ABI-funded Fee Study Launched

ABI is funding the largest study ever of professional compensation practices in chapter 11. The reporter for the study, covering some 1,100 cases from 33 judicial districts, is Prof. Stephen J. Lubben of Seton Hall University School of Law. The two-year study is the most comprehensive, independent look at how fees are awarded since ABI's National Report on Professional Compensation in Bankruptcy Cases, published in 1991. The new study is funded by a $350,000 grant from ABI and our Endowment Fund. Assisting Prof. Lubben is a Study Advisory Panel of Judge Barbara Houser (N.D. Tex), Richard Levin (Skadden Arps, et al.), Prof. Robert Lawless (UNLV School of Law), Prof. Edward Morrison (Columbia Law School), Dean Nancy Rapoport (University of Houston Law Center) and Prof. Robert Rasmussen (Vanderbilt University Law School). The Study Steering Committee is responsible for oversight over the grant and consists of Michael P. Richman, ABI President (Mayer Brown Rowe & Maw), C.R. (Chip) Bowles (Greenebaum, Doll & McDonald), Deirdre A. Martini (U.S. Trustee, Region 2), John D. Penn (Haynes and Boone), Judge Steven Rhodes (E.D. Mich.), Judge Wesley Steen (S.D. Tex.), Bettina M. Whyte (AlixPartners) and Judge Gregg Zive (D. Nev.). ABI has also named a Practitioner Advisory Panel to periodically meet with and provide insight to the reporter. This 15-member group, chaired by Chip Bowles, consists of Geoff Berman (Development Specialists Inc.), Joseph Bodoff (Bodoff & Slavitt), Rudy Cerone (McGlinchey & Stafford), Terri Gardner (Poyner & Spruill), Laura Davis Jones (Pachulski Stang, et al.), Melissa Kibler Knoll (Mesirow Financial Consulting), Richard Meth (Pitney Hardin), Neil Olack (Duane Morris), Trish Redmond (Stearns, Weaver, et al.), Thomas Salerno (Squire, Sanders & Dempsey), James Sprayregen (Kirkland & Ellis), James Sweet (Murphy & Desmond), Al Togut (Togut, Segal & Segal), Bruce White (Greenberg Traurig) and Mark Williams (Norman, Wood, Kendrick & Turner).

"There is probably no more important issue to the bankruptcy community than bringing rationality and consistency to professional fees," said ABI President Michael Richman. "This is a highly misunderstood aspect of the bankruptcy system, generating negative media attention that puts the entire profession in a bad light. Litigation over professional fee issues creates its own cost in the system, draining many hours of time more productively devoted to the hard issues of restructuring and liquidating," he added. Prof. Lubben stated: "Throughout the past three decades, scholars have made numerous attempts to examine professional fees in the reorganization of large companies. But in each case, we could only look at a small group of cases at any one time. By virtue of this generous grant from ABI, I hope to finally produce some definitive evidence on this topic by looking at a large, nationwide sample of cases."

New Directory Now Available on CD-ROM

All members received the annual membership directory on CD-ROM this month. Like the print version, it provides contact information on all 10,300+ ABI members. Load the disc into your computer drive and watch it self-launch, permitting you to search for members by firm, city, state, practice area and more. The handy format allows you to always have access to this resource, whether at home, the office or on the road. Once loaded onto your desktop, advanced technology permits you to update the database anytime the Internet is connected. We thank BMC for sponsoring the production and distribution of the CD. You can still order the 973-page print version from West. Go to http://www.abiworld.org/order/directory for easy online ordering. The cost is just $35, shipping and handling included.

Consumer Financial Variables Predict Filings

The bankruptcy filing rate, which declined last year for the first time since 2000, will likely remain flat or continue to decline during the last quarter of 2004, but may turn up again in early 2005 based on trends in consumer debt and credit card default, according to data analyzed by Prof. Ted Janger, ABI's Robert M. Zinman Resident Scholar for the fall 2004 semester. Prof. Janger's research showed that three variables—the financial obligations ratio, the credit card default rate and the credit card charge-off rate—seem to correlate with, and lead, the consumer bankruptcy filing rate. While all three variables suggest the downward trend is likely to continue when data is reported next month for the fourth quarter of 2004, an increase in the financial obligations ratio this past fall suggests that filings may begin to increase again in early 2005.

When quarterly data is compared for the period between 1994 and 2004, all three of the variables show a statistically significant correlation with the consumer bankruptcy filing rate. This correlation appears when the variables are compared individually and in multiple regressions. For the financial obligations ratio, the strongest correlation appears when the data is lagged by six months. For the other two variables, the strongest correlation appears when the data is lagged by three months. In the second quarter of 2004, the financial obligations ratio declined compared with the previous quarter. Similarly, in the third quarter, the credit card default rate and charge-off rates declined as against the previous quarter. This suggests a continued decline, or at least leveling, of the bankruptcy filing rate through the end of 2004. By contrast, the financial-obligations ratio increased in the third quarter of 2004, suggesting a possible future rise in filings again in the first quarter of 2005. Year-end filing data will be out in March, while the three variables will be updated by the Federal Reserve in early February.

"While nobody has a crystal ball, increased consumer debt ratios may be a sign that more families are in financial distress. We'll know more when the default rates are published in February," said Janger, a professor at Brooklyn Law School.

ABI Hosts Roundtable on Church Bankruptcies

The historic bankruptcy filings by the Catholic Diocese of Portland, Tucson and Spokane raise questions both profound and practical. What happens when the unique organizational structure and law of the Catholic Church runs into chapter 11? What are the implications for the free exercise of religion under both the U.S. Constitution and the Religious Freedom Restoration Act? These questions and more were explored during an ABI Law Review roundtable discussion at the annual meeting of the American Association of Law Schools, Jan. 7 in San Francisco. The panel moderator was Judge Bruce A. Markell (D. Nev.), with academic panelists including David Skeel (University of Pennsylvania), religious liberty scholar Douglas Laycock (University of Texas) and Jonathan Lipson (Temple University). Practitioners Robin Phelan (Haynes and Boone) and Nancy Peterman (Greenberg Traurig) provided the perspective of counsel for the diocese and the claimants, respectively. The roundtable's edited and annotated transcript will be the centerpiece for the Spring 2005 issue of the ABI Law Review. Look for excerpts from the dialogue next month in the Journal. The debate on how to handle these cases, and those that are sure to follow, will continue at this year's Annual Spring Meeting in Washington, D.C.

Web Site Editorial Board Update

ABI World's editorial board has been revised. The 10-person board provides important input on the content, design and functionality of the web site and works closely with ABI staff. The executive editor is Joseph Bodoff, assisted by Judge Lee Jackwig. Other members of the Board are Mark Berman, Scott Blakeley, Joel Glucksman, Gary Norton, David Peress, Matthew Schwartz, Deborah Thorne and Mark Williams. Members are responsible for writing and editing Cracking the Code, the online e-newsletter, which has new navigational tools as part of a facelift. Coming soon is a new publication called "Best of Cracking the Code," to be distributed at ABI regional conferences. Board members also help create Quick Poll topics and assist in a variety of other content matters. We thank these members for their dedicated service.