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What's Up With Oral Opinions in Bankruptcy?

posted by Adam Levitin

I've been reading a lot of bankruptcy court transcripts this past year, and I've noticed how frequently judges issue rulings orally from the bench. Sometimes these rulings are clearly drafted out, complete with pincites, etc. Yet these decision are never published. The only way to find them is to dig through the transcripts, which are usually not available on the free public dockets, but only in PACER. 

I've got a trio of concerns about this practice as well as some general questions about why this practice exists that I'm hoping our readership (particularly judges) can answer. 

First, it results in a situation in which there is a semi-secret body of law that is known only to a few cognoscenti. A Westlaw or Lexis search won't turn up any of these decisions, so these rulings cannot readily be found by anyone who doesn't already know about them. Basically, if you haven't been involved in the case, you're not likely to know about these decisions. 

Second, the fact that these decisions are rarely known to those folks who weren't involved in the cases creates a huge advantage for firms that are involved in a lot of cases. Basically, they build up an Arsenal of judicial decisions that the opposition might not know, and these decisions are particularly useful to cite back to the judge who issued them or to other judges in the district. That extra knowledge makes it more likely that the law firm will be successful, which means that they're more likely to get future business, exacerbating the cycle. It's a version of network effects in the bankruptcy bar.  

Third, rendering oral opinions squanders the estate's money. Every extra minute of a hearing results in further billing by the debtor's attorneys and any committee attorneys, and perhaps a 503(b)(3)(D) substantial contribution priority claim. All of those attorneys are going to read the transcript anyhow, so hearing the judicial reasoning out loud seems wasteful. 

This results in a very troubling situation in which there is actually a good deal of law that cannot be readily found by anyone who doesn't already know about it. Yet they get cited in court. In particular, they are often cited to the very judge who made them. 

So readers:  what explains this practice? Is there some reason not to publish opinions? Does it affect the ability to take an appeal in some way? Is it just convenience? Or something else? Informed comments are very much encouraged!


Would it be correct to understand your statement the you've "been reading a lot of bankruptcy court transcripts" to mostly mean in corporate cases and not the real bankruptcies of consumers? (I'm not being being coy about my bankruptcy prejudice and probably a bit too snide.) In real bankruptcy cases the judges usually rule orally on important issues about whether someone keeps their home, has their r
case dismissed or loses a lien and expect the parties or trustee, none of whom are generally going to get paid anything extra, let alone anything like corporate bankruptcy attorneys, to write it up.

Now Ed, you know that corporations are people too.

And remember that the number of real persons affected by some of these corporate cases exceeds the number of individual consumer filers in the United States in any given year.

I get that no judge is going to write up a valuation opinion about the split-level three blocks from the interstate, but I have been seeing some rather major determinations in corporate cases issued as oral rulings.

We can have all sorts of proximate arguments about the impact of corporate versus consumer bankruptcy beyond the immediate debtor, with an individual's bankruptcy affecting not only their financial situation, but also that of their household (2.53 people on average), their adjacent family, as well as their creditors (and employees and their households....)

But a point, that also goes towards the concerns raised in your separate blog about venue and judge shopping, is that some of the problems in the bankruptcy system ferment in the consumer side but only get recognized when it impacts the TBLs and their Chapter 11 cases.

The venue issue is one, where perhaps if districts required all bankruptcy judges to hear a random selection of all types of cases, they would neither have time to handle 39% or so of major corporate bankruptcies and wouldn't get bored with the grind of consumer cases.

But also, to take your example of a lack of a written opinion about a "split-level three blocks from the interstate", part of the reason is that the judge knows that the consumer almost certainly can't afford to appeal and the trustee likely doesn't care enough. So haphazard and flawed valuation methods build up until some fool of a debtor's attorney does take the case up. Then decisions like Till v. SCS shock the Chapter 11 bar by being applicable to all bankruptcy cases.

So too perhaps with the oral ruling trend- once something that starts in the consumer world wends its way into the "important" cases and pearls start being clutched.

That's likely just a hyperbolic and bitter pessimism on my part that has given up on expecting bankruptcy courts to treat regular debtors as decently as corporate ones and instead hopes that they'll just be equally awful to everyone.

There is a potential middle ground, as used by Bankruptcy Judge Bob Drain. He provides prompt oral rulings--but then (with a few citation corrections) publishes the oral rulings. It's a tad unique to read the opinion when it is clearly a transcript, but I think it helps get rulings out quickly but also addresses the concerns you have above.

It's about convenience, and it's about speed. Newly appointed bankruptcy judges are encouraged at their FJC orientation (or at least they were back in the day) to rule from the bench as much as possible and not take matters under advisement. The idea is to produce rulings quickly and avoid accumulating a huge backlog. It's no secret that bankruptcy judges have larger caseloads than other judges, and the matters move quickly. You know what they say about "justice delayed" . . .

Some bankruptcy judges (I'm one) also try avoid writing up and publishing what they believe are relatively routine rulings that add nothing to the law. (The B.R. is already chock full of decisions that should never have seen the light of day.) If parties believe I've erred in that determination, and one of my oral rulings should be published, there's such a thing as a "motion to publish." Appellate lawyers file them all the time. I've encouraged the lawyers I see to ask me to publish any oral ruling they believe warrants publication. I've yet to receive such a request, although I'd welcome one.

I'm afraid I don't really see your concerns, Prof. Levitin. Oral rulings don't produce some "semi-secret" body of law because, as you yourself observe, only the parties to the case and the judge know about each decision. To my knowledge, no one searches through transcripts looking for these things. And rarely does anyone cite old oral rulings to me. If they do, I know how much weight to give them. (Not much.) If someone somewhere is building up an "arsenal" of oral bankruptcy rulings, they're wasting their time. As for the cost of listening to a judge read a ruling, it's insignificant. Most judges rule from the bench only when the ruling is relatively short.

Faced either with the concerns you identify or the prospect of the bankruptcy system grinding to a halt as bankruptcy judges try to publish every decision, I'll go with the former. I bet the vast majority of bankruptcy lawyers would agree.

One reason for oral rulings is when it is time-sensitive. The judge will take a (sometimes short) recess and come back and rule. Based on the level of citation, it can be clear that a lot of the decision was sketched out before the hearing.

I don't think it is accurate to say "never published," I believe a decent portion of the time (although certainly a minority), the judge ends up entering a written version of the opinion. See In re Motors Liquidation Co., 513 B.R. 467, 469 n.1 (Bankr. S.D.N.Y. 2014) ("This written decision memorializes and amplifies on the oral decision that I issued after the close of oral argument at the hearing on this matter on July 2, 2014. . . ."). Judge Gerber may have been more inclined to publish versions of his oral opinions. Similarly, I think Judge Drain issued his confirmation opinion in Momentive as an oral ruling, and followed it with a written version. https://blogs.orrick.com/distressed-download/tag/u-s-bankruptcy-judge-robert-drain-for-the-southern-district-of-new-york/

I think it is less of an issue than in the past. Previously, Westlaw/Lexis didn't pick up a lot of bankruptcy court orders or less formal opinions - which benefited the firms involved or that knew where to look.

Access to information has eased considerably over the last couple of decades, from increased Westlaw/Lexis coverage, to dockets on claims agent websites, to Reorg Research.

I agree with my colleague, Ben Goldgar, speed and convenience are my reasons for oral rulings. I use Courtspeak software so my oral rulings are docketed as pdfs and can be listened to free initially and then saved for free or, if not saved, listened to again for standard PACER charges.

I do oral rulings frequently for matters such as motions to dismiss under FRCP 12(b(6)in adversary proceedings when I am either denying the motion or granting with leave to replead. Such decisions usually add nothing to the law and are almost always based on the particularities of the specific dispute. I can candidly (but constructively, I hope) criticize the drafting of a complaint and explain why it fails to meet basic standards without unduly embarrassing counsel. I can put together an oral ruling often in hours or days when it would take weeks or longer to put together a polished opinion. I do this not because I think no party will appeal. Rather, I do this because such orders generally are not final or fully dispositive and most attorneys accept the ruling and get their pleadings in order. No one gets "inside" info on what I am thinking about truly contested matters of law from my oral rulings. No one has ever tried to cite one of my oral rulings back to me in any case other than the case in which I made the ruling in the first place.

Ruling from the bench presents a problem in determining when your time for filing a notice of appeal runs. Note Rule 8002(a)(5) defines "entry" as when it is entered on the docket per 5003(a). However, in many instances, the oral ruling is not "docketed" except as part of the recording. The clerk is not providing notice under Rule 9022 which seems to assume that all orders are separate written orders as opposed to orders contained in a recording. In the past, we have filed a request that the court enter a written order so that we had some clarity on the grounds for appeal only to have the motion denied and the subsequent written order entered several months after the hearing. An oral ruling is fine if it followed up by a short written order which is then docketed and starts the clock on the appeal. It doesn't have to be published, just docketed.

@Ms. Lynch. There's no problem. An oral ruling is just a ruling; to appeal, you need an order. (You appeal the order, after all, not the reasons for it.) Every oral ruling should result in an order. Once the order is entered on the docket, then, as you correctly observe, the time to appeal starts to run. If the judge in your case rules orally from the bench, and you don't see an order on the docket in the next 2-3 days, call chambers and point out the omission. It will get fixed, I promise you.

One other thing to consider, is whether the particular judge's law clerk wants to, and has time, to write a memorandum opinion on the given issue / ruling. My experience was that the judge would simply ask, after issues were brief and/or argued (and he/she was prepared to rule from the bench and enter a short-form Order) "Do you want to research and prepare a draft on that case?" If it was a novel, unique issue and I had the time, then I'd say yes, absolutely; or if it was a mundane and an issue of well-settled law where the facts lined up cleanly, then writing a detailed memorandum opinion was not necessary.

With larger chapter 11 cases and an interim or final Order approving a DIP loan, for example, you'll generally not see a memorandum opinion on those rulings, but I don't see it as nefarious or creating a secret body of law. As others (far smarter than me) have already mentioned here, timing is an issue. A draft order (or multiple draft orders) that is 100+ pages long (without the credit agreement) are drafted prior to the hearing, and need to be entered / docketed promptly after approved (if approved) at the hearing, so that the case can progress, with funding, and meet any established milestones under an RSA, etc. The proposed DIP Orders are often revised / tweaked based on judges' comments at the hearing, and some judges are even able to make their own edits through electronic docketing systems. You'll also see judges asked that two, competing orders, be submitted if there's a dispute between parties on certain language.

Late to this debate... but I thought these comments were all very illuminating.

There is no doubt that oral rulings *can* and at least sometimes do prejudice non-"inside" parties. This is widely known among practitioners. Maybe in Judge Goldgar's court, it's not a problem. But in many of the busiest bankruptcy courts in the land, it is. One encounters citations to transcripts on a very regular basis, and I'm surprised that anyone could be unaware of this. (In addition to affecting practitioners, the practice also makes it harder for outside observers such as policy makers and academics to understand, and potentially critique, exactly what is going on in those courts. I'm not saying this is necessarily an intended effect, but it is an effect.)

I didn't take Adam to be arguing that it shouldn't ever happen or is necessarily nefarious. No one wants the bankruptcy courts to grind to a halt (although one might doubt if that is really a possibility; perhaps there are moderate solutions to address this issue). But in any case, there are costs to the practice--a point that more judges should keep in mind.

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