• July 1, 2014

 

Dennis O'Brien[Editor’s Note: Minnesota Litigator is delighted and honored to pass on the post, below, by retired U.S. Bankruptcy Judge Dennis D. O’Brien, below. I add, though, that I think Judge O’Brien “buried the lede,” as journalists say (or “the lead,” if you prefer), by leaving until the end Judge O’Brien’s news that he offers services to Minnesota lawyers to function as shadow counsel, advisor, consultant, expert, and mediator. I know a lawyer who had the opportunity to work with Judge O’Brien in his new role and who cannot recommend him highly enough. Finally, note that Judge O’Brien is flexible as to his rate depending on your circumstances. So, really, the question for Minnesota litigators who do not have and who need deep expertise in bankruptcy law: Can you afford NOT to work with Judge O’Brien?]

The Start of My Legal Career and the Dawn of U.S. Bankruptcy Law

When I attended law school in the early 1970s, bankruptcy law was not even remotely on my radar. My law school, William Mitchell, did not offer a course in the subject to my knowledge. But, if it did and had I been aware of it, I certainly would have avoided a course in bankruptcy. I wanted to be a trial lawyer. I clerked for a St. Paul law firm while in law school and periodically delivered papers to the bankruptcy court clerk’s office in downtown St. Paul in connection with that, but, I had no idea what any of it was about, and whatever went on behind the clerk’s counter or in bankruptcy courtrooms. The bankruptcy process was a total mystery to me. One that I had no interest in solving.

I graduated from law school in 1974, and began my practice with a small law firm in Duluth, Minnesota. It was a general practice firm, except that bankruptcy law was totally absent from the practice. Two years later, I went solo, became a St. Louis County Juvenile Court Guardian ad Litem, and practiced probate, real estate, small corporate and family law. This was the bread and butter of the small practitioner.

Bankruptcy law remained a mysterious area of the law under the Bankruptcy Act of 1898, as amended in the first half of the 20th itself was scattered throughout the U.S. Code, largely hidden from all but a few specialists. Bankruptcy court procedures, likewise, were indecipherable to those who were not the few regular bankruptcy practitioners. There were no published bankruptcy rules, national or local. What local procedures that were memorialized for the bankruptcy court in Duluth, existed in the form of “Local Orders,” copies of which were kept under the counter at the bankruptcy court clerk’s office. They were available to anyone who asked for them. Most general practitioners, including me, were not aware that they existed.

In 1978, I joined another small law firm in Duluth and shortly thereafter wandered into the area of bankruptcy law. At that same time, the bankruptcy environment dramatically changed. Congress had enacted The Bankruptcy Reform Act of 1978. The legislation produced, for the first time in American history, a comprehensive, integrated Bankruptcy Code that dealt with all aspects of bankruptcy, and debtor/creditor relationships, rights and obligations connected with bankruptcy, both liquidations and restructurings. Federal Rules of Bankruptcy Procedure followed. Local rules were encouraged.

The scope of the Reform Act was very broad. Bankruptcy courts were created separate from federal district courts. Bankruptcy judgeships were created, the judges to oversee and adjudicate legal disputes directly and indirectly involved in or affected by bankruptcies. The jurisdiction provided bankruptcy judges was seemingly limitless. But, the judges were not provided Article III status. They were appointed Article I judges for 14 year terms, subject to reappointment. Failure of the legislation to provide Article III status for bankruptcy judges, in light of the expansive jurisdiction envisioned for them under the Reform Act, proved to be a serious shortcoming that continues to plague the bankruptcy process and impede the efficiencies envisioned by the Code.

Embarking on a Life in Bankruptcy Law

My introduction to bankruptcy was under this new system. Trustees administer liquidation cases under the Bankruptcy Code, not bankruptcy referees who both administered liquidations and exercised judicial functions in connection with those cases under the old Act. Not all trustees who administer cases under the Code are lawyers. Even those who are, sometimes obtain representation by third party lawyers in bankruptcy litigation involving the trustee and the bankruptcy estate. My initial involvement in bankruptcy was representation of an elderly trustee in connection with trustee litigation.

Over the next several years, I slowly expanded my practice in bankruptcy to about 30% of my entire practice. In 1983, I learned that Duluth’s then part-time bankruptcy judge position was opening. I applied for it, somewhat on a lark. I was 35 years old, had limited experience in bankruptcy and, with just short of 10 years practice generally, had relatively no other experience to offer that would seemingly lend itself to appointment to the position. But, I got the appointment. Where were all the highly qualified applicants? There weren’t any.

Upheaval in Bankruptcy Law

It was not until shortly after I was sworn in and became a part-time bankruptcy judge in Duluth that I learned what was about to happen, and why highly qualified applicants had stayed away. In 1982, the United States Supreme Court ruled that the jurisdictional powers given to bankruptcy judges under the 1978 Bankruptcy Reform Act were unconstitutional powers in the hands of non-Article III judges.

Thus, the Reform Act was gutted of its jurisdictional provisions. The Supreme Court afforded Congress a time specific to fix the legislation during which the then current judges could continue to sit. The first deadline was missed. When I was sworn in on February 22nd, the deadline was looming. My position was about to go out of existence in just over 30 days from my investiture.

Congress again missed the deadline. But, the Supreme Court again extended it to May 31, 1984. In the meantime, a full time bankruptcy judgeship opened in St. Paul. Throwing caution to the winds, I applied for it and was accepted. By the end of May, our family was relocated, but not settled into, St. Paul. Congress missed the deadline, the Supreme Court refused to extend it, and bankruptcy judges ceased to exist.

We were all hired back as “consultants” to the federal district court judges, who were then left to deal with bankruptcy matters directly. In fact, no bankruptcy activity occurred in the summer of 1984 except for the signing of routine non-controversial administrative orders sent to the district judges by the new consultants.

Return to Normalcy in Bankruptcy Law

In the fall of that year, Congress passed the Bankruptcy Amendments and Federal Judgeship Act of 1984. The Act made the bankruptcy court a unit of the federal district court, reinstated the bankruptcy judges who had been in service and who served as consultants, and coined the terms “core” and “non-core” proceedings. Bankruptcy judges were given the authority to exercise final district court jurisdiction over core proceedings, and make recommended dispositions to the Article III judges of non-core proceedings.

During my nearly 30 years on the bankruptcy bench, bankruptcy courts functioned under this system. But, the 1984 Congressional fix began to slowly unravel not long after it was enacted and has continued to do so over the years, increasingly limiting the final authority of bankruptcy judges over the adjudication of bankruptcy core issues. The United States Supreme Court recently ruled that bankruptcy judges lack the authority to finally decide fraudulent conveyance actions. Notwithstanding the erosion of bankruptcy judges’ authority, those of us who were young lawyers privileged to occupy the position of bankruptcy judge from the early days of the Bankruptcy Reform Act of 1978, had the unique opportunity to influence the development of bankruptcy law under it. The Code, in practice, took on a life more substantial and expansive in the resolution of issues resulting from financially distressed individuals, entities, and their creditors, than even the drafters would have predicted.

My Next Chapter

In the summer of 2013, I retired from the bankruptcy bench. My nearly 30 years’ service as a bankruptcy judge for the Federal District of Minnesota has been a richly rewarding experience. But, I decided that it was time to step aside do something a little different. I am now of counsel with the law firm of Manty & Associates in Minneapolis, Minnesota.

Nauni Manty and I go back a long way. She was my legal secretary in private practice in Duluth. Nauni came with me into the judiciary as my executive secretary. While in that position, she attended law school, getting her J.D. degree from William Mitchell. After serving as my law clerk, she left to practice law, ultimately forming Manty & Associates seven years ago. The firm concentrates on bankruptcy and non-bankruptcy debtor/creditor issues, serving individuals, businesses and financial institutions. Additionally, Nauni serves as a bankruptcy trustee in both Chapter 7 and Chapter 11 cases in the District of Minnesota.

I offer services to lawyers and their clients regarding bankruptcy issues and cases that they become involved in. Specifically, I offer counseling, analysis, evaluation, strategy, expert testimony, and mediation services. My objective is to assist lawyers and their clients in connection with specific cases and issues at an affordable cost. My rates in each case are the same as those charged by the individual lawyers who are currently assisting their clients.

Dennis D. O’Brien

June 26, 2014 (published July 1, 2014)

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