SDNY Bankruptcy Courts Sing the Blues on Fox Business - Maybe they should file Chapter 11?

The Bankruptcy Brothers: Judges Robert Drain and Robert Gerber Singing the Bankruptcy Blues at the SDNY CourthouseIs the Southern District of New York (SDNY) becoming the laughing stock of our nation's bankruptcy courts? After Chief Judge Cecelia Morris' appearance on Fox Business a couple of weeks ago, that just might be the case. I found this story while researching the SDNY on Bankruptcy Law Review. It seems Judge Morris wants to now blame all of the failings of her district's courts on the fiscal sequestration that is really just now starting to affect government entities. Sounds like more excuses from a court district already plagued with problems.

Judge Morris sang the blues about her job as Chief Judge of the district telling Fox Business, "Being a chief during the sequestration and during the financial issues that anyone in the federal court is facing, it's very difficult.

"We're hurting," she continued. "But we've been stepping down for a period of time."  We've noticed, your honor...

For instance, one of your highest profile judges, Judge Robert Gerber, has been "stepping down" for a very long time in his responsibilities of making rulings (the real job of a judge). Take for example, the much celebrated General Motors (GM) Chapter 11 bankruptcy case where Gerber, in his rush to push the case through in 44 days, simply missed a $367 million payment to a Canadian subsidiary of GM. Gerber held another hearing on this error (which has the potential to completely unravel the GM settlement) back in March. As of this writing, there has yet to be a ruling from Judge Robert Gerber.

It appears he has also been "stepping down" from making rulings in the LyondellBasell case as well. Instead he is allowing his docket to become clogged with vexatious lawsuits against common shareholders of stock.  People with no responsibility for the direction of the company.  People who were simply investing in their company's retirement program are being sued for their investments.  

SDNY Chief Clerk Vito Genna with Bob Price of TexasGOPVote, Sept 2012However, instead of making rulings on motions in these cases, Gerber is creating more havoc and causing Chief Clerk Vito Genna to have to deal with volumes of additional paperwork. All this at a time when Genna told Fox Business his courts have had to lay off 27 people including all of the people in the records department. I met Vito during my visit to the SDNY Courthouse in September last year.  He gave me a very gracious tour of the courts and his records offices.  He impressed me as a hard working and very efficient chief clerk.  It is a shame to see him being dumped on by inefficient judges.

But then again, aren't courts all over the country being affected by budget cuts?Are the "Bankruptcy Brothers" really crying the blues over these budget cuts or is this some lame response to pressure about their failure to perform?

Fox Business reported, "The bankruptcy court absorbed the sequester cuts by ending all hearings at 5:00 p.m., which has been a significant change for a venue that has been known to conduct hearings well into the night." In the corporate world, when there are budget cuts and layoffs, rather than cutting back hours, employees work longer and harder to get the job done. Maybe, Judge Morris should consider that. Or is that is just too much for her to expect from government employees?

Judge Drain Could envoke the Twinkie DefensePerhaps Judge Robert Drain could implement the Twinkie defense for the SDNY courts. That is if he hadn't forced the Hostess company out of business through his inconsistent application of the law pertaining to pension funds.  According to Drain, it is okay to strip the pensions of salaried people at Delphi and top up the pensions of Delphi's union employees because they have Collective Bargaining Agreements in place.  But in the case of Hostess, it is okay to throw out the pensions of the baker's union while leaving the UAW pensions intact. I guess it depends on which union has a CBA ey judge?  

And then, I must ask the question I have asked before, why, if the SDNY courts are SO overburdened with cases, do lawyers continue to seek out and take chapter 11 cases to these courts for companies that are not located or incorporated in the SDNY? Are the courts and judges in other districts not smart enough or competent enough to handle Chapter 11 cases? Why was American Airlines, a Delaware corporation headquartered in Texas, assigned to Gerber's SDNY court instead of Delaware or Texas? Hostess was also a Texas company and its case was held in Drain's SDNY court and not a Texas court. The Delphi and General Motors cases were held in Drain and Gerber's SDNY Courts instead of a Michigan court where they might know just a little bit more about car making than someone in New York City...  just saying... LyondellBasell was heard and is being heard in Gerber's court instead of a Texas court where the people being directly impacted by these frivolous lawsuits could be more easily represented.

Maybe, if the SDNY courts are so over-worked and prone to error, it is time for Judge Morris to exercise some leadership as chief judge to start referring some of these cases back to the states where they should be held and quit burying her courts for the convenience of Wall Street bankers and hedge fund groups. And here's a thought for Judge Morris - Get Judge Gerber off his butt and tell him to make some rulings to clear out his docket as he was instructed by U.S. District Court Judge Denise Cote (a real Article 3 federal judge) over two years ago.  

Judge Morris, before you and your fellow judges go singing the blues on national news sources like Fox and try to blame all your problems on sequestration and budget cuts, take a look at how your house is being run and make it better for all concerned.


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