<DOC>
[106 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:63866.wais]
BANKRUPTCY JUDGESHIP NEEDS
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON
COMMERCIAL AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
AND THE
SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT
AND THE COURTS
OF THE
SENATE COMMITTEE ON THE JUDICIARY
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
NOVEMBER 2, 1999
__________
Serial No. 90
(House Committee on the Judiciary)
__________
Serial No. J-106-60
(Senate Committee on the Judiciary)
Printed for the use of the Committee on the Judiciary
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
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U.S. GOVERNMENT PRINTING OFFICE
63-866 WASHINGTON : 2000
HOUSE COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin BARNEY FRANK, Massachusetts
BILL McCOLLUM, Florida HOWARD L. BERMAN, California
GEORGE W. GEKAS, Pennsylvania RICK BOUCHER, Virginia
HOWARD COBLE, North Carolina JERROLD NADLER, New York
LAMAR S. SMITH, Texas ROBERT C. SCOTT, Virginia
ELTON GALLEGLY, California MELVIN L. WATT, North Carolina
CHARLES T. CANADY, Florida ZOE LOFGREN, California
BOB GOODLATTE, Virginia SHEILA JACKSON LEE, Texas
STEVE CHABOT, Ohio MAXINE WATERS, California
BOB BARR, Georgia MARTIN T. MEEHAN, Massachusetts
WILLIAM L. JENKINS, Tennessee WILLIAM D. DELAHUNT, Massachusetts
ASA HUTCHINSON, Arkansas ROBERT WEXLER, Florida
EDWARD A. PEASE, Indiana STEVEN R. ROTHMAN, New Jersey
CHRIS CANNON, Utah TAMMY BALDWIN, Wisconsin
JAMES E. ROGAN, California ANTHONY D. WEINER, New York
LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
SPENCER BACHUS, Alabama
JOE SCARBOROUGH, Florida
DAVID VITTER, Louisiana
Thomas E. Mooney, Sr., General Counsel-Chief of Staff
Julian Epstein, Minority Chief Counsel and Staff Director
------
Subcommittee on Commercial and Administrative Law
GEORGE W. GEKAS, Pennsylvania, Chairman
LINDSEY O. GRAHAM, South Carolina JERROLD NADLER, New York
STEVE CHABOT, Ohio TAMMY BALDWIN, Wisconsin
ASA HUTCHINSON, Arkansas MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama ANTHONY D. WEINER, New York
MARY BONO, California WILLIAM D. DELAHUNT, Massachusetts
JOE SCARBOROUGH, Florida
DAVID VITTER, Louisiana
Raymond V. Smietanka, Chief Counsel
Susan Jensen-Conklin, Counsel
James W. Harper, Counsel
SENATE COMMITTEE ON THE JUDICIARY
ORRIN G. HATCH, Utah, Chairman
STROM THURMOND, South Carolina PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts
ARLEN SPECTER, Pennsylvania JOSEPH R. BIDEN, Jr., Delaware
JON KYL, Arizona HERBERT KOHL, Wisconsin
MIKE DeWINE, Ohio DIANNE FEINSTEIN, California
JOHN ASHCROFT, Missouri RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama CHARLES E. SCHUMER, New York
BOB SMITH, New Hampshire
Manus Cooney, Chief Counsel and Staff Director
Bruce Cohen, Minority Chief Counsel
------
Subcommittee on Administrative Oversight and the Courts
CHARLES E. GRASSLEY, Iowa, Chairman
JEFF SESSIONS, Alabama ROBERT G. TORRICELLI, New Jersey
STROM THURMOND, South Carolina RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan CHARLES E. SCHUMER, New York
Kolan Davis, Chief Counsel
Matt Tanielian, Minority Chief Counsel
C O N T E N T S
----------
HEARING DATE
Page
November 2, 1999................................................. 1
OPENING STATEMENT
Gekas, Hon. George W., a Representative in Congress From the
State of Pennsylvania, and chairman, Subcommittee on Commercial
and Administrative Law......................................... 1
Grassley, Hon. Charles, a U.S. Senator From the State of Iowa,
and chairman, Subcommittee on Administrative Oversight and the
Courts......................................................... 2
WITNESSES
Bryant, Hon. Ed, a Representative in Congress From the State of
Tennessee...................................................... 17
Castle, Hon. Michael N., a Representative in Congress From the
State of Delaware.............................................. 12
Elsaesser, Ford, Esquire, Elsaesser, Jarzabeck, Anderson, Marks &
Elliot......................................................... 43
Hoyer, Hon. Steny H., a Representative in Congress From the State
of Maryland.................................................... 16
Kingston, Hon. Jack, a Representative in Congress From the State
of Georgia..................................................... 7
Melloy, Michael J., U.S. District Chief Judge, Northern District
of Iowa and Chair, Committee on the Administration of the
Bankruptcy System, Judicial Conference of the United States.... 19
Ray, Hugh M., Esquire, Andrews & Kurth, Houston, TX.............. 41
Scott, Mary Davies, U.S. Bankruptcy Judge, Eastern and Western
Districts of Arkansas, President of the National Conference of
Bankruptcy Judges.............................................. 36
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Bryant, Hon. Ed, a Representative in Congress From the State of
Tennessee: Prepared statement.................................. 18
Castle, Hon. Michael N., a Representative in Congress From the
State of Delaware: Prepared statement.......................... 13
Elsaesser, Ford, Esquire, Elsaesser, Jarzabeck, Anderson, Marks &
Elliot: Prepared statement..................................... 44
Gekas, Hon. George W., a Representative in Congress From the
State of Pennsylvania, and chairman, Subcommittee on Commercial
and Administrative Law: Prepared statement..................... 4
Hoyer, Hon. Steny H., a Representative in Congress From the State
of Maryland: Prepared statement................................ 17
Kingston, Hon. Jack, a Representative in Congress From the State
of Georgia: Prepared statement................................. 8
Melloy, Michael J., U.S. District Chief Judge, Northern District
of Iowa and Chair, Committee on the Administration of the
Bankruptcy System, Judicial Conference of the United States:
Prepared statement............................................. 20
Ray, Hugh M., Esquire, Andrews & Kurth, Houston, TX: Prepared
statement...................................................... 42
Scott, Mary Davies, U.S. Bankruptcy Judge, Eastern and Western
Districts of Arkansas, President of the National Conference of
Bankruptcy Judges: Prepared statement.......................... 37
APPENDIX
Material submitted for the record................................ 51
BANKRUPTCY JUDGESHIP NEEDS
----------
TUESDAY, NOVEMBER 2, 1999
House of Representatives, Subcommittee on
Commercial and Administrative Law, Committee on
the Judiciary, Jointly With U.S. Senate,
Subcommittee on Administrative Oversight and
the Courts, Committee on the Judiciary,
Washington, DC.
The subcommittees met, pursuant to call, at 2 p.m., in room
2141, Rayburn House Office Building, Hon. Gekas (chairman of
the Subcommittee on Commercial and Administrative Law)
presiding.
Present for the House of Representatives Subcommittee on
Commercial and Administrative Law of the Committee on the
Judiciary: Representatives George W. Gekas, Steve Chabot,
Jerrold Nadler, Melvin L. Watt, and William D. Delahunt.
Also present: Representative Asa Hutchinson.
Staff present for the House of Representatives Subcommittee
on Commercial and Administrative Law: Raymond V. Smietanka,
Subcommittee Chief Counsel; Susan Jensen-Conklin, Counsel;
Sarah Zaffina, Staff Assistant; Daniel Freeman, Full Committee
Counsel and Parliamentarian, and David Lachmann, Minority
Professional Staff Member.
Present for the Senate Subcommittee on Administrative
Oversight and the Courts of the Committee on the Judiciary:
Senators Charles E. Grassley and Joseph R. Biden, Jr.
OPENING STATEMENT OF CHAIRMAN GEKAS
The Chairman. The hour of 2 o'clock having arrived, the
committee will come to order.
Pursuant to the House rules, we cannot proceed until we
have two members of the committee present and accounted for.
But in striking the gavel at 2 o'clock, we have kept faith with
opening our hearings and our markup sessions, all the meetings
on time. Then we have had to dispatch the committee by
declaring a recess until the second member should appear. We
note the presence of Asa Hutchinson of Arkansas, he is not a
member of our subcommittee, however.
We note the entry and seating of Senator Grassley, the
cochair of this joint markup, and the chairman of the relevant
committee in the Senate of the United States.
We will dispense with some housekeeping, even though it is
out of protocol for the moment by simply stating that all the
statements that have been submitted to us by various
individuals, Members of the House and the Senate will be
entered into the record and made a part of the record.
We will repeat this statement when the hearing formally
begins, but until such time as the session actually begins, I
may sing a song or recite some poetry unless Senator Grassley
wishes to do the same.
We have several members who are here and ready to testify.
I think I sound like Lowell Thomas describing the scene and
waiting for something to happen. One housekeeping chore that we
could proceed to accomplish without the necessity of a full
record would be to recognize the gentleman from Arkansas, Mr.
Hutchinson, for the real purpose for which he has attended this
joint hearing.
Representative Hutchinson.
Representative Hutchinson. I want to thank the Chair, and I
appreciate you letting a foreigner participate for a little
while in this hearing. I am here as a member of the Judiciary
Committee, but not a member of this particular subcommittee, to
welcome a great Arkansan, Mary Davies Scott, who will be
testifying on the third panel today. And I just wanted to
personally extend my greetings to her and thank the committee
for inviting her and her testimony.
Judge Scott was appointed the United States Bankruptcy
Judge for the Eastern and Western District of Arkansas in 1987.
In 1997, she was appointed as a member of the Bankruptcy
Appellate Panel for the 8th Circuit.
She is a conferee on the National Bankruptcy Conference, a
member of the American Law Institute, a fellow in the American
College of Bankruptcy, and a member and past governor of the
National Conference of Bankruptcy Judges. She is currently
president of the conference and has served in a variety of
offices. Judge Scott is an adjunct professor at our law
schools, both in Fayetteville and in Little Rock. And she is
also a member of the board of editors for Collier on
bankruptcy. She is a faculty member of the American Law
Institute for the American Bar Association programs covering
banking and commercial lending law, and she also serves as a
cochair in that capacity.
In addition, she is a member of the advisory committee to
the program subcommittee of the ALI, ABA, and serves on the
bankruptcy education committee of the Federal Judicial Center.
Mr. Chairman, as a former practitioner in Arkansas, I just
want to say that she does an outstanding job for our courts in
the Federal system and as a bankruptcy judge. And we have a
good system in Arkansas, and we certainly welcome her and look
forward to her testimony.
Thank you, Mr. Chairman.
The Chairman. We thank you.
To expedite the formal proceedings, which have not yet
begun, we will entertain now the opening statement of Senator
Grassley.
OPENING STATEMENT OF CHAIRMAN GRASSLEY
Senator Grassley. At the outset, Congressman Gekas, of
course, you should have a thank you for convening this hearing
on the newest request for bankruptcy judgeships from the
judicial conference. We have an Iowan testifying today on
behalf of the Judicial Conference. Judge Mike Melloy is a
district judge from Cedar Rapids, IA; has been a friend of mine
for many years. And I look forward to hearing from Judge
Melloy, and he had previous background in the bankruptcy courts
as well.
I start this process, Mr. Chairman, with an open mind, but
also with the idea that the Federal judiciary has a tough
burden to meet in terms of justifying this judgeship request.
In the past, the Judicial Conference has not cooperated with
requests seeking information on the process the courts use for
deciding to recommend new judgeships. So I hope today, at this
hearing, that will change and we will let the sun shine in on
the process for requesting new judgeships.
As I understand it, when a district requests new bankruptcy
judgeships, the Judicial Conference sends out a team to assess
the management of the requesting district. The team discusses
court management issues with various judges in that district to
assess whether a particular district is wisely managed.
This team then makes recommendations for techniques for
improving management in these districts. I think it is
important for Congress to have access to the contents of these
interviews. It is simply unacceptable for the courts to block
the relevant committees of Congress from getting information
which will help in determining whether a judgeship is
necessary. And if the Federal judiciary is seeking new
judgeships which will require the expenditure of tax dollars,
Congress and the American people have the right to know whether
districts requesting new judgeships are mismanaged in some way.
In my view, it is high time that we open up this process
then to public scrutiny. When the Judiciary Committee passed my
bankruptcy bill earlier this year, the committee report was
quite clear that we in the Senate will be taking a hard look at
future judgeship requests.
Now, there is another troubling aspect of this request for
new judgeships and that is that it is not offset from a
budgetary point of view. Under the 1990 Budget Act, the
creation of a new bankruptcy judgeship is scored as mandatory
spending by the Congressional Budget Office. Now, in the
Senate, this means that legislation creating new judgeships is
subject to a budget point of order unless there are offsets. I
think it is only proper that the Judicial Conference suggest
offsets when they forward a judgeship request to Congress.
One of our witnesses, Mr. Hugh Ray, raises important points
about the use of traveling judges to dispose of temporary
spikes in the bankruptcy filings in some particular district.
It seems to me that traveling judges could really help
districts that suddenly find themselves under water, and
perhaps this is something Congress can do to facilitate the use
of traveling judges.
Finally, the formula that is used to decide whether new
judges are necessary really is quite old and quite outdated.
The formula, over 10 years old, means that many of the
advantages in computer and other technology may or may not be
accounted for in the formula. And I hope that we can get into
that topic today as well.
So Congressman Gekas, we are all being asked to do a lot;
perhaps we can. And I think that congressional oversight
responsibilities are very important. And we should be very
hesitant to grant requests for judgeships until we have all the
information we need and until the request is paid for.
Finally, you, Mr. Chairman, and I have introduced
bankruptcy legislation which will make bankruptcy a much less
appealing option. This in turn should reduce the number of
bankruptcies filed. I think it is responsible to look at
whether or not we need new bankruptcy judgeships in the context
of the impact of our legislation.
You convened an excellent panel of witnesses, and I look
forward to hearing their statements.
The Chairman. We thank you, Senator Grassley.
Having noted the presence now of a hearing quorum with the
attendance of the gentleman from New York, Mr. Nadler, the
ranking minority member, and the gentleman from Massachusetts,
Mr. Delahunt, the recess is declared defunct. And we will enter
into the formality of the hearing.
Without objection, the opening statement of Senator
Grassley will be inserted in the record following the fall of
the gavel.
This committee is now in session for the purposes of an
important hearing.
[The prepared statement of Mr. Gekas follows:]
Prepared Statement of Hon. George W. Gekas, a Representative in
Congress From the State of Pennsylvania, and chairman, Subcommittee on
Commercial and Administrative Law
On behalf of the Subcommittee, we extend our most heartfelt welcome
to our Senate colleagues and especially Senator Chuck Grassley, who is
to be commended for his untiring leadership on the issue of bankruptcy
reform in the other body. We also welcome those Members who have agreed
to participate on our panel today and the other distinguished
witnesses.
More than two years ago, our Subcommittee held a comprehensive
hearing on H.R. 1596, the ``Bankruptcy Judgeship Act of 1997,'' a bill
that I introduced in May of 1997. H.R. 1596 would have authorized seven
permanent and 11 temporary bankruptcy judgeships in 14 judicial
districts and extended an existing temporary judgeship in another
district. That bill, which was cosponsored by my colleague from New
York, Mr. Nadler, was passed by the House and sent to the Senate for
its consideration.
Rather than taking up H.R. 1596, however, the Senate Judiciary
Committee included a modified version of the bill in its bankruptcy
reform legislation last year. This version, which was also included in
the Conference Report on H.R. 3150, the Bankruptcy Reform Act of 1998,
a bill that I introduced last year.
Since we last considered the need for additional judgeships, there
have been significant developments with regard to bankruptcy. First,
bankruptcy case filings in calendar year 1998 topped 1.4 million in
number, the highest level ever in our nation's history. Recently,
however, the rate of filings has diminished somewhat. Second, we
continue to be on the very precipice of bicameral bankruptcy reform. As
we know, the House passed H.R. 833, the Bankruptcy Reform Act of 1999,
last May with an overwhelming bipartisan vote of 313 to 108. With
regard to the other body, we receive--on nearly a daily basis--reports
that the Senate will take up S. 625, its version of comprehensive
bankruptcy reform. The continuing and wide-ranging support for
bankruptcy reform is undeniable.
Accordingly, today's oversight hearing provides an excellent
opportunity for us to have an update from the Judicial Conference
concerning its assessment of bankruptcy judgeships, against the
backdrop of these developments.
The Chairman. We will introduce each member of the
legislative panel, our colleagues who are interested in this
subject matter. We will introduce them in the order that we
have compiled their resumes so that no one should take offense
as to seniority or any other factor, other than that is the way
the Chair has them. And each member would be free to leave
following his presentation to the committee. We will not engage
in cross-examination, unless a member requests that that be
accomplished. And we will proceed with the hearing after we
hear the opening statement of the gentleman from New York, Mr.
Nadler.
Representative Nadler. Thank you, Mr. Chairman.
I want to commend you first for scheduling this hearing.
And I want to welcome our colleagues from the other body as
well, and also to welcome our colleagues who will be providing
testimony today. I hope to be here for the entire hearing;
although, I would point out that this committee has a number of
bills pending on the floor today, and I may have to absent
myself briefly if the hearing is not concluded when some of
those bills are called up on the floor.
To any witnesses whose testimony I might miss as a result,
my apologies; you may be assured we will be reviewing all the
testimony submitted.
It has been my pleasure to work with Chairman Gekas on this
legislation since I first became the ranking Democratic member
of the subcommittee. It has been a bipartisan and cooperative
effort, even during times when we have strongly disagreed on
other matters of bankruptcy policy. The plain fact is, however,
we have not created a single new judgeship on the bankruptcy
bench since 1992.
That may not be a problem in some parts of the country, but
in places where there are still a significant number of Chapter
11s, and particularly in jurisdictions where mega-Chapter 11s
are filed, very complicated cases with broad national impacts,
it is, in my opinion, unconscionable that gridlock has held up
legislation which is clearly necessary and long overdue.
I don't know how much longer we are going to be derelict in
our duty to pass such legislation, but the failure to provide
for adequate judicial resources in the bankruptcy bench imposes
real and increasing costs on creditors and debtors and on the
people with whom they do business.
In addition, if many of the proposed changes to the
Bankruptcy Code that are pending in the bill now before the
Senate that we have passed were to become law, it is
inevitable, there is much testimony before this committee,
including from the bankruptcy judges themselves as stated, it
is inevitable that the provisions of that bill will cause much
additional business and much additional work for the bankruptcy
judges who will become even more busy and the resource backlog
will become more severe.
Those members who are proponents of the pending legislation
as, of course, I am not, should look at the demands it will
place on the bench, the additional demands it will place on the
bench and commit themselves to ensuring the demands they
propose to impose will have the adequate resource that--provide
adequate resources to meet those additional demands that the
legislation will impose on the bankruptcy bench.
So with that, I look forward to hearing the testimony. Mr.
Chairman, I yield back the balance of my time.
The Chairman. We thank the gentleman.
The record will indicate that the gentleman from Ohio, Mr.
Chabot has joined us.
We will begin with the introduction of the members who are
present for the purpose of presenting testimony.
Congressman Jack Kingston is in his fourth term
representing Georgia's First Congressional District. Since
being elected to Congress in 1992, Jack has been widely
recognized for his commitment to cut taxes, balance the budget,
and reduce government involvement in our lives. He has been
named a taxpayers hero by Citizens Against Government Waste and
received the Watchdog of the Treasury Golden Bulldog Award. In
addition, he was awarded the U.S. Chamber of Commerce Spirit of
Enterprise Award and was named a Friend of the Farmer by the
Georgia Farm Bureau.
In May 1997, Jack became the first Member of Congress to
receive the National Rural Water Association's Green Key Award
for his commitment to protecting public health, quality of
life, and the environment.
Before coming to Washington, Jack served for 8 years as a
State representative in the Georgia General Assembly.
Let the record indicate that Senator Biden has joined the
panel.
Jack Kingston is joined at the witness table by the
Honorable Mike Castle, the Congressman----
Senator Biden. Who represents Delaware.
The Chairman. I think we concur.
Senator Biden. That is a fact.
The Chairman. The former two-term Governor of the State of
Delaware. Over the course of his four terms in Congress, Mike
has focused his efforts on crime control, handgun control,
fiscal responsibility, and welfare reform.
Mike currently chairs the House Education Subcommittee on
Early Childhood, Youth, and Families where he pursues his
commitment to improving educational opportunities for our
Nation's youth. In 1997, Mike received the Congressional
Distinguished Service Award from the National Committee for
Education Funding for his leadership on education issues.
Mike serves on the House Banking Committee and was the
chairman of the Subcommittee on Domestic International
Monitoring Policy in the 104th and 105th Congresses. He is also
a member of the Permanent Select Committee on Intelligence. In
addition, Mike serves in a variety of task forces and caucuses.
Steny Hoyer joins the panel, the Member from the Fifth
Congressional District of Maryland; Congressman Hoyer has
served in the House of Representatives since 1981. Steny is a
member of the House Appropriations Committee where he serves as
the ranking member of the Treasury, Postal Service, and General
Government Subcommittee and also serves in the Labor, Health
and Human Services, and Education Subcommittee and the
Legislative Appropriation Subcommittee.
On the foreign policy front, Steny is the ranking member of
the Commission on Security and Cooperation in Europe. Steny was
first elected to the Maryland State Senate in 1966 at the age
of 27 and served until 1978.
Earlier this year, he was awarded the Jack Niles Medal of
Honor by the Public Employees Roundtable for his commitment to
public service.
With our colleagues is Ed Bryant. Long before coming to
Congress, Ed established a distinguished career in public
service. He was an officer of the United States Army in the
Military Intelligence Branch and served in the Judge Advocate's
General Corps as a captain. Ed also taught constitutional law
to the United States Military Academy in West Point, New York.
In 1991, President Bush appointed Ed to serve as United
States Attorney for the Western District of Tennessee. He was
one of the first U.S. Attorneys to establish an investigative
task force on abuse and fraud regarding various government
funded health care programs.
Since coming to Congress in 1994, he has been a staunch
advocate for Federal tort reform, Federal anticrime and law
enforcement measures, the protection of property rights and
welfare reform.
Ed is a former member of the House Judiciary Committee. He
serves currently on the Commerce Committee and the House Task
Force on Firearms.
Representative Coble may be appearing at a little later
period in this hearing.
We note the presence now, the record should indicate that
the gentleman from North Carolina, Mr. Watt, is present.
Senator Biden, wish to make an opening statement?
Senator Biden. Just to comment, Mr. Chairman, based on
those introductions, you clearly are the more gentle body. We
never say anything that nice about our colleagues from the
bench. But I am delighted to be here in such distinguished
company with the exception of Representative Hoyer.
Representative Hoyer. Your statement is understandable.
The Chairman. We thank you, Senator Biden.
Let us proceed with the testimony. As is the custom, the
written statements will become automatically a part of the
record. We also ask that each of you try to synthesize the
written statements into 5 minutes, more or less, for the
purposes of proceeding with an expeditious hearing.
Representative Kingston.
STATEMENT OF HON. JACK KINGSTON, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF GEORGIA
Representative Kingston. Thank you, Chairman Gekas and Mr.
Nadler and Chairman Grassley and Senator Biden. It is a great
honor to be here. In the approval of the House bill of 18 new
bankruptcy judges, at the time that that was done, there were
six others that were requested. And I wanted to speak about the
six others. And I will make five points on it because one of
them affects the district that I represent, the First District
of Georgia.
Based on the most recent statistics, the incumbent judges
of the Southern District of Georgia are handling a weighted
caseload which ranks them as ninth busiest district in the
country. Their caseload exceeds the threshold established for
approval of new judgeships by a margin of 25 percent, and it
exceeds the national median caseload by approximately 50
percent.
Even after approval of this additional judgeship, the three
full-time judges in the Southern District of Georgia would
still be carrying a caseload in excess of 1500 weighted hours,
the threshold level which would justify establishment of yet
another, a fourth judge. The last time judicial resources were
increased in the district was in 1993, when an additional
judgeship was created to be shared between the Middle and
Southern Districts of Georgia. Even after this additional one-
half judgeship in both districts, the caseload has continued to
grow and has exceeded the 1500 threshold for several years.
The survey team dispatched by the Judicial Conference to
review the district's requests for the additional judgeship
concluded that caseloads are being managed in a highly
efficient manner in the district, and that there was no case
management changes or suggestions that might be made in order
to assist the courts in dispatching its business in a more
expeditious manner.
And the last point I want to make, Mr. Chairman, and
members of the committee, is that the judges of the Southern
District are very active, holding court in 6 divisional
locations and cover a 43 county area encompassing a huge
portion of the State of Georgia. Because of the shared nature
of the current judgeship between the Southern and Middle
Districts of Georgia, creation of another full-time judgeship
in the Southern District will have the effect of converting the
one-half judgeship in the Middle District of Georgia to a full-
time position there.
That district is very similar in its geographic size,
population, and caseload. The judges in the Middle District of
Georgia, according to the latest statistics available, are the
eighth busiest in the country and need this help as urgently as
the Southern District does.
And, Mr. Chairman, I will submit the rest of this in
writing. I also have a letter that is signed by 18 Members of
the Congress on a bipartisan basis urging the committee to
consider the six additional judgeships.
[The prepared statement of Representative Kingston
follows:]
Prepared Statement of Hon. Jack Kingston, a Representative in Congress
From the State of Georgia
It is an honor to appear here today before your subcommittee,
Chairman Gekas and Ranking Member Nadler. As one who has followed the
bankruptcy judge issue closely for some time now, I am grateful that
you chose to hold these hearings into a matter which I believe is very
important to the judiciary not only in my home state of Georgia, but
throughout the U.S.
As you are aware, the House has previously approved 18 new
bankruptcy judgeships in various districts. At the time the House
acted, an official request had been forwarded to the Congress from the
Judicial Conference of the United States asking for approval of six
additional judgeships, one of which would be located in my district.
These six additional judgeships were not the subject of any hearings in
the House at the time the House passed H.R. 833 and thus I welcome the
opportunity to lay out a case for the approval of this additional
judgeship in Georgia at this time.
(1) LBased on the most recent statistics available to me, the
incumbent judges of the Southern District of Georgia are
handling a weighted caseload which ranks them as the ninth
busiest district in the country. Their caseload exceeds the
threshold established for approval of new judgeships by a
margin of 25%. And it exceeds the national median caseload by
approximately 50%.
(2) LEven after approval of this additional judgeship, the
three full-time judges in the Southern District of Georgia
would still be carrying a caseload in excess of 1,500 weighted
hours, the threshold level which would justify establishment of
yet another, or a fourth judgeship, in the district.
(3) LThe last time judicial resources were increased in the
district was in 1993 when additional judgeship was created to
be shared between the Middle and Southern Districts of Georgia.
Even after this additional one-half judgeship, in both
districts, caseload has continued to grow and has exceeded the
1,500 threshold for several years.
(4) LThe survey team dispatched by the Judicial Conference to
review the district's request for the additional judgeship
concluded, without any equivocation, that caseloads are being
managed in a highly efficient manner in the district, that
there were no case management changes or suggestions that might
be made in order to assist the court in dispatching its
business more expeditiously and the recommendation for the
additional full-time judgeship was approved by the Judicial
Conference in March this year.
(5) LThe judges of the Southern District are very active,
holding court in six divisional locations and cover a 43 county
area encompassing a huge portion of the State of Georgia.
Because of the shared nature of the current judgeship between
the Southern and Middle Districts of Georgia, creation of
another full-time judgeship in the Southern District of Georgia
will have the effect of converting the one-half judgeship in
the Middle District of Georgia to a full-time position there.
That district is very similar in its geographic size,
population, and caseload. The judges in the Middle District of
Georgia, according to the latest statistics available to me,
are the eighth busiest in the country and need this help as
urgently as the Southern District does.
In conclusion, approval of this judgeship for the Southern District
of Georgia will alleviate the shortage of judicial resources in two
districts of the state, both of which are operating at levels far
beyond the threshold for creation of the new judgeship and I urge the
committee to favorably act on this request in an expedited a manner as
possible.
Mr. Chairman, the facts seem clear to me, and my colleagues from
other states can recite similar statistics as I have. It is time for
this Congress to approve more bankruptcy judges in order to help
alleviate what have become almost unbearable caseloads, which bog down
the system and is a disservice to our citizens. I thank you for your
leadership and for your assistance on this important question. And I
once again commend your efforts in organizing these hearings today.
The Chairman. Without objection, that letter will be made a
part of the record. We thank the gentleman.
The Chairman. We turn to Mike.
Representative Kingston. Thank you.
[The letter follows:]
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STATEMENT OF HON. MICHAEL N. CASTLE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF DELAWARE
Representative Castle. Thank you, Chairman Gekas, I
appreciate your overly generous introduction. And Chairman,
Senator Grassley, and my friends, Mr. Chabot and Mr. Nadler and
Mr. Watt and Mr. Delahunt, and, particularly, Senator Biden,
who I know has a bigger name tag. I hope he has a
disproportionate weighted vote in any matters that comes before
any Judiciary Committees in the House and Senate on this issue.
I do appreciate the opportunity very much to testify, and I
realize how difficult it is to bring a joint committee
together. So I appreciate the fact that both of the Senators
were able to get over here. But we do need an additional
bankruptcy judge in the State of Delaware.
Attached to my testimony, which you have before you, I
believe, you will see a chart which I have here. And this is an
eye strain from there, so I don't expect you to see it; and I
will talk about it a little bit more, but it shows that
Delaware is the jurisdiction with the greatest need for a
bankruptcy judge.
And it summarizes the most recent data on the weighted
filings for the judgeship for the 19 bankruptcy districts
requesting judgeships. Now, something I learned about this is
the weighted business means when you have bigger cases, you may
be given extra, I guess, count in terms of the weighting in
which they do. In that criteria, Delaware comes out the
highest. Fourteen of these bankruptcy districts are scheduled
to receive between one and four of the 18 judgeships authorized
in the Bankruptcy Reform Bill passed by the House Judiciary now
pending before the Senate.
The District of Delaware is not among these four districts,
but it is one of seven districts seeking either a half or full-
time judgeship for a total of six additional judgeships in our
Nation's bankruptcy court system. I support the 14 bankruptcy
districts scheduled to receive up to four of the 18 pending
judgeships because their weighted filings per judgeship
demonstrate the need for an expansion. As a matter of fact, I
support the legislation that I believe both of you mentioned
that would reduce some of the need for bankruptcy in general,
too.
Among those 14 districts who are getting judges, the
weighted filings per judgeship range from 1427 to 2733. The
case is equally compelling for the seven districts seeking up
to one of six additional judgeships. For these seven districts,
which are represented by all of us here, the weighted filings
per judgeship over a 12-month period range from 1722 in the
Eastern District of North Carolina to 3108 in the District of
Delaware. Far above the 1500 filing standards that Judicial
Conference uses as a threshold for considering adding a
judgeship and even farther above the 1337 filing average for
the nation.
As a sole representative of Delaware, I would like to draw
a special attention to the needs of the District of Delaware.
With 3,108 weighted filings for judgeship, more than any other
bankruptcy district, the numbers speak for themselves and
really do not need my assistance nor, for that matter, Senator
Biden's assistance.
What the numbers do not describe is the tremendous strain
Delaware's two bankruptcy judges Judge Walsh and Judge Walwrath
are under. They are spending 8 hours a day on the bench and
many more off the bench researching law preparing for their
cases.
Most of you have been trial lawyers at one time or another.
You know if you are in court for 8 hours, you are putting a lot
of time in to get ready for the other work you have to do.
Their staffs' morale and their own morale are at all time lows
in a struggle to maintain the excellent reputations for
services come to characterize the practice of law in Delaware.
Finally, I would like to explain to the joint committee
while the District of Delaware was not included among the 14
districts receiving judges in the House-passed bill--when the
House passed H.R. 833, it included bankruptcy judgeships based
on the 1997 recommendations from the Judicial Conference. The
Judicial Conference did not recommend a new permanent
bankruptcy judgeship for the District of Delaware because they
believed the upward filing trends in Delaware could change
drastically due to anticipated changes in interest rates and
national economy and tax laws.
Furthermore, the District of Delaware ordered an order
dated January 23, 1997 which revoked the automatic reference of
Chapter 11 cases to the bankruptcy judge, the chief district
judge indicated that he and two other district judges would
share, and this is unique by the way, the Chapter 11 caseload
to assist the bankruptcy judges.
However the 1998-99 judgeship survey revealed that the
filing trends have increased not decreased. In fact, today the
District of Delaware is the busiest district in the country.
That is why I respectfully request that the Senate Judiciary
Committee approve S. 625 with the six additional judgeships and
that the House Judiciary Committee agree to the change on the
matter that reaches conference.
And again, I appreciate very much the opportunity of
speaking here today.
The Chairman. We thank the gentleman.
[The prepared statement of Representative Castle follows:]
Prepared Statement of Hon. Michael N. Castle, a Representative in
Congress From the State of Delaware
Chairman Gekas, Chairman Grassley, and distinguished Members of the
House and Senate Judiciary Committees, I appreciate this opportunity to
testify before the Joint Committee on the overwhelming need for an
additional bankruptcy judge in the District of Delaware.
Attached to this testimony you will see a chart summarizing the
most recent data on the weighted filings per judgeship for the nineteen
Bankruptcy Districts requesting judgeships. Fourteen of these
Bankruptcy Districts are scheduled to receive between one and four of
the eighteen judgeships authorized in the Bankruptcy Reform bill passed
by the House this year and pending before the Senate. The District of
Delaware is not among these fourteen districts, but it is one of seven
districts seeking either a half or full time judgeship for a total of
six additional judgeships in our nation's bankruptcy court system.
I support the fourteen bankruptcy districts scheduled to receive up
to four of the eighteen pending judgeship because their weighted
filings per judgeship demonstrate the need for an expansion. Among
those fourteen districts, the weighted filings per judgeship range from
1,427 to 2,733. The case is equally compelling for the seven districts
seeking up to one of six additional judgeships. For these seven
districts, the weighted filings per judgeship over a twelve month
period range from 1,722 in the Eastern District of North Carolina to
3,108 in the District of Delaware--far above the 1,500 filings standard
the Judicial Conference uses as a threshold for considering adding a
judgeship and even farther above the 1,337 filing average for the
nation.
As the sole Representative of Delaware, I would like to draw
special attention to the needs of the District of Delaware. With 3,108
weighted filings per judgeship, more than any other Bankruptcy
District, the numbers speak for themselves and do not need my
assistance. What the numbers do not describe is the tremendous strain
Delaware's two Bankruptcy Judges, Judge Walsh and Judge Walrath, are
under. They are spending eight hours a day on the bench and many more
off the bench researching the law and preparing for their cases. Their
staff's moral and their own moral are at all time lows as they struggle
to maintain the excellent reputation for service that has come to
characterize the practice of law in Delaware.
Finally, I would like to explain to the Joint Committee why the
District of Delaware was not included among the fourteen districts
receiving judges in the House-passed bill. When the House passed H.R.
833, it included bankruptcy judgeships based on the 1997
recommendations from the Judicial Conference. The Judicial Conference
did not recommend a new permanent bankruptcy judgeship for the District
of Delaware because they believed the upward filing trends in Delaware
could change drastically due to anticipated changes in interest rates,
the national economy, and tax laws. Furthermore, the District Court of
Delaware entered an order dated January 23, 1997, which revoked the
automatic reference of chapter 11 cases to the bankruptcy court. The
chief district judge indicated that he and two other district judges
would share the chapter 11 caseload to assist the bankruptcy judges.
However, the 1998-1999 judgeship survey revealed that the filing trends
had increased not decreased. In fact, today, the District of Delaware
is the busiest district in the country.
That is why I respectfully request that the Senate Judiciary
Committee approve S. 625 with the six additional judgeships and that
the House Judiciary Committee agree to the change when the matter
reaches conference.
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The Chairman. We turn to Steny.
STATEMENT OF HON. STENY H. HOYER, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF MARYLAND
Representative Hoyer. Mr. Chairman, Senator Grassley, and
Mr. Nadler, Senator Biden, thank you very much for allowing me
to appear.
I suppose that I am number two behind Delaware. Maryland is
the--at 2733, I think, the second busiest jurisdiction in the
country. Last year, despite a booming economy and low
unemployment, more than 1.43 million people filed for
bankruptcy, as I think all of you know. I supported H.R. 833,
only because it takes a major step forward in making people
more responsible for their debt, because section 128 authorizes
the creation of new judgeships for judicial districts in
desperate need. I think desperate is the operative word there,
in need of additional judges to meet the onslaught of increased
filings.
Although I am grateful, of course, that my home State of
Maryland will be receiving, under the legislation pending, two
additional bankruptcyships for a total of six, Maryland's
bankruptcy judges have the highest, it says the highest, but it
is the second highest workload and are among the hardest
working in the Nation.
Even with the two additional judges added, Maryland will be
substantially above the weighted average necessary to qualify
for an additional judge. And if we got a third judge, it would
still be above the 1500 weighted criteria. From July 1, 1997 to
June 30, 1998, the District of Maryland had a total of 34,463
case filings or 8,616 per judge. That is almost 200 percent--
that is almost 200 percent above the national average and
ranked Maryland first out of the Nation's 90 judicial districts
in total volume.
The 1999 recommendation made by the Judicial Conference of
the United States called for a total of 24 additional
bankruptcy judges, including three for the District of
Maryland. Both the House and the Senate bills contain only 18
judgeships, six short of the Judicial Conference's
recommendations.
Mr. Chairman, very frankly, while I speak for Maryland and
ask for an additional judgeship, based upon my review of the
figures, I think all six are critically needed. Clearly,
Delaware needs it, my friend from Georgia--Tennessee, excuse
me, and my friend from Georgia, Mr. Kingston, have spoken and
I'm sure Mr. Coble will as well. With six bankruptcy judges,
Maryland will still be far above the national average in regard
to weighted filings per judgeship as I said. The seventh
judgeship would significantly decrease that number and bring
the caseload levels closer to, but not below or at the national
average.
While I focused on Maryland, as I said, the judicial
districts of Delaware, southern Florida, southern Georgia,
eastern North Carolina and Puerto Rico would also be seriously
impacted without the additional judgeships.
While I am hopeful that the Senate leadership can reach an
agreement this week and move forward with the bankruptcy reform
bill, I cannot stress how important it is that we pass
legislation this year authorizing the creation of all 24
positions with or without the underlying reform bill.
Mr. Chairman, again, I know you are very knowledgeable in
these areas and share our concern, collective concern, that we
handle the filings with efficiency and effectiveness. And I
appreciate very much this opportunity to appear before you.
The Chairman. I thank the gentleman.
[The prepared statement of Representative Hoyer follows:]
Prepared Statement of Hon. Steny H. Hoyer, a Representative in Congress
From the State of Maryland
Mr. Chairman, thank you for the opportunity to testify on the
importance of authorizing additional bankruptcy judgeship positions to
meet the ever increasing number of Americans filing for debt relief.
Personal bankruptcy in this country has become a national
epidemic--with a 400% increase since 1980. Last year, despite a booming
economy and low unemployment, more than 1.43 million people filed for
bankruptcy.
I support H.R. 833 not only because it takes a major step forward
in making people more responsible for their debt, but because section
128 authorizes the creation of new judgeships for judicial districts in
desperate need of additional judges to meet the onslaught of increased
filings.
Although I am grateful that my home state of Maryland will be
receiving two additional bankruptcy judgeships for a total of six,
Maryland's bankruptcy judges have the highest workload and are among
the hardest working in the Nation. From July 1, 1997 to June 30, 1998,
the District of Maryland had a total of 34,463 case filings or 8,616
per judge. That is almost 200% above the national average and ranked
Maryland first out of the Nation's ninety judicial districts.
The 1999 recommendation made by the Judicial Conference of the
United States called for a total of twenty-four additional bankruptcy
judgeships including three for the District of Maryland. Both the House
and the Senate bills contain only eighteen judgeships, six short of the
judicial conference's recommendation. With six bankruptcy judges,
Maryland will still be far above the national average in regards to
weighted filings per judgeship. a seventh judgeship would significantly
decrease that number and bring the caseload levels closer to the
national average.
While I have focused on Maryland, the judicial districts of
Delaware, southern Florida, southern Georgia, eastern North Carolina,
and Puerto Rico would also be seriously impacted without the additional
six judgeships.
While I am hopeful that the Senate leadership can reach an
agreement this week and move forward with the bankruptcy reform bill, I
cannot stress how important it is that we pass legislation this year
authorizing the creation of all 24 positions with or without the
underlying reform bill.
The Chairman. We turn to our colleague, Ed Bryant.
STATEMENT OF HON. ED BRYANT, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF TENNESSEE
Representative Bryant. Thank you, Mr. Chairman. I thank all
of you for being here today for this joint session. I also
appreciate very much the opportunity to be here with my
colleagues from the House to testify to you today about this
very important matter. I won't take the entire 5 minutes, but I
think it is important for me to reiterate Tennessee's strong
need for an additional bankruptcy judge.
As a former member of this Judiciary Committee, I am well
aware of the House Judiciary support for fulfilling bankruptcy
judges. I am equally aware that Congress hasn't authorized the
additional judgeships since 1992. As you know, both H.R. 833
and S. 625 provide an additional bankruptcy judge for the
Western District of Tennessee, along with the provision
extending the temporary judgeship in the Eastern District of
Tennessee.
This position has been endorsed by the Judicial Conference.
In the Western District of Tennessee, the caseload burden on
the four bankruptcy judges is among the highest in the nation.
I think Mr. Castle's chart shows we are number 3 behind
Delaware and Maryland. We have asked our judges in western
Tennessee and across this Nation, for that matter, to work too
hard for too long. Even if Congress provides the requested
judgeships for this district and the other districts requested,
the average caseload is still probably too high.
I know in the Western District, it will be still among the
highest in the Nation, even with the additional judge. And, in
fact, the most current case weight numbers based on the filings
through June of this year are at 2,380 cases per judge in the
Western District. If an additional judgeship is provided, that
will go down to 1904 per judge. I would also point out that
1,500 is the level at which the Judicial Conference uses to
show evidence of a potential need for additional judgeships.
As a strong proponent of bankruptcy reform, I hope we will
be able to send a meaningful reform bill to the President
before the end of this first session. But should this not be
possible, I join my colleagues in asking you to split the
judgeships as a separate piece of legislation so that we can
authorize these positions this year.
Again, I thank you for holding this hearing. I appreciate
the opportunity to highlight Tennessee's situation and would
again encourage you to consider moving separate legislation
this year authorizing these additional judgeships. And I yield
back my time.
The Chairman. We thank you.
[The prepared statement of Representative Bryant follows:]
Prepared Statement of Hon. Ed Bryant, a Representative in Congress From
the State of Tennessee
Thank you Chairman Gekas, and Chairman Grassley I appreciate the
opportunity to join with Representatives Kingston and Castle in
appearing before you today. I can assure you that I will not use the
entire 5 minutes, but I did think it important to reiterate Tennessee's
strong need for an additional bankruptcy judgeship.
As a former member of the Judiciary Committee, I am well aware of
the House Judiciary Committee's support for filling bankruptcy
judgeships. I'm equally aware that Congress hasn't authorized any
additional judgeships since 1992. As you know, both H.R. 833, and S.
625 provided for an additional bankruptcy judgeship for the Western
District of Tennessee along with a provision extending the temporary
judgeship in the Eastern District. This position has been endorsed by
the Judicial Conference.
In the Western District, the case load burden on the four
bankruptcy judges is among the highest in the nation. We've asked these
judges to work too hard, for too long. Even if Congress provides the
requested judgeship for this district, the average case load for these
judges would still be among the highest in the nation. In fact, the
most current case weight numbers, based on filings through June of this
year, is at 2,380 cases per judge in the Western District. If an
additional judgeship is provided, that would go down to 1,904 per
judge. I would also point out that 1,500 is the level at which the
Judicial Conference uses to show evidence of potential need for an
additional judgeship.
As a strong proponent of bankruptcy reform, I hope we will be able
to send a meaningful reform bill to the President before the end of the
first session. But should that not be possible, I join my colleagues in
asking you to split of the judgeships as separate legislation so that
we can authorize these positions this year.
Again, thank you for holding this hearing. I appreciate the
opportunity to highlight Tennessee's situation and would again
encourage you to consider moving separate legislation this year
authorizing these additional judgeships.
And I thank the chair.
The Chairman. And we thank Mike and our other colleagues.
And we dismiss them with our gratitude.
We will now impanel the second set of witnesses which is a
solo appearance. And we will ask Senator Grassley to make the
formal introduction.
Senator Grassley. As I said in my opening statement, I have
known our next witness very well for a long period of time and
feel that he does a very outstanding job as judge. He appears
today on behalf of the Judicial Conference of the United States
where he serves as Chair of the Committee on Administration of
the Bankruptcy System.
Judge Melloy began his judicial career in 1986 as a
bankruptcy judge for the Northern District of Iowa. He was
thereafter appointed chief judge of the United States District
Court in 1992. Before coming to the bench, Judge Melloy was in
private practice for more than 10 years. He attended Loras
College in Dubuque, Iowa, graduated magna cum laude in 1970. He
then served 2 years in the United States Army. Following the
completion of his military service, Judge Melloy attended the
University of Iowa College of Law where he graduated in 1974
with high distinction.
Judge Melloy.
STATEMENT OF MICHAEL J. MELLOY, U.S. DISTRICT CHIEF JUDGE,
NORTHERN DISTRICT OF IOWA AND CHAIR, COMMITTEE ON THE
ADMINISTRATION OF THE BANKRUPTCY SYSTEM, JUDICIAL CONFERENCE OF
THE UNITED STATES
Mr. Melloy. Thank you, Chairman Grassley, Chairman Gekas. I
want to thank you for allowing me to appear in support of the
conference recommendation for 24 additional bankruptcy
judgeships. In addition to my comments today, I have prepared a
written statement which has been provided to you.
I would first like to thank both the committees for your
past support for the 18 judgeships that were requested by the
Judicial Conference last year. As you know, those 18 judgeships
were included in both the House and Senate versions of the
bankruptcy reform legislation that passed in last year's
sessions of Congress.
We come before you today requesting an additional six
judgeships. We believe all 24 positions, the 18 approved last
year and the six new positions, are critically needed.
The need for additional bankruptcy judgeships is more
critical than ever. Since Congress last approved an increase in
judgeships in 1992, filings have increased by 43 percent. Many
of the affected districts have been recommended for additional
judgeships since 1993. Those districts have used a number of
case management techniques to try to manage the heavy caseload.
These do include the use of visiting and recall judges.
Bankruptcy judges across the country have and continue to
provide many hours and days of service as visiting judges in
districts with heavy caseloads. However, visiting and recall
judges can only provide temporary relief in overburdened
districts. They do not provide a long-term solution. Their
availability is often unpredictable. There is a lack of
consistency in handling cases, particularly larger Chapter 11
cases, when the judge is only in the district for a few days.
There is significant support and judicial time involvement in
preparing for a visit--sitting by a visiting judge.
The bankruptcy committee biannually conducts a national
survey. In assessing the needs for additional judgeships, the
committee uses a number of criteria. These include factors such
as a minimum workload of over 1500 hours, judicial management,
and historic trends. The written materials which have been
provided to you contain a detailed analysis of each proposed
judgeship and show how the criteria was applied to each
position.
The Judicial Conference has given careful consideration to
each request and only recommends those that are most
desperately needed at this time. We have also recommended that
11 of the positions be made temporary. The 13 positions we are
recommending as permanent are those in districts with
particularly high caseloads and a long history of high filings.
These are districts which would have a very busy caseload and
heavy filing statistics even if they did experience a dip in
filings.
We have seen an unprecedented increase in bankruptcy
filings over the past several years. As you know, nearly 1.5
million bankruptcy cases were filed last year. Although the
numbers are down slightly this year, we expect filings to stay
high and easily exceed 1 million for the foreseeable future.
We anticipate the proposed bankruptcy legislation will also
have a significant impact on judicial workload in these and all
the other districts. We believe that the additional judgeships
are desperately needed and are needed now.
I would just like to close by urging you to act
expeditiously on this request. All the districts we recommend
for additional judgeships have been overburdened for many years
and are in need of prompt relief.
Thank you very much. And I would be happy to answer any
questions you might have.
[The prepared statement of Mr. Melloy follows:]
Prepared Statement of Michael J. Melloy, U.S. District Chief Judge,
Northern District of Iowa and Chair, Committee on the Administration of
the Bankruptcy System, Judicial Conference of the United States
My name is Michael Melloy, and I am the Chief Judge of the United
States District Court for the Northern District of Iowa. I am also
Chairman of the Judicial Conference Committee on the Administration of
the Bankruptcy System (the Bankruptcy Committee), and in that capacity
I appear before you today.
Thank you for the opportunity to appear today in support of the
Judicial Conference's 1999 recommendation for the authorization of 24
additional bankruptcy judgeships, in lieu of its previous request in
1997 for 18 additional positions. Pending legislation provides for 18
temporary bankruptcy judgeships only.
The need for 24 additional judgeships is more critical than ever to
ensure that the bankruptcy courts have sufficient judicial resources to
effectively and efficiently adjudicate the rights and responsibilities
of parties in bankruptcy cases and proceedings. Additional bankruptcy
judgeships have not been authorized by Congress since 1992 when 35 new
judgeships were approved. Since that time, case filings have increased
nationally by 43 percent. In response to this increase, the Judicial
Conference--as part of its process of reviewing bankruptcy judgeship
needs every two years--made recommendations to Congress for additional
bankruptcy judgeships in 1993, 1995, 1997, and (most recently) this
year.
While the focus of my testimony today is on the need for the six
additional judgeships in addition to the 18, the need for the 18
previously requested additional judgeships is as great as ever. The
judiciary is concerned that pending legislation in the House and Senate
provides that all 18 positions be temporary. The Conference believes
that the addition of 13 permanent and 11 temporary bankruptcy
judgeships and the conversion of three existing temporary judgeships to
permanent judgeships are justified by the extremely heavy case-weighted
filings per judgeship in the districts involved.
Today I ask for your assistance in completing the process of
securing authorization for the 24 additional bankruptcy judgeships
needed by the bankruptcy system. For your convenience, I have provided
a chart as Attachment A listing, on a district-by-district basis, the
24 bankruptcy judgeships recommended by the Judicial Conference.
JUSTIFICATION FOR THE SIX ADDITIONAL BANKRUPTCY JUDGESHIPS
The Judicial Conference is required by statute (28 U.S.C.
Sec. 152(b)(2)) to submit periodically recommendations to Congress for
new judgeships. To assist the Conference in performing this
responsibility, the Bankruptcy Committee biennially conducts national
judgeship surveys pursuant to a policy statement adopted by the
Conference in 1991.
The policy statement sets out a number of workload factors that the
Committee should consider in assessing a court's request for additional
bankruptcy judgeships, the first of which is the weighted caseload of
the bankruptcy court. Generally, it is expected that, in addition to
other judicial duties, a bankruptcy court should have a caseload of
1,500 annual case-weighted filings per judgeship to justify additional
judicial resources. Other factors the Committee is to consider include
the nature and mix of the court's caseload; historical caseload data
and filing trends; geographic, economic, and demographic factors in the
district; the effectiveness of case management efforts by the court;
and the availability of alternative solutions and resources for
handling the court's workload.
Understanding the process and criteria used in evaluating requests
for additional bankruptcy judgeships is important and should be, I
believe, a part of the official record for every judgeship request. I
have therefore included a detailed description of the process as
Attachment B to my written testimony. The attachment also provides a
description of the techniques used by the judiciary to manage existing
judicial resources effectively and efficiently.
As a result of the most recent judgeship survey conducted in the
fall of 1998, the Bankruptcy Committee received requests for seven
additional bankruptcy judgeships in addition to the 18 judgeships
previously requested. At its January 1999 meeting, the Committee
evaluated the requests based on the criteria provided in the 1991
Conference policy statement and recommended that the Conference ask
Congress to authorize the following six additional judgeships (in
addition to the 18 already requested):
<bullet> for the District of Puerto Rico: add one temporary
judgeship and convert the existing temporary judgeship to a
permanent position;
<bullet> for the District of Delaware: add one permanent
judgeship and convert the existing temporary judgeship to a
permanent position;
<bullet> for the District of Maryland: add one permanent
judgeship (in addition to the two judgeships approved by the
Conference in 1997);
<bullet> for the Eastern District of North Carolina: add one
temporary judgeship;
<bullet> for the Middle District of Georgia: convert the
judgeship shared with the Southern District of Georgia to a
full-time judgeship in the Middle District of Georgia;
<bullet> for the Southern District of Georgia: following
conversion of the shared judgeship with the Middle District of
Georgia to a full-time position in the Middle District of
Georgia, add one permanent judgeship in the Southern District
of Georgia; and
<bullet> for the Southern District of Florida: add one
temporary judgeship (in addition to the additional position
approved by the Conference in 1997);
At its March 1999 session, the Judicial Conference approved the
Bankruptcy Committee's recommendation for 24 additional bankruptcy
judgeships, which includes the 18 previously approved and the six I
just mentioned.
In September 1997, the Judicial Conference set forth its position
regarding the ten temporary bankruptcy judgeships authorized by the
Bankruptcy Judgeship Act of 1992. Other than the temporary bankruptcy
judgeship for the district of Delaware, which, in March 1999, the
Judicial Conference recommended converting to a permanent bankruptcy
judgeship, the Judicial Conference's position is unchanged. The
Conference recommends that the temporary bankruptcy judgeships in the
district of Puerto Rico and the northern district of Alabama be
converted to permanent judgeships. Further, the Conference recommends
that the temporary bankruptcy judgeships in the district of South
Carolina and the eastern district of Tennessee each be extended for an
additional five year period.
The need for these additional judgeships is critical. In making its
recommendations to the Judicial Conference, the Bankruptcy Committee
noted that, in addition to other justifying factors, the weighted
filings per judge in each of the districts requesting additional
bankruptcy judgeship positions were above the 1,500 annual weighted
case-related filings per judgeship set forth in the 1991 policy
statement approved by the Conference.
The Committee also noted that each of the requesting districts had
experienced a sustained period of heavy per judgeship weighted case
filings, straining the abilities of its judges to effectively
administer its caseload. The Judicial Conference is economically
conservative in that it only recommends an additional bankruptcy
judgeship for a district after the per judge weighted case filings in
the district show a pattern of elevated judicial workload. This pattern
of a sustained heavy judicial workload over a period of time has been
clearly demonstrated with regard to the six additional requested
judgeships:
<bullet> In the District of Puerto Rico, per judgeship
weighted case filings since 1995 have increased sixty percent,
reaching 1,843 in 1998 and 1,788 in 1999;
<bullet> In the District of Delaware, weighted case filings
per judgeship exceeded 3,000 for the past two years, more than
twice the level set by the Judicial Conference as the point at
which an additional judgeship will be considered;
<bullet> In the District of Maryland, the weighted case
filings per judgeship have been above the 1,500 level every
year since 1992, hitting record levels of 2,410, 3,020, and
2,733 in the past three years;
<bullet> In the Eastern District of North Carolina, the
weighted case filings per judgeship have been above the 1,500
level for three consecutive years, and are presently at 1,722;
<bullet> In the Southern District of Florida, weighted case
filings per judgeship have been above the 1,500 level for the
past 8 years, and are presently at 1,859;
<bullet> Finally, in the Southern District of Georgia,
weighted case filings per judgeship have been in excess of
1,500 for four consecutive years, and are presently at 1,880.
Similar patterns exist in the districts for which the Conference
previously requested 18 additional positions.
The districts I have just mentioned could have requested the six
additional judgeship positions at the time of the last survey in 1996.
In the interests of judicial economy, however, most did not, relying
instead upon judicial management techniques to administer their heavy
caseloads. The burden for those districts has now reached a critical
point at which judicial management techniques are no longer effective
and additional judgeships are necessary.
CONCLUSION
We share a common interest in ensuring that the bankruptcy court
system has the judicial resources it needs to manage near-record
caseloads justly, speedily, and economically. An unprecedented number
of cases are pending in our bankruptcy courts. Many of the 19 districts
for which additional bankruptcy judgeships are sought have had
overwhelming filings dating back years, in some cases to 1993, shortly
after Congress last authorized additional positions. Although the
judiciary has developed creative and innovative techniques to fully
utilize its existing judicial resources and manage increasing
caseloads--including the use of temporary bankruptcy judges, recalled
bankruptcy judges, inter- and intracircuit assignments, and advanced
case management techniques--the bankruptcy courts can no longer operate
as effectively as the American public deserves because of the heavy
weighted per judge caseloads. Our judicial resources are strained, and
the cost to society of an overburdened bankruptcy system is enormous.
I therefore urge you to provide for 24 additional bankruptcy
judgeships, with the status of each designated as permanent or
temporary as requested most recently by the Judicial Conference. Doing
so will allow the bankruptcy system to move forward with sufficient
judicial resources to meet the challenges it will face in the new
millenium.
Thank you, once again, for your consideration of our request and
your continued support to the system. I look forward to our continuing
joint efforts to improve the administration of bankruptcy and believe
that the authorization of these long-needed additional judgeships will
be our most important first step.
I would be pleased to answer any questions or provide any
assistance in this matter now or at any time.
ATTACHMENT A
RECOMMENDED ADDITIONAL BANKRUPTCY JUDGESHIPS
----------------------------------------------------------------------------------------------------------------
District Recommendation
----------------------------------------------------------------------------------------------------------------
Puerto Rico 1 temporary and convert the existing temporary position to permanent*
New York (N) 1 temporary
New York (E) 1 temporary
New York (S) 1 temporary
Delaware 1 permanent and convert the existing temporary position to permanent
New Jersey 1 permanent
Pennsylvania (E) 1 temporary
Pennsylvania (M) 1 temporary
Maryland 3 permanent
North Carolina (E) 1 temporary
Virginia (E) 1 permanent
Mississippi (S) 1 temporary**
Michigan (E) 1 permanent
Tennessee (W) 1 permanent
California (E) 1 temporary
California (C) 3 permanent, 1 temporary
Georgia (M) Convert the judgeship shared with Georgia (S) to a full-time position for
Georgia (M)
Georgia (S) 1 permanent, and convert the judgeship shared with Georgia (M) to a full-
time position for Georgia (M)
Florida (S) 1 permanent, 1 temporary
----------------------------------------------------------------------------------------------------------------
TOTALS: 24 and convert the existing temporary judgeships in Puerto Rico, Alabama (N)
and Delaware to permanent
----------------------------------------------------------------------------------------------------------------
* At its September 1997 meeting, the Judicial Conference approved transmission of proposed legislation to make
permanent the existing temporary judgeship in Puerto Rico. JCUS-SEP 97, pp. 53-54.
** This position would help in Mississippi (N).
ATTACHMENT B
ASSESSING THE NEED FOR BANKRUPTCY JUDGESHIPS
In the late 1980's, encouraged by urging from Congress, the
Bankruptcy Committee requested that the Federal Judicial Center conduct
a detailed, quantitative study of the bankruptcy judges' workloads and
recommend a comprehensive case measurement system. Based on time
records of the activities of 97% of all bankruptcy judges recorded over
a 10-week time frame, staggered throughout a one-year period, the
Federal Judicial Center designed a work measurement system consisting
of a case weight for each of the 17 specific case types within the
jurisdiction of the bankruptcy courts.
These case weights categorized bankruptcy cases filed under
chapters 7, 11, 12, and 13 of the Bankruptcy Code; and adversary
proceedings, i.e., a lawsuit within a case usually initiated by filing
a complaint. The cases or proceedings are generally grouped by type and
by the amount of assets or scheduled debts. For example, chapter 13
cases are categorized into subgroups according to the amount of
liabilities--one subgroup applies to cases in which the scheduled
liabilities are less than $50,000 and another to those with scheduled
liabilities of $50,000 or more. While the chapter 13 case weights are
based on scheduled liabilities, case weights for chapter 11 cases and
both the business and non-business chapter 7 cases are based on assets.
Through this comprehensive work measurement system, the ``weighted
judicial caseload'' in the United States bankruptcy courts can be
determined and analyzed. Based upon the case weight assigned to each of
the 17 categories of case types and the actual cases filed in the
bankruptcy courts, a quantitative measurement of the judicial caseload
can be made per district. This thorough system helps the judiciary
ascertain the minimum number of bankruptcy judges needed in each
district and throughout the country to administer the bankruptcy cases
presently pending.
At its January 1991 session, the Judicial Conference carefully
reviewed the Federal Judicial Center's Time Study and adopted the
proposed case weighting system. The Judicial Conference acknowledged
the Center's determination that 1,280 hours was the ``average'' amount
of time spent by bankruptcy judges on ``case related'' matters, noting
that this figure excludes the nearly 700 hours per year that the
average judge spends handling general office-chambers matters,
addressing personal issues, traveling to divisional locations,
attending meetings and seminars, conducting general research, etc. The
Judicial Conference determined, however, that a district should have an
even higher weighted judicial caseload than recommended by the Center,
a minimum of 1500 annual ``case related'' hours per bankruptcy judge,
before that district's request for an additional bankruptcy judge
should be considered.
Biennially, the Bankruptcy Committee's ``Judgeship Subcommittee''
thoroughly screens, reviews, analyzes, and assesses the pending
requests for additional judgeships from the circuit councils and
applies the weighted case filing criteria to all requests for new
judgeships. The subcommittee identifies judicial resource needs that
could be met without adding a judgeship and secures short-term relief
for those in the greatest distress. In short, the subcommittee tries to
stabilize those situations deemed most critical while awaiting the
authorization of new bankruptcy judges.
The weighted judicial caseload is not the sole determinant of
whether the Judicial Conference endorses or denies a judgeship request.
Other factors considered include:
(1) the nature and mix of the court's caseload;
(2) historical caseload data and filing trends;
(3) geographic, economic, and demographic factors;
(4) the effectiveness of the court's case management efforts;
(5) Lthe availability of alternative resources for handling the
court's caseload; and
(6) Lany other relevant factors.
It is only after all these factors are considered that a decision
is made regarding whether an additional judgeship should be requested
from Congress for a district in need.
The Judicial Conference denies many initial requests received from
the judicial councils. Some of these denials are based on information
obtained during on-site surveys. An ``on-site survey'' generally
consists of a review at the requesting district by a survey team
composed of a judge from the Bankruptcy Committee and one or more
members of the Bankruptcy Judges Division from the Administrative
Office of the U.S. Courts. The survey team reviews the court's policies
and practices, focusing particularly on the court's calendaring
procedures and docket sheets. Interviews are held with key court
personnel, members of the local bar, the U.S. Trustee's office, panel
trustees, and judges of the bankruptcy, district, and circuit courts.
Before completing the on-site survey, the judge member of the survey
team often meets with the judges of the bankruptcy court and furnishes
a candid evaluation of that court's practices. Suggestions for
improvements and ways to achieve greater efficiencies and productivity
are discussed. This form of ``peer review'' has proven to be extremely
helpful both to the courts and the Bankruptcy Committee in determining
whether additional judges or better case management is the solution to
the court's heavy workload.
Continuous improvements and enhanced efficiencies are a constant
goal and, as satisfied as we have been with the case weight and
assessment system designed by the Federal Judicial Center, we recognize
that periodic refinements are necessary. Thus, the Bankruptcy Committee
asked the Center to re-examine and to attempt to quantify more
precisely the judicial work required by chapter 11 ``mega cases''--an
area that the Center had acknowledged at the outset of their report
that the system may have undervalued. The Federal Judicial Center
responded to this request by developing a prototype for adjustment to
the case weight system in districts with a number of the mega cases,
which the Bankruptcy Committee accepted and authorized at its June 1996
meeting.
We anticipate that additional adjustments to the case weighting
system will be made as we gain experience with this system, so that we
can ensure that the system provides as accurate an assessment as
possible of the judicial workload for the various categories of
bankruptcy cases and proceedings.
DICIAL MANAGEMENT TOOLS
Management tools and processes currently used by the judiciary to
maximize its resources include:
<bullet> Temporary positions: The Judicial Conference
recommends temporary judgeship positions in those instances
where the need for an additional bankruptcy judgeship is
demonstrated through the on-site survey process, but it is not
clear that the need will exist permanently in the district. Ten
of the 35 judgeship positions created by Congress in 1992 were
temporary positions (where the first vacancy resulting from the
death, resignation, or removal of a sitting judge occurring
after 1997 cannot be filled). Of the 18 judgeship positions
requested by the Judicial Conference on April 7, 1997, 11 were
recommended as temporary rather than permanent positions.
Moreover, three of the additional six judgeships requested by
the Judicial Conference on March 24, 1999, are temporary rather
than permanent positions.
<bullet> Recall: The judiciary also meets its judicial
resource needs through the recall by any circuit of retired
bankruptcy judges to serve in a district on either a full-time
or part-time basis. Currently, approximately 27 recalled
bankruptcy judges are serving nationwide. The number of
bankruptcy judges available for recall increases almost every
year.
<bullet> Shared Positions: The judiciary turns to shared
bankruptcy judgeship positions when possible to meet the
resource needs of more than one district, thus avoiding the
cost of an additional judgeship.
<bullet> Cross Designation: The judiciary also has the
authority to designate a bankruptcy judge to serve in more than
one district pursuant to 28 U.S.C. Sec. 152(d) which permits
designation of a bankruptcy judge to serve in any district
adjacent to or near the district for which the judge was
appointed.
<bullet> Intercircuit and Intracircuit Assignments: The
judiciary uses intercircuit and intracircuit assignment of
bankruptcy judges to furnish short-term solutions to the
disparate judicial resource needs of districts within circuits
and between circuits.
<bullet> Additional Law Clerks: The judiciary has developed
several programs through which the bankruptcy judges in the
busiest districts may be able to receive additional law clerk
help through emergency funds provided by the circuit councils,
funds for supplemental law clerks provided by the Judicial
Conference, and by allowing a bankruptcy judge to hire an
additional law clerk in lieu of a secretary.
<bullet> Judicial Education: Recognizing that the number of
bankruptcy judgeships authorized has not kept pace with the
dramatic increase in case filings, the judiciary relies on
continuing judicial education to help the incumbent judges do
more with less. Ongoing improvements in case management--
through publications such as Case Manual for United States
Bankruptcy Judges and specialized management seminars--
including those covering mega-cases and ADR processes--allow
the bankruptcy judges to handle more cases than before. To
enhance the management process further, the Administrative
Office provides each court with an annual ``case processing
measures report'' that reflects how that court is managing its
caseload. Moreover, the caseloads are constantly analyzed and
monitored through the case weight tables developed by the
Federal Judicial Center.
<bullet> Other Ongoing Initiatives: The Ninth Circuit has a
pilot project designed to balance disparate bankruptcy
caseloads more evenly within that circuit by transferring
pretrial work in adversary proceedings to districts with
lighter caseloads.
<bullet> Technology: The judiciary continues to explore other
innovative and novel ways to alleviate overly burdensome
caseloads through technical advancements, where judges can help
other districts through ``virtual courtrooms,'' video-
conferencing, and the use of educational programs broadcast
over the FJTN, a closed circuit television network for the
judiciary.
The Chairman. Judge Melloy, I just have one question to try
to straighten out my thinking. The chart that was referred to
by Representative Castle, have you seen that, is that a
submission by the Judicial Conference at one point which was
reflected in his statement, or is it one on which--for which
you can vouch in one way or another?
Mr. Melloy. Well, without going over the numbers, but it
looks like a chart that was submitted. And those numbers are in
the materials, if not in that exact form, in a chart form very
similar to that.
The Chairman. Would you do me one favor, review it when you
can, I don't mean now or next week, but by next week.
Mr. Melloy. Yes.
The Chairman. And let me know whether the Judicial
Conference has updated those figures at all or whether they
stand as they are indicated there?
Mr. Melloy. If my eyesight is correct, it says the 12-month
period ending June 30, 1999, those are the most current numbers
we have.
The Chairman. They are?
Mr. Melloy. Yes.
The Chairman. All right. All right. Then we will allow that
to stand as it is. I have no further questions.
Does Senator Grassley have any questions?
Senator Grassley. Yes, I do. Judge Melloy, in my opening
statement, I mentioned that I had been seeking information
gathered by the courts during their process for assessing the
need for new judgeships.
First, as a very general matter, don't you believe that
Congress is entitled to this type of information in order to
determine whether new judgeships requested by the courts are
really necessary?
Mr. Melloy. Well, I believe that the Congress is entitled
to the report that we ultimately generate that results in the
recommendation for new judgeship. But--I understand the tenor
of your question, Senator, to be whether or not you are
entitled to the underlying source material and the notes and
that type of thing.
And I guess in direct response to that concern, my position
would be that the interviews of other judges about their fellow
judges on their court are undertaken in strict confidence, the
judges are asked some very frank--members, the members of the
Bar are asked some very frank opinions about how the judges
perform; and, quite frankly, I think the entire process would
be compromised if we could not give some assurance of
confidentiality.
In addition, a lot of the interviews are not reduced to any
kind of report form, they may even be the most sketchy of
notes, sometimes maybe no notes at all because they are just
sort of generalized interviews of how do you think this judge
is performing, what do you think he or she might do
differently?
And I think without those assurances of confidentiality, we
wouldn't be able to get the type of frank and meaningful
information that is very useful to us in making these
recommendations.
Senator Grassley. Well, we could make sure that that
confidentiality is maintained.
What about synopses of the interviews?
Mr. Melloy. Well, first of all, I am not even sure there
are synopses of the interviews because generally what happens
is when the person goes out and does the site survey, they talk
to different people. And then they prepare a report, and that
is really the only written documentation that results from the
interview.
But again, I think for the same reasons as previously
stated, even if we had synopses, if we can't guarantee
confidentiality, I think we would have a great difficulty in
getting frank opinions.
I just don't see practitioners who are being asked to
critically critique a judge being honest with us if they know
that it is going to be made available outside the committee
that is looking at the information.
Senator Grassley. You see--I think you look at our
interests as something that is very personal toward somebody
doing their job or not. We are talking about general
administration, efficiencies that are being taken or can be
taken. I think that it would be important for the seeking of
information and some determination that personal information be
kept in confidence so that it is not going to come out. But on
the other hand if you gather all of this information, you come
to Congress asking us to appoint judges that cost at least,
article III, judges a million dollars a piece, it is laying out
quite a bit of money just based on faith.
And it seems to me that that is something, you know, the
citizens of Iowa that we would have a difficult time in
justifying to them that you just appropriate money on faith.
Let me go on to another question. A witness on the next
panel has suggested in his written testimony that the
bankruptcy reform bills pending in Congress would reduce the
need for new judges if they were enacted.
Do you agree with this statement?
Mr. Melloy. Certainly not in the short run, Senator. I
think for several years. First of all, in the very short term,
we would probably see a huge spike in filings before the new
legislation became effective. But even over the longer term,
historically what happens when you bring into play new
legislation is that there is a tremendous amount of litigation
as that new legislation is tested.
The current bankruptcy bill is a very mature law. As you
know, back when I started in 1986 in Iowa, we had a huge number
of farm bankruptcies; and I think what has happened over the
years is that as those lenders and debtors become more
accustomed to what is going to happen in bankruptcy, we saw all
kind of out-of-court workouts. We see cases that never come to
bankruptcy court because everybody knows what is going to
happen, and they can do it outside of the arena of the
bankruptcy system, and they do out-of-court workouts.
And I think any time we have a new legislation like this,
there is going to be a tremendous learning curve. There is
going to be a lot of litigation generated, and plus if the
legislation has its intended effect of forcing a lot of people
who are currently filing Chapter 7s to file Chapter 13s, that
will increase the workload substantially. There is
significantly more work involved from a judicial standpoint in
handling a Chapter 13 case than in----
Senator Grassley. You don't see the legislation having any
impact long term of people who would otherwise file for
bankruptcy foregoing bankruptcy?
Mr. Melloy. I think that is very possible. I don't mean to
say that it isn't, Senator, and I think that is a very
possible--that is very possible and in the very long term, that
we will see an ultimate decrease. But I think certainly over
the next several years, it is not going to impact the workload
of the judges in a positive sense.
The litigation that is going to be generated will be
substantial. And like I say, I think the Chapter 13s are going
to result in a lot more work for most of the judges.
Senator Grassley. I will ask one more question and then
submit two for answer in writing--is that possible to have
questions answered in writing?
The Chairman. Without objection, we will do it.
Senator Grassley. Judge Melloy, could you discuss how the
formula for assessing judgeship needs accounts for the
possibility of using visiting judges to help courts get their
docket under control? Some of the testimony from the next panel
suggests that more could be done in terms of using visiting
judges to control dockets.
Mr. Melloy. The formula itself does not factor in the use
of visiting judges. And so it is not a factor in the formula
itself. It is a factor, however, that is--when we talk about
the formula being the 1500 hours, it is a factor that we
consider in assessing the overall needs of a particular
district. As I said in my prepared remarks, however, use of
visiting judges I think is only a temporary solution. The
problem with visiting judges is that they are not necessarily
dependable, their availability is very unpredictable.
One of the things that I think has been talked about a lot
is of the benefit of consistency in rulings. There is nothing
more inconsistent than having different judges rotating in
through your district on a periodic basis. And in general, it
helps in the short run, but I think in terms of addressing a
long-term solution, if we had a district, Senator, that we saw
a spike--as a matter of fact this is what happened with
Delaware, we thought that Delaware was a temporary aberration
that these numbers were going to go up and come back down. We
would certainly advocate using visiting and recall judges if we
thought it was just a spike situation and that the numbers are
likely to come back down again. But once we come to the belief
that that is a sustained filing situation, which we have now
with Delaware, that is when we believe it is appropriate to
recommend a new judgeship as opposed to using visiting judges,
but certainly they have a place and particularly in those cases
where we think the numbers are an aberration over a short
period of time.
Senator Grassley. Yes. In closing, my staff has
communicated to the administrative office that I would be
requesting updated information on noncaseload-related travel,
so I would like to make that request officially in regard to
the 18 districts.
The Chairman. Without objection, that will be considered as
a direct request to the witness, and we would prompt a
response.
Mr. Melloy. Okay.
The Chairman. We thank the gentleman. And we now turn to
the gentleman from New York; he is recognized for a period of 5
minutes.
Representative Nadler. Thank you, Mr. Chairman.
Judge Melloy, as I stated in my opening comment, we have
had testimony before this committee earlier this year and last
year that the pending legislation would, in fact, increase the
necessity--increase for new judges would increase the judicial
workload. You just testified, I think you said, in two
respects, one that because existing laws is a mature law, lots
of things are settled out of court, because everybody knows
what the new law is--but what the existing laws, I should say,
but without a substantial change in the law, a major rewrite
which is what the legislation is, you would have a lot of
litigation as to what it means as to what a lot of--what the
real meaning of a lot of the terms in the law, et cetera; and
that would increase legislation--that would increase litigation
substantially for a number of years until that flattened out.
But you also said a lot of people would be now transferred
from Chapter 7 to 13, which is one of the goals of the
legislation, and there is more of a workload on the Judiciary
in Chapter 13 cases than in a Chapter 7 sense, that would be a
permanent increase in the workload of the Judiciary.
Have I understood you correctly that?
Mr. Melloy. That would be correct, Congressman.
Representative Nadler. Let me ask a follow-up question. And
thank you. How much more work is there for a judge on average,
and I know it may be silly, to the extent you can say, on
average in a Chapter 13 case than in a Chapter 7 case?
Mr. Melloy. Well, in a Chapter 7 case and in a typical
Chapter 7 case, there may be very little judicial involvement
at all, whereas in a Chapter 13 case, at a minimum, you are
probably going to have a confirmation hearing where the debtor
comes in and the trustee. There may be litigation over
exemptions and the other factor about a Chapter 13, unlike a
Chapter 7 is that a Chapter 7, particularly if it is a no-asset
Chapter 7 gets filed, there is minimal judicial involvement
unless there is some, like dischargability litigation or
something of that nature, and the case is closed within 60, 90
days.
A Chapter 13 case is going to go on for 5 years under most
Chapter 13 plans. And so there is the ongoing potential for
additional litigation if the debtor doesn't make their planned
payments, they fall behind, maybe a creditor comes in during
the pendency of the Chapter 13 and commences stay litigation.
So there is the potential for a significant additional workload
in a Chapter 13.
Representative Nadler. Now, are there any other ways that
this bill might increase workload, other than the definitional
question and the switch from Chapter 7 to Chapter 13 that you
already discussed? For example, what comes to mind immediately
is that Chapter 13 workouts are now 3 to 5 years; under the new
bill they will be presumptively 5 years, which obviously
increases the supervisory role of the judges. Are there any
other provisions that you would think, for example, the small
business provisions or any other provisions of this bill would
have an impact to increase or decrease the workload?
Mr. Melloy. Well, to be honest with you, Congressman
Nadler, I am not an expert on the new bill. And so I don't
purport to know all the provisions that might result in the
additional workload. So I guess I am just not prepared to
answer that question with any specificity.
Representative Nadler. Okay. But you would say then just to
summarize what you have been saying that if we do pass this
bill, it would be prudent to expect a substantial increase in
the workload, and you would disagree with anyone who said it is
probably going to result in a substantial decrease?
Mr. Melloy. Certainly in the short run. And by short run, I
mean 3 to 5 years until this initial period of litigation over
the provisions work themselves out.
Representative Nadler. Thank you very much. I yield back.
The Chairman. The gentleman yields back the balance of his
time.
We will now recognize Senator Biden.
Senator Biden. Thank you very much, Mr. Chairman. I want to
thank you and Senator Grassley for having this hearing.
Judge Melloy, since I was the author of the ninth, along
with the Senator from Alabama, of the bankruptcy court to begin
with. I would like to remind people of the historical fact, you
district judge courts; and you weren't a judge in 1980, if I am
not mistaken.
Mr. Melloy. No, I was not.
Senator Biden. And in 1980, the Judicial Conference
opposed, initially, the establishment of bankruptcy court
judges because you didn't like the idea that they would have
any jurisdiction. And you all were very upset that there would
be judges that could be called judges that aren't article III
judges and would be in the same Federal courthouse.
And so the only reason I bother to mention that, Mr.
Chairman, is the Judicial Conference didn't like the notion of
bankruptcy court judges, they are like masters, they like them
much better because they were under their control more
directly. And so if a Judicial Conference comes along
recommending more judges, it is not because they like these
guys and women.
And I mean that sincerely, I know I am not supposed to say
things that bluntly, but I was chairman of the Judiciary
Committee for years and ranking member for years. And I would
argue in making that argument that the fact that you were
recommending these judges so strongly is evidence we probably
need more than you are recommending.
With regard to Senator Grassley's question, I would think
you should be--go back, if I might respectfully suggest, and
consider Senator Grassley's request, he and I disagree on the
need for more judges. But he is right about one thing, the
Judicial Conference is a congressionally authorized entity, you
all can't do it without our approval. We can pass a law
tomorrow eliminating the Judicial Conference and any
recommendation you made about anything has absolutely no impact
whatsoever if we did that.
So you have no constitutional argument against supplying to
Mr. Grassley, Senator Grassley what he is seeking. You have a
very strong practical argument, a very practical point to make
about how straightforward an answer you will get to questions
if you can't assure confidentiality. It may be if I can suggest
to Senator Grassley, it might be appropriate that he as the
chairman of the subcommittee maybe meet with the Judicial
Conference and see if he can work out a reasonable way in which
to share this data you could guarantee its security.
But you are right, they have no, zero, no constitutional
authority to deny you the work product. You could introduce a
bill tomorrow, I don't want to encourage you, but to eliminate
the Judicial Conference, it might give you an idea, which I
don't like doing. But I hope you can work that out, because
Senator Grassley is the best lawyer, nonlawyer I know. He brags
about not being a lawyer, but the problem is he knows too much
about the law.
And the most dangerous person in America is a nonlawyer who
knows as much as lawyers know. Because he gets the benefit of
bragging he is not a lawyer, and he has the knowledge base that
lawyers have. But he is dead wrong, with all due respect, on
the need for these additional judges. So I am not going to ask
any questions, except suggest to you that you let the Chief
know about this, because until you all on the bench begin to
speak out more loudly about what is not being done with
judicial nominees across the board, you all are going to get
the kind of treatment you all have been getting.
I thank you for your hard work. I am not going to make a
special case for Delaware. If I make the special case for
Delaware, which is overwhelming on its facts, someone along
here will say I know how to fix your problem, and it won't be
new judges. So I am not going to make the case. But I thank you
very much for the workmanlike product.
A closing comment, Mr. Chairman. For years, when I chaired
the committee and the other body one of the things that I found
without fail was how incredibly detailed and how incredibly
thorough and thoughtful any analysis from the Judicial
Conference was on most any matter. And when I was chairman of
the committee during Republican Presidents, I am the guy that
pushed through 89 new Federal district court judges.
And I hope we can sort of look at that and begin to view
the judicial needs and the workload in the context of need, not
in the context of other considerations that don't relate to
need. But again, my friend from Iowa and I are working very
hard to pass a bankruptcy bill. I do think it is mildly
premature to suggest whether it is going to impact or diminish
the caseload, my guess is it will increase the caseload not
diminish it.
But I thank you for your work product. And I find it
compelling across the board. I think we need all 24 of these
judges myself. I thank you, Mr. Chairman.
The Chairman. I thank the Senator.
We turn to the gentleman from North Carolina, Mr. Watt, for
a period of 5 minutes.
Mr. Watt. Thank you, Mr. Chairman. And I probably won't
have time to ask the judge questions, but I thought it would be
a good time now since my good friend and colleague, Howard
Coble from North Carolina, hasn't been able to come and may not
be able to come before we get through to try to make the case
for North Carolina that he would have made. And I want to say
at the outset that I don't profess that I can do it nearly as
good as Howard Coble so I hope you will deliver that word to
him.
The Chairman. We will do that.
Mr. Watt. I do think that there are two compelling things
that need to be said. One is that the current way filings per
judge in North Carolina is 1,722. And we are one of the
additional--Eastern North Carolina which is not where I am from
or where Howard Coble is from, for that matter, is one of the
recommended districts to get an additional judgeship, but
beyond the current state of affairs insofar as the weighted
filings per judge, I would like to ask unanimous consent to
submit for the record a letter from the entire North Carolina
delegation that talks about the impact that we anticipate
Hurricane Floyd having on bankruptcy filings in North Carolina.
Our concern is that homeowners, farmers, and small business
owners, many of them will have no alternative to bankruptcy
filings as a result of the predicament they are finding
themselves in as a result of the extensive and devastating
flooding that has taken place in Eastern North Carolina.
So beyond the retrospective caseload and weighted averages,
all of which were calculated well before the floods took place
in North Carolina, this Eastern District of North Carolina is
the same place that the flooding took place, and we don't see
any way that we can escape a significant spike in bankruptcy
filings in Eastern North Carolina.
And so I would hope that Eastern North Carolina and the
Eastern District of North Carolina will be included in whatever
additional judgeships get approved. And I would ask unanimous
consent to insert the delegation's letter in the record.
The Chairman. Without objection, the letter and other
documents submitted by the gentleman from North Carolina will
be made a part of the record.
[The letter from North Carolina Representatives follows:]
<GRAPHIC NOT AVAILABLE>
<GRAPHIC NOT AVAILABLE>
Mr. Watt. Having made that case and probably not nearly as
eloquently or in as downhome a fashion as probably our
colleague, Howard Coble, would have made it, I will ask one
question of Judge Melloy.
I have noticed from one of the second panelists, I think,
Mr. Ray, who is taking the position that allowing direct
appeals to circuit courts from bankruptcy determinations should
be done before we do any new judgeships. And I was just
wondering what your reaction to that is and how that might have
an impact on the need for additional judgeships?
Mr. Melloy. Well, it is the Judicial Conference position
that the current system should remain in effect with one
modification, and that being that for cases of high importance,
where there is clearly unsettled law, that the district judge
or the bankruptcy appellate panel could certify a case directly
to the Court of Appeals for decision and bypass that
intermediate step of appeal. With all due respect, I am not
sure it is going to have even that big of an effect, even if
there was direct appeal.
As I said to someone earlier today when we were talking
about this issue, those of us at the district court bench who
practice or who work in the area of civil litigation, see tons
of cases coming out of the Court of Appeals in the area of
employment litigation; and if you think that is a settled area
of the law, someone is very sadly mistaken. The more cases tend
to make it more confusing. So I don't think it is going to have
a significant effect one way or the other on the workload of
bankruptcy judges.
Mr. Watt. Thank you, Mr. Chairman. I yield back.
The Chairman. We thank the gentleman.
We are ready to bring to the table the next panel. We thank
you for appearing.
The next panel and last panel is composed of the Honorable
Mary Davies Scott who appears today on behalf of the National
Conference of Bankruptcy Judges where she serves as president.
In 1987, she was appointed to the bankruptcy bench and,
thereafter, was appointed to the Bankruptcy Appellate Panel for
the Eighth Circuit Court of Appeals in 1997.
Judge Scott is a member of the National Bankruptcy
Conference, the American Law Institute, the American College of
Bankruptcy, and the Bankruptcy Judges Committee of the National
Conference of Federal Trial Judges. She is also faculty member
of the American Law Institute of the American Bar Association.
In addition to her judicial responsibilities, Judge Scott
is an adjunct professor of law at the University of Arkansas.
She is joined at the panel table by Hugh Ray, a partner in
the law firm of Andrews & Kurth in Houston, Texas. He has
practiced bankruptcy law for more than 30 years and has
actively participated in some of the Nation's largest Chapter
11 cases.
Mr. Ray is a former chair of the Business Bankruptcy
Committee of the Business Law Section of the American Bar
Association. Currently, he cochairs the ABA's Joint Ad Hoc
Committee on Bankruptcy Court Structure and Insolvency Process.
Mr. Ray is a member of the American College of Bankruptcy and
the American Bankruptcy Institute. He obtained his law degree
from Vanderbilt University in 1967.
Ford Elsaesser appears today on behalf of the American
Bankruptcy Institute where he serves as President and oversees
the Institute's Executive Committee. He is also a member of the
American College of Bankruptcy.
Mr. Elsaesser is a partner with the Sandpoint, Idaho, law
firm of Elsaesser, Jarzabek, Anderson, Marks & Elliott, where
he practices commercial and banking litigation, bankruptcy, and
real estate transactions.
In addition to his law practice, Mr. Elsaesser serves as a
trustee in Chapter 7, 11, and 12 cases. He also is a frequent
lecturer on bankruptcy and commercial law.
Mr. Elsaesser obtained his undergraduate degree from
Goddard College and his law degree from the University of Idaho
School of Law.
As we have indicated to the previous panels, the written
statements that have been prepared by the witnesses will be
made a part of the record automatically. We will ask that each
review of those statements be limited as far as possible to 5
minutes. We will begin in the order of introduction with Judge
Scott.
STATEMENT OF MARY DAVIES SCOTT, U.S. BANKRUPTCY JUDGE, EASTERN
AND WESTERN DISTRICTS OF ARKANSAS, PRESIDENT OF THE NATIONAL
CONFERENCE OF BANKRUPTCY JUDGES
Ms. Scott. Thank you, Chairman Gekas, Representative Watt,
and other members of the joint committee. My name, as you have
indicated, is Mary Scott. I am one of three bankruptcy judges
sitting in the Eastern and Western Districts of Arkansas. I am
also a bankruptcy appellate panel judge for the Eighth Circuit
Court of Appeals. This year, I have the great honor to serve as
the President of the National Conference of Bankruptcy Judges.
In that regard, I have been asked to appear here and make some
comments about the pending judgeship bills before this
committee.
The Conference of Bankruptcy Judges was founded in 1926;
and since that time, it has been a resource for Congress in the
drafting of bankruptcy legislation. Mr. Chairman, 319 of the
filled positions are members of the Conference of Bankruptcy
Judges, which is virtually all of the judges in the country. We
have been asked to testify here on the need for these
additional judgeships.
In 1994, the Judicial Conference of the United States
recommended to the Congress that it authorize additional
bankruptcy judgeships. We have been very fortunate in the past
to have the support of both of these committees in recommending
approval of these requests to Congress. As recently as the
105th Congress, both the Senate and the House of
Representatives approved the 18 judgeships recommended by the
Judicial Conference in 1994. We are very grateful for this
support and ask that these judgeships, in fact, be approved
immediately.
In addition, this past year, the Judicial Conference
recommended to Congress that it authorize an additional six
judgeships. Because there has been a decline in case filings
for the first time in 6 years and only the third decline in
case filings since 1980, a legitimate inquiry by these
subcommittees and others has been raised as to the continuing
need for these judgeships.
Let me initially address the question of the continuing
need for the judgeships that have been requested since 1994,
the initial 18. In that year, the judgeships were requested
based upon 800,000 case filings. Since 1996, case filings have
exceeded 1 million cases per year to a record filing of 1.4
million cases in 1998. Even with the decline in filings this
year, no one is predicting that the filings will drop below the
1994 levels. It is also worth mentioning that even though the
total number of filed cases may be declining, that decline is
not shared uniformly around the country. Virtually all of the
districts requesting new judgeships are still experiencing the
caseloads that convinced the Judicial Conference of the United
States to approve them in the first place. In addition, many of
these districts are experiencing an increase in filings.
Looking at a year-to-year comparison gives a misleading
picture. We urge you to look at the longer term picture. I can
assure you that the judiciary has utilized and continues to
employ all resource available to meet its needs before coming
to Congress with these requests. The Eighth Circuit where I sit
gives careful consideration to workload in deciding whether to
fill judgeships of retiring judges. There is currently one
judgeship not filled, and there are no plans to fill it. Other
circuits have done the same. In addition, judges with lower
caseloads are volunteering to help in districts with overload
problems. But these are temporary assignments, and they do not
provide a permanent solution. It is important to note that the
recommendation for the 24 judgeships is being made only after a
long-term pattern.
I want to mention one thing about the six additional
judgeships, and Representative Watt, I don't agree. I thought
you were very eloquent, but I do want to mention the Eastern
District of North Carolina. No one can have missed seeing the
media coverage of the recent storms that devastated the State.
All 44 counties in the Eastern District of North Carolina have
been declared a disaster area. The damage from the flooding is
of monumental proportions. Homes, businesses, and lives have
been lost. To be sure, the citizens have lost much, but their
situation may be even more dire. The media has just recently
pointed out that most of these victims are not insured. In
fact, the bankruptcy court will be their best possible solution
to, in fact, get the fresh start that Congress has so long
recognized as part of what the bankruptcy code is all about.
I thank you. My written statement, of course, is longer,
and I know that that is part of the record.
[The prepared statement of Judge Scott follows:]
Prepared Statement of Mary Davies Scott, U.S. Bankruptcy Judge, Eastern
and Western Districts of Arkansas, President of the National Conference
of Bankruptcy Judges
The National Conference of Bankruptcy Judges was founded in 1926.
Since its founding the Conference has been a resource for Congress in
the drafting of bankruptcy legislation. Of the 326 bankruptcy
judgeships currently authorized in the United States, 319 are filled
positions and virtually all of these judges are members of the
Conference. Additional bankruptcy judges were last authorized by the
Congress in August of 1992.
The National Conference of Bankruptcy Judges has been asked to
testify at this joint hearing on the need for additional judgeships. In
1994, the Judicial Conference of the United States recommended to the
Congress that it authorize additional bankruptcy judgeships. In
addition, this past year the Judicial Conference recommended to the
Congress that it authorize an additional six judgeships. Because there
has been a decline in case filings for the first time in six years and
only the third decline in case filings since 1980 (See Attached Chart),
a legitimate inquiry by the Judiciary Committees and others has been
raised as to the need for these judgeships.
Let me initially address the question of the continuing need for
the judgeships that have been requested since 1994. In that year, the
judgeships were requested based upon over 800,000 case filings. Since
1996, case filings have exceeded one million per year to a record
filing of 1,442,549 cases in 1998. Even with the decline in filings
this year, it is unlikely that we will see case filings drop below the
1994 level. It is also worth mentioning that even though the total
number of filed cases may be declining, that decline is not shared
uniformly around the country. Those districts requesting new judgeships
are still experiencing the case loads that convinced the Judicial
Conference of the United States to approve the creation of them in the
first place. In addition, many districts are experiencing an increase
in filings.
The Eighth Circuit, where I sit, gives careful consideration to
work load in deciding whether to fill judgeships of retiring judges.
There is currently one judgeship not filled and there is no plan to
fill it. Other circuits have done the same. Judgeships are not being
filled unless there is a need. Judges who have lower caseloads are
volunteering to help in districts with overload problems. These
temporary assignments are just that--temporary--and only provide
momentary relief to those districts. Any argument that this temporary
fix, which has been utilized historically to provide assistance to
overburdened districts, could be the permanent solution is not
realistic. Yes, bankruptcy judges are doing a good job, but they are
being required to adjudicate disputes in an ever increasing caseload
without a commensurate increase in judicial resources.
In 1984, the year Congress reestablished the Bankruptcy Court
following the decision of the United States Supreme Court in the
Marathon case, there were 232 bankruptcy judges who processed a total
caseload of 348,521 cases. In 1986, Congress, responding to a dramatic
increase in agricultural bankruptcies in the farm states and
significant increases in other parts of the country, created 52 new
judgeships. I was one of the 52 judges. The number of cases filed that
year totaled 530,438.
Between 1986 and 1992, Congress, on two occasions, increased the
number of sitting bankruptcy judges to 326. During those same years the
case filings steadily climbed to 971,517. In the record breaking 1998
year when 1,442,549 cases were filed, there were still only 326
(actually 319 filled positions) authorized judgeships. (See Attached
Chart.) I realize that simple division does not produce the number of
cases per sitting judge because all caseloads are not divided equally.
I would also point out that these figures, based on all filings, don't
necessarily reflect whether they are business or consumer cases. In
fact the actual statistics reveal that there were many more Chapter 11
cases in the earlier numbers. However, in 1994, Congress significantly
increased the debt limits for Chapter 13 eligibility which has allowed
many individuals with small businesses to utilize that chapter. These
cases dropped out of the Chapter 11 statistics, but they are still
there and take considerably more time getting to confirmation than non-
businesses consumer cases. Hence, judges are busier than ever with
complicated business related issues that used to just arise in Chapter
11 cases.
How can we do this? There are at least two reasons why the dramatic
increase in workload has not so far overwhelmed the system. Judges have
been able to handle this tremendous increase without asking for several
hundred new judges because automation has allowed us to streamline our
case processing techniques which, in turn, has increased our
efficiency. The Federal Judiciary wisely decided, about the same time I
became a judge, that the bankruptcy courts ought to be the initial
focus of its massive effort to automate the federal courts. In
addition, we and our staffs are working harder and longer hours. Thus,
resources are stretched thin. The Judiciary budget requests are not
being fully met. The decline in overall case filings does not really
help those districts needing those judgeships.
The statistics overwhelmingly demonstrate that all 18 judgeships
approved by the Judicial Conference in 1994 are still desperately
needed, and they need to be authorized now. The Bankruptcy Courts need
to be ready with sufficient resources. History has amply demonstrated
that waiting until the crisis is out of hand does not serve the
taxpayers. Yes, the economy is good and unemployment extremely low. But
I would caution against relying on these broad generalities in the same
way I caution against reading too much into the recent decline in
bankruptcy case filings. Overall figures or statements regarding a
general trend are often misleading and do not give a true picture of
particular areas where the generalities simply do not match the local
conditions.
While the authorization of these additional judgeships has been
languishing since 1994, the Judicial Conference of the United States
revisited those requests, reiterated the necessity for their
authorization and identified the need for six additional positions
meeting the strict criteria for creation of a new judgeship. We
strongly encourage the Judiciary Committees to consider these requests
together with the 18 judgeships I've already discussed. These judgeship
requests are based on case filings and case weighted numbers per
sitting judge that remain valid even though there is a decline in case
filings at the national level. Again, I ask you to consider my comments
and concern that overall generalities do not reflect the reality in a
particular district. These judgeships are needed now.
Let me mention one particular district in the additional six
judgeships. It is the Eastern District of North Carolina. No one can
have missed seeing the media coverage of the recent storms that have
devastated that state. All 44 counties in the Eastern District of North
Carolina have been declared a disaster area as a result of Hurricanes
Floyd and Irene. One-half of the cotton crop has been destroyed. The
damage from the flooding is of monumental proportions. Homes,
businesses and lives have been lost. These citizens have lost much but
their situation may be even more dire. The media has recently focused
on the fact that an extremely high percentage of these victims of
nature find themselves uninsured. There is little doubt that these
families of farmers, sole proprietors, and mom and pop businesses will
have little recourse. They will desperately need the relief that the
Bankruptcy Code offers them. These are the honest but unfortunate
debtors seeking a ``fresh start.'' For over a century and a half
Congress has recognized that this relief could be required and would be
essential in order to provide for a uniform and orderly system of debt
relief and restructuring.
The Bankruptcy Court has become the commercial court of the United
States. Even those pointing to the decline in case filings are not
willing to predict that we will ever see filings of less than 1,000,000
cases per year. If a downturn in the economy or a recession occurs,
these numbers could dramatically increase with no warning. The much
appreciated assistance you have given to the Judiciary many times in
the past is desperately needed again. In asking for your assistance, I
assure you that this request for new bankruptcy judge positions is made
only after the judiciary has taken earnest and sincere steps to
maximize all other programs and resources to meet the districts'
judgeship needs first.
One last item bears mention. All bankruptcy judges are keenly aware
that Congress is now considering significant bankruptcy reform. The
National Conference of Bankruptcy Judges has attempted at every
opportunity to comment upon the impact this legislation will have on
the administration of the system and the workload of the judges and
their staffs. No matter what will be the long term impact of this
legislation, bankruptcy judges know that, upon passage, litigation will
multiply. Creative lawyering will abound. No matter how clear the
statute Congress passes, no matter that Congress intends to close
loopholes and curb abuse of the bankruptcy process, history tells us
that lawyers litigate new issues. New laws inevitably create new
issues. Last year's President of the National Conference of Bankruptcy
Judges, Randall Newsome, testified twice before the House Subcommittee.
In March of 1999, he pointed out some 54 potential areas of litigation
in the new legislation. Since then other new issues have arisen.
Anytime new amendments to the Bankruptcy Code are passed, imaginative
lawyering and litigation is inevitable. Thus, Judges will be busier
than ever.
Chairman Grassley and Chairman Gekas, I wish to thank you and the
members of the two Subcommittees for the opportunity to present these
comments at this joint hearing. The National Conference of Bankruptcy
Judges stands ready to be of assistance in providing any additional
information you seek. We need these judgeships. Your assistance is
vital.
U.S. BANKRUPTCY COURTS--FILINGS FOR THE YEARS ENDING DECEMBER 31,1980-1998
----------------------------------------------------------------------------------------------------------------
Total Chapter Chapter Chapter
12 Months Ended 12/31 Bankruptcy Business Nonbusiness Chapter 7 11 12 13
Filings Filings Filings Filings Filings Filings Filings
----------------------------------------------------------------------------------------------------------------
1980 331,265 43,671 287,594 247,083 6,753 - 77,420
1981 363,946 48,086 315,860 260,744 10,042 - 93,156
1982 380,252 69,242 311,010 257,674 18,821 - 103,748
1983 348,881 62,412 286,469 234,551 20,284 - 94,038
1984 348,521 64,214 284,307 234,861 20,325 - 93,315
1985 412,510 71,277 341,233 281,053 23,376 - 108,069
1986 530,438 81,235 449,203 374,786 24,773 607 130,257
1987 577,999 82,446 495,553 409,595 20,078 6,125 142,161
1988 613,465 63,853 549,612 437,769 17,684 2,037 155,945
1989 679,461 63,235 616,226 476,470 18,281 1,445 183,214
1990 782,960 64,853 718,107 543,334 20,783 1,346 217,468
1991 943,987 71,549 872,437 656,460 23,989 1,496 262,006
1992 971,517 70,643 900,874 681,663 22,634 1,608 265,577
1993 875,202 62,304 812,897 602,980 19,174 1,244 251,773
1994 832,829 52,374 780,455 567,240 14,773 900 249,877
1995 926,601 51,959 874,642 626,150 12,904 926 286,588
1996 1,178,555 53,549 1,125,006 810,400 11,911 1,083 355,123
1997 1,404,145 54,027 1,350,118 989,372 10,765 949 403,025
1998 1,442,549 44,367 1,398,182 1,035,696 8,386 807 397,619
----------------------------------------------------------------------------------------------------------------
AUTHORIZED BANKRUPTCY JUDGESHIPS
----------------------------------------------------------------------------------------------------------------
Year Full time Part time Total Public Law
----------------------------------------------------------------------------------------------------------------
1959 110 67 177
1960 112 67 179
1961 130 65 195
1962 136 60 196
1963 140 59 199
1964 160 51 211
1965 160 51 211
1966 167 50 217
1967 170 46 216
1968 175 45 220
1969 178 41 219
1970 180 38 218
1971 184 37 221
1972 184 37 221
1973 185 36 221
1974 185 36 221
1975 190 34 224
1976 210 25 235
1977 214 24 238
1978 215 24 239
1979 217 23 240
1980 219 21 240
1981 221 21 242
1982 229 12 241
1983 230 11 241
7/84 232 0 232 Pub. L.No. 98-353
10/86 284 0 284 Pub. L.No. 99-554
11/88 291 0 291 Pub. L.No. 100-587
8/92 326 0 326 Pub. L.No. 102-361
----------------------------------------------------------------------------------------------------------------
The Chairman. We thank the gentlewoman, and we turn to Mr.
Ray.
STATEMENT OF HUGH M. RAY, ESQUIRE, ANDREWS & KURTH, HOUSTON, TX
Mr. Ray. Thank you, Mr. Chairman. I appreciate the
opportunity to be here.
One of the suggestions that I made with my written
materials was that we move judges around. Certainly,
Representative Watt's situation is a prime example of how and
why this should take place. This committee has available to it
not just top-down data as to the number of cases which, in
fact, are leveling off in 7 and 13 and declining in Chapter 11,
but it doesn't just have this information available to it.
It has bottom-up information such as if a bankruptcy judge
is sitting on the bench only 7\1/2\ hours a month in a multi-
judge district, doesn't it seem logical that maybe that
district doesn't need all the bankruptcy judges that it has and
maybe those judges could be moved to North Carolina to sit and
hear cases in dire straits as opposed to taking the rest of the
month off.
The court reporters are required to keep records of how
much they sit when the judge is on the bench, the court
reporter for a particular judge. I haven't seen any statistics
nationwide on how many hours per month bankruptcy judges
actually sit in certain districts. Certainly, there are some
bankruptcy judges like those in Delaware, thanks to the
Delaware venue provision, who sit more than 7\1/2\ hours a day.
But there are some bankruptcy judges that I know of that I have
been told by court reporters and others who sit less than 7\1/
2\ hours a month.
There are plenty of soft spots in the bankruptcy system.
When the first Continental Airlines case was filed in Houston,
it was handled by a judge from Mississippi who came over to
hear the case. The second Continental Airlines case was forum-
shopped to Delaware where Judge Balick heard the case. I get
most of my income these days from Delaware. So it is a
situation where we have a venue provision that encourages that
to become our national bankruptcy court.
But what about these other courts where they no longer have
the caseload anymore? Do they need additional judges? Certainly
the Chapter 7s and 13s have leveled off, the 11s are down; and
in connection with the direct appeals, it is difficult to argue
with the proposition that our society demands stability from
its legal system.
The bankruptcy system is unstable. And it is unstable for
the following reason: You can find a lower bankruptcy court
opinion for just about any proposition you want on bankruptcy
law. Judge Melloy said that we had a mature code, it is 20
years old. He said the code is now mature legislation. We have
fewer cases because of mature legislation.
I would submit that while it helps me for me to be able to
say we don't need new judges because we have a mature, stable
piece of legislation, the truth is that there are many
unanswered, fundamental, seminal issues in bankruptcy law; and
they are unanswered because we have a multiple of judges coming
up with different decisions.
And the appeal process in bankruptcy is ludicrous. It is
ludicrous because cases go to the district court and sit there
until they become moot or dismissed and the circuit courts
never get a chance to hear it. That is not necessarily true in
the Third Circuit where Delaware is because it has so many big
cases that they have been able to get a number of good
precedents there.
So, a client comes in and asks me, well, here are my facts,
what is the court going to do? And I have to answer hey, it is
not what you say, it is who you say it to. So if we file in
Delaware, I know this is going to be the answer. If you file it
in L.A., we've got 22 judges, the answer could be anything.
One last question. The predictions that we have heard on
the need for bankruptcy judges are based on well, the new
statute is going to increase it or the coming downturn in the
economy is going to increase it. You know what? They are saying
that these committees should appoint bankruptcy judges on the
come. They are not Alan Greenspan, they don't know where the
economy is going. I think we are supposed to appoint judges
when there is a clear need shown. I am not an economist; I am a
lawyer. I haven't seen any economists say anything to the
contrary. So until we have a clear need, I don't think that we
should have new judges.
The Chairman. We thank the gentleman.
[The prepared statement of Mr. Ray follows:]
Prepared Statement of Hugh M. Ray, Esquire, Andrews & Kurth,
Houston, TX
My name is Hugh Ray, I am a partner in the law firm of Andrews &
Kurth where I head the bankruptcy section. I am a former chair of the
Business Bankruptcy Committee of the Business Law Section of the
American Bar Association and the current co-chair of its Joint Ad Hoc
Committee on Bankruptcy Court Structure and Insolvency Process. I am a
member of the American College of Bankruptcy, the American Bankruptcy
Institute and former chair of the Bankruptcy Committee of the State Bar
of Texas. The opinions expressed herein are my opinions and not
necessarily the opinions of any of these organizations and those
organizations may in fact have different opinions from my opinion.
During the past 30 years that I have practiced bankruptcy law in
various districts throughout the country, I have seen upswings and
downswings in bankruptcy caseloads, often dramatically. In the Southern
District of Texas in the late 1980s, a six year depression in the oil
and gas industry led to a huge bankruptcy caseload increase. In
particular, chapter 11 cases increased dramatically. After most of the
caseload increase had abated, the number of bankruptcy judges for the
Southern District of Texas was substantially increased. However, prior
to the creation of new judgeships, judges from other districts in other
states unaffected by the energy industry meltdown were brought in to
assist in handling the increased bankruptcy caseloads.
Before new bankruptcy judgeships are authorized for the districts
that have a current increase in insolvency caseloads, it would seem
logical to assist these districts (which are experiencing primarily an
increase in chapter 7 cases and chapter 13 cases) by bringing in
visiting judges. In some districts, the caseload increases may not be
permanent and may not be sustained. Often the causes of increased
bankruptcy caseloads are cyclical or attributable to a downturn in a
particular industry. While chapter 13 cases and chapter 7 cases have
increased, the most time consuming cases, those under chapter 11, have
not generally increased. In addition, the bankruptcy reform legislation
currently pending before Congress (Senate Bill 625) will impact
caseloads substantially if it is passed. Many consumer bankruptcy
specialists believe the legislation, if passed, may cause recidivist
debtors to find bankruptcy substantially less attractive. Whether one
opposes or supports the reform legislation now being considered, it
would seem only sensible to determine whether or not that legislation
is to pass before creating new judgeships to deal with caseloads that
may change radically if it does pass.
An important substantive proposal currently being considered by
Congress is the proposal to permit direct appeals from the Bankruptcy
Courts to the Circuit Courts. This proposal should be enacted prior to
any new bankruptcy judgeships being created. There is currently largely
an absence of stare decisis in bankruptcy substantive law. At present,
a party can find bankruptcy case authority for virtually any
proposition in the vast number of varying decisions of bankruptcy
judges on seminal substantive questions of bankruptcy law. No other
area of substantive law approaches it in this regard. For this reason,
many major bankruptcy-related organizations support the direct appeal
proposal. As these committees have heard in prior testimony, under the
current appellate structure, appeals of the decisions of bankruptcy
judges are usually futile at this time for structural reasons. Appeals
often languish in the district courts until they become moot.
The workload of bankruptcy judges would drop dramatically if clear
precedents existed on fundamental bankruptcy principles. The district
courts deal with no other area with such substantive uncertainties. In
districts where multiple bankruptcy judges sit, clients contemplating
bankruptcy are often dismayed to learn from their counsel that the
answers to seminal legal issues in their cases will depend on which
judge they draw. Corporate debtors often opt to file their chapter 11
cases in Delaware where fewer substantive differences of opinions among
judges usually lead to more predictable results.
Society demands predictability and stability from its legal system.
Currently, the bankruptcy system is unpredictable because of the
appellate structure which has led to a lack of clear decisional
authority interpreting a statute that has been in effect for 20 years.
Creating more bankruptcy judgeships against this backdrop simply
compounds the problem. The real way to solve the workload issue for
bankruptcy judges is to lessen that load by giving the judges a
structure that will facilitate more higher court precedents for
recurring questions.
The Chairman. Mr. Elsaesser.
STATEMENT OF FORD ELSAESSER, ESQUIRE, ELSAESSER, JARZABECK,
ANDERSON, MARKS & ELLIOT
Mr. Elsaesser. Thank you, Mr. Chairman, Congressman Watt,
and members of the committee and staff. The American Bankruptcy
Institute is pleased to serve, we believe, as really the
clearinghouse and most reliable source of all bankruptcy
information, including the progress on the current legislation
and including some of the background on this legislation. The
general membership of the ABI really holds probably the
majority of people who practice before the bankruptcy courts;
and so we are, in reality, perhaps the most regular customers
and the best evaluators of how the bankruptcy court systems
actually work on a general basis.
I want to speak today from my own personal experience as
someone who has engaged in litigation and consumer agriculture
and bankruptcy, business bankruptcies in several different
bankruptcy courts. I would make the observation, having done so
and having practiced before both overcrowded courts and courts
that are not overcrowded, that overcrowded dockets do, in fact,
sometimes create real prejudice to parties before the
bankruptcy court and particularly creditors but often all
parties in the bankruptcy process.
The use of traveling judges and technology, I think, is
something that needs to be addressed today before the
committee. I come to you from the Ninth Circuit, which has been
a leader in using visiting judges. Frankly, when it is 25 below
zero in Butte or Juneau, it is not too hard to get visiting
judges to travel to San Diego or Phoenix to help out with their
caseloads in those areas in the wintertime.
In addition, I have witnessed the innovative use of video
and telephone conference hearings, with the help of the
administrative office, to clear the backlogs, particularly in
the Southern, Eastern, and Central district of California,
where essentially they utilize Northwest judges who are,
frankly, not that busy right now, using teleconferencing and
video conferencing to have hearings before the courts in the
Central and Southern Districts of California to clear up large
backlogs of adversary cases. I think up to a certain point that
does work, and it has helped considerably clearing backlogs of
cases. But I think these are not, ultimately, means to an end
that will cure the problem of those specific districts that are
overcrowded. I think that technology has its limits too.
I have had occasion to witness both telephone and video
conference hearings where, frankly, the parties that are before
the court are not particularly respectful of the court, and in
many cases, that is because these are debtors who have never
actually been in a real courtroom. That is something that is
not really able to be substituted by using a telephone or a
video conference.
So while I think that that technology is of a great help in
reducing backlogs, I don't think it tells the whole story.
Likewise, I think visiting judges, particularly in the Ninth
Circuit where you can have a fair amount of judges moving from
north to south where the heavy caseloads are, I don't think
actually addresses the problem that there are certain areas of
California that do seem to genuinely show the need, as stated
by the Judicial Conference.
At the same time, as we said in our written testimony, we
strongly support the increased use of technology as some of the
areas that I don't think any of the witnesses disagree on, and
the increased use of traveling and visiting judges. But the
basic concept of having a judge with a caseload in the 1,000 to
2,000 case range is really, we think, more the optimum
condition.
The third item I would like to address is the reform bill.
As a Chapter 7 trustee that handles 1,200 cases a year, I agree
with the chairman and I agree with Senator Grassley that if the
reform bill passes this year in some form similar to both the
House and the Senate bill, there will be a reduction in
consumer case filings. It will not impact business or farm
cases, but it will, I think, reduce--my own personal opinion in
that it will reduce cases. At the same time, though, I think
that the committee would have to admit you are creating a
policing system for the existing consumer cases that will
require substantially more work by judges in the consumer area,
by trustees in the consumer area, and the U.S. trustees in the
consumer area; and I think that argues that on balance, that
this bill is a well thought-out bill. Thank you, Mr. Chairman.
The Chairman. Thank you, Mr. Elsaesser.
[The prepared statement of Mr. Elsaesser follows:]
Prepared Statement of Ford Elsaesser, Esquire, Elsaesser, Jarzabeck,
Anderson, Marks & Elliot
Chairman Grassley, Chairman Gekas and members of the joint
subcommittees, I am Ford Elsaesser, the President of the American
Bankruptcy Institute (ABI). I am a senior partner with the Sandpoint,
Idaho firm of Elsaesser, Jarzabek, Anderson, Marks & Elliott where my
practice is primarily in the areas of commercial and bankruptcy
litigation, corporations, partnerships and rural electric cooperatives.
I am also the bankruptcy panel trustee for chapters 7, 11 and 12 in the
District of Idaho and the Eastern District of Washington, handling
1,100 cases per year. As a speaker at numerous regional and national
educational programs around the country, my perspective on bankruptcy
is national in scope.
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, ABI is non-profit and non-
partisan. Our more than 6,800 members span the entire spectrum of
bankruptcy professionals: attorneys for both creditors and debtors in
individual and commercial cases, judges, accountants, lenders,
trustees, credit managers, turnaround professionals, academics and
others.
Importantly, the ABI is not a lobbying organization and we do not
advocate positions before Congress, although we regularly appear before
these subcommittees and other committees of Congress. We have
historically supported legislation that affects the administration of
justice in the bankruptcy system, such as regarding the salaries of
bankruptcy judges, or to provide for judicial retirement benefits, and
to increase the number of judges where needed and appropriate. We
appeared most recently in support of more judgeships in June, 1997 and
December, 1995.
We are pleased to appear again today to provide our views on the
Judicial Conference's request for 24 additional bankruptcy judgeships,
including 18 now contained in the bankruptcy reform bills (H.R. 833 and
S. 625) and six additional positions (District of Puerto Rico, District
of Delaware, District of Maryland, Eastern District North Carolina,
Southern District of Florida, and Middle District of Georgia, to be
shared with the Southern District of Georgia) recommended by the
Conference in March 1999.
The ABI applauds the work of the Judicial Conference of the United
States for its continued careful assessment of the workload burdens of
the bankruptcy courts, and for its prudent recommendations for
additional judgeships. Congress last authorized new bankruptcy
judgeships in 1992. The Judicial Conference sent recommendations for
additional judgeships to Congress in 1993, 1995, 1997 and earlier this
year. Each time, the Conference has reassessed its prior
recommendations to ensure that the need continues to be demonstrated.
The formal process of the Bankruptcy Committee of the Conference is
elaborate, taking into account not only a weighted caseload formula
developed by the Federal Judicial Center (generally requiring more than
1,500 weighted filing per judge) but also on-site surveys and other
factors not captured by a mere numerical formula. While the focus has
been on the formula as an objective measurement, the results from the
use of the formula are never dispositive. Some districts that exceed
the 1,500 weighted case filings are not recommended for more judges
because those courts believe they can handle the additional
workload.\1\
---------------------------------------------------------------------------
\1\ For example, the 1993 request for more judgeships did not
include requests from 10 districts with more than 1,500 weighted case
filings per authorized judgeship. In the 1995 request, there were 4
such districts and in the 1997 request, there were 5 such districts.
---------------------------------------------------------------------------
Filing Trends in Perspective
As these subcommittees are too well aware, the pending judgeship
request comes in the wake of an explosion in bankruptcy filings during
much of the 1990's, with total new cases peaking in 1998 at over 1.4
million. Your subcommittees have heard much testimony over the last few
years about the apparent paradox of record bankruptcies during ``the
best economy in a generation,'' in the words of President Clinton.
During the '90s, consumers have dominated the national economy,
accounting for two-thirds of our gross domestic product. High rates of
employment, household wealth and consumer confidence have coexisted
with record levels of household debt as a share of after-tax income.
For the first time, the rate of personal savings is negative.
Bankruptcy filings have grown in virtual lock-step with an increase in
family debt burden, from both home mortgages and installment debt.
Most recently, as consumers' non-mortgage debt burden has
stabilized (in the wake of sustained low interest rates and intense
competition in the consumer credit markets), we have seen a leveling
off and even a decline in personal bankruptcies. The U.S. per capita
personal bankruptcy rate dropped by 17.5 percent from the fourth
quarter of 1998 to the second quarter of 1999.\2\ Certain economic
factors suggest that this decline will continue in the near term.\3\
---------------------------------------------------------------------------
\2\ Visa's Bankruptcy Notification Service compiles weekly reports
of the number of personal bankruptcy filings. They report filings to be
down 8.3 percent this year. The Chicago Mercantile Exchange also
compiles filing statistics in connection with its Quarterly Bankruptcy
Index. The most recent CME index is off by 9.59 percent this year from
a year ago.
\3\ The fraction of consumer credit accounts that have been 30 days
past due is falling and the fraction of accounts that have been 30 days
or more past due is stable. Standard & Poor's DRI, September, 1999.
---------------------------------------------------------------------------
Using a year-end of June 30, filings for the 12-month period ending
in 1999 were 1,391,964. In comparison, 1,429,451 new cases were filed
for the 12-month period ending in 1998. Although filings have declined
this year, the number of new petitions filed represent a 62.2 percent
increase over the same period ending in 1995.
Workload Impact
As these subcommittees know, the focus cannot be entirely on total
case filings as not all cases result in the same workload for a judge.
The vast majority of cases are consumer filings. Since 1993, consumer
(non-business) cases have accounted for an increasing percentage of
total bankruptcies, peaking at 97 percent this year. These cases
typically require less time of a bankruptcy judge. Unless there is an
adversary proceeding brought by a creditor, or a motion to convert the
case brought by the trustee, most of these cases now involve very
little work by the judge.
However, the pending requests should be considered in light of the
significant changes to the consumer bankruptcy laws proposed by H.R.
833 and S. 625. Consumer bankruptcy cases which now involve relatively
little or no judge time will likely account for a greater workload if
either of these bills become law. Attached to my statement is an
excerpt from a comprehensive, new analysis completed last week by Hon.
Eugene R. Wedoff, a bankruptcy judge in Chicago and the Co-chair of the
ABI Consumer Bankruptcy Committee. Judge Wedoff's analysis identifies
several discrete areas of ambiguity in the application of the means
test found in H.R. 833, where parties and the trustee will be forced to
litigate new issues. Beyond the means test, there exist an array of
other changes to current law that will require satellite litigation
before the bankruptcy judge. These areas include reaffirmations,
broadened exceptions to discharge, credit counseling requirements, and
more.
As a Chapter 7 trustee, I can state that under the proposed
changes, there would be a substantial increase in consumer bankruptcy
litigation, even if there is a corresponding decline in filings due to
the ``disincentives'' to file found in both H.R. 833 and S. 625.
Ironically then, consumer bankruptcy cases that heretofore rarely
reached a bankruptcy judge, will now occupy more judicial time.
Neither will the reform legislation's proposals in the business
bankruptcy area lessen the workload faced by bankruptcy judges. It is
clear that business cases often involve numerous parties, creditors and
collateral litigation over complex issues. These cases have a workload
impact far beyond their numbers. The pending bills make few changes
designed to lessen this workload. In part due to the healthy national
economy, business cases have declined. In the year ending June 30,
1998, there were 39,934 new business cases, down from 50,202 a year
earlier. Chapter 11 filings in particular have dropped sharply in
recent years, from 13,221 in 1995, to 12,859 in 1996, to 11,159 in
1996, to 9,613 in 1998 and 8,684 last year.
There is concern, however, that a rise in Chapter 11 filings could
occur just around the corner. Federal bank regulators have issued
repeated warnings in recent months about credit quality and concern
over underwriting standards for commercial loans. Bond defaults are
rising. Sectors including health care (nursing homes and hospitals) and
retail are seeing growth in the number of financially-troubled
entities. Health care bankruptcies, in particular, are very judicial
time intensive.
Requests for Resources Should be Scrutinized
While it is important to meet the legitimate resource needs of the
courts, we agree with Chairman Grassley that the judiciary bears the
burden of demonstrating the need for new judgeships. We applaud
Chairman Grassley's healthy skepticism toward an ever-growing federal
bench, especially a the appellate level. It is also important to
realize that the Third Branch of government, including the bankruptcy
courts, is not immune from oversight into its use of current resources.
No request for more resources should be approved by Congress without an
assessment that the current judges are being used in the most efficient
manner. We note, however, that the Bankruptcy Committee has
consistently recommended fewer permanent and more temporary judgeships
than requested by the Circuit Councils.
Limiting judgeship requests to the number necessary is important
because each bankruptcy judgeship costs about $721,000 to establish and
about $575,000 per year to maintain, according to the General
Accounting Office. At the same time, it is important that there are
sufficient judgeships to enable the bankruptcy system to operate fairly
and efficiently. We believe the Judicial Conference, through its
Bankruptcy Committee, has struck the appropriate balance in the pending
requests.
Cost Saving Mechanisms Should be Pursued
One cost-conscious innovation we support is the use of temporary
judgeships. Eleven of the 24 new positions would be designated as
temporary. This provides Congress with a periodic opportunity to assess
the continued need for these positions. Converting temporary judgeships
to permanent positions should occur only when the long-term need is
clear.
There are a number of other cost-saving innovations that should be
further promoted, including more and better case management techniques,
greater use of automation in the bankruptcy courts, expansion of the
use of visiting judges both intra-circuit and inter-circuit, more use
of recalled and retired judges, temporary law clerks and other ways to
match the existing resources with current need. These devices are
especially important in managing complex business cases. We encourage
the Judicial Conference and the Administrative Office of the Courts to
continue to work to find ways to better equalize the workload of
judges.
We thank the Subcommittees for inviting ABI to participate in
today's 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.
__________
[Note: Additional material submitted for the record by Mr.
Elsaesser: An Analysis of the Consumer Bankruptcy Provisions of H.R.
833, Bankruptcy Reform Act of 1999, As passed by the House of
Representatives, written by Hon. Eugene R. Wedoff, United States
Bankruptcy Court, Northern District of Illinois, Chicago, Illinois--
prepared for the American Bankruptcy Institute, Web posted and
Copyright October 29, 1999, American Bankruptcy Institute, is on file
with the House Judiciary Committee's Subcommittee on Commercial and
Administrative Law.]
The Chairman. Does the gentleman from North Carolina seek
recognition?
Mr. Watt. Thank you, Mr. Chairman. Just briefly, to thank
Judge Scott for her plug for North Carolina.
Ms. Scott. Representative Watt, I got calls from my
colleagues in North Carolina who wanted to be sure this
committee knew the facts of what was going on, and I was
pleased to see you be here today.
Mr. Watt. It is a serious problem, and I hope--I wish that
Representative Coble could have made it, but apparently he is
not going to make it. So we did the best we could in his
absence.
Just to Mr. Ray to say that I have actually been an
advocate of direct appeals from bankruptcy court to circuit
courts, although not for this particular reason; this gives me
a new argument to make. But it has always seemed to me that
bankruptcy judges and district court judges who sit essentially
in the same courthouse, it is very difficult for a district
court judge who goes to lunch with and sees regularly his
counterpart on the bankruptcy bench to then be in a position to
overrule some decision that they have made, and I just have
never seen one ever do that. It just seems to me that it makes
better sense to have some more independent body to which an
appeal can be taken.
Mr. Ray. Thank you.
Mr. Watt. I appreciate your perspective.
I will yield back. I don't have any other questions or
comments.
The Chairman. We thank the gentleman.
The Chair only has one question generally to ask for any
and all of the three witnesses. That is, would it be prudent on
the part of the Congress to accept the numbers that add up to
the 24 new judgeships, but create them on a temporary basis,
pending the flow of whatever might come of the bankruptcy
reform bill, if it should pass, and to take into account the
floods in Eastern North Carolina and any downturn in the
economy, God forbid, and then be able to calculate at some
future time whether they should be made permanent and even more
judges be appointed, et cetera?
This thought came to me only while we were listening to
this testimony, and it is worth analyzing. Does anyone wish to
respond to that? Mr. Ray.
Mr. Ray. Yes, sir, Mr. Chairman. That is the most I take
away from today's hearings, is that we have the floods in North
Carolina that, hopefully they won't happen every year. But
every time there is a tornado or hurricane or something like
that, we do have an uptake in personal bankruptcies; but they
last 3 or 4 or 5 years.
I think, if I were running the show, I would do the
following thing: First of all, I would find out the judges that
are sitting 7\1/2\ hours a month and ask them, most people
don't want to take a paycheck and sit there bored. I have had
judges ask me from the bench, Mr. Ray, why don't you file that
next big case here, because I don't have anything to do. That
is on the record.
I think if you would ask some judges to move, you might
then know better where the mop is going to flop with this new
bill, and this new bill I think is going--we think maybe it is
not going to increase the caseloads. We think it is going to
decline them. I think it is going to decline. People are going
to stop using bankruptcy--bankruptcy is supposed to be a safety
net, and people are using it as a trampoline. That is going to
stop once we get the new legislation passed.
But the most that I would take away from today's hearing is
temporary judges. I don't see that anybody has made a case for
14 years.
Ms. Scott. Mr. Chairman, point of fact is, though, 14 years
is the term of office for a bankruptcy judge, and creating only
temporary judgeships does force the Judicial Conference to keep
coming back to Congress in order to either make them permanent
or get them extended. That takes a lot of resources on the part
of the judiciary to perform that function, which again takes
time.
Again, a temporary judgeship is just that. We have proven
the need for them historically. In some cases it has just
simply been a Band-Aid approach, and we need the permanency of
these judgeships.
Again, I go back to the figures that the Judicial
Conference used, the case-weighted numbers. These are all based
on figures before 1994, having to do with the 18 judgeships. I
don't think we are going to see the cases drop below those
figures any time in the near future.
I know that my colleague, Mr. Ray, has already admitted
that he is a Chapter 11 lawyer, practicing, I guess, a lot in
Delaware these days. In my case, the vast majority of the cases
are consumer cases. I spend the vast majority of my time, and I
assure you I am on the bench longer than 7\1/2\ hours in a
given month, covering almost 9,000 cases.
If the current Chapter 7 cases, which number about,
according to last year's figures if I remember correctly, some
993,000, suddenly become Chapter 13 cases, which numbered about
359,000, I can assure you that we will be spending considerably
more time dealing with the issues that are going to come before
us. My colleague, Judge Randall Newsome, from the Northern
District of California who preceded me as the president, spoke
before your subcommittee last March 9, 1999. His written
statement is in your records from that hearing. During that
hearing, he outlined 54 litigation points that could cause more
litigation in the bankruptcy court. Since that time, the
proposed legislation has been changed or there are changes
anticipated that will come up, so there are yet more issues
that we haven't dealt with.
But I know this: Lawyers are creative individuals; and, if
there is a new piece of legislation, they will have to litigate
to find out what the judge is going to say, what the judge is
going to do. These cases do not go up on appeal. It doesn't
matter whether it is a direct appeal or to the district court,
the dollars simply are not there. So that I think the direct
appeal argument for the vast majority of these cases doesn't
stand on its own.
Mr. Elsaesser. Mr. Chairman, just briefly, as stated in our
written testimony, we do support the concept of temporary
judgeships; and we do think that is a potential solution to
this issue. But since Mr. Ray raised in his question, I wanted
to just expand just very briefly on what the new bill will do
to those of us who are in the mix, in the consumer business,
that is--in my role as a Chapter 7 trustee, I am not--I believe
that if the bill that is before the House and the Senate is to
work as intended, there has to be more work for the judges in
the courtroom because I think what you have created in the bill
is a system of stricter, much stricter scrutiny of Chapter 7
debtors. And if that scrutiny is going to work, the judges have
to back up what is in the bill.
I speak throughout the country to consumer bankruptcy
lawyers on both sides. I spoke at the Visa conference just a
month and a half ago of obviously attorneys representing the
creditors of the credit card industry and the consumer
bankruptcy lawyers, and I believe that they are in agreement on
one issue and that is that there will be a substantial increase
in consumer bankruptcy litigation across the board if the bill
passes. I am not saying that is necessarily a bad thing, but it
is probably going to happen.
Thank you, Mr. Chairman.
The Chairman. The time of the Chair has expired. All time
has expired. We dismiss the panelists with our gratitude, and
we will see what happens.
The subcommittee stands adjourned.
[Whereupon, at 3:30 p.m., the subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Prepared Statement of Hon. Paul D. Coverdell, a U.S. Senator From the
State of Georgia
Congressman Gekas, Senator Grassley, I thank each of you today for
agreeing to hold this joint hearing on an issue that is important to
many states. Increased bankruptcy filings, as you know, are placing a
severe strain on our federal courts and on the judges who preside over
these cases. The House and Senate Bankruptcy Reform bills seek to
address this issue by authorizing eighteen new bankruptcy judges. While
Congress recognizes the need for these judges, it has not yet taken the
steps it deems necessary to approve another needed group of bankruptcy
judges identified by the U.S. Judicial Conference in March of this
year. This hearing is an important step in that direction.
As you know, Georgia is one of the states that the Judicial
Conference has indicated needs another bankruptcy judge. The Middle and
Southern Districts in Georgia have, respectively, the eighth and ninth
highest weighted caseloads in the country. The most recent data from
the Administrative Office of the U.S. Courts indicates that the
weighted bankruptcy filings per authorized judgeships is 1,907 for the
Middle District and 1,880 for the Southern District. Even with approval
of a new judge for the Southern District, the three full-time judges in
those Districts would still carry a caseload that exceeds the threshold
of 1,500 weighted hours that justifies the creation of another
judgeship.
The review undertaken by the Judicial Conference of the workload in
these districts also found that caseloads are being managed in a highly
efficient manner. The Judicial Conference had no suggestions to assist
the court in expediting its caseload. A new judgeship is the only
solution to this caseload problem.
I understand the Judicial Conference used the same criteria to
justify the six new judgeships in their March 1999 recommendation that
they used to justify the 18 judgeships in the Bankruptcy Reform bills.
Understanding the need for a new bankruptcy judge in my state, I
support the Judicial Conference's recommendation and have introduced
legislation that would authorize the six additional judges. I believe
this, along with today's hearing, will shed important light on
caseloads and the need for new judges. Again, I thank the distinguished
chairs for holding this important hearing and I hope it will help move
this issue forward.
__________
Prepared Statement of Hon. Dianne Feinstein, a U.S. Senator From the
State of California
I would like to thank Chairman Grassley and Chairman Gekas for
conducting this hearing today to review the need for additional
bankruptcy judgeships.
I will focus my comments on the caseload crisis affecting the
Central and Eastern Districts of California. The judges in these
districts are so overwhelmed that the Judicial Conference has proposed
three permanent and one temporary bankruptcy judgeships for the Central
District, and one temporary judgeship for the Eastern District.
Rising bankruptcy filings are not a new problem. Since 1980,
Bankruptcy filings have risen over 400 percent. Congress last tried to
address the increased burdens on bankruptcy courts in 1992 by enacting
the Bankruptcy Judgeship Act, which created 25 permanent and 10
temporary bankruptcy judgeships.
Continued growth in bankruptcy filings have rendered the 1992 act
obsolete. While no new judges have been authorized since 1992,
bankruptcy filings have risen by 43 percent from 971,000 to 1,391,000.
Four hundred thousand cases have been added to the docket.
A disproportionate share of this caseload growth has impacted the
Central and Eastern Districts of California. Judges in the Central
District, for example, presided over 113,000 case filings in fiscal
year 1999, which is approximately 8 percent of all bankruptcies filed
nationwide. The Central District has the largest number of Chapter 7
filings, the most Chapter 13 filings, and the second largest number of
Ch. 11 filings of any district in the United States.
The Judicial Conference uses a case-weighing system to analyze the
workload of a bankruptcy court. This statistic measures not only the
number of cases a judge handles, but also the complexity of the cases.
The national average of case-weighted hours per judge is 1,397 hours.
If a district has an annual caseload average of 1,500 hours per judge,
the Judicial Conference will generally recommended that it receive
another judgeship. In 1998, the Central District had a case-weighted
average of 1,766 hours per judge and the Eastern District's average was
1,731 hours per judge.
The Eastern and Central Districts of California are also well above
the national average in filings per judgeship. In calendar year 1998,
the national average of filings per judgeship was 4,425. The Central
District of California, meanwhile, had 5,761 filings per judgeship and
the Eastern District of California had 6,558 filings per judgeship.
Because of this overwhelming court docket, parties litigating in
the Central and Eastern District of California receive substantially
fewer judicial resources than in many other parts of the country.
Judges have less time to hear cases, courtroom calendars are longer,
and the costs of litigation are higher.
Bankruptcy lawyers from the region report that any trials lasting
longer than a day must be spaced over weeks, even months, because of
the unavailability of clear court days. Moreover, practitioners are
having to warn clients that the courts lack the time to read all of the
pleadings, analyze financial documents or ferret out misleading
assertions.
The Senate is presently grappling with legislation to reform and
update the bankruptcy code. I recognize that comprehensive bankruptcy
reform may take some time to iron out, but we need to adopt more
judgeships now. There is precedence for putting certain bankruptcy
issues on the fast track. Recently, Congress enacted a needed extension
to the Ch. 12 farm bankruptcy provisions of the bankruptcy code. I urge
my colleagues to give bankruptcy judgeships the same high priority.
When considering this issue, we also must recognize that it
typically takes 18 months to install a judge after a new position is
authorized. Thus, Congress has no time to waste.
I pledge to work with colleagues in both the House and the Senate
to move this issue forward.
__________
Prepared Statement of Hon. Paul S. Sarbanes, a U.S. Senator From the
State of Maryland
Chairman Grassley, Chairman Gekas, I appreciate having the
opportunity to submit this statement on the need for additional Federal
bankruptcy judges in the District of Maryland.
As the members of these House and Senate Subcommittees know all too
well, bankruptcy filings across the country have skyrocketed in recent
years. In Maryland alone, the total number of filings rose from 9,201
in 1990, to 34,463 in 1998--an increase of approximately 275 percent.
This year, as in years past, your Subcommittees have been hard at
work to determine the causes of this dramatic expansion and what, if
anything, can be done to stem the tide of bankruptcy filings. While
Members of Congress may have reasonable differences of opinion in what
should be done to reform the Bankruptcy Code, one thing we should all
agree on is the need to administer that Code fairly and in a way that
provides certainty to individuals and the business community.
At the heart of dispensing such justice are our bankruptcy judges.
Unfortunately, in too many cases these bankruptcy judges are
overburdened and unable to perform their duties expeditiously. With the
changes that may occur in the Bankruptcy Code, this situation could
worsen. Simply put, we must ensure that bankruptcy judges are not
spread too thin to deal with our current laws and we must increase our
judicial resources as necessary to ensure that we have the ability to
deal with any changes in the Bankruptcy Code.
This year, the United States Judicial Conference has recommended
the creation of 24 additional bankruptcy judgeships across the country.
A look at the conditions currently facing Maryland's bankruptcy judges
is a powerful example of the critical need for the new judgeships
recommended by the Judicial Conference. Perhaps no state has been
impacted as severely by the rise in bankruptcy filings as the State of
Maryland. The last time Maryland received a new bankruptcy judgeship
was in November of 1993. Since that time, the number of bankruptcy
filings in Maryland has more than doubled. In fact, by any measure, the
need for additional bankruptcy judgeships in Maryland is critical.
In 1991, the U.S. Judicial Conference adopted a ``case-weighing''
system for bankruptcy judges under which different types of cases are
assigned different degrees of difficulty and overall weighted case-hour
goals are established for the judges. Under this system, the average
United States bankruptcy judge currently has a weighted case-hour load
of 1,337 hours per year. The Judicial Conference generally does not
consider a request for new bankruptcy judgeships by a federal district
unless the average case-hour total for the district's judges exceeds
1,500.
Given these yardsticks, the burdens facing the District of
Maryland's bankruptcy judges are truly astounding. As of June 30, 1999,
the average case-hour load of Maryland's four bankruptcy judges is
2,733 hours a year. If Maryland received the two additional bankruptcy
judges currently provided--although only on a ``temporary'' basis--by
S. 625 tomorrow, the case-hours per judge in the District would still
be 1,822, 136 percent of the national average and well in excess of the
1,500-hour mark used to rate a District's need for new judges.
In fact, if Maryland were to receive the three additional
bankruptcy judgeships recommended by the Judicial Conference,
Maryland's weighted case-hours per judge would still be 1,562 hours a
year. Therefore, even with the addition of the three judgeships
recommended by the Judicial Conference, Maryland bankruptcy judges will
still have a case-hour total far in excess of the national average of
1,337 hours a year and in excess of the 1,500-hour mark used to rate a
district's need for new judges.
Aside from the case-weighing statistics, consider the number of
bankruptcy cases filed in Maryland. For the year ending June 30, 1998,
the District had a total of 34,463 cases filed, or 8,616 cases filed
per authorized judgeship. This places Maryland as first in the Nation
among the 90 judicial districts in the total number of filings per
authorized judgeship--at 196 percent of the national average.
Clearly, this situation cries out for remedial action. Recognizing
as much, the Judicial Conference recommended to the 104th Congress that
Maryland receive an additional bankruptcy judgeship. Then, in March of
1997, the Judicial Conference approved the addition of two bankruptcy
judgeships for the District of Maryland. Unfortunately, neither of
these proposals were enacted into law and, as a result, the problem
worsened considerably. Now, in its most recent recommendation, the
Judicial Conference has determined that Maryland is in need of three
additional bankruptcy judgeships.
Maryland's four sitting bankruptcy judges continue to show a
dedication that is especially remarkable given the extraordinary
burdens placed on them. But despite their admirable commitment,
additional judgeships are essential to the fair administration of the
Bankruptcy Code for all of the business and individuals that come
before the Maryland District--whether as creditors or debtors.
Furthermore, efficient operation of our bankruptcy courts is vital to
Maryland's economy. Bankruptcy laws are crated to foster orderly,
constructive relationships between debtors and creditors as they deal
with economic difficulties. This in turn results in businesses being
reorganized, jobs (provided by creditors and debtors) preserved, and
debts managed fairly. Overworked bankruptcy courts have a destabilizing
effort on this system and the economy suffers as a result.
Howard Rubenstein, President of the Bankruptcy Bar Association for
the District of Maryland, points out that the ``Bankruptcy Code can
only work effectively when there is an opportunity for bankruptcy
judges to promptly hear and resolve disputes that will enable
bankruptcy cases to be administered and disposed of swiftly.'' The
weighted case load burden on Maryland's District puts a severe strain
on the ability of the Court to perform its duties in a manner that is
consistent with the goals of the Bankruptcy Code.
As your Subcommittees look into the problems facing our bankruptcy
system, I urge you to recognize that additional bankruptcy judgeships
are a critical component of the Congressional response to these
problems.
__________
Prepared Statement of Hon. John Tanner, a Representative in Congress
From the State of Tennessee
I would like to thank everyone involved in today's hearing on the
Judicial Conference's recommendation for additional bankruptcy
judgeships and on the extension of several temporary judgeships.
As we all know, many states, including Tennessee, are being
overwhelmed by the explosion in the number of bankruptcy filings in
recent years. I am pleased that H.R. 833 includes an additional
judgeship for the western district of Tennessee and also extends the
temporary judgeship for the eastern district of Tennessee. West
Tennessee ranks third in the nation in the number of weighted filings
per authorized judgeship and the situation is not improving. I know how
desperately an additional bankruptcy judgeship is needed in Memphis,
Tennessee which is above the national average in bankruptcy cases
filed. I agree that we must address the root problem of the causes of
bankruptcy filings, but in the meantime we can not fight this problem
when case load levels are rising and the number of judgeships is
remaining static.
I have heard from judges in my district that are frustrated with
the situation as it stands and I would urge Members to approve these
judgeships this year in order to address the deluge of bankruptcy cases
that our courts are facing.
I commend Chairman Gekas and Grassley for holding today's hearing
and am hopeful that we can move forward in meeting the Judicial
Conference's recommendation this year.
__________
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