The Chapter 11 Professional Fee Study: An Interview with Prof. Stephen J. Lubben
In this edition of the newsletter, we are very excited to chat with Prof. Stephen J. Lubben of Seton Hall University School of Law. In December 2004, ABI announced that it awarded a $346,000 grant to Prof. Lubben to carry out a landmark chapter 11 Professional Fee Study. Late last year, Prof. Lubben published the results of the study, which is the largest and most comprehensive analysis of professional fees in chapter 11 cases to date. Prof. Lubben joined Seton Hall in 2002 after several years in practice with Skadden, Arps, Slate, Meagher & Flom LLP in New York and Los Angeles, where he represented parties in chapter 11 cases throughout the country. He received his bachelor's degree from the University of California, Irvine; his J.D. magna cum laude from Boston University School of Law, where he was an editor of the Boston University Law Review; and his LL.M. from Harvard Law School, where he was a teaching fellow. Following graduation from Boston University, he clerked for now Chief Justice John T. Broderick Jr. of the New Hampshire Supreme Court. Prof. Lubben has been an ABI member since 2001.
How did you get involved with ABI?
I'll admit that I initially joined just to get the ABI Journal. As I moved from being a junior associate to a mid-level, I found I really had to stay sharp on a much broader range of issues; the articles in the ABI Journal were an easy way to do that.
Why did you leave private practice for academia?
It was something that I always intended to do. That's why I took a year off from Skadden to get an LL.M. at Harvard. But I made the move a few years before I had originally intended for a couple of reasons. First, I was advised by several academics that I should not stay in practice "too long." Hard as it is to believe, it is possible to have too much practical experience: Law schools fear you won't be able to transition to academia. Second, and more importantly, my daughter was born shortly after I started at Seton Hall. I was doubtful that I was going to be able to be the kind of father I hoped to be while also being a mid-level associate at a firm like Skadden.
How did you get involved with the bankruptcy world?
When I was interviewing for summer associate positions I thought I wanted to do M & A, and I was thrilled when Skadden's New York office offered me a position in the 1995 summer class. But during my second year of law school I took a bankruptcy class and loved it, so I volunteered for some assignments in Skadden's Restructuring Department during the summer. I really enjoyed the work and liked the people in the department, and that's where I went when I returned to Skadden after my clerkship.
Among your students at Seton Hall University School of Law, how much interest do you see in the practice of bankruptcy law after graduation?
Every year I have a handful of students who are really interested in bankruptcy, but I've also experienced two "waves" of increased interest during my time as an academic (one in 2002 when I first started, and one right now). When the economy gets a little "shaky," many students see the writing on the wall and develop more of an interest in bankruptcy than they might have had otherwise-but I can't really complain, since I took an indirect route to bankruptcy myself.
What advice do you give to students who hope to pursue a career practicing bankruptcy law?
I recommend that they take my bankruptcy class, of course! If they are interested in the business side of bankruptcy, I also recommend a series of classes that can help them get the broad business law background you need for a successful chapter 11 practice. Some are obvious, but some, like corporate tax, require more of a sales pitch on my part. I also recommend that students consider a clerkship with a bankruptcy judge. I think students often overlook the practical experience they can get out of a clerkship.
How did the idea for the fee study come about?
ABI contacted me through Prof. Robert Lawless-currently at the University of Illinois College of Law, then at the University of Nevada-Las Vegas William S. Boyd School of Law. ABI was looking to do this kind of a study and wanted to have an independent academic run the project. Bob was aware of my LL.M. thesis from Harvard, which was published in the American Bankruptcy Law Journal in 2000. It involved a very small empirical study of professional fees, based on some data that Profs. Elizabeth Warren and Jay Westbrook had gathered for their National Conference of Bankruptcy Judges study of business bankruptcies.
You have concluded that venue of cases in Delaware and the Southern District of New York is neutral as to fees, and maybe even more efficient than other venues. How has the fee study been received outside of Wilmington and Manhattan?
I think it has been well-received wherever I've presented it. But in or out of New York or Delaware, it is always a challenge for folks to accept results that conflict with what they have observed in practice. I know this affects me too; I had a hard time imagining chapter 11 as something other than how I experienced it in practice, although once I did some data entry for myself, that changed pretty quickly. Obviously the "average" chapter 11 case is nothing like the kind of case I worked on at Skadden, but it helped to actually see the pleadings from an average case to drive that home.
Likewise, I know a lot of practicing lawyers have a hard time believing some of my results, such as the finding that fee examiners don't reduce costs, because they recall cases they worked on where it seemed like the fee examiner actually did a lot of good. Of course, the whole point of doing an empirical study is to see if these anecdotal experiences are generally true-and in the broad universe of chapter 11, it seems that fee examiners don't reduce the overall cost of a case.
What do you plan to do with the fee study data going forward?
In the near term, I'm working on a series of articles that use the fee study data. One article involves comparing the "big case" fee data to comparable data from the Netherlands. I am working on that paper with a professor at the University of Groningen. I'm also working on papers about the various types of chapter 11 cases and another on chapter 11 "failure." This last paper is an attempt to develop a model that predicts which debtors are especially likely to convert or dismiss-an important point not only for policymakers but also practitioners, as the fee study found that 80 percent of the cases where the attorneys did not get paid at all involved conversion or dismissal. In the long run, I'd like to see the fee study data used as the baseline for future studies, whether done by myself or others.