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work rather well. The judge will have before him a number of plans and will select the ones he feels worthy of consideration and submit this to the ICC for an advisory report. And that plan is either accepted or rejected, and then he goes to other plans. And I see no reason to confine the presenting of plans to a trustee.
Mr. KLEE. Both bills appear to omit cross-reference to a section which specifies what a plan may provide. Would you be satisfied with incorporating section 7-303 of H.R. 31 and section 7–301 of H.R. 32 by cross-reference? Would that be adequate in the case of a railroad reorganization?
Mr. SAYRE. We had given some thought to the provisions of the plan and the following of the strict priority rule which has been a historical part of railroad reorganizations and chapter X's. And as to the section 7–303, yes; I would be satisfied with that.
Mr. PATCHAN. However, Mr. Klee, I believe it is important to give the trustee and the court great flexibility in this instance. We debated that very point. And it is my feeling that flexibility will be served better by having the fewest number of restrictions, or at least the fewest number of requirements for a plan.
Mr. KLEE. Thank you, Mr. Chairman. I have no further questions.
Mr. EDWARDS. Gentlemen, we thank you very much for your very instructive testimony.
The subcommittee will stand adjourned. We meet tomorrow morning in the same room at 9:30 on the same subject.
(Whereupon, at 10:50 a.m., the subcommittee recessed to reconvene at 9:30 a.m., Tuesday, April 27, 1976.]
BANKRUPTCY ACT REVISION
TUESDAY, APRIL 27, 1976
HOUSE OF REPRESENTATIVES,
Washington, D.C. The subcommittee met, pursuant to notice, at 9:50 a.m., in room 2226, Rayburn House Office Building, the Honorable Don Edwards (chairman of the subcommittee] presiding.
Present: Representatives Edwards, Drinan, and Butler.
Also present: Richard B. Levin, assistant counsel, and Kenneth N. Klee, associate counsel.
Mr. EDWARDS. The subcommittee will come to order.
Today we continue the bankruptcy hearings with a good friend of the subcommittee, Berkeley Wright, the Chief of the Bankruptcy Division of the Administrative Office of the U.S. Courts.
Mr. Wright will testify to the transition provisions of the two bills, H.R. 31 and H.R. 32, or how we get from the current bankruptcy system to the new one. These provisions appear in chapter X of the Commission bill and chapter XI of the Judges bill.
Berkeley, it is nice to have you back again to help us wind up, as you helped us get started a while ago.
Without objection your statement will be made a part of the record. We are glad to have you proceed.
[The prepared statement of Berkeley Wright follows:] STATEMENT OF BERKELEY WRIGHT, CHIEF, DIVISION OF BANKRUPTCY, ADMINISTRA
TIVE OFFICE OF THE U.S. COURTS ON H.R. 31 AND H.R 32 TO ESTABISH A UNIFORM LAW FOR THE BANKRUPTCY SYSTEM
Mr. Chairman, I am Berkeley Wright, Chief of the Division of Bankruptcy of the Administrative Office of the United States Courts. My background, including the duties of my position and the organization of the Administrative Office of the United States Courts, was presented to this committee in a paper submitted at the hearings on May 7, 1975, which was accepted as part of the record.
I again wish to emphasize that I am speaking on my own behalf and not as a spokesman for the Judicial Conference of the United States which is the policy making organization for the United States courts.
The Judicial Conference Committee on Bankruptcy Administration, under the chairmanship of United States District Judge Edward Weinfeld in New York, has indicated they will meet to consider the proposals for reform of the bankruptcy system after a single bill has been reported out. The recommendations of the Committee will be presented to the next regular meeting of the Judicial Conference, which normally meets each March and September.
We must assume that nothing is going to be done by the Director of the Administrative Office of the United States Courts with respect to proposed changes until an Act is actually signed into law. I will, of course, have prepared for the Director a complete list of his responsibilities under the proposed bill as reported out with briefs as to what will be required. However, no affirmative steps, including addi
tion of needed personnel in the Administrative Office of the United States Courts, should be expected prior to actual enactment.
As soon as the legislation is enacted, the Director must commence the surveys needed to determine the number, headquarters and territories served by the bankruptcy judges of the new court, and outlining the places of holding court. It is significant to observe that the data that is now accumulated by the Division of Information Services of the Administrative Office is not the data that will be required to make the determinations needed to establish the court system. This is because the measurements are now bankruptcy case related rather than measurement of the judicial functions in cases now performed by bankruptcy judges. Under the present system, bankruptcy judges, in addition to their judicial duties, have broad responsibilities in the area of administration of the estates which will be eliminated if there is a separation of the judicial from the administrative function.
Data elements for required studies will include the number, kind, point of origin, and time requirements of each type of judicial matters to be heard by the new bankruptcy judge. None of this data is now in the Administrative Office's computerized statistical system. A year and a half ago, I started manual development of the information showing judicial determinations by bankruptcy judges by hand count within my division. While accurate, the system is primitive in terms of modern data systems, consisting of monthly reports from each bankruptcy judge of all judicial matters concluded during the month showing the manner in which terminated. The Committee has been provided with the most recent results of these studies. I have attached a copy of the latest summaries of this information for your convenience.
These reports are presently the only source of information on judicial work available; however, they are inadequate for the purposes of the survey to be required. The reports are inadequate in that they do not show the point of origin of the adversary or contested matters within the territory served by the bankruptcy judge reporting. (The case data we receive through the Division of Infor. mation Systems serves the essential function of enabling us to find the county of the bankrupt's residence and thus pinpoint the areas of concentration of workload to establish headquarters offices and places where court should be held.)
The reporting system will also have to be modified to reflect any changes in substantive law in the new legislation that will affect the judicial work of the bankruptcy judges, such as increasing the jurisdiction of bankruptcy judges over plenary actions. Averages would also have to be developed on the amount of judicial time required for each of the various types of court proceedings. In addition, the system of obtaining the data would also have to be improved from a hand counted monthly report to an individual proceeding basis and put on the Administrative Office or other computer system.
I have been advised by the Division of Information Systems that the minimum time to establish such a system would be between 12 and 18 months. Such time would be needed to work out a computer program and obtain the necessary personnel. The eighteen month period takes into account a supplemental appropriation within a reasonable time after enactment and that the program would be added on to the existing system rather than starting from scratch. Assuming that the Bankruptcy Division would do the survey analysis, as we now do, the staff of the Bankruptcy Division would have to be quickly increased by several positions, which would also require appropriation.
I note that the Rand Corporation, which made a study for the Bankruptcy Commission, estimated three to four years to design and implement a computerized statistical system; however, they contemplated a system which would also include the fiscal accounting for estate funds. (See Rand Report, March 1973.)
A delay of twelve to eighteen months from date of enactment before any work measurement began would be desirable even if the mechanics could be set up immediately. Whenever there is a change in the law there will be a period of up to one year when the workload is not representative. This is partly due to the reaction to change which distorts the picture until attorneys become familiar with new procedures. Also, the statistical shakedown period in which the data received in a new statistical gathering system must be closely reviewed and errors of submission worked out and misunderstandings corrected. This is necessa ry no matter how careful the instructions are drawn.
A minimum of two years of accurate data would be necessary for a sound basis of a recommendation to establish new bankruptcy Judge positions. Ideally, a longer period (up to five years) would be desirable.
The foregoing discussion has been entirely with respect to the bankruptcy court. If surveys are necessary to establish separate offices for filing cases, liquidation of estates and supervising plans, the data now being accumulated by the Division of Information Systems (i.e. number and types of cases filed and terminated) will suffice.
Once recommendations are prepared by the Director, the approval process starts. If it is necessary to go through the judicial Conference the procedure would be to present the Director's recommendations to the Bankruptcy Committee of the Judicial Conference which would then make its recommendations to the Judicial Conference,
Our present procedure of first obtaining the views of the district courts to the recommendations would not be required since the district courts would no longer have interest in the separate court. If the circuit councils are to be the appointing authority, their views would presumably be requested prior to presen. tation to the Bankruptcy Committee. The procedure of reporting through the Bankruptcy Committee is necessary because the Judicial Conference, by its own rules, only takes action on matters that have been considered by its designated committees.
If bankruptcy courts are separated from United States district courts, and if the approval of positions is to be finally made by Congress and the appointments to be made by the President with advice and consent of the Senate, the Judicial Conference, which primarly consists of circuit and district judges, in effect is being asked to take part in a rather elaborate process in which they have no real interest. It would, however, serve to make the Director's recom. mendations subject to a review, which I feel is a necessary step, and would suggest that the Judicial Conference Committee on Bankruptcy be constituted to include bankruptcy judges rather than United States district and circuit judges, who would have greater direct interest and understanding of the organization and its problems. At the present time, the chairmen and members of the Judicial Conference committees are not necessarily members of the Judicial Conference itself but are selected from circuit and district court judges. The committee chairmen appear and make their reports to the Conference. There appears to be no reference in Title 28, Section 331, to the committee structure of the Judicial Conference so presumably the new bankruptcy judges could be appointed to committees.
To elaborate even further, I feel that a review of the Director's recommendations by some interested body is needed prior to presentation to the Congress. The recommendations presently prepared in the Bankruptcy Division of the Administrative Office that are provided the Bankruptcy Committee often contains five or six pages of narrative and statistical justification for system changes. At the Committee meetings, whenever there is a question, the Bankruptcy Division staff is questioned at length regarding the justification. In turn, the Bankruptcy Committee's recommendation to the Judicial Conference consist only of the recommendations without the justifications. I feel that this justification process to the Committee is an essential part of the process leading to fully justifiable recommendations for positions.
One alternative that would also accomplish the same results would be for the Chief Justice to designate a review committee of bankruptcy judges to conduct the approval process and eliminate the Judicial Conference from the process. A second alternative would be for review committee of Congress to be added if it is to make final approval of positions.
Approval of recommendations of the Director by the Judicial Conference through the Bankruptcy Committee from the time recommendations are formulated by the Bankruptcy Division, printed and distributed to the Bankruptcy Committee, considered at a meeting, preparation and distribution of the Committee's recommendations to the Conference and consideration at the next semiannual meeting of the Judicial Conference would take an estimate of nine months.
Following approval by the Conference, if the recommendations are to be approved by Congress, an additional period will be required depending on what procedure is established. I have arbitrarily set this at three months, making the entire approval process one year.
The last step in the process is obtaining the funding necessary to put on the new positions. Assuming that this will be done through a special or supplemental appropriation, it might be accomplished in six months, including the hearings before Appropriation Committees.