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Get going this morning. Good morning. Welcome to CLE by the Sea, sponsored by the State Bar of Arizona. For those of you who either don't know me or wonder where

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the white-haired man went, I am Dale Schian of Schian Walker and will be your moderator this week. A few housekeeping items before we get going. They are attempting to turn down the air conditioning in here. I think I feel it coming

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on. I have offered to trade it for a smaller room with more air, but we will see. But hopefully it will cool down shortly. There are two handouts. There's the big

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group of materials and then there's a supplementary sheet for this one. Hopefully everybody grabbed both of those when they came in this morning. Our first panel is the Bankruptcy Legends panel moderated by Judge Redfield T.

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Baum, Tom Baum, to all of his friends, which is just about everyone in the district of Arizona. Joining him is Lowell Rothschild from the Mesh Clark and Rothschild firm and Jerry Smith, who I always think of as Louis and Roca,

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but he has been practicing with his son for the past several years now as Smith and Smith. They are going to have a presentation on kind of the history of bankruptcy practice, the characters, the events, some of the more interesting

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cases, to give us some perspective. And then also hopefully share with us where they see things going forward as all of our sitting judges are set to retire and it's going to be a time of transition in the district.

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So without further ado, please join me in welcoming our panel. Thank you all. When I was called and told I was going to be the moderator for this program, I realized instantly that my role was to be Mr. Irrelevant because the two

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gentlemen to my left, they'll probably kick me for saying this, but I think we have almost 120 years of experience in the bankruptcy world. Covering the national level, the enactment of the 1978 bankruptcy code, and probably every case, certainly in the Arizona and a

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lot beyond that you've heard about from the 1950s, the 1960s, and so on. So without further ado, I'm gonna hand the microphone off to the gentleman to my left, Will Rothschild, and I just want to say this about him. It's in the materials. But in

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1955, the state bar of Arizona had to form a bankruptcy section. Because the cases filings had exploded from 100 cases in 1953 to 500 cases in 1955, and there were then 5 members of the founding section of the bankruptcy code, one of them being Lowell Rothschild.

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Lowell. I don't know where to start because whenever I get around - can you hear us? Can you? I was going to start the 1898. I asked that we make a preliminary statement. In the first induction of the American College of Bankruptcy, the speaker

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was Jerry Smith, and he made the comment that reorganization and bankruptcy was an element of capitalism. And it stuck with me. It's 21 years ago in terms of the things that we do. I've been very lucky. I've had an opportunity to be

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healthy and watch the practice develop, for - really I practiced 60 years, which is an anomaly. I'm not suggesting that you all follow my lead, because I think it's very different now than when I practiced. We had no technology. We didn't have

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to answer. My practice generally was and has been a debtor's practice, so I spent a lot of time hiding from creditors and slowing the process down so that the value of their money became less and less, which was one of the strategies,

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and then along came an entirely different crew of attorneys. And my judgment is that in Arizona where we had 5 or 6 or 7 of us, Tony Jones in Phoenix, Henry Jacoboitz, myself, a man by the name of Ed

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Scruggs. I was a beginner. Ed became a Supreme Court judge, and we were served in the court by a referee. And you'll look at the list and later on I'm gonna talk about the genesis of the judges, and how

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many you got there and what quote the system was, whether some of you think it was the system or not, so it was very informal and judge referee German would, he was an itinerant judge, he would come to Tucson

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when it was convenient. I've gone to Miami Globe in a little courtroom there, and he went around the state and he did it for 19-20 years. To my surprise, when I start looking at this to tell the story, we've had referees since 1912,

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which is coincidental, and you'll see it in here with the establishment of the state. In 1903, before that, Arizona had two bankruptcies. and Nevada had 4, and you can get all these statistics which become kind of irrelevant by now, but the bankruptcy

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practice, in my view of it, basically grew as the state grew. And the quality of the lawyers who did it improved as we went along. So I think now that the level of professionalism with the attorneys that practice in Arizona is very

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good, well trained. I'm gonna make a couple of personal comments. I attribute that, and by the way you don't have to like these people or not, but I attributed a lot of that to two men and I

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told that at the bar, one to Jerry Smith who Brought a certain level and when you hear what he was involved in we even learned last night things they were involved in that I never knew throughout the United States. And so

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I have to tell you, Jerry really directed a major part of the United States bankruptcy code and since '78 through his personal interest and training and also did that for the lawyers of Arizona. I personally felt that way about about John Dawson,

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all 6'5 of them, 200 or 300 pounds of him. I like to be able to call him at 11 o'clock at night when he was working, he was always there, which, doesn't say much about me, but I had a

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good relationship with him. We fought a lot. We screamed at each other, not really screamed at each other. We fought a lot over matters, but in my case we always, he was tough and he worked hard and he was totally committed. And

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he created a progeny of I think outstanding lawyers that are in all kinds of firm a couple of them are sitting here in this room, so the level of the practice came from being the people who financed the retail merchants to a

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very sophisticated group of lawyers who who developed a practice that I personally am proud to be part of, you know, the whole history of who was the bankruptcy lawyers where it was Sullivan and Cromwell and all these people didn't touch their hands,

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the outliers became bankruptcy lawyers and so that and Tom's gonna talk to you a little bit about that. So as you're doing this, you should have a lot to be proud of. I've looked at it at 60 years. I,

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I know most of you, and I'm very impressed. Of course there've been different waves of interesting things. What do we have? 1234 women here, and when I started practicing there was zippo women. They didn't have an opportunity. It was a men's club. And I'm going

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to tell a little side story because unfortunately you're on video, but I'm going to tell it. I was on the first selection committee that really became a commission. Historically the judges were picked by the chief judge and they were obviously very political

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notwithstanding the so-called objectivity my friend Moe rest in peace, but it wasn't inconvenient that Marcia was a close friend of Dennis's wife and the time came up and when they decided to pick a judge for Tucson, and Moe had been a

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industrial commission, a lawyer and had been honored by the industrial commission, did all kinds of things, created the law that had to do with the heart problems in industrial commission, the Supreme Court law. Then he got involved in that and became the judge.

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Let me interject for those of you who don't know, Dennis. As Dennis DeConcini, former United States Senator, one of the authors of the Bankruptcy code, and a great friend of the federal court, so Senator DeConcini called then Chief Judge Mickey and said it would be really

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nice if Lawrence Moe Ollison was the next bankruptcy. Were you Mickey's clerk at the time? You were gone by then, weren't you, Michael? You were gone by then and so subsequently they had the various commissions, that and I thought that was,

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and we'll talk fully about that. I thought that brought it to a really reasonably open level. I'm using my words very carefully in the sense that, people had an opportunity, to at least be exposed to the commission. We've had 5 commissions now.

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I've sat on it when Boswell sat on it, McGrass sat on it, and those of you who practiced a long time, I'm sorry if you didn't like some of our recommendations. They obviously made some mistakes because I'm sitting in there. As somebody said to me,

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recently, which I kind of resented a little bit. He said, that's your cross to bear and they're a friend. At any rate, so those of you and it's a small group here I think I'm obviously biased that the practice of

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bankruptcy law at the level it is in Arizona, and we'll talk about major cases is in the 60 years gone from a 2 to a 10. And you're to be confident. We were talking about my friend, Skip Wood who

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I never agreed with on anything or that's not quite true, who had devoted a good portion of his practice to people who couldn't pay. He did his legal aid. He did it as a practitioner. I always wondered why he never collected any money but

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still spends his time living on a sailboat in San Diego, so maybe he didn't tell me the whole story, but that the breadth of the practitioners. The breadth of their ability to do the general practice, the business practice, the litigation is really fascinating, so

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you should be very proud of what you do and your interest. Dale passed out a sheet prepared by the federal center and we're gonna talk about how the events of these years have affected the practice and the nature of the

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things you do and many of you as I look around the room have been involved in the cases that we're involved in. I'm gonna talk to you about a case called Henry Yellow Cab. Well, I'm gonna tell you right now. A lady gets

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injured. A yellow cab runs over and she loses her leg, and they're just worthless, the whole gang of them. And so this young lawyer shows up. His name is Don Gaffney and representing her, and we got

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into this thing and he was a, you know. I don't know if he's changed much, but he was pretty snippy and young and full of it, and, Bill Scanlon was the judge and really biased and the NLRB was

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involved in it and that prejudiced Scanlon immediately. And I love the statement which Don probably ran. We went into chambers and Scanlon said to him, you know, Don, you need to work on this. Lowell's gonna have you on a slow boat to China. It's

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gonna take a long, long time, which didn't sit very well with Mr. Gaffney. The end of the story is whatever the ruling was, it was appealed and really Don's participation later on, by the way, the woman received I think about $100,000 in strike length waived their

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fee. And I'm telling you publicly that. So we go to this appeal and Salerno shows up. Gaffney doesn't show up, but Salerno shows up to make the argument, and I get up and Herb Katz, who had been the San Diego judge and was the

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head of the BAP, I get up and he turns his back on me. He totally turns around with his papers and never saw me, never heard my argument, never did anything. They gave me a clue I'd lost. And thereafter we settled so we're gonna talk

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about incidents and in a number of the cases you've all been involved in tell you some of our reaction but more importantly the star and the person who really created a living for all of you and it was able to help a

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lot of people because of this philosophy is my friend Jerry Smith it was interesting. I always thought when I talk about Jerry, I talk about him as a Kansas farmer boy. Well, I learned last night he never lived on a farm. He lived in

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some city, went to New York City, got infected by Larry King and all of those people who were writing the act, and then ultimately he has been the modern Larry King and the modern Frank Kennedy. Jerry, before you make your opening

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statement, I want to tell all of you a little something I've learned about Jerry Smith over the years. As a lawyer in Arizona, I knew Jerry was the godfather of bankruptcy in Arizona. But what I learned after I went on the bench and had

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a chance to sit in a number of the other jurisdictions in the Ninth Circuit and go to meetings and conferences in places all over the country. Jerry started to become the Lone Ranger too. And if you remember the end of the Lone Ranger TV series,

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those of you who are old enough anyway, they would always end by saying, who was that masked man he rode in, solved some vicious problem, but rode out every time. And that was the concluding phrase. And I started to think of Jerry as not the masked

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man, but who is that man? Cause I could go to Wisconsin and do something with Bob Martin, I could go to the East Coast, to New York, Charleston, Miami, Atlanta, you name it, and everybody would say, oh, you know, Jerry Smith. Jerry Smith is the guy.

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Jerry. First, let me disclaim some of the statements that have been made. I've been totally blown out of proportion, but thank you. I had an extremely fortuitous role in working on the present bankruptcy laws, and I'll get into that a little bit. And it

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was one that was totally unexpected. I was a commercial litigator in the 60s. I was activated in the Air Guard, Phoenix Air Guard in 1961 and didn't start practicing until 1962. And I did commercial suretyship litigation. One of my first cases was up in Holbrook,

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and the visiting judge there was Frank Kennedy, R Frank. Oh And senior moment - he was out in the western part of the King. Yeah, Frank Gordon and I developed a wonderful relationship with him. We tried the cases for the surety company I

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was defending. Joe McGary was really the person I worked with primarily at Lewis and Rocca. We got into construction matters so the focus of my early practice was construction litigation, suretyship, and then they got me into foreclosures of all things. I'm a debtor's

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attorney, as it turns out later, but I represented Gibraltar Savings and Loan, Southwest Savings and Loan, and well every SNL failed in the 80s. But in any event, you'll see if you get into that area that some of the appellate cases

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that resolved some of the issues in the early days were ones that I handled in the trial court, for example, the question of whether the undispersed construction proceeds could be reached by the lien claimants who otherwise weren't going to get paid. California had done that

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but our Supreme Court ruled that no that was inappropriate. That was there for the lender's protection, but things have changed over the years, but in any event, I did that type of litigation and then I got a call, and I won't spend long on this,

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from Charles Seligson, who I had become close to at New York University where I went to law school. Charles taught the federal jurisdiction course in the evenings as an adjunct professor because of his practice with Morris. It was

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Morris and Seligson then, and they represent PepsiCola, for example. It's a small firm and we would go out in the village and have supper at night and he knew these little places were almost like someone's living room and dining room were

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there so we were close. He was from the southeast, I think South Carolina as I recall, and he really did like the New York environment and he loved teaching, he loved students. In any event, I got a

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call from him and he wondered if I would like to become involved with the National Bankruptcy Conference. This is an organization that was created in 1933 and 34 really at the direction of of the Congress. This was a group of self-anointed

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experts that were working on the legislation that was being introduced in the New Deal days and really looking at it carefully. They were the leading experts in the country. There were only 8 or 10, eventually it was 20. But they were

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asked by the Congress to form an organization and it became known as the National Bankruptcy Conference. To advise Congress, Congress wanted an independent group of people that had no ax to grind. Many of them were academics so they worked throughout the period through

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38 and then continued on thereafter and there's quite a bit of material in the materials that you have relating to the National Bankruptcy Conference. Well, this was in 1970 that I was asked if I'd be interested, and I said, I don't know

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what it is. Can you tell me what it is? And he did, and I said, yes, I'm interested. They would meet in Washington DC and then if they needed two meetings a year, they'd have another meeting somewhere else in the country,

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often in Texas sometimes in other venues, but they would take everything that had come to their attention and they had various committees and they would work on it throughout the year and then present a paper at the conference's meeting if it's an annual

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meeting at the annual meeting and the conference then would either buy it after making changes or say no we don't think this will fly, but a lot of suggestions over the years have come from that organization. In any event, I said yes so

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I ended up being nominated by Pete Lasso at the University of Texas who might have been but for some disagreement I think primarily with Harold Marsh as I recall. The reporter rather than Frank Kennedy, and that delayed the startup of the

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commission and I'll come to the commission's part of this shortly. In any event, the next thing that happens is I get a call, well, in the meantime I had met Vern Countryman. During the McCarthy era, got crosswise with some of the

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people at Yale where he was an instructor, bankruptcy. He was also co-author of the Collier edition with Professor Moore, and he got primarily crosswise with Moore, and I don't know the details of that, but it must have been bitter because he

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left there, came out to the University of New Mexico, and was teaching out there. And John Franken, our firm was a clerk at the same time that he had. John was for Black and Vern was for Douglas. So I met him and talked

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him into going fishing with me down to Rocky Point, Puerto Penasco. In the early days that was great fishing. We'd go out to 22 Mile Reef and catch wonderful grouper and pinno. And Vern came down, we drove down and we were out in the

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boat and my friend Bill Hammer, who had Messenger Printing back in the 80s before it failed, was on the boat and he's kind of a colorful character and Vern was just catching these little rock bass which we would then use for bait. And

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Towards the end of the day after we'd caught maybe 20 or 30 pinno and he'd caught 100 rock bass, little ones, Hammer turned to him and said, you know, countrymen, I think we're gonna name you the master baiter. And Vern actually told that story

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at one of the National Bankruptcy conference conventions when he used to be about 60 or 70 people there, and he got a big kick out of that, being known as the master baiter. In any event I got to know Vern pretty well

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from those experiences, and I get a call asking if I would be interested. They were apparently having some difficulty getting decent staff at the time to go back to Washington because it didn't pay anything and it was disruptive. You had to move your family and

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everything, and they wanted to know if I would be willing to spend a year with the commission on the bankruptcy laws. This was after the first year had been spent. Now this was the commission that was created really as a result of the

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impetus created by the Brookings report on the system of bankruptcy, primarily consumer bankruptcy. And Congress authorized the creation of this commission. There were to be, I think, 2 senators, 2 from the House of Representatives, 2 appointed by the Chief Justice. And 2 by the

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president. I forget the - let me interject just so you understand the history. Initially there were supposed to be 2 bankruptcy referendums here we go on that group. And when the Weinfeld communicated with Chief Justice Warren Burger, the decision was made that there would be no

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referees. And that's true, and this is pervasive, the difficulties, and let me divert for just a second - when I did get back to the commission, and I'll come back to how I got there, I had about 3 months to read everything that ever been

00:27:23.709 - 00:27:47.209

printed from the Library of Congress on uh bankruptcy reorganizations, protective committees, all of those materials and one of the things that I became familiar with was the article - can you all hear me OK by the way? - was the

00:27:47.219 - 00:28:10.670

Thatcher report. And also the Donovan report. Wild Bill Donovan, who later formed the CIA and is famous for other reasons, actually did the study for the Attorney General of the United States mandated by Congress to look into the scandals that had occurred in New York City

00:28:10.969 - 00:28:32.089

as far as bankruptcy and the connections between referees and those who were handling the cases, they'd file involuntaries they would end up with the case. It really was a terrible situation and this is all outlined in the Donovan report. Then Solicitor General

00:28:32.189 - 00:28:54.430

Thatcher also is asked by Congress to do an analysis of bankruptcy, and that's a separate document that's available, so I think much of the real distrust and dislike for the system and in particular the referees was generated from that. And Ed Weinfeld, who

00:28:54.430 - 00:29:16.959

became one of the commissioners on the commission, was from the Southern District of New York, a well-known judge, highly respected, but he really did not like referees. He didn't want them to have any higher status of any nature, and did everything he could and

00:29:16.959 - 00:29:36.699

it was the sole reason because the commission's ultimate work product contemplates an Article 3 judge for the bankruptcy court, but we couldn't. The commission didn't want to grapple with that because they had Weinfeld, they had Chuck Wiggins, who was a magnificent person. I think

00:29:36.699 - 00:29:52.459

he'd probably been in favor of it, but you never know. Article 3 judges stayed together pretty well, and we had another from Chicago, I can't think of his name right now. It'll come to me later. So we had 3

00:29:52.459 - 00:30:10.260

Article 3 judges. So that really was a non-starter, even though the National Bankruptcy Conference had recommended that, and you'll see in the materials on Stearns, I think you gave them my paper at the University of Texas. I have attached to that all the resolutions of the

00:30:10.260 - 00:30:31.209

National Bankruptcy Conference in 1970 anticipating the work of the commission on the bankruptcy laws which had been created that there should be an Article 3 judge, otherwise you had continuing problems and it would elevate the court to a level that it was needed. So the

00:30:31.209 - 00:30:49.930

NBC has always been strongly in favor of that. It's the Article 3 judges. That, and I don't know if you remember this, but they wouldn't even let bankruptcy referees wear robes, initially it was amazing. There was such prejudice they didn't want

00:30:49.930 - 00:31:07.589

him to look anything like a judge. In any event, part of that came out of the early scandals in New York that were documented by Wild Bill Donovan in the Donovan report and by solicitor Thatcher in the Thatcher report. Well, moving on forward, what

00:31:07.589 - 00:31:23.780

happened then, I don't know if you're all familiar with this, but California used to have and probably still has a California Financial Lawyers Association that meets once a year and they have programs at a high level. They were having a program in Alla

00:31:23.780 - 00:31:41.359

Salle in the early part of 1970 inland from Oh, I can't remember where it was, but it's a beautiful place up north ways to have a gather gathering, and Countryman was there, Harold Marsh was there, who by now was the chairman of the

00:31:41.359 - 00:32:03.770

commission, and Frank Kennedy, who was now the executive director or the director of the commission and was really going to be the laboring oar. He was a professor from Michigan, had an incredible career in the bankruptcy field. He was the rules reporter,

00:32:04.030 - 00:32:26.020

for the rules and just a wonderful person. Everybody loved him and to tie in with the later story, I'll tell you, he was a Sterling professor at Yale with the gentleman that headed up the SEC reorganization department and will have an

00:32:26.020 - 00:32:43.540

interesting comment from me about that later on because we eventually took the SEC out of the process, at least that was our recommendation, and Congress agreed with that. In any event, I went over to Ala Salle primarily to meet Harold Marsh and Frank

00:32:43.540 - 00:33:06.439

Kennedy and Steve Byrne, who I knew already at that point. So we had nice conversations and as a result, they did recommend that I become a deputy director. So in 1970, we rented our house in Phoenix and

00:33:06.439 - 00:33:27.209

had two young kids and moved to Foxhall Village in Washington DC and I started working on it and again, a digression to a degree, but Bart Porter, Newman's brother, was with CREP, the Committee for the re-election of the president. And Bart Porter was

00:33:27.209 - 00:33:48.099

having supper Richard Nixon. I wouldn't dignify him with the middle name. In any event, Bart was at our table the first night we were there and could have him over. He lived not far away near the Russian embassy then. It was in a different location

00:33:48.420 - 00:34:09.600

and we started talking a little bit about what had happened with the committee for the re-election, and he mentioned that he was going to be interviewed the next day by the FBI. I said, Bart, do you have an attorney? He said, Oh, there are all kinds

00:34:09.600 - 00:34:24.540

of attorneys at the committee. And I said, Bart, your brother Newman is one of the best attorneys I know. Haven't you even talked to him about it? No. Well, he got in trouble. He went in and gave a little cover up on an issue and

00:34:24.979 - 00:34:44.958

check, but that's another story. Let me set the stage for you a little. In any event, I'm there. I'm finished with the background. I want to talk about the judges. Well, I think we ought to talk briefly about the

00:34:44.958 - 00:35:04.050

'78 code and its enactment and Jerry's role in that. And I didn't appreciate really what the forerunners on the bench had done for people like me and my current colleagues. But before the '78 code was enacted, there were only bankruptcy referees. You couldn't be called judges.

00:35:04.989 - 00:35:20.770

Sometimes you didn't have a log. You didn't have a secretary. Sometimes you didn't have a courtroom. You talked to some of these people and they held court out of the hallways because that's the only place they had. And

00:35:21.010 - 00:35:36.370

I don't know if any of you are old enough, if you practice under the Bankruptcy Act that was in existence before '78, one of the first battles you fought was over whether this was governed by summary or plenary jurisdiction. And there was a very limited power

00:35:36.370 - 00:35:57.110

that the referee had under the Bankruptcy Act to enter various kinds of orders that we all now take for granted. Well, as the commission got started, a couple of things they proposed out of the box was to give the bankruptcy court total jurisdiction

00:35:57.110 - 00:36:17.030

over all proceedings, you know, the magic permits arising in are related to the bankruptcy process that's proposed and so that the courts can hear those and decide those to make the bankruptcy judges Article III judges just like most federal judges. Well, that started about 1970.

00:36:17.389 - 00:36:33.830

It didn't go well out of the box and to give you a little taste of the history at that point, There was no bankruptcy referee on any national federal judicial committee, and you don't know this until you go on the bench. They couldn't

00:36:33.830 - 00:36:53.879

even go to the conference. The Ninth Circuit was the first one to invite bankruptcy referees to their annual conferences. Chief Justice Warren Burr - who Taylor Ashworth was a lawman for, by the way - would not respond to letters written by

00:36:53.879 - 00:37:10.879

the referees about the legislation, would not return their phone calls. He would have his secretary or the administrative office do that because he didn't think he should have to deign to stoop that low. So that was kind of the lay of the land

00:37:10.879 - 00:37:26.780

as it started. And there were really kind of two tracks. There was a bill proposed that had a lot of that in it, but it also said that bankruptcy would be an administrative process and there would be administrators. It wasn't going to be

00:37:26.780 - 00:37:44.699

a courtroom, there weren't going to be judges, etc. And the referees got involved and created a companion bill that I talked about to make it a bankruptcy court with Article 3 bankruptcy judges. And as I started working on this, Jerry gives me his written statement to

00:37:44.699 - 00:38:04.419

Congress, which I think is in the materials. And there's also his testimony in 1975 to Congress about all of this, and Jerry was really one of the point people at the fight throughout the 1970s that culminated in the 1978 code. So Jerry,

00:38:04.500 - 00:38:24.449

give us some overview of your thoughts and how that went. Whatever you want to say about it. Well as I said, I had a chance to deeply immerse myself in bankruptcy, history and background and the existing laws, so I'm beginning to

00:38:24.449 - 00:38:45.020

start writing, on various sections I wrote the community property initial draft. I wrote the fraudulent transfer provisions. I wrote the preference provisions, and the goal was always on my part to try and simplify things and make them clear and understandable. Sometimes it worked

00:38:45.020 - 00:39:05.020

out that way, sometimes it didn't. In the meantime, I had recommended to the commission through Frank Kennedy. And I've never told this story. Frank Kennedy was a good friend of Norm Nachman's. There was a small boutique firm in Chicago, did a

00:39:05.020 - 00:39:23.449

lot of major bankruptcy work. Nachman, Adler, and Jerry Muniz was a young lawyer there. Jerry's now even older than I am in Lowell. I think he's older than you are, Lowell. But he's still contemporaries. He's in Chicago, but Frank, because of his

00:39:23.449 - 00:39:40.570

relationship with Norm, wanted Jerry Muniz, but I'd had some matters over in California in the meantime with the Stubman Tree Ser and Glad. It was actually Quittner, Stuttman, Tree Stern Glad and Barney Shapiro's firm and I felt there was a

00:39:40.570 - 00:39:57.729

lot of talent over there and I'd encountered a gentleman named Ron Trost. And Ron, I was particularly fond of, and I suggested Ron Trost get involved with the reorganization part of it and work with Larry King to take what King was working on for

00:39:57.729 - 00:40:15.959

the Rules Committee and on his own and integrate it into the approach we were taking at the commission. And Ron did fulfill that part of it. I later then took what they had done and put it into the final product for the commission, but

00:40:16.620 - 00:40:33.899

most of that was done by Larry King with Ron's help, and Ron was very helpful and then I did the final putting it into the final framework of what we were doing, so it didn't look like something completely separate and different than our

00:40:33.899 - 00:41:00.250

drafting style but I didn't have a major role in that chapter. Well, I'm getting ahead of myself a little. what happened then is, I felt strongly that bankruptcy was an important aspect of the American economy and also of

00:41:00.250 - 00:41:18.260

litigation in the federal courts had to be really a federal bankruptcy law. We toyed with the idea of maybe delegating the consumer stuff to the states. But in the long run, it really needs to be federal, it needs to be

00:41:18.260 - 00:41:38.570

uniform. You have to have a uniform law to make things work properly. It would be a disaster if you didn't. But we needed to have good judges and we needed to have be able to attract good people to be judges, so the commission

00:41:38.570 - 00:41:59.689

was really persuaded to that as I said earlier and they ultimately decided they couldn't face up to the Article 3 issue. They couldn't do that but they could at least recommend that they be appointed by the president

00:42:00.040 - 00:42:19.699

with the advice of the consented Senate, and that there be long terms. I think the term we had in the proposed act was. Somewhere between 12 and 15 years, may have been 15 years but again, we did not face up to the ultimate

00:42:19.699 - 00:42:40.419

question of Article 3 versus Article 1, and to have Article 3 judge, you have to have life tenure during good behavior. That was really the only significant difference in what we did. And we had fairly elaborate retirement system built in. We

00:42:40.810 - 00:42:59.419

had I think a pretty good strong court except for the life tenure. That was the only thing the commission could not face up to. And Weinfeld was dramatically opposed to that. He was the Article 3 judge that had a great reputation in the

00:42:59.419 - 00:43:20.310

federal system from the Southern District of New York. So yes, I think we were strong advocates for a strong court. Well, apparently not strong enough because I'm an Article One judge. You know, the vehemence of those times, it's just amazing when you go back

00:43:20.310 - 00:43:37.239

in history. I assume we all know that we have these three branches of government and separation of powers. One of the first things I was informed after I got sworn in is that, you know, you can't be involved in any kind of political activity. Even

00:43:37.239 - 00:43:50.939

if I support a candidate, I cannot write a check and donate to that candidate's campaign. OK, you know, I can live with that. That's a fair trade-off to me. Well, when you go back to the history about the fight for whether the new bankruptcy code of

00:43:50.939 - 00:44:12.530

bankruptcy judges were going to be Article 3 judges, constitutional life tenure, fixed salary. One of the main opponents to that was Chief Justice Warren Burr. And he was literally over there in Congress. This went on for several years, actively lobbying that, that he didn't want these

00:44:12.530 - 00:44:35.169

incompetents made into Article 3 judges. It just wasn't right. I've cited to you in the outline the articles by bankruptcy Judge Gerald E. Bunn, which is a really great history of it. But at one point in I think 1977, right before it. The bill's

00:44:35.169 - 00:44:55.070

passed. Chief Justice Burr, as the Chief Justice, writes to the congressional committees and says making bankruptcy referees Article 3 judges is quote, almost like promoting all the sergeants in the armies to captain. That's how he saw it. Now at some point, it gets kind

00:44:55.070 - 00:45:13.020

of humorous because one of the people in the house wrote back to him and said, Chief Justice, you are a really effective advocate. And I'm really impressed with the performance. However, It does occur to me that as Chief Justice, perhaps might be somewhat inappropriate for you

00:45:13.020 - 00:45:28.139

to be over here lobbying all this because, you know, it's possible that someday some of this may come before you in your capacity as Chief Justice of the Supreme Court. So I think what you ought to do, given your tremendous talents over here, is resign

00:45:28.139 - 00:45:48.979

as Chief Justice, run for office, get elected to the house, and then you can do all the lobbying and campaigning you want from this point. Well, how prophetic. That letter was because in 1982 or 3, the marathon decision came. That the broad jurisdiction given to the

00:45:48.979 - 00:46:05.780

bankruptcy court can't pass muster because you don't have Article 3 judges and they can't hear a lot of these issues and you know, lo and behold, it, it's really amazing how things never change because just over a year ago the Supreme Court comes out in

00:46:05.780 - 00:46:24.399

Stern versus Marshall and when you step back from all the nits and nats of it, I consider it marathon 2 saying. Article One judges can't decide certain kinds of cases, notwithstanding what Congress did in enacting the code. They don't have the judicial power granted under the

00:46:24.399 - 00:46:42.120

Constitution. And so you still have this battle ongoing about what to do with the jurisdiction of bankruptcy court, what to do with bankruptcy judges, and just to begin to bring it back into context, about two weeks ago the president of the National Conference of Bankruptcy

00:46:42.120 - 00:46:57.679

Judge, I was asked to testify and did testify at the House about the effect of Stern and the effect it's had on the system, and thoughts about what to do about it and basically said, you know, you've got 4 options. The last one is to make

00:46:57.679 - 00:47:17.550

bankruptcy judges, Article 3 judges, and therefore they can exercise the full grant of jurisdictional power held by the federal courts. So here we are, you know, 30 years later, right back where we started. And, just to complete that thought, Skip doing the immigration work within

00:47:17.550 - 00:47:35.500

a week. Well maybe you want to repeat, maybe everybody didn't hear it. Skip made a great point. He said you'd be doing immigration work within a week. I'll tell you candidly, I've been on the board of the National Conference of Bankruptcy Judges twice, and

00:47:35.500 - 00:47:49.939

there's been a lot of discussion about this over the years. One of the concerns I have is I love being in bankruptcy. I love what I do, but I fear if we were to be made Article 3 judges, we would be doing immigration cases, criminal cases,

00:47:50.010 - 00:48:09.929

and a whole lot of other things. To be blunt, I'm probably not qualified to do them. I really don't want to take this job to do those things. Two comments about this.

00:48:09.929 - 00:48:28.010

I went to law school during the act, so the tail end of that era. But 22 factors I was around.

00:48:30.040 - 00:49:00.750

There was some really deep

00:49:00.750 - 00:49:24.820

grudges, as Jeff my colleague once said, he started practicing law, if you were Jewish, Irish, or Italian in a major city you practice. You have to have a deep presence in the system. And I think it's attitudes, law firms and judges who didn't want

00:49:24.820 - 00:49:49.419

people from certain minority groups to mention. It still exists in the 70s.

00:49:49.419 - 00:50:06.939

That wasn't the issue really. The commission didn't even recommend that, and that's what the judges got upset about. We weren't going to fold them in.

00:50:07.000 - 00:50:27.320

We didn't recommend that. And so the judges came up with their own bill that did that. But the idea of having One person was also one of the little obstacles to making any progress. Thank you, it was pretty well focused on by the time it was in front

00:50:27.320 - 00:50:52.209

of Congress, everybody knew it had a constitutional issue with the president, but there was no one. Not a really organized group out there we're staying back out. Well, as I recall, in '75, the House's version of the commission's bill did have Article 3

00:50:52.209 - 00:51:07.889

status. It came out, but it was taken out and the House bill, I think the Senate bill wasn't Article Three. The House bill was, and it goes to conference committee, and if I remember correctly, the conference committee sat on the bill for a

00:51:07.889 - 00:51:25.270

long time, didn't meet. And then very late in the session and somewhat, at least according to what I've read, a little bit, for lack of a better term, somewhat under concealment, came out with a recommendation of resolving the split by not making

00:51:25.270 - 00:51:46.810

the bankruptcy judges Article 3 judges. And again, that was really pushed by Chief Justice Berger and particularly the other district judges. There is I believe Judge Winfield, who Jerry mentioned, was the chair of the National Bankruptcy Committee, and they were

00:51:46.810 - 00:52:01.360

also lobbying to get the Article 3 part out of there and make them Article 1 judges, and the bill actually then kind of sat, and it was getting very late in the session, and there was a big push at the last minute. I think that

00:52:01.360 - 00:52:23.459

was one of the last bills that President Carter signed. He signed it on my birthday, November 6th 1978. Talk about Arizona judges. All right, so I think we've kind of given you a a taste. We all were, in terms of the

00:52:23.459 - 00:52:38.959

history that got us to the code, so we get the code in 1978, and I think we ought to shift our focus now and talk about Arizona, and I think we have to - let me just clean up one little point. The SEC was active,

00:52:39.620 - 00:53:04.979

they had their protective committee study starting in the 1933 or 1934. Douglas headed it up. It was eight volumes. The final volume is a masterpiece. He wrote it, and we didn't used to have reorganizations in the Bankruptcy Act. Instead, you would have a receivership,

00:53:05.020 - 00:53:25.639

either federal, and it was primarily federal in the major matters, or state, and there would then be a committee formed and Curvas Swain and Moore was one of the leading advocates of that approach because Swain was one of the persons who made an incredible living

00:53:25.639 - 00:53:49.459

off of these protective committees, and so he was adamantly against the SEC coming in and getting involved or creating a reorganization statute. So, in any event, in 33, they passed section 77, which was really the forerunner of Chapter Roman 11, which became Merged in our

00:53:49.459 - 00:54:09.979

chapter 11 of today and it was for smaller cases. The SEC wasn't involved, but then the next year the SEC had 77B which was for reorganizations. The petition had to be approved by the federal district judge when you filed it. It was ex parte, but

00:54:09.979 - 00:54:28.560

still he had to look it over and decide whether or not to approve it. That then initiated a process where the SEC was intimately involved from the very beginning in the entire process. One of the things we did was, and I had

00:54:28.560 - 00:54:49.360

told you, Frank Kennedy's great friend, was at the commission. We used to have Wednesday lunches with him and his staff, in Washington DC near, I think we were on 16th Street and K near there, 1611 or 16, I forget what. In any

00:54:49.360 - 00:55:11.270

event, we'd have lunch with them and we'd talk over things and it was pretty close. Well, when the commission decided to eliminate the SEC's role, Frank had to go back and tell his friend that we've just eliminated and disemployed you, and I heard that

00:55:11.320 - 00:55:31.360

conversation. Frank had invited me into his room to listen to it, and it was incredible. The guy was so unhappy and pretty rough conversation. In any event they then worked hard to stay involved, but that was the way the SEC was taken

00:55:31.360 - 00:55:50.469

out. So, let's shift to Arizona Lowell, tell me, if you will, kind of, you got the section formed in 1955 and I'm just curious, what did you guys do? We gave educational programs. It's interesting. There's a list in here and I thought it

00:55:50.469 - 00:56:09.429

was, I was laughing at myself because I spoke on how you prepare schedules which nobody thought was very interesting, of course, but, I've always taken a lot of care, pretty complicated on, on schedules so that something didn't

00:56:09.429 - 00:56:28.449

come and bite me later, of course later on the new code, the 205 code, I guess it was, caused the lawyers to have to, I don't know, are the lawyers who do consumer work? Had to verify the

00:56:28.449 - 00:56:47.800

truth of those chapter 7 schedules. I have not signed one in the last 6, year, many years. It isn't that I'm a cynic about what my clients tell me, but I didn't want to have any continuing liability or exposure. One of the things that

00:56:47.800 - 00:57:04.399

was interesting about this, there's a list of referees starting in 12, and I mentioned it, and I got this from the clerk of the court. I didn't even know they existed. They were appointed, of course, by the chief judge, but the interesting ones were

00:57:04.399 - 00:57:23.270

Tombstone, Globe, Globe, Morency. And what those were was there were a bank, the mines were closed down. These are contemporaneously with mine closing down or strikes. And they would have these bankruptcies and they didn't come to Tucson or Phoenix. They had

00:57:23.270 - 00:57:37.919

the bankruptcy court in where the incident occurred. And then Alan Perry, didn't he - did you know Alan Perry? I knew Alan Perry. Yeah, and I didn't know he had been a referee. And in the program there's a list of

00:57:37.919 - 00:57:55.719

this program which the new bar group did later on in '66. Henderson Stockton is giving a speech. I didn't know he had been a referee. He never let on. And then of course Stanley German, who I've talked about, but Caldwell, Cracciola, Maggiore, and Davis really

00:57:55.719 - 00:58:15.110

were refereees until anointed by the '78 act and then you will see this repeats now Caldwell Maggiore Davis are all of a sudden judges by virtue of Congress. This must have been Joe Jenks' father. Yes, that's who it was. I was trying to case

00:58:15.110 - 00:58:31.919

in front of Mormon and very busy objecting and it was interesting. The lawyer on the side was Neil Wake, who I now obviously must know more about evidence. He couldn't get anything into, he couldn't lay a foundation to get this in evidence, and

00:58:31.919 - 00:58:51.600

I was being very smart and obnoxious and objecting and Morman took a recess. He went off the record and he said, Lowell. And he didn't call me Mr. Rothschild. He said, well, do you not think I understand the difference

00:58:51.600 - 00:59:09.469

between relevant things and irrelevant things? We'll be here all day long. I'm gonna leave the bench. You're gonna show Mr. Wake how to lay the foundation, and we're going on. And that was fine because he ruled in my favor. I didn't care what he said.

00:59:10.060 - 00:59:36.899

Then there was first appearance in the court here. I stood up and tried to make - Ok can you speak up a little? Yeah, the man said he appeared in front of Judge Maggiore and started to make an objection, and Judge Maggiore said, sit

00:59:36.899 - 00:59:49.889

down, shut up and sit down. My reaction to you is he, he was a little short in temper. I think that's being generous. I don't know what my reaction was that was plenty of power. I didn't think he needed it. Well let me

00:59:49.889 - 01:00:07.310

tell you my relationship to him, and because this is, it's being videoed, apparently he had a lot of stomach problems. And somebody told him one day that if he rolled a bowling ball on his stomach he would get rid

01:00:07.310 - 01:00:23.620

of whatever it was gas or whatever his problem was so I get a call from his clerk. His clerk says, do you have an extra bowling ball? We know you're involved with bowling. And I said, why? Well, Vince Judge Maggiore is coming to Tucson, and he'd

01:00:23.620 - 01:00:43.370

like to pick it up. And I said, no wonder I always lost when I had you on the other side, and I said, ok, my phrase for that is it was a little informal is the best I can tell you. And then Ed

01:00:43.370 - 01:01:04.399

Davis, and them all became Mr. Smith's hard work judges. Pretty cold if you need to file a bankruptcy trustee. It's 2 o'clock in the afternoon go to the ranch. You could get orders signed in Duran by

01:01:04.399 - 01:01:24.649

a lot of judges in the. And so then there was William Scanlon, and he was at Bidley for a long practice and apparently did a lot of employment work, a lot of things, but had grown to

01:01:25.360 - 01:01:42.429

not care for government very much. So when the NLRB showed up, they didn't do very well. I told you about the yellow cab case that got reversed and the good job that at that time I think Don was at strike line. And

01:01:43.260 - 01:02:02.860

Bill was pretty even-handed. He had seen a lot of things, had a personal tragedy in his life, which a bunch of us had to participate in. But what the thing I found interesting except for Joe Craciola as

01:02:02.860 - 01:02:23.510

we come into what I call the modern age Nielsen Ollison they all had long terms so they sat on the bench. George Nielsen's will now be on the bench 28 years in 1983, so there is a

01:02:23.510 - 01:02:44.139

certain stability to who you're practicing in front of and I'm gonna recommend you and we'll talk about it later Judge Marler or Jim Marler wrote a paper on the Basha case on getting confirmed the Basha case which I suggested to Rob

01:02:44.139 - 01:03:01.090

Charles, who was teaching a course at the law school, you ought to take that and give it, hand it to all of your students because it's a great outline. Skip - I used to teach bankruptcy at Beaver College. And Mary Ellen was Rob came every year

01:03:01.090 - 01:03:20.560

to do a lecture and he developed that out. From 6 or 7 pages to 25 pages and I always gave Marler original credit. Don't tell me that. At any rate, but in it he said something,

01:03:20.689 - 01:03:39.449

and I can now say this, and as Smith enjoyed telling me, well, you're really kind of the oldest and maybe the youngest acting, you know, it's a typical Smith response. He holds you up and then he makes sure he makes sure you realize things. Marler

01:03:39.449 - 01:03:53.840

in that paper wrote something that I thought was not an admission, but something we can all learn, and there are a lot of experienced people in there, and I thought it was fascinating, particularly as we have a judge going out and a judge

01:03:53.840 - 01:04:14.830

coming in, we think, sitting here, and he wrote a line "know your judge before you start," and I thought the good practitioners, and by that my standard is if they get their cases confirmed, and

01:04:14.850 - 01:04:38.540

if they're doing the best for their clients, really have to understand -maybe this is the one, the human, what motivates that judge about him and and watched what transpires, but it was interesting that Jim recognized that maybe about himself and

01:04:38.540 - 01:04:52.679

put it in. I thought it was pretty good advice. So then we came - let me chime in on that point with a little story for you. Following up on the comment about Judge Maggiore and misdemeanor. At some point it dawned on me as

01:04:52.679 - 01:05:08.120

a bankruptcy lawyer, the one place Judge Maggiore didn't want to be was on the bench in the courtroom listening to lawyers put out evidence or argue. The key was to get back in his chambers and he had these big, very comfortable, massive leather chairs, a little

01:05:08.120 - 01:05:21.179

bit lower than his bench, so you had to look at that. So to get everybody back in there and then try and get him to turn on opposing counsel for some reason and start arguing your case with opposing counsel, and if you got that far, you were

01:05:21.179 - 01:05:36.929

going to win your case. Conversely, if he was arguing with you, you're going to have to figure some way to try and get that spotlight shifted back over to the other guy. I think, and I personally like Judge Maggiore, but I have

01:05:36.929 - 01:05:54.310

to say I think temperament-wise, maybe the worst temperament of anybody I ever ran into on the bench to be a judge. Just was not a patient man and would very quickly turn on somebody. So the old adage, know your judge is really critical. So then

01:05:54.310 - 01:06:09.350

we came and still at the point of Nielsen Ollison, and then we came and Sarah Curly so I'm gonna tell a story on myself. I was chair of the and I wasn't chair, my partner who was a federal judge, Alfred Marcus was chair of

01:06:09.350 - 01:06:27.360

the committee when she was selected and on it was Paul Bender and then a couple - a partner of yours who I don't know I don't remember, and it was interesting, so, you know.

01:06:27.639 - 01:06:49.040

Jim Khan filed his application late or he would have been the judge. And we had Barbara Caldwell and we had Sarah, and Dawn Zeitlin. So Dawn Zeitlin. And we saw 8 people out of 640 that we

01:06:49.040 - 01:07:07.679

interviewed on a Saturday, and I love to tell the story. Dawn Zeitlin was very qualified. She was extremely qualified, but she was like 32 years old, and here we're sitting with all these old men, and she walked in and she was,

01:07:07.850 - 01:07:30.520

a convert. She had married my fraternity brother's son and she's a good lawyer and she was being married on Sunday. And our interviews were on Saturday and she was converting and she she had converted and they're the worst anyhow and she was very

01:07:30.520 - 01:07:50.120

dedicated so she walks in and she's sitting with this Hispanic judge and these two Jews, Paul Bennett and I, and she says, you're nothing but a bunch of prejudiced people. Was he? Not very well. And she said, why did you set this on Saturday? I should

01:07:50.120 - 01:08:08.520

be in synagogue. I'm getting married tomorrow. Marcus said in recess, Marcus said, You think she has the temperament to be a judge? And that was the end. Lovely lady, very smart, bright gal, but her one sentence doomed her. So now she's off picking

01:08:08.520 - 01:08:23.660

oranges and being very rich with her husband. Apparently was quite as smart as we all thought she was - to follow up on this bit of levity. I wanted to tell the story about when I first got involved in a bankruptcy case. It was

01:08:23.660 - 01:08:43.939

Consumer Smart of America and I think it was 1962, and I didn't even know how to spell bankruptcy and McGary, was working with Stubman Trieser, well, Quittner Stuttman Trieser and Glad. And this was one of the first chain stores that had

01:08:43.939 - 01:09:00.430

ever been developed. It was from Florida across to California. They had a place in Phoenix, and they got in financial difficulty. George Raft, who was in England at that time living there, used to open up their stores for them, and they'd have a big

01:09:00.430 - 01:09:24.870

spread. In any event, McGary filed a 77, which is the equivalent of later Roman 11 for small corporations, and it didn't have to be approved by the judge. But McGary got it approved by the judge. The federal district judge approved the

01:09:24.870 - 01:09:43.709

petition. I got to reading things a little bit and I said to McGary, I've been looking at these leases, we're gonna have some problems coming up, and I looked back at the order approving the petition. And the leases all had a default clause that

01:09:43.709 - 01:10:04.358

allowed them to be terminated if there was a petition approved by the federal court. Apparently the person who had drafted the leases hadn't really focused on the difference between the two, reorganization cases, and McGary certainly hadn't, and from that came my tendency to always tell

01:10:04.358 - 01:10:21.140

the younger person, read the statute. I told McGary, you better get that eliminated, so he went in and got an ex parte elimination of the order, and no one ever raised the issue. So then we came to the selection of judges by the commissions. And

01:10:21.290 - 01:10:40.930

there was Curly Bob and if you look at it like Sarah was appointed 86, Bob who's quitting us running off is 90, that's now 21 some odd years, 22 years, Jim and Case, and then we're left with the two. So the real point of

01:10:40.930 - 01:11:03.810

this is here practitioners are there nd I look at the lawyers who are interested in all that and they understand the rule and now there's gonna be an entirely different path and so I guess my advice is be patient. I think

01:11:03.810 - 01:11:24.819

the level of selection, I think the method is better than it was. I don't think you can ever come to watching it for all of these years. I don't think you can ever really come to a perfect system in anything.

01:11:25.209 - 01:11:46.689

Everybody does their best and you see, because as you talk about. We've talked about 10 12 that you all know, most of you all know, starting with Hugh Caldwell, the kind of the wild card was Joe Cracko that

01:11:46.689 - 01:12:07.569

was kind of a strange little transaction that was really again I'll call it a relationship appointment with Dennis, that the whole family was - he became a pretty good judge though -he was all right. Yeah,

01:12:07.580 - 01:12:32.310

I think Skip Woods clerked for Hugh Caldwell. No, I clerked for Scan and Michael. Michael clerked for Mickey and Caldwell, but he had long hair then, as my wife said, you hired him 20 years later. When

01:12:32.310 - 01:12:46.919

you think back about some of these judges, when you tried a case in front of Hugh Caldwell, he would lean way back in that chair and he would close his eyes, and if you didn't know better or you hadn't been there before, you would think he

01:12:46.919 - 01:13:04.020

was asleep. But that's how he tried cases and he was not asleep and woe to any attorney who intimated that perhaps he wasn't paying attention. At that point in your case pretty much was over waterfall. I love my Hugh Caldwell story. First of all

01:13:04.100 - 01:13:21.689

I've learned more from him than I could ever learn from anybody, but I would go to Yuma and I had a case. I went there 52 times. He was a farmer who on the same case - what

01:13:21.689 - 01:13:39.330

did you charge? - Well, let me tell you, after 52 times and I was representing trustee, this is a farmer who either intentionally drove into a canal or accidentally drove in a canal and left a $4 million policy. And Hugh Caldwell at some point

01:13:39.330 - 01:13:57.370

in the proceeding decided that $2 million of it was exempt to the wife. Don't ask me the law. I could not tell you what law that was. But there was enough. Arizona statute makes it exempt, right? At any rate,

01:13:58.580 - 01:14:12.500

so I had my feet come up and we didn't get interims at that time unless I made a mistake in Nicole's case. They had 45 million. I saw that so you came, you made your application, but it was basically at the end of the

01:14:12.500 - 01:14:28.799

case and it was in the juvenile court, and Tom says he sat there in juvenile court and Hugh, after every matter at that point in his life, would take a recess and go in his chambers and smoke. So my matter came up and it was the

01:14:28.799 - 01:14:49.970

fertilizer company that was, and this was a very important thing to my life, the $75,000 fee. And Mike Smith was the lawyer. And we recessed and then we came back together again and there was no Mike Smith. He had walked into the detention part, walked

01:14:49.970 - 01:15:10.750

out to the right, which is a padded cell. And they, fortunately it was a Friday, we'd go there on Fridays and they brought some truants in that week and they retrieved them at like 4 o'clock in the afternoon. So the moral

01:15:10.750 - 01:15:27.169

of the story is don't ever object to my fees. In in the old days in Yuma you either had to take a very rough flight of a small plane or drive almost 3 hours one way from Phoenix to get there. Neither Judge Ellis or

01:15:27.169 - 01:15:43.279

Caldwell held court in the state juvenile court, and there were only 4 chairs for lawyers in that courtroom. In those days, it was Jimmy D. Smith, Mike Smith, Ted Mullen and John Wheel. And I used to do a fair amount of work down there and at

01:15:43.279 - 01:15:55.270

some point I realized the way to get them to get out of your case quickly was to get there before one of them, get one of those chairs, and then they were so anxious to get into that chair they really wouldn't want to fight or argue

01:15:55.270 - 01:16:11.270

that much about your case and you'd get hurt early and get out of there and be on your way without a great deal of problems. They now have a courthouse named after John Rowle, who was a wonderful human being. Jerry, did you ever think that

01:16:11.629 - 01:16:30.600

enough credit was ever given to Judge Morgan for basically saving? I forgot my hearing aid. Did you think enough credit was ever given to Judge Morgan for saving our hometown area? Oh, You know that I didn't participate to any degree in that case, but it certainly

01:16:30.600 - 01:17:02.720

seemed to me that it went very well, and I don't know. Oh Don, you go first. Well, I do think it's critical. There was a practitioner case error on Celebrex. The other thing which,

01:17:02.729 - 01:17:29.120

a lot of people don't know. The airline. They reached the point that they knew exactly. They could not find. And there was a group of businessmen. I feel I have money back not extend the deal. You have to

01:17:29.120 - 01:17:50.450

have X amount of money. Put into the state. There was a fairly infamous meeting that occurred amongst banks inArizona. I heard that then Governor Symington was kind of leading the herd of the businessmen to get them together, saying we have, I remember the number,

01:17:50.529 - 01:18:03.910

I want to say it was $10 million but whatever the number was, he was basically saying to them they'll be gone if we don't have this money in their hands by this date and we'll start to go around the room and say, OK, Schian, I need

01:18:03.910 - 01:18:23.259

this amount from you cross this amount from you, and that's what. But the greatest moment of the meeting was Bank of America was the first bank to take over and now the state during that transition. So they had a new crew that

01:18:23.259 - 01:18:45.830

was sent down to San Francisco for the Bank of America, and they got the Bank of America, which is almost new. I talk to the sons about is that Bob Logan. Those of you have a pretty tough - And they got the

01:18:45.830 - 01:18:57.270

Bank of America guys and they said well, you know, we might be willing to do this, you know, we're gonna have to do so and so kind of background, we have to do this, and the stars, we may have to align with

01:18:57.270 - 01:19:13.979

mercury for us to do this loan and Logan looked across the table and said, I'm gonna make the loan today and I'm gonna write it off tonight. That's how much I think is collected, and you ought to make a decision now. That's it. It's interesting when

01:19:13.979 - 01:19:33.220

you talk about, Brenda, did you represent a secured creditor in that? I didn't hear unsecured creditors come in here. I find we're gonna talk about the various industries you can see from the outline, but how about

01:19:33.220 - 01:19:52.979

the wheel turning that now US Airways is talking about a merger of American. I find that the American story, it's a capitalist system. Well, if you look at the outline somewhere on there, Chapter 11 mega cases, number

01:19:52.979 - 01:20:11.589

2, the airline industry, and almost every airline in the United States has been through Chapter 11 at least once. So here we go again. Now I got to tell you a couple of war stories about America West. I believe it was filed in 1991. And

01:20:11.589 - 01:20:28.250

I've just gone on the bench, and at that time, Bob Mormon, who draws the case, is the chief judge on the map on the road a lot. And so he asked me, could you hear the first day hearings, and they need a dip loan approved. Sure,

01:20:28.370 - 01:20:40.279

I can do that. So I heard it. No problem. Not a lot of fight about it approved. Well, a couple of months later, he says, you know, they're coming up on the 2nd loan hearing. I've got to be out of town. Can you hear it?

01:20:40.430 - 01:20:55.450

And I said, Bob, I'd do it, but I'm gone. And you know, if you knew Bob, well, he kind of sighed and I said, you know, I think Moe could hear him. And he says, do you think there'd be a problem? And I said,

01:20:55.729 - 01:21:07.609

I don't think so. I think it'll be fine. So I was up in the hearing, I believe was on Friday. I'm in Pinetop with my family on vacation and they're all sleeping in, so I get the morning paper and I open it up and I

01:21:07.609 - 01:21:26.720

get to the business section, and there's a headline and a story about the hearing. And this is the one where Moe asked one of the lawyers, Do you know the meaning of retro mention? No, go get the dictionary and find out. And then

01:21:26.899 - 01:21:40.580

when they got to the fee applications, he said to the lawyers, he said, you know, I was thinking I flew up this morning on America West, and the flight attendants told me that they have been for years paid in America West stock which is now worthless and

01:21:40.580 - 01:21:58.299

so I think in fairness to the system, we ought to pay all of you professionals with America West stock. Well, I mean all the orders got in and everything got approved and it was fine. And Moe never heard anything else in that case, but he

01:21:58.299 - 01:22:12.279

did, I think, at the confirmation hearing or one of the hearings, unbeknownst to Bob Morman, Moe sneaks out on the bench before the hearing starts and all the lawyers are just over there. And he walks over to the bench, he says, looks up and says, I

01:22:12.279 - 01:22:29.160

just needed to get a pencil. Excuse me. You know you could tell 1000 mo stories, but one of them that you reminded me of, somebody would show up, and I was telling them last night, and I had filed multiple 5 or

01:22:29.160 - 01:22:49.549

6 cases of what we call the Carry Marbus cases and which might finish up properly. And somebody came in and he starts out with this lawyer from Dallas and says to him, did you get that suit you're wearing on sale at Brooks Brothers? And

01:22:49.549 - 01:23:06.439

that totally collapsed the guy. He didn't know, you know, what to respond to. And then another boy was there from striped Ly before it was closed and gravy, and he had an area in his hair, and Moe says to him, does Mr. Strike know

01:23:06.439 - 01:23:26.450

you wear an earring crew? And the kid turned white. Absolutely. He said, don't worry, I won't tell you. We don't have a lot of conversations. But I was reminded last night by the judge of the sign he had in his podium

01:23:26.799 - 01:23:45.589

that sometimes said I don't know exactly the first thing, but it referred to Mr. McGrath speaking in the courtroom, a physical sign had, and then when he wasn't there and I was there, it was Mr. Rothschild speaking and he had these signs that

01:23:45.589 - 01:24:06.560

he would have knowing that we were coming there. It did kind of quiet us down. Then I'm going to tell my last story of myself. And he would say, good to see you, starting to talk. You thought you had gone

01:24:06.560 - 01:24:24.109

to the party to stop and say, how much time has elapsed? And I've never quite understood the saloon. You know where he would order you to the Salerno seance room. You don't know that story? No, I really, I know the story and I've been ordered into

01:24:24.109 - 01:24:39.910

the Salerno room more than once. I never know how Tom got the name, the permanent name. I don't know the specifics, but I know this is gonna shock everybody, but I think Tom was being a little obstreperous and the out to the

01:24:39.910 - 01:24:55.299

room, I believe, got started when Bo told Tommy J. Salerno and whoever else was involved in the case out into the room and talk it out and work it out and stay in that Salerno seance room until you do. Don't come back here until you have

01:24:55.299 - 01:25:06.459

it worked out. We can spend a lot of time telling most stories, but I have to share this one with you. You know, Moe had been the judge in Tucson, I think, for about a decade when I went on the

01:25:06.459 - 01:25:22.259

bench in 1990, and the way the assignments were going to work is I was going to take over a third of the cases in Tucson, so I would be the first bankruptcy judge in Tucson in over 10 years other than Moe. And if you ever appeared

01:25:22.259 - 01:25:35.529

or practiced in front of Moe, he had a different style about running things, so right about the time I get sworn in, Moe calls and says, can you come down and have lunch, and we'll talk about how to reassign the cases. In those days

01:25:35.529 - 01:25:49.390

there were no computers, so you had to manually say which cases were going to go, which cases we're going to stay, as a little aside, because Moe was the only judge in Tucson and he was, in my opinion, a very pro-debtor judge. If you had

01:25:49.390 - 01:26:04.089

a debtor case in Arizona and you could figure out a way to file in Tucson, you did. And so there were some cases on that list that I couldn't take. He says, if you would be in my chambers no later than 11:20, fine. So if

01:26:04.089 - 01:26:14.890

you remember the old La Placita Village, he had that kind of second floor place. So I get back there and I can't find Mo and I'm talking with Blanca and I said, do you know where Moe is? And she said, come on, I think he's in

01:26:14.890 - 01:26:25.890

the chambers. So we go to the chambers and there's no Moe, and she says, Oh, you know, there's an emergency hearing that I think you're gonna have to go here because Moe's not here, and kind of slips the robes on me and opens the door and

01:26:25.890 - 01:26:38.580

shoves me out. And I look out there and here's the court staff and there's probably 10 lawyers in the courtroom and they call the first case and you're just standing there going, you gotta be kidding me. I have no idea what's going on. It

01:26:38.660 - 01:26:53.799

was a total setup because in about 30 seconds Moe comes in and sits in the back of the courtroom and watches me fumbling around. Moe was a great friend of mine. I think it was about 10 years that he was on the bench

01:26:53.799 - 01:27:08.060

that I was a lawyer, and I think every time I was in front of him it was representing some bank or financial institution, and I don't know the number of cases, but I'm fairly confident that whatever the number was, I was 0 for something in front

01:27:08.060 - 01:27:22.270

of that he was a dear friend. I was never on the other side. Oh, unfortunately, do you remember the first time I met Mo? I take over a case from Bill and will be shown here from Valley Bank. It's kind of a mess, and so there's

01:27:22.270 - 01:27:34.310

a hearing in the afternoon in Tucson in the old Walsh building, at the bottom there where Caldwell used to sit. So the bankers and I go over and we sit down in the courtroom. It's about 10 minutes before the thing and it's now, you know, 1:35

01:27:34.310 - 01:27:45.189

and it's supposed to be a 1:30 hearing. So I kind of walked back and said to his secretary, I introduced myself. I said, is there going to be a hearing? And she goes, Oh, I think you're supposed to be in chambers with them. So

01:27:45.189 - 01:28:01.290

I go in there and there's Judge Caldwell and Lowell Rothschild, and at this time I did not know Moe, and there's a guy with his feet up on Judge Caldwell's desk and his hand behind his head. And if you ever walked into a room and killed

01:28:01.290 - 01:28:16.439

the conversation, that's what happened to me, and that's the first time I ran into Moe and one of the early contacts with Lowell, and things didn't go well for the bank in that case is my clear memory. Are they still in existence today? I'm sorry, is

01:28:16.439 - 01:28:37.799

the bank still in existence? Valley Bank, it became Bank One, and now it's JPMorgan Chase Bank. Skip, I was a scandals clerk. And Alison scale were good friends as I had a bit of legal aid in the days when there were still

01:28:38.299 - 01:28:52.830

Article 3 kinds of stuff and you had to file a complaint for relief instead of when I had been a legal aid, we do counterters, you're gonna sue for both. I got all this fair debt collection. I'll do that. So I taught that to up

01:28:53.750 - 01:29:16.620

when I was scanning his law. And a scan came into my office today with this bleeding, and he threw it on my desk. He said it's remo, fix it. Yeah, it's pretty colorful Don. I know it's even worse for OL is the largest case. To manage

01:29:16.620 - 01:29:54.250

to solve first year I mean the largest case he's ever had was the two sole. And I represent a multi issue involved. Yeah. Richard Levi was scandal. How long did it stay in Phoenix, Don? Is he talking

01:29:54.250 - 01:30:10.669

about TEP? Well, and that you brought it up, I'll bring it up. So Dodd files this case in Phoenix, which pissed Moe off. And it comes back to Tucson. I don't know if any of you realized there was never an order entered in that. He never

01:30:10.689 - 01:30:30.399

adjudicated. You know, at any rate, let me tell. We have the initial hearing. Rich Levitt, who if you've ever worked with, is great, one of the best, and Rich gave about an hour and a half hour hour presentation about the electrical industry in

01:30:30.399 - 01:30:45.819

Tucson Electric and that structure and additions, and it was brilliant. And he finished doing this presentation, said, thank you, Judge, for the time and, you know, got a whole series of issues and said, Mo looked at it, he picked up some papers, kind of it

01:30:45.819 - 01:31:03.459

like this and said, I'm appointing Tom Chandler, special examiner to as to whether or not the rates should be lowered for electricity in the city of Tucson, and stood up and walked off the bench. It went out, we went out. And the lawyer will come after

01:31:03.459 - 01:31:20.549

him and the guy from the stand and said, there is not leave out all the experts. There is no way that this case is going to go another minute. The case was settled. Yeah. That was an interesting case. That's a good case. Also, but the line

01:31:20.549 - 01:31:40.810

that Don doesn't tell him, so it's classic is he's there and he's up arguing and Allison says to him, you know, when you shoot the king, you better be sure he's dead. That sent the whole message. How long does that involuntary you out

01:31:40.810 - 01:31:58.939

of work that, you know, that was pretty important. was pretty important to our community. It didn't make any difference. That was the, what the case was gonna be. Should we take a little break? Everybody get coffee.

01:31:59.979 - 01:32:35.859

Why don't we take a 10-minute break and we'll come back and talk a little bit more about Arizona. Thanks. Only for you. You needed a smoke. I could see you did need a smoke.

01:32:55.100 - 01:33:32.500

Are we doing OK, coach? Can you hear me? I think we need to speak up a little. Jerry's got the mic. No, it's me. I will talk right in my hearing. Well, you tell me what happened.

01:33:33.520 - 01:33:50.080

Well, I know, I know my hearing's impaired and I promised my daughter-in-law, who is the kindest, nicest, empathetic person who finally got the guts, she said, when are you gonna have your

01:33:50.080 - 01:34:08.359

hearing tested? I said, I'll promise you by September 1st I'll have my hearing test. I told my mom and dad one Thanksgiving, I said, I'm worried. Christmas. Oh, you don't. No, no, I do. Yes, and they're hearing aids with the two of you, and they say,

01:34:08.399 - 01:34:26.919

what? They looked at me and said, Really, they want to for Christmas. And what, what happened with your mother-in-law? Anything? She was, she's moves in to me. And is she's not happy, but we were all out to dinner with my mom and dad up

01:34:26.919 - 01:34:42.810

at the 10 days ago instead of stop. I've got an announcement to make. I decided I'm moving out. No, they were gonna make her and moving out of my home. Oh my, thank God we were all like, whoa, great. Should we get going again here? Let's

01:34:42.810 - 01:35:06.990

get started. OK. Just a couple of housekeeping matters that may help with the materials. One of the interesting things about putting together this program is I discovered that 3 very different panels had materials that largely overlapped and so to the point that at certain times

01:35:06.990 - 01:35:20.870

as I was looking at the materials I had to try and discern which group it was. The panel this morning actually mentioned two articles or sets of materials that are elsewhere in the materials. I just wanted to let you know where to find them. The

01:35:21.029 - 01:35:47.479

Bash's article by Judge Marler is at page 363. The litigation panel tomorrow also included Jerry Smith's materials from talking about the Article 3,

01:35:47.589 - 01:36:05.450

Article 1, and the need for bankruptcy judges to be Article 3 judges. Those are in the litigation panel's materials at page 137. So if you're looking for those, they're in the materials are just a little different place. I was going to share one

01:36:05.450 - 01:36:25.169

other aside from where kind of where the panel concluded. It wasn't just Judge Mormon in the 90s that kind of kept the entire Arizona economy afloat as you know, as it was all of our judges, as the entire real estate economy was crashing.

01:36:25.209 - 01:36:45.330

In some sense, you don't appreciate perhaps how difficult that was until you realize that with AmericaWest Airlines, that case was filed a year or two after Eastern Airlines was filed on the East Coast and for those who don't remember, Eastern

01:36:45.330 - 01:37:02.979

Airlines did not have a particularly successful conclusion. It stopped flying one day and as I recall July of '91. And I don't recall the judge who handled that case, but he was roundly criticized for having let that case go on and all the things

01:37:02.979 - 01:37:19.660

that happened in that case. So when Judge Morman was making the decision to keep our hometown airline afloat there was some precedent from the East Coast that probably made that a little bit more difficult decision than what we can really

01:37:19.660 - 01:37:37.250

appreciate after the fact years later when we know how the case came out. Yeah that case was filed based on the incorporation status of the frequent flyer Company. Harvey Miller filed it in the Southern District in New York, and it seemed to me it was

01:37:37.250 - 01:37:54.649

assigned, and I can't remember his name either, but it was a judge that handled kind of the upstate New York cases I think that's right. In re ionosphere as I recall, you'll never find Eastern Airlines, but if you search for in re ionosphere

01:37:54.729 - 01:38:12.589

that's the name of the case. With that, I'll turn it back over to our panel. Thank you. Well, I think we were kind of talking about the bankruptcy judges. You know, I wanna talk about them - if I could interject one thing, I

01:38:12.589 - 01:38:28.750

don't know if I can make this available to the state bar, it'd be good to circulate to the bankruptcy committee. It is Harvey Miller's interview, oral interview of Frank Kennedy. Harvey gave it to me and, well, Frank actually sent it to me. I've got

01:38:28.750 - 01:38:51.609

a cover note. And it was done, I think in the early 2000s before Frank developed Alzheimer's so badly, but Frank Kennedy was absolutely incredible, and I'm just gonna make one reference. In here, it's his tenure on the Rules Committee. And I hadn't even

01:38:51.609 - 01:39:12.649

realized it was so long. It started, I just read that I thought I had marked it. If I can't find it quickly. Any event, it was almost 16 or 17 years. It started in '73, and he was the draftsman of really what is the

01:39:12.649 - 01:39:33.680

major backbone of our rules today. And he did a wonderful job and the other thing he discusses with Harvey is the need for legislation to allow the rules to override the Bankruptcy Act or code as was to become known, and he refers to it as the

01:39:33.680 - 01:39:53.990

famous section 2075 and Frank says this is Harvey's question. Frank had said we're handicapped because in working on the general orders by some archaic language in the provisions of the statute, so we drafted a statute to authorize the Supreme Court to promulgate bankruptcy rules that

01:39:53.990 - 01:40:11.899

would become the binding law of the land even though they conflicted with the Bankruptcy Act enacted by Congress. Then Harvey said, was that the famous section, and I'm sure he's referring to 28 USC Section 2075. Frank answers yes, there was a very broad statute enacted

01:40:11.899 - 01:40:27.899

by Congress authorizing promulgation by the Supreme Court of bankruptcy rules that would be binding even though in super session of a federal statute, and we were very bold, we didn't have any battle in Congress on the bill. Congress passed that law giving the Supreme Court the

01:40:27.899 - 01:40:48.399

authority to write it, but then they raised the question whether that's constitutional. Fortunately it hasn't been ruled on yet, but that might be an issue that comes up someday as to whether that can be done. There's a section in your outline. I'm gonna talk

01:40:48.399 - 01:41:08.700

to the mic so everybody hears me. Apparently, I was mumbling, which I tend to do. On the Arizona bankruptcy practice, we have an outline of, or let me phrase it this way, Judge Baum very well outlined the 60s, the 70s, 80s, the 90s, and whatever

01:41:08.700 - 01:41:25.009

in the 2000s. That's fine and then I start practicing 8 years before you start doing it, we did have cases before you were born. I want talk about a couple that I was involved in and then we'll talk about some

01:41:25.009 - 01:41:47.890

of your questions. Arizona Atomics, let me tell you about Arizona Atomics, which was a Tucson case, was owned by basically by a man by the name of Keith Brown, who was the senator from Santa Cruz County and American Atomics

01:41:48.709 - 01:42:10.750

made exit signs just like the one that's as you leave here and they used to light up the exit signs with a some kind of chemical called tritium. It was in every, in every commercial airplane. So at any rate,

01:42:10.750 - 01:42:28.859

one time some employee, and they did a lot of glass and used a lot of the at one point some employee did something, dropped something, and there was an emission from the locale where Arizona Atomics was. They were next door to

01:42:28.859 - 01:42:52.939

the main food processing facility for the Tucson Unified School District. So a number of the parents got very, very upset. Went to Governor Babbitt, and Governor Babbitt exercised the police powers by organizing the National Guard and coming down and raiding the American atomics and closing

01:42:52.939 - 01:43:08.419

them up. About that time, Mr. Schoenherr, Billy Schoenherr, and they were always late when they referred me a case. There's always been, you know, after all, why would you dirty your hands with bankruptcy or anything like that. Later on they learned and so

01:43:08.419 - 01:43:29.089

we filed an 11, which of course enjoined them. Bill Scanlon was the judge at the time. And with his objectivity towards government, the first thing he did was say to the state, and do any of you remember Tony Chin? He was

01:43:29.089 - 01:43:49.540

the solicitor general for Bruce Babbitt. He came, a very nice guy and a good lawyer, and he came down and they called in and Scanlan ordered, where did you get this information that was hurting people? In the meantime, I've gone to the

01:43:49.540 - 01:44:05.270

university and talked to somebody in the chemistry department. He said Oh, you can drink that stuff and nothing's gonna happen to you. But it really cost, it really caused people a lot of anxiety. So they took all of our equipment

01:44:05.270 - 01:44:24.299

packed it up in National Guard trucks, and moved it to Flagstaff. And so the real case was about and by the way, the lawyer for the owners was the guy sitting to the

01:44:24.299 - 01:44:39.459

left of me Mr. Smith and he said, go get them. Well, they had a mortgage, you know, the Southern Arizona Bank, so the whole case revolved around how we could sell this stuff and reduce the debt we had. American Atomics was never going

01:44:39.459 - 01:44:56.680

to be a viable company again. It was gone. The question is how do you minimize the loss basically. About 2 weeks into the case, the people in Flagstaff said, well, if it's not good enough for Tucson, Governor, why is it good in

01:44:56.680 - 01:45:19.020

Flagstaff? So here's my thrill. My wife says that sometimes I'm the only person she knows who might have an orgasm over a confirmed plan. That's her kind of private joke and I said, so now we had to stay and he

01:45:19.029 - 01:45:36.379

was stuck with all of this poison in Flagstaff. So I went to Phoenix and Tony got me an entry with His Highness the Governor and it was big play. I mean he was saving the world with the National Guard coming down and we negotiated a

01:45:36.379 - 01:45:56.299

a truce on the basis that he would go away as we sold these things, we had a standard of how it cleaned up and he got to move, they got to move to an actual real repository for, dangerous chemicals. So that was an untold

01:45:56.660 - 01:46:14.609

real story, but a real interesting use of a chapter 11, and it was fun if if that's what turned you on. Of course they didn't survive that. No, they were gone and the airlines no longer use tritium. I think it was eliminated everywhere

01:46:14.700 - 01:46:34.350

in the United States. I'm gonna talk about 3 cases. The other case I'm gonna talk about is to illustrate the utilization was the city of South Tucson which was filed by Mr. McGrath and I as a chapter 9, what happened was that,

01:46:34.379 - 01:47:00.160

the city of South Tucson, which is a square mile city of 98% Hispanic people, it had a very complicated history. Part of the street as you go down 6 was occupied by a lot of enterprising houses of prostitution, a lot

01:47:00.160 - 01:47:19.410

of gambling, uh, a lot of issues, but they were working very hard to kind of get it all straightened out. They had a great city manager, a guy by the name of Enrique Serna. They had a joint agreement with the city of Tucson police

01:47:19.689 - 01:47:38.169

that if there was some big exposure of some sort, they would jointly go out and there was a domestic relations fight and both went out and the South Tucson police shot Mr. Garcia in the back, one of their co-officers, and made a quad

01:47:38.169 - 01:47:59.600

out of him. That case was tried. In the Superior Court and a $4 million judgment was rendered against the city of South Tucson for which during a period where they had lapsed on their insurance policy. So I think they maybe had maybe $100,000. And

01:47:59.600 - 01:48:14.310

so we filed a Chapter 9, one of the requirements, and today is a requirement, is you have to negotiate with your major creditor, and that came out of the history of the New York City bond things when they did all of that. I read on the

01:48:14.310 - 01:48:38.459

ABI blast the other day because of Stockton and San Bernardino filing there, since 1980 there have been 250 chapter 9s filed. 20 of which are cities, the rest are waste product situations. The Jefferson County, Alabama one really has to do

01:48:38.459 - 01:48:54.919

with a different system which Ken Klee recently gave a lecture on that Brenda and I were at that was really interesting, and the problem is even getting more complicated down there. So in the city of South Tucson we filed

01:48:55.220 - 01:49:13.220

the 9 and the process had been or still is that the circuit appoints a district court judge and a bankruptcy judge. That's to keep it really being bankruptcy judges that are involved with the cities, and they appointed Richard Bilby, who was the chief judge at

01:49:13.220 - 01:49:34.229

the time, and Bob Moorman. Bob Morman never entered an order in the case. Bilby kept the case. Bilby was going to come to a solution and so the first day of hearing, John Dawson was representing the injured

01:49:34.319 - 01:49:51.589

Garcia. And he made a motion to dismiss. We weren't qualified or whatever it was, and I like to tell this about John. He got up, you know, huge as he was, and said, My name is John J. Dawson. I'm a partner at Strike

01:49:51.589 - 01:50:05.390

Lang, and he went on and Richard Bilby said, together with the other 100 partners. And well that already set the tone of the case. Bilby was going to be in charge and it really didn't make a lot of difference what the lawyers were doing

01:50:05.390 - 01:50:20.919

and then he looked at me and he said, and file a plan in 60 days and no shortstopping, you know, the real plan, Mr. Rothschild, you're not going to negotiate. John also said to him, which I thought was a fatal error, you can do one

01:50:20.919 - 01:50:37.100

of two things, Judge, in a 9, and this is kind of an interesting part of a 9. You can approve the debtor's plan or deny it. You can't do anything else. You either got to go up or down. And Judge listens. I thought to myself,

01:50:38.290 - 01:50:56.580

John, don't talk to Richard Bilby that way. You're gonna get in real trouble. So the next thing we've got an order denying our plan. And, I don't know if you remember, Michael, the iron plan and saying but if you amend it, A, B,

01:50:56.770 - 01:51:14.520

C, D, E, and F, I will confirm it. So the judge was writing the plan. I mean he was a very activist, judge to say the least, and he was obviously bound and determined that South Tucson wasn't going away under any circumstances, and

01:51:14.520 - 01:51:32.200

we couldn't get to a solution, John and I for economic reasons. I had nothing to do with any of that. And so Bilbly called us in and he said, I'm gonna appoint Earl Carroll as the mediator. I said, oh.

01:51:34.100 - 01:51:47.419

Well, Earl Carroll - I had been the president of a water company that Earl represented very well, by the way, and I was talking to somebody the other day. Earl went on the bench at the same time as my ex-partner Margaret,

01:51:47.620 - 01:52:05.089

so Earl's 90, and I said, how's Earl doing? He said, he's a little grumpy. And I said, really? No kidding. At any rate, we ultimately settled the matter and we settled it at the Denny's at Oracle and River, John and I, and

01:52:05.089 - 01:52:23.390

had a payout. We bonded it out. Prudential got us a bond, 10% interest. I have a copy of the certificate in my office but by the time I said, can I buy one of those

01:52:23.390 - 01:52:41.569

bonds? They're sold. And it was a, you know, a, and then they refinanced it, so that was the city of South Tucson. He got paid. Michael, we had a party. A celebration party at one of the I don't

01:52:41.569 - 01:52:57.790

know what restaurant it was on the south side, and Michael and I were the honored guests, and he was there. The plaintiff was there. His lawyers weren't there, at that time, and then there was a little dispute over the fees. Bilby complained

01:52:57.830 - 01:53:22.069

Strike Lang had charged $120 for copying, and the explanation of the fees was, Bilby said to him, What is everybody charging? Well, we're charging 50%. And here's what the federal judge's response. You're charging 50% of this paraplegic

01:53:22.509 - 01:53:38.229

recovery. How do you get there? Well, the plaintiff's lawyer got a third. There was an appeal, and that made it to 40%, and we're the bankruptcy lawyers. And we're kind of getting 10%. And he was kind of interesting, and of course I was

01:53:38.229 - 01:53:55.540

licking my chops, really, and he said, Well, I'll take a look at it, but he never did. And I don't know what the ultimate arrangement was. Michael, he says - as Moll said, the way the settlement was funded by was by the city of South Tucson.

01:53:58.370 - 01:54:24.270

The largest In South Tucson the underwriters of revenue. Which was the greater dog and that was how most of the tax dollars are going to be generated. To make sure that there will be enough handle at the dog track. So I'm not as sure,

01:54:24.279 - 01:54:46.419

we're gonna talk about the future of where all of us are in another phase of this. In that case it was not a very serious political problem filing the 9 because how it came up I think for most cities it's become

01:54:46.419 - 01:55:04.009

a serious political problem. I see in the San Bernardino case which I would have thought there was an order filed and then I read the other day the judge never entered. I thought it would be automatically entered. He has appointed the lady

01:55:04.009 - 01:55:25.379

from Portland, Liz Paris, to bankruptcy judge to mediate the case between whoever that creditors and all that, but I think you're going to see more, it is a very powerful tool for these cities, you know, to stretch or reduce interest to

01:55:25.379 - 01:55:50.200

market. Michael and I did the Handmaker Jewish Nursing Home, which is a nonprofit who had bonds and that became a little more difficult because of the bond situation. We have also participated and you may see this again, we

01:55:50.200 - 01:56:09.330

represented Pinal County and there are a whole bunch of water districts who just quit paying their taxes. They just stopped. And then when the county assessors started complaining about it, 2 9s were filed, and Jim Marler handled both of those, and it

01:56:09.330 - 01:56:27.899

wound up to be basically a stretch. The district court didn't involve themselves in it at all. They just sent it right to the bankruptcy judge and all of your jurisdictional questions that we've talked about. Close your ears, Judge. We just ignored them. We

01:56:27.899 - 01:56:46.790

just went on with them, and it was get to a solution and nobod fussed and raised hell because the bondholders said we're not gonna fight with you, just get us some money and get it done in a manner. But it is

01:56:46.790 - 01:57:08.209

a pretty powerful tool if you're against creditors. Let me add a footnote to that. Larry King for the Commission on the Bankruptcy laws and actually for Congress accelerated the work on the municipal adjustment statute because the great concern at that time in the mid to

01:57:08.209 - 01:57:30.589

a little later 70s was that New York City would file and he wanted to have a good statutory format in place and it did get passed ahead of the reform act. I think it was in 1977, maybe 76, so he did accomplish that, and that

01:57:30.589 - 01:57:52.000

was rushed through by Congress. Let me shift the focus, Jerry. There's a case that sounds very innocent from the 70s, White Fence Farms. Those of you who follow the Arizona real estate market, ever since I've been around, you've had the Wolfswinkel brothers,

01:57:52.279 - 01:58:10.350

Conley, Darryl, Clifford. There's a fourth one whose name escapes me. And it's been my sense in my time that if some Wolfswinkle wasn't suing another Wolfswinkle somewhere in Arizona, it was a very odd and unusual years, at least to my knowledge, that started with White Fence

01:58:10.350 - 01:58:35.259

Farm. So Jerry, what was that about? Well, Conley and Darryl and their older brother Clifford owned the entity. Clifford and Conley had 44+% and Darryl had a smaller percentage. There were fundamental disagreements over certain investments and how to handle them

01:58:35.259 - 01:59:00.180

and who was really in control. Clifford was the older brother, very domineering, strong personality, so was Conley. And what they got to fighting about was control. Well, control rested with Darryl and Conley as long as Darryl and Conley got along, and Clifford was outvoted.

01:59:00.850 - 01:59:22.990

So Clifford went to Henry Jacoboitz to file an involuntary petition. Now why in the world they did that? This is called brotherly love. It escapes me, but they were doing fine. They did have some unpaid obligations as they always do, but there really

01:59:22.990 - 01:59:44.390

was no need for Chapter 11 to be filed. Now this was just after the new bankruptcy code had come into position. Hugh Caldwell was assigned to the case and set in Phoenix through the entire time of that case, and what I did was take in

01:59:44.390 - 02:00:05.839

at the very beginning a consent to adjudication and an operating order like we had used in the old format under the prior bankruptcy Act. And Hugh Caldwell signed both of those ex parte as he should have done. We gave them what they wanted. Conley was president.

02:00:05.919 - 02:00:24.660

We didn't even have to have a board meeting, and he was named in the operating order. The operating order had a number of provisions that were protective of everybody's interest, requiring notice, requiring consent, requiring authority from the court to do things. We took 21 propositions in

02:00:24.660 - 02:00:46.439

a relatively short period of time. That was when Arizona was really booming. They were turning all of the farmland into buildings and things, and there was a very active market and we had 21 propositions, and every one of them was fought by Clifford.

02:00:46.500 - 02:01:06.759

He had a new attorney at that point and was putting up a vigorous battle. They got to the end of the road though. Conley kind of overreached on one. Little squeamish, yeah, but any event, I did submit it and Caldwell denied it, so

02:01:06.759 - 02:01:29.950

we decided it was time to fold the tent and conclude this matter and they had $100 million in cash or assets that was really solid, and they'd gone into that proceeding with needing to do some things, and they got them done, and the problem

02:01:29.950 - 02:01:45.830

was they were stalemated outside of bankruptcy and Clifford really opened the door to a very creative solution, but he fought it every inch of the way. He just couldn't stand it and it turned out they were really ultimately fighting about a diamond ring and a

02:01:45.830 - 02:02:09.990

Mercedes. I know all about that diamond ring. In any event. And I think, did you give them the materials on the on this arbitration? Any event, they worked through everything and they got down to Clifford was asserting a final claim,

02:02:10.089 - 02:02:31.640

a little less than a million dollars as I recall, and he said, Conley, you can arbitrate it. You be the arbitrator. I'm going to submit my position to you and I couldn't believe this was happening. I sat around this huge table

02:02:31.640 - 02:02:47.580

it was on the southeast side. They built a new hotel out there in some of the land they've sold. I forget the details and the name of the hotel, but there was this huge table and we were all sitting

02:02:47.580 - 02:03:06.229

around that and Clifford put on his case, Conley listened to him patiently, had a recess, came back in. Said Clifford, I'm ruling against you. So that was the end of the matter. And I can't say they all lived happily ever after, but they did get

02:03:06.229 - 02:03:24.000

a lot of money. Well, as I said, my view has always been that one of them is suing some of the other ones someplace sometime. So if we go into the 1980s, you've got American Continental and Charlie Keating, which at the time was the

02:03:24.000 - 02:03:40.540

biggest bankruptcy case ever filed. We, by the way, were local counsel in that but had to bow out because we weren't disinterested. And I can't remember the details of that, and I think then as a result of that - who was it took over? The judge

02:03:40.540 - 02:04:00.970

or the attorney? The attorneys, the local counsel. I should remember, but they brought in a council. Who brought in counsel from LA. Yeah, somebody from LA. It was. Yeah, I'm trying to think of his name, Mick got disqualified.

02:04:02.540 - 02:04:27.700

But they did have someone local is it Salerno? That was a lawyer's relief case. Yes, it was. To kind of go back to the Wolfswinkel plan. The the biggest borrower from Lincoln Savings, Charlie Keating's then SNL was Conley

02:04:27.700 - 02:04:49.339

Wolfswinkel and his company. And, you know, the RTC started showing up in about 1988. I go on the bench in March of 1990, and if I remember correctly, it's 1991. A very large case gets filed by Mesh, Clark, and Rothschild in Tucson on behalf of

02:04:49.339 - 02:05:09.419

Conley Wolf Swinkel and WGI and as I said before, obviously they filed in Tucson because Judge Ollison's there. So in those days, and let me finish. You have your view of that, I have mine. So in those days you would physically

02:05:09.419 - 02:05:20.620

walk the petition in and there were little names in a cup, kind of like one of the little games we played as kids and a name would be pulled out of the cup and that was your assigned judge. Well, the petitions filed, they pull the name

02:05:20.620 - 02:05:43.060

out of the cup and they're told you've drawn Judge Baum. And I was told by the people at the front desk that the response to that was that cannot be right. So before we had computers, you know that thing that you shake

02:05:43.060 - 02:06:01.689

up and people play dice with, so they had 3 judges in Phoenix and Judge Caldwell and I guess whatever the overlap was, and his clerk and secretary had moved with him to Phoenix. And so I get this call one day. I was telling them

02:06:01.689 - 02:06:22.279

at dinner from John Westover. And John Westerver says, there's gonna be a hearing tomorrow, petition, and I've got $80,000 worth of fees coming, and John Dawson is challenging it, and I need some help. Will you fly up? So I said sure and John, I

02:06:22.399 - 02:06:39.839

never drove those days. Did you charge that to the estate? There was no estate. My client was my client was O'Connor Kavanaugh. That was a really good law firm by the way. At any rate, so shall we talk about the Harry Kavanaugh John

02:06:39.839 - 02:06:55.069

Flynn fight? He was my classmate, and he and John Mesh were like brothers. So you know. Come up there, so I arrived and they're talking about how the case is going to be done, and she shakes it up and out comes

02:06:55.450 - 02:07:09.640

one cube. There was only one cube in there and it turns out to be Hugh. So anyway, we go and Dawson, John looks at me and all that. We finally settled it. I don't know, for pretty close to what John was at, and we're driving back

02:07:09.640 - 02:07:25.060

to the airport and he said, Oh, this is wonderful. You've got me this fee and it's very important to the firm. What do I owe you? I said, you know, just fix it. Pay my airplane fare, tell me about it. He said, I'm going

02:07:25.060 - 02:07:42.040

to send you a check for $20,000. I said nothing. I was a little taken aback. By the time I got on the plane, got back to my office, there's a call for John Westover. He said, you know, I think I was a little enthusiastic. He

02:07:42.040 - 02:07:57.399

said, I think that's a little high. Would $5000 do, which I thought was 3 times about what I was entitled to anyhow. I said, that's fine. So that was the cubes and, and how long did you clerk for him, Michael? 1

02:07:57.399 - 02:08:20.850

year. In what year? So, I've got one more case that I'm gonna talk about and then they're gonna talk about others. And the reason that I picked these out has nothing to do with me personally or any of you.

02:08:20.990 - 02:08:41.779

It was just the utilization. That how we utilize the court and that's Tucson diocese - Judge shopping? No, I didn't judge shop. We had utilized the court

02:08:41.779 - 02:08:59.100

to get a result is what I meant. I hope that comes on the video correctly. I had for a long time had a friendship with a lawyer by the name of Tom Murphy whose father had represented the diocese for 40, 50 years.

02:08:59.220 - 02:09:21.569

Tom now is, I think, a Gus Rosenfeld. He'd gone, but he represented the diocese as an outside counsel, and the diocese had, among other things, had decided to owe $20 million to create a television station to spread the message and

02:09:21.569 - 02:09:45.339

they had engaged themselves and contracted with film producers so they had product to sell. They had the financial Monsignor was very aggressive in his business side of that, so that became a problem. We couldn't pay it. We had big debts. We

02:09:45.339 - 02:10:07.209

had big debts. We, the diocese had big debts, and then we, inally negotiated with, we went and met a number of - The Cardinal, who's now a Cardinal from Los Angeles, they had a committee and I remember traveling with the bishop and he's reading

02:10:07.209 - 02:10:25.459

his missile and I'm worried how I can put numbers together and he's prayed, which I thought was a help as a matter of fact so we got there and they want to know what shnook. Entered this business deal. And I said, not me. And

02:10:25.459 - 02:10:46.839

we had hacked the cemetery and it was just a total mess. Finally it got worked out with, and they were very cooperative. And then we got a notice from I don't know what Lynn Cadogan's partner was a claim of this child abuse.

02:10:47.740 - 02:11:08.140

And somehow we got into the fact situation that rather than filing the lawsuits, we would have a mediation. And when we arrived at the mediation, there were like 14 cases that they had that they presented and ultimately for better or for worse, at that

02:11:08.140 - 02:11:30.919

time the diocese was changing bishops from Bishop Moreno to the current bishop who's a spectacular, honest, nice guy. I once said to him, did you know when you were coming to Tucson you're gonna be facing this horrible

02:11:30.919 - 02:11:50.350

event, and his answer was a soldier that he was, he said, what choice do I have? I came here to do my job. So we settled that in a mediation probably. Well, it was no secret about a million dollars a copy for the 14.

02:11:51.140 - 02:12:09.240

At which point, and of course those are supposed to be all the cases. About two weeks later I got a claim for one of them for somebody that Taylor wound up knowing very well, and a long thing asking for some $6 million for this

02:12:09.250 - 02:12:29.589

event. This man who ultimately became chairman of the tort victim Committee, I think he took $500 or $600. He was a CPA, a very reasonable, interesting guy and a lot of the cases revolved around repressed memory, statute of limitations, a lot of issues,

02:12:29.609 - 02:12:53.419

constitutional issues of separation of church and state. And so they filed. Susan Boswell filed it. She'd been in the periphery of it with Michael and I, and we were gone somehow we thought. Somehow we've been sophisticatedly fired. I mean, that's how

02:12:53.419 - 02:13:13.529

I took it until we got a call from Susan and the bishop saying come back, we want you to represent the 76 parishes. Well, the truth of the matter is, in my view, the value of the churches, the assembly halls, the schools under Michael and

02:13:13.529 - 02:13:37.830

my theory was there because by that time the dioceses hopelessly insolvent for themselves. They really didn't have any money that the parishioners didn't send them. While that was going on, Spokane file. And the judge who you knew listened to all of

02:13:37.830 - 02:13:54.979

this and said, well, it's obvious all the parishes owe the money. One of the weaknesses that I, well I won't concede it was ever a weakness, was that we had sent all of our money downtown to the diocese and they mixed

02:13:54.979 - 02:14:16.060

it up and spent it. Didn't steal it all that, but they were doing central banking is their thought. Michael and I's position is they were trustees holding our money. We didn't have any documents that said that, but that's what

02:14:16.060 - 02:14:35.350

we thought we were sending the money about. The case had to have a solution. So they formed a tort victim committee of which that chapter was a fight over - I can't

02:14:35.350 - 02:14:51.310

remember the lawyer's name from - that chapter was who would have that committee, and how much money they would make and the same thing we all go through with relations, what was it? Yeah, he had all of those. At

02:14:51.310 - 02:15:10.089

any rate, so let me tell you now because you're all getting the inside of it. Taylor devised a plan of kind of measuring and I don't wanna be gross about it, it was the degree of abuse I guess if you

02:15:10.089 - 02:15:26.330

got pat on the tush that didn't work as much as sodomy or whatever else was going on, but it was a situation to be done and a couple of them were done. And the diocese had all kinds of property that had been

02:15:26.330 - 02:15:47.770

donated to them. I mean lots of property, almost 54 pieces of property, and the judgment was made by them to sell it and create a fund to pay for, and this is my words, pay for the sin and the crime. And a master

02:15:47.770 - 02:16:04.399

was appointed by Judge Marler. A woman who'd been a Superior Court judge by the name of Alina Rodriguez, and she would have hearings. Well, of course she had to go through every prisoner in Florence who had read the paper and decided that the reason

02:16:04.399 - 02:16:22.569

he was in prison was because some priest had abused him when he was 12 and by this time he was like 60. So it was very, very complicated, much to the credit of Taylor and his committee. That part resolved, but I will tell you

02:16:22.569 - 02:16:41.429

two stories about it. We're at the Arizona Inn. I had lost a watch that had been given to me for some honor, and I was bitching and complaining about that, and McGrath's on one side of the table and the two sweethearts were there, Ashworth and

02:16:41.570 - 02:17:06.109

McGrath. And Ashworth is trying to leverage more money out of us, and I'm saying we're innocent. All our parishioners just happened to be around. We're also victims and all that. And he said some snotty thing and all that

02:17:06.279 - 02:17:25.660

to which McGrath gets up in his usual calm way, and I said, we're leaving. And I said I lost my watch and I'm upset and I'm now wearing, I will tell you. So Taylor throws this watch at me. And

02:17:25.660 - 02:17:44.690

says if you don't have a watch here you could have that talking about the club that we all belong to, the necessity for coming to solutions notwithstanding tough problems so I have it engraved. The tailored to LAR, it was the date of that we settled it

02:17:44.690 - 02:18:03.610

very shortly after that. We took the two tempers out of the room and so there was an ultimate result. Let me tell you something interesting about Ms. Boswell's plan. Thereafter she became kind of a national star knowing about it, and

02:18:03.610 - 02:18:22.230

she and Judge Marler, I thought he might be here today, went around on the tour and told about it and all that. And then she went to San Diego's counsel for San Diego and got her brains knocked out, just really, really beat up. Judge Adler

02:18:22.230 - 02:18:40.809

was having none of a solution. She was going to punish that diocese if they stood on their head, and so that's the way that went. We then represented Riverside, and I guess we were paired Michael. Michael represented Riverside, and then it went on and

02:18:40.809 - 02:19:01.919

on. I see now they're doing a mediation in Iowa, but I wanna tell you. Two things happened. One, the bishop and we had a statute of limitations problem they had the plaintiffs. The bishop said if in fact it was proved that a priest molested somebody,

02:19:02.160 - 02:19:27.299

I don't care about the statute of limitations. They're to get $15,000 even if they can't collect. So they had pretty much documented all of it. Do you remember that? You're gonna want to pay some sum of money $10000 to $20,000 to anybody that was

02:19:27.299 - 02:19:47.289

clear you regardless of. But it was an interesting case, you know, you see the end of the cases and you see that they end and the publicity about it and even the lawyers don't know anything about it.

02:19:47.678 - 02:20:03.999

But we were sitting in a meeting, Michael and I with Boswell, and they had had insurance coverage. We actually hired an obituary insurance guy because some of these events had occurred 20, 30 years before that to find the insurance coverage. So I'm sitting there minding my own business,

02:20:04.079 - 02:20:15.849

ha ha ha, and I say, how much money are you getting, Susan, from the insurance company? I'm not going to tell you. Because she's trying to negotiate more money out of Michael and I from the parishes. I said, what do you mean you're not going to

02:20:15.849 - 02:20:35.690

tell us? We're on the policy. How do you get a release without us? Oh, and the bishop's getting very upset with me and he said, you're yelling at my lawyer. I said, yeah, she needs to be yelled at. So we get all finished with the case,

02:20:35.769 - 02:20:53.469

which I thought was a, you know, an impossible case to have a real solution, but it ended, and I remember going to some funeral masses and for some friends of mine and I walked out and I said to Anne, I said this place is

02:20:53.469 - 02:21:09.240

going to be here after this case. I mean, it's been here for 4 or 5000 years, right or wrong. This diocese is gonna survive and it was important to people. So if you want to know why I think bankruptcy is important at any rate, so

02:21:09.240 - 02:21:30.009

then we had a dinner. The bishop had a dinner and he invited Taylor and he invited us and all that, and we went to his home. And I remember, I'll remember, he got up and he said, this is not a victory celebration. This is an appreciation

02:21:30.009 - 02:21:47.419

for the lawyers that helped us, he said, because it was a horrible crime and a sin. And then we went on, had our wine and did something else, so. All of you have been involved in all of these things and have been exposed, but,

02:21:47.429 - 02:22:08.889

that was a magnificent utilization of what you do professionally in my judgment. It never solved 100%, but it took a big chunk out of a lot of people and effort and it was a whole team of lawyers.

02:22:09.299 - 02:22:24.259

The last story about this case is I went to see Judge Marler, at the request of my colleagues on both sides, and they said, why don't you go talk to him and tell him what a good job you think he did. So I go

02:22:24.480 - 02:22:45.660

tripping up there. And he said two things. He said, well, one thing, we never really got to the issue, did we, Lowell? He said, you and McGrath hid. So I said yeah, and he said, but you know what, the case would have never gotten

02:22:45.660 - 02:23:06.139

to it in the solution if I didn't have good lawyers. So I was Personally proud of my colleagues. So that's the 3 I want to talk about. I'm gonna tell you two stories in the 1990s that will always stick with me. I mentioned that Lowell's firm

02:23:06.139 - 02:23:27.919

filed the WGI case. This was the days of the RTC and all the S&Ls, and Arizona had failed. The RTC now owned all the assets. And because Conley Wolfswinkel and his company were Charlie Keating, the biggest borrower, they were public enemy number one,

02:23:27.969 - 02:23:42.290

to be blunt about it. So there was a big piece of property up near Oracle. I don't know how many acres, but it's now got all these homes on it. There's the Rancho Vistoso golf course, Stone Canyon golf course. I used to own quail out there,

02:23:42.830 - 02:24:00.019

a couple other golf courses - I can't understand why. Did you ever pay a green's fee? No, before they put anything in, it was that recent, yesterday. Well, the RTC wants stay relief. There's a big fight about it, and I've appointed a trustee, and at that time, lawyer,

02:24:00.089 - 02:24:13.379

Chuck Case is representing the trustee. And after a lot of hearings, I finally told the RTC I said, you know, I'm not gonna give you stay relief. Let's auction the property and see what it's really worth. And I did that in part because

02:24:13.379 - 02:24:30.110

they had about 3 appraisals and said it was worth the round numbers $12 million and the other side numbers were dramatically different. So we get to the auction, and it's the most outrageous auction I've ever witnessed as a lawyer or

02:24:30.110 - 02:24:46.110

a judge. There's so many people there that the courtroom is so full that you've got bitter groups sitting in the witness stand in that area. You got other bitter groups over there next to the courtroom deputy in the well where people usually can't go. It's

02:24:46.110 - 02:25:02.780

packed with people. To cut to the heart of the auction, I believe there were 4 or 5 bids over $30 million cash, and I think it sold for almost $40 million cash. Tell him who it was sold to - to Conley Wolfswinkel, who was the principal and

02:25:02.780 - 02:25:15.540

the debtor, and for Conley to be able to bid, there was a big fight about whether he could be able to bid or not. Going in, you had to put up a million dollars deposit to be able to bid. So I let him go back

02:25:15.540 - 02:25:26.269

and forth the fight for a while and I finally just ruled to end it. I said, you know, he has to put up $2 million and if he does, he can bid. I don't care what you say, Archie says. So he puts up his $2 million.

02:25:27.330 - 02:25:45.610

And when he comes in, he comes in with what I'm gonna call an entourage. Everybody know who Danny Ainge is? Comes in with Danny Ainge. Comes in with Chuck Fairbanks, who had been the football coach in Oklahoma and Colorado, and I think had at least one

02:25:45.610 - 02:26:00.690

national championship, and I don't know how many people from Germany, and it was the classic auction because there are all these bidders, but every time it looked like it was about to be over, Mr. Wolfswinkel would raise the bid by another million dollars or so and

02:26:00.690 - 02:26:20.339

bought that property. But at some point over the course of the auction, John Dawson, those of you who know him, John was not a quiet character in court proceedings. And he had the stalking horse bid then Del Webb Home Building Company. And it just was

02:26:20.339 - 02:26:35.370

getting beyond them very quickly, and John, as John was want to do, would start objecting about this part of it. I want to comment about this part. I want to be clear about this. Even with that crowded of a courtroom at some point, John is

02:26:35.370 - 02:26:51.580

now back up at the podium about to say something, and Danny Ainge and Connolly Wolfswinkle sort rolling to my right, and you hear Danny Ainge say in a voice way too loud, I'm getting really sick of this Baby Hewitt guy. And If you knew Ed Davis,

02:26:51.660 - 02:27:06.259

the old bankruptcy referee and bankruptcy judge we talked about, Ed was a real character, and he had a nickname for everybody, and his nickname for John Dawson was Baby Hewitt. So it was real hard for me and I think most of the courtroom kind of knew

02:27:06.259 - 02:27:21.769

that to try and keep a straight face through that, but it, was an amazing auction and it's the one, those of you who've heard this from me, this is kind of where it came from. Appraisers have their job to do. They

02:27:21.769 - 02:27:35.320

have opinions about value. If you want to find out what something's really worth, put it on the auction block and see what somebody will pay for. The other war story out of the 1990s I want to share with you is this has to be - I got

02:27:35.320 - 02:27:52.280

sworn in March of 1990, so this is probably late 1989, it might even have been January, February 1990. I've been doing a lot of work in Yuma, so I was down there, Yuma once a month down there. Mo Wallison, who we talked about was

02:27:52.280 - 02:28:11.169

the judge. I think I'm having breakfast or lunch with Mo before or after court. And there was another RTC SNL debtor, Randall Jenkins, in Tucson. And he had about 10 cases, a lot of property, and I represented 4 or 5 banks in that. And my bankers

02:28:11.169 - 02:28:27.009

were just livid because this is part of the heyday of the U of A basketball team, and Randall Jenkins had 4 seats in row 2 right behind the UFA bench. So every game, Randall Jenkins would parade in with his family or somebody and kind of his entourage and

02:28:27.009 - 02:28:41.769

sit in those seats. My poor bankers who he owed millions to were sitting up, you know, in row 55, you know, kind of with their magnifying glasses trying to see where the court was. So I'm sitting there with Moe knowing I'm gonna be sworn

02:28:41.769 - 02:28:53.320

in a couple of months. I said, you know, Mo, I probably shouldn't say this, but what are you gonna do about Randall Jenkins with his basketball ticket? What are you talking about? And I explained the story to him. He didn't say anything, so I figured, you

02:28:53.320 - 02:29:09.669

know, nothing's going to happen. So, I don't think I've been sworn in yet, but this was just classical Mo. You would get something in the mail, no return address, no signature, but it's an article from the Tucson Daily Star that says Judge orders U of A basketball

02:29:09.669 - 02:29:28.080

tickets to be sold. And those were the first four basketball tickets that were sold in probably about 91. And if I remember correctly, in the bid was just simply for the right to go to the university to buy the tickets. Those 4 tickets sold for about

02:29:28.080 - 02:29:49.019

$25 million cash after some incredibly competitive bidding. Well, Moe then grabs me after I've gone on the bench and says, I'm entering an order. Appointing, is it Al Gamble, I think who was it Tucson? Appointing Al Gamble to be the court administrator and I'm ordering the

02:29:49.019 - 02:30:07.709

University of Arizona athletic department to turn over the current and former ticket list for the basketball program and Mr. Gamble is to compare those names against the debtor's list for like the last 10 years, well, Moe knew, as only Moe could, that there were a lot

02:30:07.709 - 02:30:25.870

of people who had been very successful in Tucson who now had gone through bankruptcy but had season tickets to the U of A basketball games, and for about the next 4 years, about every 90 days or so, we would auction off 246 U of A basketball tickets. And it

02:30:25.870 - 02:30:40.230

was like a feeding frenzy with a bunch of sharks with, I mean, red meat in the water. The competitive bidding for those was just amazing, and they would sell for about $10,000 or more for the right to go buy the ticket. And that went on for

02:30:40.230 - 02:30:55.040

about 4 or 5, maybe 6 years, and then in the materials is the site of the Inre Harrell decision by the Ninth Circuit. Out of the Lewis and Roca firm that said, Phoenix Suns basketball tickets, there was no right to the future tickets. It was

02:30:55.040 - 02:31:11.259

a mere expectancy. And that was the end of the U of A tickets, but for about 4 or 5 years, it was a very wild process. I was not responsible for that case. I thought you were the head of that firm, but never mind.

02:31:11.610 - 02:31:32.110

You know, there's a case called Boston Chicken, Jerry, I think you had some role in. What was Boston Chicken all about? I can't talk about it. It's still pending. This goes back to 1998, and a counsel from Texas were going to file a

02:31:32.110 - 02:31:55.910

chapter 11 case and they decided to file it in Arizona. And Judge Case was the judge and because I had started him in bankruptcy and we were pretty close, I always disqualified myself from any case where he was involved basically at his request so I

02:31:55.910 - 02:32:17.019

introduced all the players at the first meeting and then said in accordance with your request, I will no longer participate in this case. Don Gaffney did a marvelous job defeating for Sherman Sterling a preference attack, very interesting case. If you ever get a

02:32:17.019 - 02:32:57.410

really difficult preference matter, Don can help you. I will tell my story. We finished the stage of the case. The Data case file is a pre-pack. It's set up. So yeah there was some litigation filed. And by

02:32:57.410 - 02:33:16.440

this time we're leaving this office summer. I turned out to be your star witness. And they told me I had to come look at the doctors but I had to do it on Saturday morning

02:33:16.940 - 02:33:38.509

to shut off the air condition. I stayed in here for 14 hours and all associates left. I found the doctrine, which included a long discussion on their views of Judge Casey. It was also shared with the lawyers. And I don't know this is upset and

02:33:38.509 - 02:34:10.089

they got it. I said that's fine. I'll send it. And we submitted care based on some of the biggest. You have the case. Later on the case was confirmed and provided for a liquidation trust in 2002, and I became the trustee. And hired Leo

02:34:10.089 - 02:34:34.919

Buse and I forget the figure, we recovered it was $345 million. I think it's a little more than that. In any event, it helped Leo out considerably, and I told him when I went in I will set my fee at

02:34:34.919 - 02:34:57.629

an hourly rate of $350 and I've never moved it so Louis Roca didn't do real well out of it, but certainly abuse did and by an odd circumstance, Arthur Andersen was on its last legs at the time, and they gave

02:34:57.629 - 02:35:17.259

me confidential information to look at in deciding whether to settle, and I can't even mention the amount for which we settled, but I looked at it and concluded yes, they're doing the best they can. And that kept them from filing a bankruptcy proceeding, my agreeing

02:35:17.259 - 02:35:37.110

to accept that, and we were the last one, and that allowed the case to be put to bed as far as Arthur Anderson, so that was an interesting sidelight about it. But we did pretty well. There's another

02:35:37.110 - 02:35:57.299

story from that case now. You can't let it go untold. That's one of those plans we want to be careful about what you require the plan trustee to do because Jerry was appointed as plan trustee or liquidating trustee, whatever it was called, but it basically

02:35:57.299 - 02:36:14.580

required him to look at just about everything in the case. I mean claims whatever there was, but it included all the professional things. Well, you already mentioned that the case was heard by Judge Case who made this former. And most of the

02:36:14.580 - 02:36:34.099

large part of the case was done by Randy Higgins, who by the time the plan is confirmed, is now judging. Well, the plan is confirmed. Jerry's required to look at everything, including all the professional fee applications. He notes that that case was filed, I don't

02:36:34.099 - 02:36:53.929

know, 6 in the morning or whatever it was before the markets. And now Judge Haynes had billed and set off all of his time, pre-petition time before at 6 in the morning before the case was filed. So he duly objects that Judge Haynes had pre-petition

02:36:53.929 - 02:37:15.280

time included in his fee application to which Susan Freeman on behalf of Lewis wrote and indicates that he was working all night and of course there was time he couldn't set up. I might have suggested to Ms. Freeman that it was an ill-timed objection and

02:37:15.280 - 02:37:36.049

that she should have sought sanctions, but she didn't think that was a problem and Judge Kates had no trouble overruling your objection to. Well, I'd forgotten about that. In any event, you can be in an awkward situation every once in a while when you're a trustee.

02:37:37.250 - 02:37:55.089

That was one of them. Now let me shift the focus to another set of cases, Lowell, that you were involved in. Now, in the 1980s, the Sabin family filed a bunch of bankruptcy cases, and the Sabin family was the first U-Haul dealer for the

02:37:55.089 - 02:38:16.790

U-Haul company. And their biggest predator were a lot of the members of the Shone family who owned the U-Haul. Well, if you followed it, there was tremendous litigation between that family. The founder of U-Haul, Leonard Shun, I think had about 15 children with 4

02:38:16.790 - 02:38:35.160

or 5 different wives, and I was the settlement judge and when I was finished with them, and I didn't settle during my tenure. I said I guess they don't get together for Thanksgiving anymore, and that was being incredibly diplomatic. I'll never forget going one side

02:38:35.160 - 02:38:49.080

of the family gets about, I think maybe a $2 billion judgment in. I'll tell you about the judgment. Well, let me say one more thing and I'm going to hand it off to you. So it's Judge Marler's case. I'm appointed to be the settlement judge, and

02:38:49.080 - 02:39:03.139

I set a scheduling hearing to get them together. And the first thing I'm told by the lawyers is they will not meet in the same building. So you know, that's gonna be a little awkward because I'll have to leave Building A and go somewhere

02:39:03.139 - 02:39:16.580

to Building B, and that seems a little counterproductive. So I said, can't we work it out where we'll put, you know, one plan on one floor and agree that nobody else can go on that floor and we'll get another floor. OK, so we do that. So

02:39:16.580 - 02:39:35.120

I'm going to have a preliminary meeting with the 5 debtors. There's 3 shows and 2 officers who you are. And Lowell represents one of them, Hap Carty, and I can't remember all the lawyers, the other one. So I go to a meeting, I think

02:39:35.120 - 02:39:49.500

in the Moore Hackett Law firm conference room. And when I go in, I'm thinking 5 debtors, OK, I'm gonna have, you know, 5 to 8 lawyers there. There were so many people in that room. If I counted correctly, not counting me, not counting the debtors, I

02:39:49.500 - 02:40:04.410

think there was almost 30 other people in that room. The 5 debtors, I think had about 8 different law firms and 7 different accounting firms, and you're just sitting here going, you know, this probably isn't gonna go real easy. So Lowell, maybe you can share a

02:40:04.410 - 02:40:24.620

little bit with us about the, the shown debtors, the bankruptcies, and that process. Well basically it was a strike land case. Dawson and Boswell did it, and I was hired by Hap Carty. Hap Carty was the brother-in-law of the show that Feynman,

02:40:24.849 - 02:40:41.410

and Hap had invented the hitch that you do when you're at the U-Haul. He was the one that did that, and he came to my office and he said, I've just gotten a judgment against me for a billion dollars. I said, pardon me. You know, I've

02:40:41.410 - 02:40:58.309

represented people who owe a lot of money, but I've never represented, and he's very nice, outstanding guy. You know, he had a tattoo and he was wearing a U-Haul black t-shirt and he was a very simple, nice guy. And he said, Well, what difference

02:40:58.309 - 02:41:16.129

does it make if I have a judgment for a billion dollars? I don't have that kind of money. It really doesn't make any difference. So it was in the Superior Court and they had hearings and all that, and the judgment was reduced to $1,400,000. And

02:41:16.379 - 02:41:29.919

so I went home and I said that and God did we get a break? Did we get a break in this case? It went from a billion dollars or whatever the number was to $14 to which my wife said to me, is there a difference?

02:41:29.929 - 02:41:50.330

You know, what difference does it make? That case went on for a couple of years, basically a plan was filed to give these people Taylor represented one of those families to give these people the indubi equivalent, we're going to give them this

02:41:50.330 - 02:42:09.169

land in Iowa and this land in California and all of this and some money. They were the 3 different kids, 3 of them, 3 groups, and they took depositions, so it's coming out of years. They went all over. One of the depositions

02:42:09.480 - 02:42:23.120

was of Mr. Shelton, the father, and I didn't. It was in Las Vegas, and Boswell and Holliwell go. Holliwell was at Nash Clark and Ross at that time, and she comes back and she says, Why did you do this to me? I said, What are you

02:42:23.120 - 02:42:37.379

talking about? She says, we get there and we're talking about it, and he's telling me what bright children he had. One was a lawyer, one was a doctor. The one that runs it was none of that and very, very capable. That had been the 2nd

02:42:37.379 - 02:42:55.519

time the case had been filed. John had filed it once before in Chicago. They'd had a whole history. I said, Why? He said, well, we're asking Mr. Schone about this child and this child, and he said to Ms. Boswell, Ms. Holliwell, Well, I

02:42:55.519 - 02:43:13.370

guess you don't understand. I have special sperm. I said he couldn't have said that to you. Well, she said, I'll get you the transcript and you can read it for yourself. So I said, oh good. Unfortunately, I will tell you he, you know, ultimately committed suicide

02:43:13.799 - 02:43:33.490

and the company is very successful now, but yeah, we did this year and a half. I got, made a lot of money just reading strike line pleadings for Hap Carty. And it was interesting because I filed an 11 for Carty

02:43:34.150 - 02:43:45.750

because he was the defendant, and I talked to you about it, Jerry, and they never sued the wife. They never got a judgment against the wife. They just got a judgment again, so I said, what do I do? And Jerry said, we'll

02:43:45.750 - 02:44:01.940

just file for the husband. So if they're ignoring her, you ignore her. So that's how the case stood. They come to the confirmation hearing, elaborate confirmation hearing. There had been an early motion to dismiss either by Taylor or somebody else. Somebody had filed a motion to

02:44:01.940 - 02:44:25.589

dismiss. Millions and millions of dollars were spent. It was a lawyer's paradise. And Merler denied the confirmation. He said, you have to pay cash. That's the deal. You can't do it with an indubitable equivalent. So ultimately it was settled one for 55 million, one for another

02:44:25.589 - 02:44:49.620

60 million. Who knows what it was, but then the case resolved itself. I mean the numbers were staggering. I can remember sitting there with one member. Children of their lawyer. And I don't remember the numbers exact. They basically were prepared to write a check for

02:44:49.620 - 02:45:16.950

like $70 million to if this daughter was over 30 at that point. Well, none of them, of course I'm going to show you my bias. None of them worked. Why did they fire her? What did work. Yeah. What did they run? One

02:45:16.950 - 02:45:33.709

area you had a gallery in San Francisco. It was very nice, but the numbers were just staggering. I mean this was probably about 1995 and you're talking about $70 million now. I don't know about you all, but I think, you know, if you

02:45:33.709 - 02:45:47.469

gave me $10 million I could live extremely comfortably for the rest of my life. I bet I can negotiate a lower number. I bet you can. It was just mind boggling. And then of course the judgment desk were the ones who owned

02:45:47.469 - 02:46:07.089

the company and still own the company and the judgment. Lord only knows what you're getting. It's about 11:20, so why don't we take a second break for about 10 minutes and then we'll spend one more hour to wrap up. So you all get credit. Well,

02:46:07.190 - 02:46:30.969

it was, he let them do all of this, but the plan was there on his table for years, you know, he could have dismissed it out and said that he didn't, they put on the proof. And he said, this requires cash. On or off. Apparently

02:46:30.969 - 02:47:02.299

it's in the early days. I got to, I don't know. I've got to tell you something. How interesting. I told you the last time. Yeah, now it's crazy. How long do we go? 12:30.

02:47:02.299 - 02:47:23.679

Mike wants us to talk about Fort Defiance. He told us. I think he said, all right, we're going to start it up again last, about 45 minutes plus or minus. Over the break, Mr. McGrath asked us to talk

02:47:23.679 - 02:47:49.839

about a very unusual Chapter 11 case, Fort Defiance Housing Corporation which was a government-funded building of housing units on the Navajo reservation. I think the total funding was in excess of $100 million and there was a lot of construction up on

02:47:49.839 - 02:48:09.150

the reservation, but one day dropped into my courtroom this case, and it was initially filed by a solo practitioner, I'm gonna say from Gallup, New Mexico. I'm not exactly sure if I have the town right. But it became very apparent very quickly that

02:48:09.549 - 02:48:24.049

he didn't know his way around the bankruptcy court. In fact, I think I had to remind him a couple of times he needed to file an application and affidavit to be appointed, and it just was one of those cases where nothing was going right. So very

02:48:24.049 - 02:48:43.950

quickly I ordered that a trustee be appointed and my soon to be colleague Brenda Winnery was the trustee. And it was a wild case. I know at some point I don't think I ordered, but I strongly suggested that Brenda should make sure that

02:48:43.950 - 02:49:08.240

she visited all the sites because there are all these remote locations in Northern Arizona on the Navajo reservation. And it was really a mess because the money had gone through the $100 million round numbers had gone through Ford Defiance, who had hired. Two people, Bill

02:49:08.240 - 02:49:27.360

Aubrey and Brenda Todd and their company to actually build these housing units. And there are a lot of issues with the appropriateness of the building. But more importantly a lot of things didn't happen that were supposed to, and in a simple sense, and I don't

02:49:27.360 - 02:49:43.709

remember the numbers exactly, but I'm gonna say in round numbers, about 75 million actually went into the housing units. And the other 25 million, it was a little fuzzy about where it went, but Mr. Aubrey and Ms. Todd, who at one time were living together, seemed

02:49:43.709 - 02:49:59.629

to be flying very high. I think there were airplanes and cars and trips and casino gamblings, and they managed to take a lot of the people who are making the decisions at Fort Defiance and on the Navajo tribe seemed to be guests

02:49:59.629 - 02:50:20.379

of there someplace and the trustee files a lawsuit against these two. And it's basically in a cryptic sense for taking this money that should have gone into the housing and sticking it on their own pocket. And it was a very interesting trial. If I

02:50:20.379 - 02:50:38.660

remember correctly, Brendan, you tell me if I'm way off. I'm gonna say the exhibit books were probably more than 10 ft long, probably closer to 15 to 20 ft long, and you know when you have these multiple entities and it's HUD money and government forms.

02:50:39.379 - 02:51:02.679

What was the word NASDA something regulations about how you had to do the construction. Laurie represented one of the main lenders. And when the adversary was all over I entered a judgment against them for round numbers about $18 million punitive damages,

02:51:02.969 - 02:51:21.019

and I don't know the whole story thereafter. Maybe Brenda or the successor trustee Lowell Rothschild, when Brenda becomes sworn in, they've gone up to Las Vegas. They filed Chapter 11s there. There are still appeals floating around somewhere at the Ninth Circuit about something, but

02:51:21.459 - 02:51:44.559

it was an amazingly unique case. And the one thing it really illustrates to me is that chapter 11 is not perfect. But it does provide a mechanism for troubled financial entities whether it's General Motors, whether it's Fort Defiance, whether it's the Shones, Bashs,

02:51:44.580 - 02:51:58.660

or whomever to have an opportunity to try and deal with those as opposed to being kind of dismembered in any kind of state court proceeding. And at least to me sometimes I think when we get into the nits and gnats of the battles of individual

02:51:58.660 - 02:52:15.379

cases you kind of forget that basic premise that's really what it's there for that's what it's all about and in my sense, again it's not perfect but generally it works and it allows a lot of businesses, a lot of jobs, a lot of

02:52:15.379 - 02:52:51.830

industries to be there. Think about it. No Chapter 11, no BSHs. No, now US Airways, on and on and on. Brenda, I don't know if there's anything you want to add about Fort Defiance.

02:52:51.830 - 02:53:27.900

In the case. You know, I'm always optimistic about those things, but I've worked for the federal government for a long time. They made up a success Don, well, I do want that. But there is always good. Struck

02:53:27.900 - 02:53:54.299

me that chapterize as being successful if there was a very - Yeah, true in some cases. And I would offer the other thing which we see a lot more because I can obviously in the clear it's become significant progress in this country. Probably the bankruptcy

02:53:54.299 - 02:54:18.320

courts handle probably I would guess 78% of the major fraud cases in the United States and yeah, there's only getting. Except when it's the bank's doing the problem he called that preserving, by the way, dollar point of view clearly overwhelmed everything in my house. What's

02:54:20.190 - 02:54:37.910

you get your name? What's the library? What's the liability? What do you wanna do? What, I have one now but I - take you back to Arizona. Arizona's got some amazing fraud cases being filed for bankruptcy court being the

02:54:37.910 - 02:54:59.559

one regardless of whether it's a plan or not because it's kind of a problem having to be the judicial body sorts it all out, I mean really sorting out on that board who's not who's done.

02:54:59.559 - 02:55:13.959

You mentioned Ned Warren, so I'm gonna share this story with all of you I told at dinner last night when we prepared for this program. For those of you who don't know, Ned Warren was kind of the Charlie Keating of the late 1960s and early 1970s in

02:55:13.959 - 02:55:32.129

Arizona, and I'm gonna have to admit that Ned Warren's law firm was Rawlins, Ellis, Burrs, and Keywitt, where among others, Tom Boh and Jim Marler practiced law. And as things kept getting darker and darker for Ned Warren, in my view, our best client Valley

02:55:32.129 - 02:55:45.570

Bank comes up one day and says, you know, you guys are really good lawyers and we really like you and we'd like you to be our lawyers going forward, but we've come to the conclusion that you can either represent Ned Warren or Valley National Bank, take

02:55:45.570 - 02:56:00.429

your choice, and it was a very difficult choice because in about 30 seconds we said to Ned, you know, maybe you ought to get another lawyer. You know, apropos to what Don said, I look at it, I think essentially the same way, but I

02:56:00.429 - 02:56:17.400

call the bankruptcy court the court of last resort because nobody goes to the bankruptcy court as their first solution to whatever their economic or other problem is. You try everything else. I'm not saying they should, but what I'm saying is when everything else has failed and

02:56:17.400 - 02:56:32.990

there is no other solution, whether you're General Motors or I'm going to mention a couple of good clients of mine, John and Elizabeth Tucker and everybody in between, you go into Chapter 11, and that's your last resort, your last chance to save whether it's the

02:56:32.990 - 02:56:53.419

auto industry or the family farm, mortgage is limited, all the investments they made in all that real estate all over Arizona. American continental, the same thing, etc. etc. It's the last shot and sometimes it works, sometimes it doesn't, but it's the process that brings it

02:56:53.419 - 02:57:13.030

to whatever conclusion it's going to come to. So let me ask this question. So we're now in 2012, we are. Some are wrestling with individual chapter 11s we now have it's not a phenomenon, it's just that we have debt and guarantees and we

02:57:13.030 - 02:57:34.000

have before the Ninth Circuit an issue on where the guarantors are paying the debt and Judge Marler has, the comments of the two of them were funny at dinner, has issued an injunction, while the appeal is going on to

02:57:34.000 - 02:57:52.870

stop really the lawsuit against the guarantors. So what is the real future? I know you must think we're a little strange discussing this at dinner, but we're talking about, and it's gonna come up, we're talking about some thinking now,

02:57:53.209 - 02:58:14.830

and maybe you can talk about it, Jerry, of having a chapter 11 and a half. Maybe it's a different 13 because the numbers don't work anymore. You can have a condo in New York City and you're out of the jurisdiction of

02:58:14.830 - 02:58:34.450

a chapter 13 even if you'd be otherwise eligible. So really the future is now developing an ability for individuals and I've read the Marquel case and I know that the disputes which may be talked about in the next couple of days,

02:58:34.870 - 02:58:56.389

but we've talked all about history we've told our war stories, but we're kind of interested in where we're also going. You've got a new set of for Arizona you're gonna have maybe 7 different new judges and a state that will

02:58:56.389 - 02:59:21.160

continue to grow a system where risk and entrepreneurialism is desired, frankly. In my judgment what is the practice of bankruptcy going to be for protecting individuals who now are in the situation where they were guarantor and attempting to get

02:59:21.160 - 02:59:42.219

the capital to develop the things that we need in the state housing institutions. You have a reaction to that? Yes, a strong reaction. We really need to undo what was done in 2005 and we need to make it as to the individual

02:59:42.740 - 03:00:05.530

and make it so that an individual can have effective relief available and one more war story when the commission was getting to its final stages in the spring of 1973, we were all gathered around, everybody was there, we were going through the final motions to approve

03:00:05.629 - 03:00:24.230

what had been done and I had taken the commission's approach on the administrative side of it, which was to have the US Trustee basically, I don't know that we called him with US Trustee, maybe we did, I can't even remember that. But

03:00:24.230 - 03:00:48.879

we got to that point and I had done something in the individual context using the administrator to approve what he was going to be spending. And Seligson, who had handled Mike Todd's case the producer of Around the World in 80 Days, he said

03:00:48.879 - 03:01:11.860

of Elizabeth Taylor's. And he said, Smith, you viper, you've stabbed me in the back. And countrymen piped up and said, Charlie, you've mixed your metaphors. In any event, he felt so strongly about that it kind of weakened our relationship even after all

03:01:11.860 - 03:01:31.259

that had happened over the years and for the last year, and I've always felt very sensitive about that. If there had been something like what came out of BAPCA for individuals mentioned it would have really bothered him and I think everybody else. So Jerry,

03:01:31.339 - 03:01:53.750

let me ask you a question. You know, you really are more of the philosopher about the bankruptcy than many of us besides being an effective advocate. And for somebody who spent, I mean, you're pretty objective about it, you're really a switch hitter you

03:01:53.750 - 03:02:15.429

represent banks or you did major things and all that, it sounds like you think, and I'm very sympathetic, I plead guilty. There ought to be more relief for people who have this debt and take this risk and do all that, then like

03:02:15.429 - 03:02:31.879

205 ultimately wound up. You're not a great believer in 205? No, and you know where this all goes back to. There was a bankruptcy judge in Alabama in the 30s that when a straight bankruptcy was filed for an individual, he would not enter the

03:02:31.879 - 03:02:55.200

discharge. He would suspend that and if a certain amount was paid to creditors, then he would dismiss the case. This was the origin of chapter 13, and chapter 13 I've never been very fond of chapter 13, frankly, but I think we're stuck with that,

03:02:55.620 - 03:03:16.139

but to impose that then on an entrepreneur, an individual who these people are risking everything to do things that are important to our economy. They're important to them too, they can be selfish about that, but to then make it so difficult for them to

03:03:16.139 - 03:03:34.389

get any relief, it is a nightmare, the individual case with the 2005 BAPCPA. I would eliminate all of that. I don't even know that I would have 13 if it were up to me, but I think we're probably stuck with that. But

03:03:34.480 - 03:03:52.040

if we are stuck with the individual BAPCPA provisions, we need to modify those and we probably need to lift the maximum debt that can allow you to file 13 and just get rid of the individual

03:03:52.040 - 03:04:09.669

chapter 11 case or we need to have a separate chapter and the National Bankruptcy Conference is working on that and have been working on that. The problem that came about is the credit card companies and the banks were paying so much money in lobbying. I

03:04:09.669 - 03:04:25.269

think I used to use a figure 180 million. I saw 80 million mentioned by somebody. And the National Bankruptcy Conference didn't try to touch it even though the legislation was pending. They could have done things to that legislation that would have made it at least livable,

03:04:25.610 - 03:04:42.570

but they never did anything and all of a sudden it passes and it's a nightmare. Well, let me share a couple of doom and gloom thoughts about all that with you. You may have remembered that I mentioned the president of the National

03:04:42.570 - 03:04:58.480

Conference of Bankruptcy Judges was scheduled to testify before the House Judiciary Committee about Stern versus Marshall, its impact in some ways that Congress could think about dealing with that. Well, over the break I was looking at my iPad and I got an email and that hearing

03:04:58.480 - 03:05:19.559

has been canceled and it has not been rescheduled. I've been told from a number of sources that I have a lot of faith in that there is no stomach in Congress today to even touch the bankruptcy code in any respect. There's not gonna be

03:05:19.559 - 03:05:39.110

any amendments presently, and I don't know when that might change, but it reminds me of something that Winston Churchill said about our country. So you can always count on America to do the right thing after it's tried everything else and that hasn't worked.

03:05:40.070 - 03:05:57.830

And so my sense is, I hate to say this, but I think things are gonna have to get worse in the bankruptcy world collectively before there's enough motivation in Congress to deal with this issue. Well, if you look at that chart that

03:05:57.830 - 03:06:16.629

Dale handed out of the evolution of the bankruptcy act, you can at the bottom of it, and it's a very well done document. You can see the economic things that are happening. I felt, or at least my observation for the last 6 decades is, and

03:06:16.629 - 03:06:35.190

it hasn't in the last 10 years, but that's a political thing that that relief moves with the times. I mean it's very, very clear. I mean if you look historically, they had a bank other than the Constitution says they will create one.

03:06:35.650 - 03:06:53.480

They've had an act or code or whatever, and they've abandoned it sometimes. It depends on the times. So unfortunately if our world gets worse economically, they're gonna really be forced to be facing it. What I was interested in is

03:06:53.540 - 03:07:18.929

I've always resented, frankly and because I think it was decided on a morality basis, taking away the right to file a 7 straight out in, I just think it corrupted what I thought was the bankruptcy. And that's 12, our world

03:07:18.929 - 03:07:35.719

economically is like what I call California, the land of the misplaced decimal point. If you talk about $1000 at one time, you're now talking, and we've talked today about millions of dollars and $80 million hundreds of millions of dollars. Well in my lifetime it's

03:07:35.719 - 03:07:54.889

sort of like looking at a merry go round. And so the numbers have all changed, and I don't think that law which is important to me and to a lot of people has moved with it. Or I thought

03:07:54.889 - 03:08:27.809

the 205 moved backwards, but it was very clear that. That was a morality decision or it was a lot of very influential banks and credit card companies. I have a question for you. I think. I don't count Statute. And this

03:08:28.730 - 03:09:10.240

not favorable to the legislative consideration, but there almost never is. So my question to you is OK. So security market and all that. There were some things, but that process cannot take a long

03:09:10.240 - 03:09:50.480

time. Didn't really have a bunch of crises we call it top so how did kind of just stay right. Far out the dangerous fuel was an unusually solid piece of legislation. I got a whole bunch of crap. Well, you had a

03:09:50.480 - 03:10:08.459

great deal of work done and it was in pretty good shape by the time it was being considered initially by Congress, and then Congress put a lot of effort into it. The Senate had its own version. And then the House and you had really some excellent

03:10:08.459 - 03:10:30.740

legislators, Don Edwards, you had for the House, you had Senator DeConcini, and I don't know, maybe the times were different. Yes Don. It kind of pop up here and felt.

03:10:30.740 - 03:10:54.929

But Pinegate was in '74. And there were a lot of people upset about the Pinegate decision and crammed down to 12, and the lender community thought that they would get a better deal and so they were relatively passive on the plan. They

03:10:54.929 - 03:11:13.179

did not send the lobbyists out. Because they felt like it was getting fixed. You know, I think Jerry hit on a point that to me is very apropos about, I think the times were different in the 70s. If you read

03:11:13.559 - 03:11:29.679

Judge Munn's article that I've mentioned that's cited in the materials, there was a bipartisan effort and agreement, maybe not on the specifics, but that we need to do something. We need to pass a new law. The one we have isn't working. It was,

03:11:29.759 - 03:11:43.169

if you read that article in entirety and as Jerry said, it was signed in mid November, very near the end of the term, it almost didn't happen, but a lot of people got behind it and pushed it. Well, I hate to get

03:11:43.169 - 03:11:57.790

into the political world today, but I just don't think there's much bipartisanship going on right now in our country. I'm not not gonna say one side or the other is right or wrong. I'm just saying it's collective and so until you have some agreement

03:11:58.160 - 03:12:15.580

in the political process, the chances of getting another bill enacted, I think is extremely remote or any bill. Yeah, any bill. I mean, not just bankruptcy. I mean, they're, you know, I think Bernanke said yesterday to basically Congress and the President, if

03:12:15.580 - 03:12:32.299

you don't solve the mandatory cuts that are coming, it's going to be catastrophic in terms of the effect on our economy, and that happens, I think January 3, 2013, so it's less than six months away. There's no bill pending. There's no hearings about it. They're going

03:12:32.299 - 03:12:52.750

to wait until after the election, so they're going to do that in the last 60 days before the deadline. Well, I think we're finished. Are there any questions?

03:12:56.040 - 03:13:14.360

Let me conclude by saying something about my two colleagues up here, how much I appreciated their times and their comments. It's obvious that we've talked about this today, the wealth of knowledge, history, and experience that they have, and I, for one,

03:13:14.490 - 03:13:43.940

and I think all of us are very grateful that they took their time today to share it with us. So let's give them a round of applause. Thank you. You're a good moderator. Thank you. Thank you, Jerry.

03:13:43.940 - 03:14:08.150