Loss of Temporary Bankruptcy Judgeships Would Be Significant

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By Diane Davis

March 30 — The bankruptcy court in Delaware, which handles mostly business or commercial bankruptcy cases, could face a severe hardship if one of their judges leaves the bench in the near future, judges told Bloomberg BNA.

The U.S. Bankruptcy Court for the District of Delaware has six judges, but five of those judges are temporary judgeships. That means that after May 25, 2017, if one of those five judges leaves the bench, the position wouldn't be filled, and ultimately, Delaware could be left with only one judge to handle all of the cases, based on the way the temporary judgeships work, Judge Mary Walrath told Bloomberg BNA March 18. Walrath is a bankruptcy judge in Delaware.

‘Highest Weighted Caseload.'

Delaware has one of the “highest weighted caseloads” for bankruptcy judges in the country, Walrath told Bloomberg BNA. The Judiciary has been “very frugal in filling vacant judgeships,” she said. “If the filings are low, and a judgeship becomes vacant, often it won't be filled until the filings come back up,” Walrath said.

Bankruptcy filings have “trended back up, especially in Delaware,” Chief Judge Cecelia G. Morris of the U.S. Bankruptcy Court for the Southern District of New York told Bloomberg BNA March 23. Last Monday, March 21, there were nine cases filed in her district that each had over $100,000 in debt, she said.

Convert Temporary Judgeships

On March 15, the Judicial Conference of the United States said that it wants to convert 16 temporary bankruptcy judgeships to permanent judgeships in nine districts that have high caseloads .

The Judicial Conference, which is a 26-member policy-making body for the federal court system, said these nine districts have a 55 percent increase in weighted bankruptcy filings from Dec. 31, 2006 — the last time new bankruptcy judgeships were authorized — until Sept. 30, 2014.

The nine district courts that the Judicial Conference recommends converting temporary bankruptcy judgeships include: Puerto Rico in the First Circuit; Delaware in the Third Circuit; Maryland, North Carolina — Eastern District, and Virginia — Eastern District in the Fourth Circuit; Michigan — Eastern District, and Tennessee — Western District in the Sixth Circuit; Nevada in the Ninth Circuit, and Florida — Southern District in the Eleventh Circuit.

Created in 2005

The temporary judgeships were originally created in 2005 under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) and were treated as “temporary” in order to round up the votes to pass the legislation, Judge John K. Olson of the U.S. Bankruptcy Court for the Southern District of Florida told Bloomberg BNA March 17.

When Congress passed BAPCPA, it thought “bankruptcy would go away,” Judge Morris told Bloomberg BNA. That's why the judgeships were treated as temporary, she said. An overview and history of the temporary judgeships is discussed in detail in Bloomberg Law: Bankruptcy Treatise, pt. IX, ch. 285 (D. Michael Lynn et al. eds., 2016). Both Olson and Morris are editors of Bloomberg Law: Bankruptcy Treatise.

In the Southern District of Florida, for example, Judge Olson said, there are two temporary judgeships, which are currently occupied by himself in Fort Lauderdale, and Judge Laurel Isicoff in Miami. Both seats were newly created in BAPCPA, he told Bloomberg BNA.

Huge Impact on Workloads

“Unless the sunset date of May 2017 is extended, or the judgeships are made permanent, any retirement or other departure of any judge in a district with temporary judgeships will not be filled,” Olson told Bloomberg BNA. “Our Chief Judge, Paul Hyman, has announced his retirement in January 2018, and we have two other judges who are well over retirement age (that is, they could retire right now and receive a pension equal to their full judicial salary). One of them is A. Jay Cristol,” Olson said. “Without the temporary judgeships being made permanent or the sunset date extended, when Paul Hyman retires in early 2018, he will not be replaced and our district will lose a judgeship,” Olson said.

“This has no direct impact on Judge Isicoff or me,” Olson said. “We will keep our positions through the end of our 14 year terms in February 2020,” he said, but “obviously the loss of a judgeship or two will have a huge impact on the remaining judges' workloads.”

“The problem is even more severe in Delaware, where a disproportionate number of large business cases are filed,” according to Olson. “Losing those positions would be a huge blow to case administration there,” he said. “Puerto Rico is a financial disaster zone, so losing a judgeship there would likewise create a huge burden on the remaining judges, Olson said.

By Diane Davis

To contact the reporter on this story: Diane Davis in Washington at ddavis@bna.com

To contact the editor responsible for this story: Jay Horowitz at jhorowitz@bna.com

For More Information

For more information about temporary judgeships, see: , pt. IX, ch. 285 (D. Michael Lynn et al. eds., 2016)