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Representation and Realities of (Bankruptcy) Court Work

posted by Melissa Jacoby

The Yale Journal of Law and the Humanities held a symposium on "Courts: Representing and Contesting Ideologies of the Public Sphere" in 2011, and recently published papers from this event. Some of the contributions to this symposium, especially the piece by Judith Resnik and Dennis Curtis, and the commentary by William Simon, emphasize the potential disconnect between representations of law and justice that might adorn courthouses and the nature of the actual work that goes on inside. Although these scholars did not discuss the bankruptcy court in depth (Simon does mention that scholars have long seen bankruptcy as deviating from traditional models of adjudication), each side of the disconnect may be quite interesting for our purposes.

First, although I cannot report on sculpture or artwork conveying images of justice in various bankruptcy courts, the physical experience of entering them varies. For example, some are in public buildings (whether or not designed for such purposes), perhaps with other federal courts and government services. But others occupy a floor, or several, of a private office building; technically, I suppose, one does not enter the courthouse until emerging from the elevator, at which point the marshals screen the visitors. Presumably, the architects of these private buildings were even less conscious of trying to convey the ethos of a public court.   

But assuming that all spaces holding bankruptcy courts somehow reflected a unified and traditional court-image of the role of the court, a disconnect would persist because of the nature of the work that must get done in a bankruptcy court. All bankruptcy judges do some of the traditional adversarial work, but they also do a lot of "managerial" work. By "managerial," I don't mean managing the debtor. Rather, as used for generalist courts (especially ever since Judith Resnik's foundational article), the term refers to managing the docket and court workflow by trying to move along cases and proceedings and encourage settlement. (The corresponding concept of "vanishing trials" has been examined in bankruptcy by Credit Slips' own Bob Lawless as well as others). The pressure to be managerial is not unique to bankruptcy courts, although they face it at multiple levels: cases plus the adversary proceedings and contested matters within them. 

Furthermore, much of the work of that bankruptcy courts do (or that some people think they should do) does not fit comfortably into either the adversarial or managerial category. Appellate court decisions, along with some treatises and academics, suggest bankruptcy judges should exercise an independent duty - even in the absence of party objection - over all sorts of things, such as scrutinizing the feasibility of a restructuring plan or evaluating the reasonableness of thousands of pages of professional fee applications. Think about Supreme Court decisions like Espinosa, Energy Resources, and Till, the 11th Circuit decision in Lett, and the 3rd Circuit decision in Busy Beaver. The exercise of this independent duty is neither an adversarial role nor a managerial one as those terms generally are used. 

The "conventional wisdom," though, at least in larger cases with active creditor involvement, is that the barriers to raising of issues sua sponte, such as questioning plan feasibility when it otherwise is uncontested, are formidable. Explanations supporting this conventional wisdom include deference to the parties with money on the line who consider the matter resolved; the limited amount of information available to the judge, by 1978 Bankruptcy Code design, about the underlying business; the lack of resources and infrastructure to independently evaluate feasibility, especially if one is reluctant to hire experts under Federal Rule of Evidence 706); extensive workload from other cases and the aforementioned managerial ethos to keep things moving; or a more minimalist interpretation of the Bankruptcy Code, coupled with a belief that the appellate court exhortations are either dicta or inapplicable. Surely this list is missing other explanations.   

An extensive academic literature explores the philosophical justifications for and institutional competence of generalist courts to engage in non-adversarial and non-managerial work and other models of adjudication. Some bankruptcy scholars have discussed and employed portions of this literature (off-hand, I can think of Christopher Frost, Ted Janger, Jonathan Lipson, and myself), but I see more we can do with these strands of research in the bankruptcy world. More to come in future writings, but in the meantime, it is worth thinking about what expectations are conveyed by the physical experience with any given (bankruptcy) court as well as how one might characterize the enormous amount of work that gets done there.  

Comments

Methinks that the physical experience of a bankruptcy (or other) court really isn't that significant to business lawyers or other repeat players. They are as accustomed to the shabby digs of regulators as they are to the magnificence of a federal appellate courtroom. They know what the real power relations are, and can adjust for physical surroundings.

The physical experience, I think, makes a big difference for non-professional litigants: personal bankruptcies, divorces, crimes. These are big deals in the lives of individuals, but they tend to get the grottier courtrooms. People can understand seeing a parking judge at the end of a Steelcase desk, but I think they feel cheated when their divorce courtroom doesn't look very different.

This was very interesting, thank you.

I have always felt it is unfortunate that our system drives bankruptcy through courts. It is really not something that fits into the mold of A v B with competing narratives of past events. The past events are rarely contested at all. It would lend itself to a much less judicial approach (I don't use the word "managerial" because of the ambiguity - does the manager merely manage the process or is s/he a decisionmaker on substance notwithstanding the lack of any stake in the outcome). But at least the Code facilitates and incentivizes private ordering to mitigate the inaptness of the traditional judicial model. It is a great invention to have parties vote on the outcome of the "case" based on how much they have at stake and to bias the process toward ratification of that outcome. You can see by contrast to say Spanish banking problems the benefits of the US's reorganization method.

Ebenezer Scrooge: Yes, there is some interesting research on the role of ceremony on perceptions by litigants and the public, which could include the look and feel of the courthouse. Agreed that repeat-players are more accustomed to conducting dispute resolutions in a variety of settings (although I've heard of some pretty nice settings for private business-to-business arbitrations).

MT: I completely agree that a lot of bankruptcy involves forward-looking predictive judgments of a financial nature rather than untangling what already happened, and that Congress was wise to balance private ordering with the judicial approach. Yet, many other matters before federal courts present similar challenges to the traditional conception of the judicial role. Consider, for example, the remedial phase of institutional reform litigation (changing prison conditions, or school funding mechanisms).Also, fairness hearings for class action settlements, and court supervision of class counsel fee awards. So I'm trying to find ways of looking across these contexts to ameliorate the tension (preferably in ways that do not require Congressional action) rather than to push further down the administrative road. But I just saw an article by Rafael Pardo and Kathryn Watts on SSRN that suggests a more fully administrative agency route (the extreme version of which is eliminating bankruptcy courts and the UST/BA programs and setting up a new bankruptcy agency, building on some ideas from the 1971 Brookings Report). I don't endorse this view - just reporting that it is out there.

Good points. I would add that, in most other countries, substantial amounts of or the entire consumer insolvency system is handled outside of the courts.

As an aside to Ebenezer Scrooge, I would bet that even repeat players have some susceptibility to the effects of the "magnificence of an appellate courtroom" more than we suspect. Physical space can provide subtle visual cues about roles and attitudes that play unconsciously on everyone.

With respect to Bob's point on consumer bankruptcy in other countries, I'm hoping in my research to hear more views on whether the court's role in consumer bankruptcy is of a qualitatively different nature than in business bankruptcy. At the very least, the adversarial and managerial roles are less emphasized in chapter 7 consumer cases.

Also, having just re-read Jack Ayer's 1986 article, "How to Think About Bankruptcy Ethics," it totally belongs on my "off-hand" list above.

Court Security: Will those shoes set off the metal detector?
Me: No
CSO: Know the drill?
Me: Yes.
CSO: Sorry to hear that.

=======
Client: Is he the bankruptcy judge.
Me: No, he's the trustee.
Client: Okay, good.

I think that the assumption of a judicial persona is also an interested and related idea. Judges robe themselves both figuratively and literally before taking the bench. Many litigants are quite deferential to this persona, and I always find it fascinating how things go when a litigant is not. Does the judge accept the push-back or seek to overcome it? In any event, it is great theater.

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