Interview with New NCBJ President Judith K. Fitzgerald

Journal Issue

Oct 2001

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Editor's Note:

ABI Executive Director Sam Gerdano recently interviewed Judge Judith K. Fitzgerald (W.D. Pa.), the incoming president of the National Conference of Bankruptcy Judges.

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ABI: In your nearly 15 years on the bench, what major changes have you observed
in bankruptcy practice and procedure?

Judge Fitzgerald: It will be 14 years in another two months. I think the
biggest change has come in the form and method by which we receive pleadings and make
information available to the public. When I first came on the bench, we had
electronic memory typewriters but no computers, and now of course we are going to use
an electronic case file system, where everyone is communicating in a totally automated
fashion and the use of paper is being somewhat reduced. So this has been a big
change in both the capability of lawyers to get information to the court and to access
information.

ABI: In what stage of development is your district?

Judge Fitzgerald: We are in the process right now of implementing the CM/ECF
system here. We expect to go live probably around April 1 of next year.

ABI: Will that require some training of the local bar?

Judge Fitzgerald: Yes, we are developing training manuals for both the lawyers and
their paralegals and legal assistants, who will actually be doing the filing. We have
a committee that is composed of representatives of the court, the clerk's office and
the bar itself. We are taking a look at our local rules and how they may need to
change.

ABI: Is the goal ultimately to have a paperless clerk's office?

Judge Fitzgerald: That is the goal. Whether we will ever be successful in totally
eliminating paper, I think is a question that we can't answer right now. But
certainly this should go a long way toward minimizing the quantity of paper we have
to handle and to give 24/7 access to information. No matter where you are or what
particular pleading you wish to access, you can get it simply by dialing into the
court's system, downloading the pleading and having it available, rather than having
to carry hard-copy papers.

ABI: Let's talk a little about the Delaware venue situation, which is receiving
so much attention. You are among the group of judges who sit in Delaware to help
with the large docket of mega-cases in that district. Indeed, you were telling me
that you have been doing this since 1990, so you have seen the rise in popularity
of Delaware as a venue of choice for publicly traded companies. From your perspective
then over time, why do you think Delaware is such a popular forum choice?

Judge Fitzgerald: First, the statute authorizes bankruptcies to be filed in the place
of incorporation, and Delaware is such a popular venue in which to incorporate. Since
Delaware has a very well-recognized and established commercial court in the Court of
Chancery, I think there is a historic reason why Delaware may be a venue for the
other end of the commercial litigation, not only for the successes but also the
failures. So, I think from that perspective, since it has so many corporations
incorporated there, Delaware is a logical choice. Having said that though, I think
the initial press to get into bankruptcy court in Delaware was the fact that for a
very long time it was a one-judge court. And you get consistency in results when
you have a small court. There isn't anybody making contrary rulings in cases. So if
you have one judge who is hearing all the cases, then you can be pretty sure you
will get consistency in results. All the parties in the system like the fact that
there can be consistency. So I think those two things made Delaware attractive at
the outset.

ABI: Not just consistency generally speaking, but consistency of a particular
result. Montana, for example, was a one-judge court also, but you wouldn't see big
cases filed in Montana.

Judge Fitzgerald: Well you might, if Montana had the same attraction as Delaware
as a place of incorporation. For example, right now I understand there is an
increase in the number of incorporations in Nevada. Las Vegas is becoming an attractive
venue because the state has changed some of its incorporation laws. As a result,
more companies are moving into that venue at the outset of their businesses. So, if
in fact Nevada turns out to have the popularity Delaware does in terms of how its
commercial courts handle the commercial business side, then maybe its popularity as a
bankruptcy venue will increase also. Delaware is also somewhat convenient in terms of
its geographic location for most constituents—not for the typical unsecured creditor,
however. It is close to Washington, D.C., New York and Philadelphia. It is
convenient to where the major players in big cases are, such as the banks which are
centered in either Delaware or New York or coming in from overseas and having fairly
close access into Wilmington.

ABI: On the bankruptcy side of things, some courts seem to be making a concerted
effort, starting with bench/bar conferences, to talk through these issues and to plan
a way to structure their rules and procedures to be more hospitable to home-grown
large cases, rather than having them flock to Delaware. Texas has been in the news
in this regard. What do you make of those efforts?

Judge Fitzgerald: Well, I hope they are successful. I think it would be nice
if corporations chose more than one venue in which to file. Certainly the impact on
the creditors and employees of companies is felt in the local community where the
business actually conducts itself a whole lot more significantly than in Delaware. I
think this goes back to the issue I raised before about the need for consistency.
If the bar is aware of the fact that a court is willing to do certain things like
schedule your first-day hearing within, say, 48 hours after the time in which the
motions are filed, then that lends a level of consistency. They know that each judge
in a district will abide by that procedure. You will get a prompt hearing on the
things you need from a business point of view to keep your case going. So I think
that is a good thing to let people know that a court is willing to do it. When
fee issues start to come up, then that may be another test of whether or not cases
will remain elsewhere. I think it is fair to say that attorneys who go into
Delaware from the larger cities are getting paid top dollar for their cases even
though they are in little Wilmington as opposed to big New York City. So, what the
local culture does with the fees will have some impact. Certainly the local efforts
by the courts to tell the bar at the outset, "Delaware is not the only place where
you can go to get prompt first-day orders," I think is a good thing.

ABI: You talked about the predictability as something lawyers value more than
anything else, and are more likely to get it in a court where there are a smaller
number of judges, rather than a larger number of randomly assigned judges. Does this
mean that a very large court, like the Central District of California, is unlikely
to become a popular venue of choice for large cases?

Judge Fitzgerald: I don't have a clue about that. California's caseload is so big,
just generally speaking, that I don't know that you can use that as an example for
much of anything. Certainly if you want to juxtapose what California looks like with
what Delaware looks like in terms of the number of people and the number of cases
that are filed there, you can certainly see where you are on either extreme. Except
for the chapter 11 cottage industry in Delaware, it is not a big venue. It does
not have a lot of cases filed there. It just happens to get all these mega-chapter
11s. I don't know how attorneys view the Central District of California. I
would think that if the bar felt that it was getting consistent results from 20
judges as opposed to one judge, then that view would be equally shared in California
as it would be in Delaware. I just think it is easier for one judge to be
consistent than it is for 20 people to buy into the same substantive ruling. They
may all buy into the same procedural process because that is why you have local
rules, but how similar cases actually come down based on the substantive law I think
is a little more difficult question. The more people you add to that process, the
more complex it becomes to get consistency.

ABI: Would the best way to even out the distribution of mega-cases be to change
the statute as the National Bankruptcy Review Commission recommended, to eliminate
venue based on the place of incorporation?

Judge Fitzgerald: I don't know that I am enough of a student of politics to have
an answer to what the best way to do it would be. There are all kinds of ways that
things could be done. You could have, for example, just a workload assessment that
would say something like Delaware is obviously overworked right now and therefore we
will take a certain percentage of cases and send them somewhere else. But that would
take a statutory change. I don't know that Congress wants to get into this
subject—that is, to say that a particular venue is being "overused" in that the
judicial resources are tapped to the fullest extreme. The way the statute is currently
crafted, with the opportunities for parties to raise motions to transfer venue, should
be adequate. If parties used that provision, I think that a remedy is already built
into the Code.

ABI: You mentioned overuse. Do you think Delaware is overused?

Judge Fitzgerald: I think Delaware's bankruptcy judicial resources are tapped to the
maximum extent, in fact over-tapped, yes. That's why so many visiting judges sit
there. And I think the bankruptcy clerk's office is suffering significantly. Delaware
did go live with its chapter 11 electronic case filing system. Maybe that will help
somewhat. I don't think it is helping immediately though, because there are training
issues and CM/ECF is not mandatory yet in all cases. As a result of the
consumer cases, which are still coming in largely as paper filings, the clerk's office
has to scan in large quantities of paper before the pleadings can be docketed. That
is a very labor-intensive process. At some point maybe this will even itself out,
but right now I think the judges are tapped. One advantage to electronic case filing
and video conferencing capabilities (which the Delaware bankruptcy court is not yet
using) is that people from virtually anywhere in the country can participate in a
hearing. Going back to your earlier question, perhaps we'll have to re-think forum
and venue rules as technology affords expanded opportunities for nationwide participation
in a case, regardless of where it was filed.

ABI: We talked about the role of Congress to address some of these workload
issues. The bankruptcy reform bill is pending in conference as we speak. You are very
familiar with many of the provisions and specifically what impact they might have on
your workload as a judge in business and even in consumer cases. Do you have a view
on the likely impact of the pending bill on your workload?

Judge Fitzgerald: Until we get an actual bill and see what Congress really passes,
that is difficult to answer. Certainly there are horror stories about the fact that
so much is going to end up being litigated. The workload is going to increase at
all levels in the system. That would be true for any substantive amendment to any
provision of the law until it is tested. The judicial resources are going to be used
until you get a consistent body of law. When you get a brand new statute that
attacks as many things as this statute would purport to change, I think, yes, we
are going to be very busy. The major impact though is really going to be on the
cost to file bankruptcy. It appears that it is going to very expensive for consumer
debtors to get lawyers who will be able to work them through the means test and the
documentation that will be required by this new legislation, if it is enacted according
to what the drafts are now. I think the cost will be a down side.

ABI: The additional collateral litigation matters which have to go before a court,
whether it be on eligibility for chapter 7 or whether the pre-bankruptcy debt
counseling requirements have been satisfied, issues that now don't get litigated, they
are going to add to the cost, are they not?

Judge Fitzgerald: They will certainly add to the cost and they will definitely affect
how much time judges have to spend on other matters, because every day that you are
in court dealing with issues like that you can't get to the merits or the substance
of legal issues that are involved. When you have to worry about the eligibility
thresholds, you are never getting to the economic concerns that the bankruptcy is
designed to affect.

ABI: The NCBJ has been very active in the past on the pending bill, testifying
before Congressional committees, commenting informally, helping staff understand the
impact on the courts in particular. Is this something that you think you will
continue during your tenure as the NCBJ president?

Judge Fitzgerald: To the extent that we stand ready to assist with providing whatever
expertise the conference committee or some legislative group would need, certainly that
will continue. At the moment, I'm not convinced that there will be any need to
offer further testimony. So unless the bill is somehow removed from the committee level
or testimony is otherwise requested, I doubt that we would be testifying. But
certainly as a group, the judges all stand ready to provide whatever help Congress
would ask of us.

ABI: Let me ask you about a program that the NCBJ and the ABI are jointly
involved in, and that is our program to help state court trial judges understand the
impact of bankruptcy on state trial proceedings. I know you have been a faculty at
programs in the past in Pennsylvania and elsewhere to try to assist in the education
effort. Why is it important to educate state court judges on bankruptcy substantive
law?

Judge Fitzgerald: It is somewhat of a symbiotic relationship. Bankruptcy law relies
to a large extent on the underlying substantive state law, and state courts are
affected by a bankruptcy filing. So the better educated the state court judges are
as to the consequences of bankruptcy, the less we in a bankruptcy court have to
deal with problems or breaches of the Bankruptcy Code, even unintentional ones.
For instance, this program alerts a state court judge about the problem if he goes
forward with a hearing that is subject to the automatic stay, simply because of not
being aware of the provisions of the Bankruptcy Code. To the extent that we can
assist state court judges in understanding the reach of the automatic stay, or how
some of the bankruptcy issues dovetail with state law, I think we have done the
system a favor. We have helped them avoid errors in conducting cases in violation
of the Code and we have had an opportunity to articulate areas of concern to them,
and to learn of their concerns. At one of the seminars I was teaching in
recently, I found out about a process that is implemented by the local district
justices here in Pennsylvania that I knew nothing about before. It really opened
my eyes to why I am getting particular issues in bankruptcy court that I did not
understand before. So, I think it feeds both ways. I know the comments coming
back from the state judges who have attended have been gratifying. They were thrilled
with this course and wished that it were offered more regularly. So, I think it
is a good thing that the ABI and the NCBJ are doing.

ABI: Well, we very much appreciate the NCBJ Endowment's support. In terms of
furthering federal/state judicial relations, we also think it is very important to
improve communication. If the state court judge has a colleague, a fellow judge they
can simply call with a question, we find that improves the lines of communication
immeasurably, so there is not a wall built up around the federal system that can't
be approached by the state court.

Judge Fitzgerald: In fact, I think that is one of the benefits of these
seminars. At each of the ones I have participated in, we have passed out a list
of the bankruptcy judges' phone numbers so that if the state court judge does have
an issue, then there is at least someone on the bankruptcy side that they can
call. Whether, for example, a particular proceeding is really subject to the stay,
or even something as simple as how they can verify whether the person who comes in
and says they filed the bankruptcy is telling the truth, are questions they often
ask. So I think you are correct, there really is a benefit toward fostering
improved state and federal relations.

ABI: During your year tenure as president, have you thought about things you would
like to try to accomplish?

Judge Fitzgerald: I have a few things I would like to present to the Board as
ideas and to see if I can get some support. One thing I definitely want to do
is keep the trend going that the previous several administrations have done in
fostering good relations with other organizations, such as the ABI, the CLLA,
the NACTT and other groups that attempt to do some of what we do in educating
people about bankruptcy. Second, I would like to continue to foster good relations
with academics. The NCBJ recently has made strides to try to get academics involved
in our conferences and to participate on a very high level by writing articles for
the American Bankruptcy Law Journal and getting grants from the Endowment. I would
like to continue along those lines as well. On the legislative side, judges hope
to see chapter 12 become permanent. Obviously, if the bankruptcy reform legislation
passes, then that may not be so much of an issue. But these continual temporary
extensions of chapter 12 are problematic both for the people who need to file
chapter 12 and the bankruptcy courts. We have 27 new judgeships in the Senate
bill that have been stymied for quite some time, which means that a lot of courts
are very hard-pressed in terms of their judicial resources right now. So the NCBJ
hopes to find some way to get the 27 judgeships through. An issue that affects
all federal judges, our law clerks and clerks of court is the need for improved
salary and benefits. I would like to assist whatever organizations are looking into
those issues and keeping that concept alive, particularly for our clerks. I think
we are way behind in what the federal government could or should offer in the way
of competitive salary and benefits. I think we need to do something to try to
shore that up.

ABI: That is a very full plate of issues.

Judge Fitzgerald: Probably too full.

ABI: We wish you luck and thank you very much for your time.

Judge Fitzgerald: Thank you.

Journal Date

Monday, October 1, 2001 - 12:00

Bankruptcy Rule

2001