Interview with New NCBJ President Judith K. Fitzgerald
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.