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Detroit's Chapter 9 and the Vanishing Umpires

posted by Melissa Jacoby

When the Chief Judge of the Sixth Circuit selected Judge Rhodes to preside over the City of Detroit's chapter 9 case, she attached a letter from the Chief Judge of the Eastern District of Michigan. Among other things, it lauded Judge Rhodes' case management skills, and asserted the need for those skills in a case of this nature. To many, the phrase “case management” may evoke procedural judicial tasks of little normative content. But the sandwich of the two words should invite deeper questions about the role of courts, judges, judicial adjuncts, and trials, and the impact of the presence or absence of disputes playing out in public view.

In the possibly fictional land rumored to have existed, trial judges were admired especially for their trial prowess. Today, as Judith Resnik and others have taught, the federal judiciary has come to value federal trial judges especially for their ability to avoid trials, the dogs that never bark - or, with confidential mediation, that bark in private. ADR is only one piece of case management. Status conferences, court-directed schedules, and other methods of keeping trains running on time are part of the program. Although units of the district courts, bankruptcy courts originally lagged behind in strong case management in the second half of the Twentieth Century for a variety of good reasons not directly relevant here. It eventually became clear that the federal judiciary as well as Congress expected these ideals to apply to bankruptcy judges. As in any type of court, bankruptcy judges varied - then, now, forever - in their embrace of case management ideals or in how they interpret the concept.

For anyone who has attended or listened to the July 24 and August 2 hearings in the City of Detroit case, the approach Chief District Judge Rosen commended shines through. From the outset, the Bankruptcy Judge took a firm hand in scheduling. He proposed a facilitative mediator with a broad scope and the power to appoint additional judicial and non-judicial mediators. He made a strong oral statement on the value of mediation to the goal of rehabilitation, to creditors, and to the people of Detroit, particularly because he believed mediation was preferable to litigation in stabilizing long term relationships. He invited comments written and oral to the proposal. I believe he was willing to listen to reason. But the preference for mediation had been put on the table. And today, August 13, the Court entered this mediation order. Chief District Judge Rosen, of the Bankruptcy Judge's own district, is the mediator. A future post will reckon with that detail. 

The Judge also has proposed a fee examiner whom he would appoint, after considering input, if ultimately ordered. At the August 2 hearing, Detroit's lawyers indicated that it would not oppose the proposal. When parties asked for discovery on various matters, they were prompted to explain such requests more than might have been required in other courtrooms and cases (although I understand initial skepticism about its need, for example, on what appeared to be a motion to assume an executory contract). The Judge floated the idea of a tort claimant committee to ensure that litigation would not derail the case's schedule later. The City's lawyers gently suggested they were dealing with tort suits a different way, so we'll see.   

Managerial judging is supposed to make federal cases and legal disputes run on time; Detroit, the debtor, must make buses run on time. Thus, the Judge has read introductory statements into the record, as reported in the press, emphasizing his limited role and that he does not control the City of Detroit. One can hardly blame any court for wishing to make this clear, given misinformation spread by news media and some elected officials in other chapter 9 cases. Indeed, because of the mediation order, the Judge may know as little as the rest of us what unfolds behind the scenes. Limiting the "leaky fact" problem, as I like to call it, is consistent with a more traditional adversarial model of judging.   

And, speaking of this, the Bankruptcy Judge presiding over Detroit's Chapter 9 has served in a traditional umpire role in more expedited matters, as is often the case in bankruptcy. After the City of Detroit filed motions to clarify the scope of the automatic stay under 362 and 922 of the Bankruptcy Code as well as to enjoin actions against certain non-debtors under section 105, there was argument, counterargument, and rebuttal, followed by a recess, an oral decision read into the record, and orders entered granting both motions (105 here362 and 922 order here). A similar pattern occurred when the City requested that the Court authorize the establishment of a retiree committee, also approved by the court. But with the mediation order in place, the number of disputes argued and decided in the public court may be limited. 

I'm neither the biggest opponent nor proponent of managerial judging in bankruptcy. My analysis depends on the type of case, technique, and dispute. For those watching the Detroit case, though, the question is whether the first month of the case reflects the style of management and administration that the federal judiciary generally, and the Sixth Circuit specifically, was hoping for. I have to believe the answer is an unequivocal yes.  

Spiral crowd image courtesy of Shutterstock 



Great article, I enjoyed the read - very informative.

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