the extension for chapter 12.
A substantial discussion took place as to the politics and behind-the-scenes activities, with the congressional staffers providing their insights on why bankruptcy reform failed.
Turning to the new Congress, it is noted that there will be a change in the Senate Judiciary Committee with, in all likelihood, Senator Robert Torricelli (D-N.J.) taking over as the ranking subcommittee member, as a counterpart to Senator Grassley. Committee members discussed the impact that the president's impeachment will have on both the process and the likelihood of passage of any legislation. Comments and suggestions were solicited as to ways to ensure that both current and future legislation is technically correct and as helpful as possible.
The committee closed with a consensus view that substantial legislative activity is likely during the next congressional session, but a great deal of uncertainty exists as to the shape and manner of the legislation.