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The "Bankruptcy Judgeship Act of 1997"

before the House Judiciary Committee
Subcommittee on Commercial and Administrative Law

June 19, 1997

Chairman Gekas and members of the Subcommittee, I am Michael P. Richman, a member of the Board of Directors of the American Bankruptcy Institute (ABI), and bankruptcy partner in the New York office of Mayer, Brown & Platt. I am admitted to practice in New York and the District of Columbia and regularly appear in federal and state courts around the country. I am also active in the New York State and American Bar Associations and am a certified mediator in the U.S. Bankruptcy Court for the Southern District of New York. I am pleased to appear before you today on behalf of the ABI and in support of H.R. 1596, the Bankruptcy Judgeship Act of 1997.

As you know, the ABI is the nation's largest multi-disciplinary organization devoted to research and education on issues related to bankruptcy and insolvency. Founded in 1982 to assist Congress in the development of sound bankruptcy policy, the ABI is non-profit and non-partisan. Our more than 5,600 members span the entire spectrum of bankruptcy professionals: judges, attorneys, accountants, bankers, academics, trustees, credit managers and others on all sides of bankruptcy issues. The ABI is not a lobby group, nor do we typically advocate positions before Congress. However, the ABI has in the past supported legislation regarding the salaries of bankruptcy judges, to provide for retirement benefits, and to increase the number of judges where needed and appropriate. We appeared before the subcommittee on the need to increase bankruptcy judgeships in December, 1995.

The ABI applauds the work of the Judicial Conference of the United States, and particularly Judge Thompson and his committee, for carefully studying the workload needs of the bankruptcy courts. As this subcommittee is well aware, the number of bankruptcy filings exploded during the years between 1984 and 1996, rising by 238%. Alarmingly, the explosion of new bankruptcies continues in 1997. In the first three months of this year, for example, a record 335,073 cases were filed. This figure not only marks the fifth consecutive quarter of record filings, but it exceeds the total number of cases filed in all of 1980. The result has been emergencies in a number of districts, with overworked judges and clerks offices, and long delays for the parties seeking access to the courts.

Bankruptcy filings are now more than double the level recorded in 1987. But unlike the increases in the 1980s, which tended to be regionalized, the new wave of bankruptcy filings is nationwide: each of the 94 judicial districts reported an increase in 1996 over the previous year. Based on these filing trends, there appears to be a clear need for additional bankruptcy judges. However, perhaps more important is that these increased filings are occurring during an unusually long period of marked economic stability and prosperity. When the next recession arrives, as inevitably it will, we think it likely that there will be a literal explosion of new bankruptcy filings, especially large commercial cases that require the most judicial attention. This is therefore the time when we should be ensuring that there are sufficient judges with experience and ability to manage not only the current volume of cases, but the potential crisis of a vastly-increased number of cases.

The legislation before you is also timely given the delays typically attendant to the filling of any new bankruptcy position by the regional courts of appeal. Accordingly, we hope this committee and Congress can successfully complete action on this bill without delay.

Mr. Chairman, as the one who regularly litigates cases in the bankruptcy courts—particularly busy districts such as the Southern District of New York—let me try to provide some insight on the practical and real problems parties face when dealing with overworked judges. The first consequence is that the judges necessarily have less time to spend on each case. For simple motions and proceedings, this may be of little consequence. But many cases require bankruptcy judges to have extended hearings, with witnesses, equivalent to trials and mini-trials. In those cases, judges are often forced to delay proceedings for many months until sufficient time may be found.

Another consequence of overworked judges is increased demands and costs placed on debtors and creditors. On a typical day in the Southern District of New York, for example, a bankruptcy judge may be required to schedule 20 or 30 matters at 10 a.m. The attorneys and parties on all those matters are required to appear at 10, as none can be certain how long any single matter will take, or when their particular matter might be called. If by 1 p.m. or so, the calendar has not been completed, the matters spill over to the afternoon. Thus, three or four hours of lawyer and party time may end up being consumed, on a matter that might only take 10 or 15 minutes, all as a consequence of the crowded calendar.

Perhaps some of these problems could be alleviated if judges had more time to ascertain in advance how long a matter might take, and then schedule matters on a staggered basis. But even that time is not available for the overworked judges. When there is precious little time for the substantive casework to be done, the judges cannot be expected to devote time to the preparation of schedules to make it less onerous on the lawyers and parties who appear before them.

Finally, on a more fundamental level, as a lawyer who wants to ensure that his clients receive a full measure of justice, I am concerned that the stress of overwork placed on the bankruptcy judges may potentially impair the quality of justice received. No matter how capable the judge, it seems to me that under the stress of overwork, more mistakes will be made, more snap judgements will be made, more reversible error made. This leads to more appeals, increasing the caseloads for the district and court of appeals judges, and increasing the cost of justice for the parties. It is important to our system of justice that the full deliberation that a judge should bring to important decisions not be impeded by the competing demands of having too many cases, especially where the problem can be addressed by increasing the number of judges.

While it is important to meet the resource needs of the courts, it is also important in this era of budget restraint to authorize only those judgeships that are essential. As Congress downsizes its committees and eliminates support agencies, and the executive branch faces possible budget cuts, it is only prudent that this subcommittee scrutinize the resource needs of the third branch, including the bankruptcy courts. In H.R. 1596, the Judicial Conference appears to have struck the proper balance between the resource needs of the bankruptcy courts and the prudent use of taxpayer dollars.

Here again, the ABI commends the Judicial Conference for its careful calculation of the case weighing statistics, resulting in this recommendation of 18 new bankruptcy judgeships. Each district provided for in this bill is substantially above the national average of weighed filings per judge. Indeed, in all but one of the districts, (E.D. Pa), the weighed filings per judge will still be higher by at least 8% than the national average, even after the new judges provided for here are installed.

One cost-conscious innovation we support is the concept of "temporary judgeships". Eleven of the 18 new positions at H.R. 1596 would be temporary positions. However, we suggest that some greater degree of flexibility be maintained to fill vacancies arising after five years, in cases where the temporary designation may cause unanticipated hardships.

For example, a vacancy arising from the sudden death of a judge would not be filled if the district was designated as temporary and the death occurred at least five years after the appointment date. In such a case, it is easy to imagine a two judge district (such as the Middle District of Pennsylvania) suddenly becoming overworked, using the Judicial Conference's caseload measurement guidelines. Under the temporary judgeship provision in H.R. 1596, however, the vacancy "shall not be filled." Relief could come only from the Judicial Conference, going through the lengthy process of recommending a new position and the Congress approving both a judgeship authorization bill like the one before you today and an appropriations bill. Clearly, this is not a process designed to move quickly.

We suggest that some flexibility be retained by the courts of appeal in determining the continued need. Perhaps the legislative language in 28 U.S.C. 152 could include a presumption against filling a new vacancy designated as a temporary position, but one that could be overcome upon the Judicial Conference's certification of an ongoing need.

Such an arrangement would accommodate the cost-conscious purpose of temporary judgeships, without unduly limiting the discretion of the judiciary to best serve the needs of the bankruptcy system. We would, of course, be pleased to work with the subcommittee and others in formulating language to meet these interests.

We thank the subcommittee for inviting the ABI to participate in today's important hearing and we look forward to assisting you and your staff in any way you find helpful. I would be pleased to answer any questions you might have.