The bankruptcy rulemaking process

American Bankruptcy Law Journal

Volumn 70, Issue 3, 1996, Pages 245-276

  Resnick, Alan N ^a,b  

^a HOFSTRA UNIVERSITY   (United States)

^b Advsy Committee on Bankruptcy Rules ^*

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EID: 5244289890     PISSN: 00279048     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (116)

1. See, e.g., Symposium, Letters to the Commission, 69 AM. BANKR. L.J. 431 (1995).
2. Peter G. McCabe, Renewal of the Federal Rulemaking Process, 44 AM. U. L. REV. 1655, 1676-78 (1995), for a discussion of the need for greater participation by judges and practicing lawyers in the federal rulemaking process.
3. 28 U.S.C. §§ 2071-77 (1994).
4. For discussions on the history of the Rules Enabling Act, see Thomas E. Baker, An Introduction to Federal Court Rulemaking Procedure, 22 TEX. TECH. L. REV. 323 (1991); Stephen B. Burbank, The Rules Enabling Act of 1934, 130 U. PA. L. REV. 1015 (1982); Alexander Holtzoff, Origin and Sources of the Federal Rules of Civil Procedure, 30 N.Y.U. L. REV. 1057 (1955); McCabe, supra note 2.
5. For discussions on the history of the Rules Enabling Act, see Thomas E. Baker, An Introduction to Federal Court Rulemaking Procedure, 22 TEX. TECH. L. REV. 323 (1991); Stephen B. Burbank, The Rules Enabling Act of 1934, 130 U. PA. L. REV. 1015 (1982); Alexander Holtzoff, Origin and Sources of the Federal Rules of Civil Procedure, 30 N.Y.U. L. REV. 1057 (1955); McCabe, supra note 2.
6. For discussions on the history of the Rules Enabling Act, see Thomas E. Baker, An Introduction to Federal Court Rulemaking Procedure, 22 TEX. TECH. L. REV. 323 (1991); Stephen B. Burbank, The Rules Enabling Act of 1934, 130 U. PA. L. REV. 1015 (1982); Alexander Holtzoff, Origin and Sources of the Federal Rules of Civil Procedure, 30 N.Y.U. L. REV. 1057 (1955); McCabe, supra note 2.
7. 28 U.S.C. § 2075 (1994). The Rules Enabling Act, including § 2075, has been amended in several respects since its enactment.
8. National Bankruptcy Act of 1898, 30 Stat. 544 (1898).
9. Pub. L. No. 95-598, 92 Stat. 2549 (1978).
10. 54 Fed. Reg. 13,752 (April 5, 1989), reprinted in Proposed Rules, 163 F.R.D. 91, 159-63 (1995).
11. The court of appeals judges of each circuit, except the Federal Circuit, select one district judge from that circuit to serve on the Judicial Conference.
12. See Act of July 11,1958, Pub. L. No. 85-513,72 Stat. 356 (codified at 28 U.S.C. § 331 (1994)). See also McCabe, supra note 2, at 1659.
13. 28 U.S.C. § 331 (1994).
14. See id. § 2073(b).
15. The current secretary also serves as the Assistant Director for Judges Programs of the Administrative Office of the United States Courts.
16. Part I, Section 1, Procedures for the Conduct of Business by the Judicial Conference Committees on Rules of Practice and Procedure, 54 Fed. Reg. 13,752 (April 5, 1989).
17. One practicing lawyer is currently a visiting law school professor. Of the five practitioners, one is a legal services lawyer specializing in consumer bankruptcy law and the other four are primarily engaged in business bankruptcies.
18. The current chair, The Honorable Paul Mannes, Chief Bankruptcy Judge for the District of Maryland, was a member of the Advisory Committee for six years before commencing a three-year term as chair.
19. See 28 U.S.C. §§ 601-12 (1994). See generally Richard S. Arnold, L. Ralph Mecham: A Tribute, 44 AM. U. L. REV. 1479 (1995). Commenting on the Administrative Office under the leadership of its current director, Leonidas Ralph Mecham, Chief Justice William H. Rehnquist has written that the A.O. "is committed, above all, to providing high quality services to judges and court administrators so that judicial business proceeds smoothly and with the degree of excellence the public has come to expect. These efforts include stronger staff support to policymakers in the Judicial Conference of the United States and its committees ...." Honorable William H. Rehnquist, Some Introductory Thoughts, 44 AM. U. L. REV. 1477, 1477 (1995).
20. See 28 U.S.C. §§ 601-12 (1994). See generally Richard S. Arnold, L. Ralph Mecham: A Tribute, 44 AM. U. L. REV. 1479 (1995). Commenting on the Administrative Office under the leadership of its current director, Leonidas Ralph Mecham, Chief Justice William H. Rehnquist has written that the A.O. "is committed, above all, to providing high quality services to judges and court administrators so that judicial business proceeds smoothly and with the degree of excellence the public has come to expect. These efforts include stronger staff support to policymakers in the Judicial Conference of the United States and its committees ...." Honorable William H. Rehnquist, Some Introductory Thoughts, 44 AM. U. L. REV. 1477, 1477 (1995).
21. See Preliminary Draft of Proposed Amendments to the Federal Rules of Bankruptcy Procedure, Rule 8020, published for public comment in September, 1995. See also FED. R. APP. P. 38.
22. 13 F.3d 326 (9th Cir. 1994).
23. Id. at 327-29.
24. See FED. R. APP. P. 4.
25. See Preliminary Draft of Proposed Amendments to the Federal Rules of Bankruptcy Procedure, Rule 8002(c), published for public comment in September, 1995.
26. See 28 U.S.C. § 158(a) (1994), as amended by § 102 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106. See also 11 U.S.C. § 1121 (1994)(setting forth the period within which only the debtor may file a Chapter 11 plan).
27. See Preliminary Draft of Proposed Amendments to the Federal Rules of Bankruptcy Procedure, Rule 8001(a), published for public comment in September, 1995.
28. See 11 U.S.C. §§ 101(51C), 1121(e), 1125(f) (1994), as amended by § 217 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106.
29. See 11 U.S.C. § 1104(b), as amended by § 211 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4100. In Chapter 11 cases filed before October 22, 1994, the effective date of the amendment, all trustees are appointed by the United States trustee in consultation with parties in interest, rather than elected by creditors.
30. See 28 U.S.C. § 157(e) (1994), added by § 112 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106.
31. The Standing Committee established the Local Rules Project in 1985 to review local rules of district courts and courts of appeals. See McCabe, supra note 2, at 1688-89.
32. See FED. R. APP. P. 47, FED. R. BANKR. P. 8018 and 9029, FED. R. CIV. P. 83, FED. R. CRIM. P. 57, as amended December 1, 1995. The most significant changes to these rules, wich minor variations to accommodate differences in the four bodies of federal rules, are: (1) a new requirement that local rules "conform to any uniform numbering system prescribed by the Judicial Conference of the United States;" (2) the addition of a provision stating that "[a] local rule imposing a requirement of form shall not be enforced in a manner that causes a party to lose rights because of a nonwillful failure to comply with the requirement;" and (3) a new provision restricting the effect of orders or chambers rules of particular judges that are not incorporated in local rules, which states that "[n]o sanction or other disadvantage may be imposed for noncompliance with any requirement not in federal law, federal rules, Official Forms, or the local rules of the district unless the alleged violator has been furnished in the particular case with actual notice of the requirement."
33. The Rules Enabling Act was amended in 1988 to require open meetings except when a committee goes into executive session for cause. See 28 U.S.C. § 2073(c), as amended by Pub. L. No. 100-702 (1988). Although § 2073(c) did not govern the Advisory Committee on Bankruptcy Rules until 1994, Advisory Committee meetings held before 1994 were open to the public nonetheless. See Bankruptcy Reform Act of 1994, Pub. L. No. 103-394. § 104(e), 108 Stat. 4106.
34. Part I, Section 3 (a), Procedures for the Conduct of Business by the Judicial Conference Committees on Rules of Practice and Procedure, 54 Fed. Reg. 13,752 (April 5, 1989), reprinted in Proposed Rules, 163 F.R.D. 91, 161 (1995).
35. If comments and suggestions are received by the consultant on style too late for consideration before the proposed amendments are presented to the Standing Committee with a request for publication, his comments are considered by the Advisory Committee after the publication period expires and before the proposed amendments are presented to the Standing Committee for final approval.
36. See Part 1, Section 4(d), Procedures for the Conduct of Business by the Judicial Conference Committees on Rules of Practice and Procedures, 54 Fed. Reg. 13,752 (April 5, 1989), reprinted as amended in Proposed Rules, 163 F.R.D. 91, 161 (1995), which provides that either the Standing Committee or its chair may shorten the publication period when it is determined: that the administration of justice requires that a proposed rule change should be expedited and that appropriate public notice and comment may be achieved by a shortened comment period, without public hearings, or both. The Standing Committee may eliminate the public notice and comment requirement if, in the case of a technical or conforming amendment, it determines that notice and comment are not appropriate or necessary. Whenever such an exception is made, the Standing Committee shall advise the Judicial Conference of the exception and the reasons for the exception. Id.
37. See Part 1, Section 4(b), Procedures for the Conduct of Business by the Judicial Conference Committees on Rules of Practice and Procedures, 54 Fed. Reg. 13,752 (April 5, 1989), reprinted in 163 F.R.D. 91, 161 (1995).
38. See McCabe, supra note 2, at 1668.
39. See Part I, Section 4(c), Procedures for the Conduct of Business by the Judicial Conference Committees on Rules of Practice and Procedure, 54 Fed Reg. 13,752 (April 5, 1989), reprinted in, 163 F.R.D. 91, 161 (1995).
40. When amendments are proposed that are noncontroversial and few in number, public hearings are often canceled for lack of witnesses interested in testifying.
41. See Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986, Pub. L. No. 99-554, 100 Stat. 3088.
42. 28 U.S.C. § 2075 (1994), as amended by § 104 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106. Prior to the 1994 amendment, amendments to the Bankruptcy Rules became effective on August 1. The amendment was designed to conform to the other sections of the Rules Enabling Act that have made amendments to the other federal rules effective on December 1.
43. Id.
44. Id.
45. See Amendments to Federal Rules of Civil Procedure, 507 U.S. 1089, 1091 (1993).
46. Id. at 1094. Justice White stated two reasons for this conclusion: First, to perform such a function would take an inordinate amount of time, the expenditure of which would be inconsistent with the demands of a growing caseload. Second, some [of] us, and I remain of this view, were quite sure that the Judicial Conference and its committees, "being in large part judges of the lower courts and attorneys who are using the Rules day in and day out, are in a far better position to make a practical judgment upon their utility or inutility than we." Id. (quoting from a 1966 opinion of Justice Douglas dissenting in part from the Court's promulgation of amendments to the Federal Rules of Civil Procedure, 383 U.S. 1089, 1090 (1966) (Douglas, J., dissenting)).
47. Id. at 1096.
48. Amendments to Federal Rules of Civil Procedure, 507 U.S. 1089, 1096. See FED. R. CIV. P. 11 and 26, as amended in 1993.
49. See Letter of Transmittal, Amendments to Federal Rules of Civil Procedure, 500 U.S. 964 (1991).
50. Communication from the Chief Justice, the Supreme Court of the United States, Transmitting an Amendment to the Federal Rules of Evidence as Adopted by the Court, Pursuant to 28 U.S.C. § 2076, H.R. Doc. No. 250, 103d Cong., 2d Sess. (reprinted at 114 S. Ct. intro. page 682-84) (1994). See McCabe, supra note 2, at 1684-86.
51. 11 U.S.C. § 521 (1994); FED. R. BANKR. P. 1007.
52. See FED. R. BANKR. P. 2002(a), (f).
53. See 11 U.S.C. §§ 501, 502 (1994); FED. R. BANKR. P. 3002-05.
54. See FED. R. BANKR. P. 9013.
55. See FED. R. BANKR. P. 9014.
56. See FED. R. BANKR. P. 3007.
57. See 11 U.S.C. § 363(b) (1994); FED. R. BANKR. P. 2002(a), (c)(1), 6004.
58. See FED. R. BANKR. P. 7001-87.
59. See 11 U.S.C. § 1125 (1994); FED. R. BANKR. P. 3016, 3017.
60. See 11 U.S.C. §§ 941, 1121, 1221, 1321 (1994); FED. R. BANKR. P. 3015, 3016.
61. FED. R. BANKR. P. 9009. Rule 9009 of the Bankruptcy Rules also recognizes the existence of socalled "Director's forms." See id. These forms are issued by the Director of the Administrative Office of the United States Courts, rather than by the Judicial Conference, and are used by clerks, judges, and practitioners for guidance and convenience.
62. A 1991 amendment to Bankruptcy Rule 9029 makes it clear that a local rule may not prohibit or limit the use of any Official Form.
63. For example, § 322 of the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353, 98 Stat. 357, amended the Official Form for the voluntary petition by adding two numbered paragraphs and an exhibit (Exhibit B). Specific language was added to the form to require an individual debtor, whose debts are primarily consumer debts, to state, in essence, that he or she is aware of the availability of relief under Chapter 7 or 13, but has chosen to seek relief under Chapter 7. This language was changed by Congress in 1986, pursuant to § 283(aa) of the Bankruptcy Judges, U.S. Trustees, and Family Farmer Bankruptcy Act of 1986, Pub. L. No. 99-554, 100 Stat. 3088, to include references to Chapters 11 and 12. Exhibit B is the declaration of the debtor's attorney that he or she explained to the debtor the availability of relief under Chapters 7, 11, 12, and 13.
64. 28 U.S.C. § 2075 (1994). The same provision is included in 28 U.S.C. § 2072, which governs the other bodies of federal rules. Id. § 2072.
65. See FED. R. BANKR. P. 3002, 3003.
66. See FED. R. BANKR. P. 4004.
67. 28 U.S.C. § 2072(b) (1994).
68. 11 U.S.C. § 501(c) (1994).
69. 11 U.S.C. § 362(e) provides: (e) Thirty days after a request... for relief from the stay of any act against property of the estate ..., such stay is terminated with respect to the party in interest making such request, unless the court, after notice and a hearing, orders such stay continued in effect pending the conclusion of, or as a result of, a final hearing and determination under subsection (d) of this section. A hearing under this subsection may be a preliminary hearing, or may be consolidated with the final hearing under subsection (d) of this section. The court shall order such stay continued in effect pending the conclusion of the final hearing under subsection (d) of this section if there is a reasonable likelihood that the party opposing relief from such stay will prevail at the conclusion of such final hearing. If the hearing under this subsection is a preliminary hearing, then such final hearing shall be concluded not later than thirty days after the conclusion of such preliminary hearing, unless the 30-day period is extended with the consent of the parties in interest or for a specific time which the court finds is required by compelling circumstances. Id.
70. 11 U.S.C. § 102(1)(A) (1994).
71. Id. § 102(1)(B)(i).
72. Id. § 102(1)(B)(ii).
73. Id. § 1128.
74. See id. §§ 1224, 1324.
75. Section § 101(51C) defines "small business" to mean: a person engaged in commercial or business activities (but does not include a person whose primary activity is the business of owning or operating real property and activities incidental thereto) whose aggregate noncontingent liquidated secured and unsecured debts as of the date of the petition do not exceed $2,000,000. 11 U.S.C. § 101(51C) (1994).
76. See 11 U.S.C. §§ 101(51C), 1121(e), 1125(f), as amended by § 217 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106. The 1994 amendments apply only in cases commenced on or after October 22, 1994.
77. See, e.g., In re Hausladen, 146 B.R. 557 (Bankr. D. Minn. 1992)(en banc). Contra, e.g., In re Zimmerman, 156 B.R. 192 (Bankr. W.D. Mich. 1993)(en banc).
78. In re Hausladen, 146 B.R. at 559-60.
79. See 11 U.S.C. § 502(b)(9) (1994), added by § 213 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106.
80. FED. R. BANKR. P. 3016(a).
81. 11 U.S.C. § 1121(d)(1994).
82. For a more general discussion of legislation that amends federal procedural rules without adherence to the Rules Enabling Act process, see McCabe, supra note 2, at 1682-87.
83. Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 114, 108 Stat. 4106. See FED. R. BANKR. P. 7004(h).
84. Pub. L. No. 98-353, 98 Stat. 333 (1984).
85. Pub. L. 99-554, 100 Stat. 3088 (1986).
86. 28 U.S.C. § 158(a), as amended by § 102 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106.
87. 28 U.S.C. § 157(e), added by § 112 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106.
88. 11 U.S.C. § 1104 (1994), as amended by § 211 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106.
89. 11 U.S.C. § 101(51C), 1121(e), 1125(f), as amended by § 217 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106.
90. The use of suggested interim rules is not new. It was also used after the enactment of the Bankruptcy Reform Act of 1978, pending the 1983 revisions to the national Rules. Similarly, after the enactment of the 1986 legislation that added to the Code Chapter 12 for family farmers, suggested interim rules were drafted by the Advisory Committee and forwarded to courts for adoption as local rules to govern Chapter 12 cases pending the 1991 revisions to the national Rules.
91. The practice of having separate packages of amendments in different stages of the rulemaking process at the same time has not gone without criticism. See. e.g., Charles Alan Wright, Forward: The Malaise of Federal Rulemaking, 14 REV. LITIC. 1 (1994).
92. FED. R. BANKR. P. 8018, 9029.
93. FED. R. BANKR. P. 1006, 1007, 1019, 2002, 2015, 3002, 3016, 4004, 5005, 7004, 8008, 9006.
94. FED. R. BANKR. P. 1019, 2002, 2007.1, 3014, 3017, 3018, 3021, 8001, 8002, 9011, 9035.
95. Proposed new FED. R. BANKR. P. 1020 (small business elections), 3017.1 (conditional approval of disclosure statements in small business cases), 8020 (damages and costs for frivolous appeals), and 9015 (jury trials).
96. See 11 U.S.C. § 548 (1994).
97. See FED. R. BANKR. P. 7001.
98. See FED. R. BANKR. P. 7001-87. Because many of the Bankruptcy Rules incorporate by reference particular Civil Rules, one member of the Advisory Committee on Bankruptcy Rules regularly attends meetings of the Advisory Committee on Civil Rules to monitor proposed amendments that could affect proceedings in bankruptcy cases.
99. FED. R, CIV. P. 11(C)(1)(A).
100. Preliminary Draft of Proposed Amendments to the Federal Rules of Bankruptcy Procedure, Rule 9011, published for public comment in September, 1995.
101. W. See 11 U.S.C. §§ 707(a). 1112(b) (1994).
102. See FED. R. APP. P. 47, FED. R. BANKR. P. 8018 and 9029, FED. R. CIV. P. 83, and FED. R. CRIM. P. 57, as amended December 1, 1995.
103. See Proposed Amendments to FED. R. APP. P. 25, FED. R. BANKR. P. 5005, and FED. R. CIV. P. 5, which, if approved by the Supreme Court and Congress, will become effective on December 1, 1996.
104. See McCabe, supra note 2, at 1682.
105. 11 U.S.C. § 521(a) (1994) (emphasis added).
106. FED. R. BANKR. P. 1007 (emphasis added).
107. Preliminary Draft of Proposed Revision of Federal Rules of Appellate Procedure Using Guidelines for Drafting and Editing Court Rules, April, 1996.
108. FED. R. BANKR. P. 9036.
109. The proposed amendments to Rule 5005 will become effective on December 1, 1996, unless Congress enacts legislation that provides otherwise.
110. Similar amendments will be made to Rule 25 of the Federal Rules of Appellate Procedure, and Rule 5 of the Federal Rules of Civil Procedure, effective December 1, 1996, unless Congress enacts legislation that provides otherwise.
111. The Federal Judicial Center is an agency "whose purpose it shall be to further the development and adoption of improved judicial administration in the courts of the United States." 28 U.S.C. § 620(a) (1994). Among other functions, the Center conducts "research and study of the operations of the courts." Id. § 620(b)(1).
112. See FED. R. CIV. P. 26, which is applicable in adversary proceedings under FED. R. BANKR. P. 7026 and, unless the court otherwise directs, to contested matters under FED. R. BANKR, P. 9014.
113. FED. R. CIV. P. 26 permits courts, by local rule or order, to opt out of certain discovery provisions.
114. A subcommittee was formed in early 1995 to study and make recommendations relating to disclosure requirements for professionals and other areas governing professional responsibility.
115. Long Range Plan for the Federal Courts, December, 1995, Committee on Long Range Planning, Judicial Conference of the United States, p. 58.
116. Id. However, experience has shown that few judges and lawyers respond to proposed amendments during the six-month public comment period. See McCabe, supra note 2, at 1676-78, for a discussion of the need for greater participation by judges and practicing lawyers.