Chapter 11 Bankruptcy Venue Reform Gains Momentum

This week, Wilbraham-based Friendly’s Ice Cream Corporation announced that it would close 63 locations as it seeks to reorganize under Chapter 11 bankruptcy protection.  Friendly’s has a long history in Massachusetts, starting with its founding in Springfield in 1935.  Despite its local roots, Friendly’s joins a growing list of Massachusetts companies – including Polaroid and Evergreen Solar – who have filed for bankruptcy protection in Delaware.

Once upon a time companies were required to file for bankruptcy where their corporate headquarters or corporate assets were located.  Then Congress expanded those choices to also include where the company is incorporated or the place a corporate affiliate has previously filed.  While the expanded statute gives courts the power, on request, to overrule venue choice if it is inconvenient or unfair, an employee trying to save her job or pension is ultimately unlikely to petition the courts.

Since 2005, federal legislation to curb venue shopping has been filed and H.R. 2533, The Chapter 11 Bankruptcy Venue Reform Act of 2011 was introduced again this session.  The bill would require corporations to file for bankruptcy protection in the judicial district where they have their principal place of business.

Supporters of the bill say that companies should be forced to reorganize close to home, so that local employees and creditors can more easily participate in the bankruptcy process.

Opponents have pointed to the fact that anyone can file a motion for change of venue.  In reality, doing so is not only inconvenient but expensive.  In previous sessions, a notable opponent was former Delaware Senator Joe Biden.  This session, the Bar of the City of New York has opposed the bill.  Both Delaware and the Southern District of New York seem to enjoy a monopoly on these types of cases.  It is said that an overwhelming majority of these cases are filed in those two districts.

Early indications suggest that this legislation may actually have the momentum to pass this session.  In September, the House Subcommittee on Courts, Commercial and Administrative Law held a hearing on the bill.  Among those who testified was Chief Judge Frank J. Bailey of the United States Bankruptcy Court for the District of Massachusetts.  Chief Judge Bailey testified on his own behalf, travelling to Washington D.C. at his own expense, and pointed to the serious unintended consequences of the current law.

The BBA is reviewing this legislation.  The Bankruptcy Section has already voted to support the legislation and it should be on the BBA Council’s agenda next month.

By filing hundreds or thousands of miles away from their headquarters, companies disenfranchise employees, marginalize pensioners and disregard stakeholders who have invested heavily in the corporation.

Big corporations like Friendly’s really are part of their local communities – they employ residents, contribute to the local economy and pay taxes to local governments.  Communities, like Wilbraham, take pride in their association with and commitment to their businesses.  Bankruptcy venue shopping is not just a loophole – it violates a community’s trust.

-Kathleen Joyce

Government Relations Director

Boston Bar Association

Legal Services Corporation Needs a Lifeline

This week BBA President Lisa Goodheart sent a letter to Senator John Kerry and the rest of the Massachusetts Congressional Delegation requesting support and protection for the funding of the Legal Services Corporation (LSC).  As written about before on Issue Spot, support for legal services is a core part of the BBA’s mission and is a vital service to some of the most vulnerable people in society.

Funding for civil legal assistance in Massachusetts is a partnership between federal, state and local governments as well as private attorneys and foundations.  The current economic climate has led to a substantial drop in resources for LSC programs due to both a 50 percent decrease in IOLTA revenue over the past two years and budgetary constraints among state and private contributors. All this comes at a time of unprecedented need – more than 1 in 5 Americans now qualify for legal assistance.

Legal services funding is not merely a spending issue.  LSC-funded programs in Massachusetts provide critical legal services to individuals who need it most, including victims of domestic violence, veterans returning from combat, those coping with the after-effects of natural disasters, persons with disabilities, and individuals undergoing foreclosures and evictions.  LSC funds four programs in Massachusetts – the Volunteer Lawyers Project of the Boston Bar Association, the Massachusetts Justice Project, Merrimack Valley North Shore Legal Services and the New Center for Legal Advocacy – all of whom have already absorbed massive cuts to their budgets and staff.

Why is LSC funding in jeopardy now?  It all goes back to August when Congress, reaching a last-minute compromise on the debt ceiling crisis, established the Joint Select Committee on Deficit Reduction.  The Committee is made up of 12 lawmakers – including Massachusetts Senator John Kerry – who have been tasked with finding $1.2 trillion in budget savings by November 23rd.  If the Committee is unable to come up with the necessary savings, the difference will be made up by automatic spending cuts, divided evenly among domestic and defense programs.

Senator John Kerry and, in general, the Massachusetts Congressional Delegation have been supportive of legal services.  They understand that legal aid attorneys provide meaningful representation to people who have no place else to turn.  Despite the presence in Congress of legal aid advocates who appreciate the importance of legal services, the fiscal situation before the Committee is daunting.  Funding cuts threaten to adversely impact our neighbors, friends, families, and communities.  We need to do everything we can to ensure that the citizens of Massachusetts are able to receive the legal assistance they need.

 

-Kathleen Joyce

Government Relations Director

Boston Bar Association

 

Innovative Pilot Program Lends a Hand to Struggling Courts

At a recent meeting with our new President, Lisa Goodheart, we heard firsthand from staff and the First Justices of the Boston Municipal Court.  Inadequate funding of our state courts has hit the BMC hard.

All eight of the BMC’s First Justices described to us the drastic impact the budget crisis has had on the BMC and its ability to administer justice.  Inadequate staffing levels and the consequences of a hiring freeze have led to more delays in the processing of cases, increased security risks in courthouses, and low morale among hardworking employees who are troubled by the fact that it’s virtually impossible to provide adequate public services in a timely and effective manner.

So what’s a bar association to do?  It’s now a given that we advocate for adequate funding for the courts on a year round basis.  We also need to find creative ways to help fill the gaps left by a shrinking budget.

The district court clerkship program – a pilot partnership established by the BMC, with the help of BBA Diversity and Inclusion Section’s Co-Chair Macey Russell – does just that.

This pilot venture began with one purpose – to increase diversity in the legal profession and provide opportunities for minority law students.  But the program has also helped ease some of the negative effects of an underfunded judiciary, while mitigating the impact of a hiring freeze on court employees at no cost.  It was refreshing to hear about the positive experiences the BMC’s First Justices have had with the 3Ls that have been matched with them.

It’s a win-win situation.  The judges are thankful for the assistance, and the student interns have had fantastic experiences with invaluable mentoring from the judges.  Any assistance with the court’s workload is helpful.  The BMC’s First Justices appreciate having resourceful law student interns in their courts.

To date, the program has helped place over 20 students with judges around Boston.  If only a handful of clerkships at a single court can make a difference, imagine what the effect of an expanded program would be.

-Kathleen Joyce

Government Relations Director

Boston Bar Association

Permanent Campaign for Court Funding Revs Up

As we wait to see whether the Massachusetts legislature will throw the Judiciary a life line – in the form of a supplemental budget with funding to fill the egregious gap between what our state courts need and what the legislature appropriated – we need to gear up for the future.  Not surprisingly, Fiscal Year 2013 is shaping up to be every bit as difficult as the past two fiscal years.  The BBA is in the throes of what it now realizes is a “permanent campaign” to secure adequate funding for equal access to justice in Massachusetts.

Nearly every constituency grows organically. For example, when state university students lobby for increased funding for higher education, hundreds of students at Massachusetts’ public universities — along with faculty and staff members – arrive by the busload and fill the halls of the State House. They tell stories about what would happen if funding were to be cut from their line items.  This grassroots effort yields results!

It’s a different story for the Judiciary.  If you believe the courts have no constituency aside from lawyers, you’re only half right.  Yes, a court is usually a place of last resort.  Most litigants go kicking and screaming after other efforts to resolve their conflicts have been exhausted.  Most people are not particularly happy about going to trial, and in fact many of them come out feeling even worse when they see the result.  When the Judiciary makes its annual funding request to the legislature, the group most inclined to take up the cause and carry the torch is a small one.

One other constituency that understands the gravity of the situation facing our state courts and the value of a properly funded judiciary is the business community.  In recent years, the Business Litigation Session has taken on a healthy caseload, demonstrating its value in making Massachusetts a more predictable place to do business.  Yet the lack of proper funding threatens even the Business Litigation Session.  Business leaders know that time is money.  They know all too well that for their employees using the court system to resolve their own personal disputes or serve as witnesses, court delays mean a loss of productivity, which in turn hampers competitiveness.

Each of the last two years, Paul Dacier, Executive Vice President and General Counsel of EMC Corporation, has rallied other general counsel to plead the case for adequate court funding.  To his credit, Paul recruited twenty-three other general counsel in 2010 and twenty-nine general counsel in 2011 at leading Massachusetts companies  – including John Hancock, Fidelity, Partners HealthCare System, National Grid, TJX, BJ’s Wholesale Club, and others – to sign onto a letter supporting funding for the courts.  While the signatories represent companies across Massachusetts, they are also lawyers and part of the constituency that understand the consequences of under funded courts.

-Kathleen Joyce

Government Relations Director

Boston Bar Association

Reader Comments Re: Reduced Court Hours Miss the Mark

On Tuesday, the Supreme Judicial Court announced that it will reduce public office hours for 38 courthouses across the state starting September 19th.  The scheduling of court sessions will not be affected by the changes in office hours and access will be available for cases of the greatest urgency.

Kyle Cheney’s story on this subject ran in the Boston Globe on Wednesday, generating reader comments that reveal gross misperceptions about the work going on in our courthouses each day.

The court system is a sitting duck for attacks because it has no natural constituency, unlike the other branches of government, and because most of the public’s interaction with the courts stems from a negative life experience.  “Before the courts stage there (sic) work slowdown over budget cuts somebody ought to do a time study of what the court workers really do especially the judges,” wrote seen-it-all. “No money should be restored until the waste and fat is trimmed. Stop your whining!!!!!!”

What waste and fat?  The courts are in full triage mode.  Every day 42,000 people access our courts.  At last count, the number of Trial Court employees was down 1,167 people, a 15 percent reduction in staff since 2007.  In combination with budget reductions of $85 million over three fiscal years, the result has been a hiring freeze, work furloughs and an exhaustive reduction in non-personnel expenditures.  Cuts have been made everywhere, as the courts have been forced to use an ax in place of a scalpel. Courthouses have been consolidated, judges have asked for a moratorium on judicial appointments and plans for court relocations have been announced.

Another reader commented as if the recent announcement is nothing more than a political ploy: “Let the games i.e. posturing begin.  Cut my budget we’ll cut back hours and penalize everyone like a petulant child,” wrote XENOPHONIC.  The truth is that our state courts are staffed at levels well below national standards and there are just not enough employees to keep up with the caseload.

Our courts are hurting and the people who need access to them the most have been hit hardest. Ill-informed comments about our state courts do not help the cause.  Facts and figures are important, but numbers can only tell part of the story.  It is essential that we consider the real life anecdotes about the effect of the cuts on real people. We understand the financial situation facing the Commonwealth, but while cutting the state court budget may seem inconsequential to some people, it endangers the basic constitutional rights of Massachusetts citizens.  This cannot continue without disastrous consequences for the administration of justice.

 

-Kathleen Joyce

Government Relations Director

Boston Bar Association

Passage of Probate Laws Needed ASAP

The Massachusetts Uniform Probate Code (UPC) will be effective for estates on January 2, 2012; it became effective for guardianship on July 1, 2009.  This landmark piece of legislation is something the BBA has worked on and supported for over 20 years.  Not only does the UPC improve what was a deplorable situation concerning the appointment and conduct of guardians, but it will simplify the probate process for families and our courts while expediting the process for administering estates. The UPC facilitates the appointments of executors and also provides options for choosing informal or formal procedures to open and close probate matters.  All in all, lawyers and the courts are pleased with it.

The Probate and Family Court has been educating its staff on the new law and working diligently to promulgate new forms that will be used when the rest of the UPC is rolled out in January.  To supplement their efforts, the BBA will offer a continuing legal education seminar introducing the new estate rules in November to help practitioners navigate the changes.

Now what? The Legislature needs to pass two more bills quickly.  The first, S704, contains technical corrections to the UPC.  These corrective changes address issues that came to light during the initial implementation and take into account things like missed cross references, typos and other oversights. The second bill, the Massachusetts Uniform Trust Code (MUTC), is a companion piece to the UPC.  Since the MUTC repeals most of Article VII of the UPC and replaces it with more current language, it would be advantageous to have all the statutory trust law provisions in the same place in the new MUTC and take effect as scheduled on January 2, 2012.

Like the UPC, the MUTC is a substantial bill that has been well-vetted.  It was produced by the Uniform Laws Commission after a five-year drafting period.  Then in 2005, an ad hoc committee of lawyers, including members of the BBA, was convened to review the bill in detail.  They debated each section of the MUTC and, as a result, what we have is a statute that will simplify and make the trusts laws in Massachusetts more accessible.

Here are just a few reasons that the MUTC should be passed:

  • The laws concerning trust will be uniform, comprehensive and easy to find.
  • It will make the administration of trusts more uniform among the states.
  • It will reduce uncertainty and costly and needless litigation.
  • It provides guidance and protection for trustees who, by the terms of the trust, are to take direction from a non trustee.
  • It simplifies judicial proceeding regarding non judicial settlement agreements and modification and termination of trusts.

January is less than five months away and, realistically, we are looking at a legislative schedule that at best might enact the bills by late September – not a lot of time to conduct the education and training necessary for a smooth implementation next January.  Whatever can be done to facilitate the prompt passage of the MUTC legislation should be done.  Adopting the MUTC will move Massachusetts into the 21st century in trust law.

-Kathleen Joyce

Government Relations Director

BostonBar Association

Sentencing Legislation Teed Up for Sept.

While it has been reported that the halls of the State House have been quiet lately, work is still getting done in the legislature.  Not only was the 155-page casino bill released this week, but the Judiciary Committee announced their hearing schedule for September.  The Judiciary Committee will hold two public hearings next month.  Bills pertaining to sentencing and re-entry issues will be heard on Tuesday, September 20th and bills relative to sex offenders and statute of limitations will be heard on Tuesday, September 27th.

Scheduling these two hearings almost immediately after the unofficial summer recess is significant and sends the message that the legislature wants to do sentencing reform…

The agenda for the first hearing contains 44 pieces of legislation currently under consideration by the Judiciary Committee.  One of those bills, House 40, was filed by Governor Patrick earlier this year and would provide parole eligibility for non violent offenders in state prisons.  House 40 builds upon the sentencing reforms contained in the comprehensive crime bill that Governor Patrick signed into law last August.  Last session’s crime bill is known for its landmark CORI reform, but it also included other important reforms such as parole eligibility for drug offenders serving mandatory minimum sentences in county prisons.  Now, parole eligibility can only be granted if the drug offenses did not involve guns, violence or children, and if the individual did not direct others in the sale of drugs.

There’s a lot of work to be done in this area.  Recently the Legislature established the Special Commission to Study the Commonwealth’s Criminal Justice System that will begin its work in September.  One of the board members will be a representative from the BBA and we look forward to being involved in the debate on policies that keep our Commonwealth safe while offering sensible solutions to Massachusetts’ sentencing practices.

-Kathleen Joyce

Government Relations Director

BostonBar Association

Practictioners’ Perspectives on the Alimony Reform Act

With the Alimony Reform Act of 2011 poised for passage, we thought we’d ask some of our members to share their reactions on the coming changes.  Here are the independent thoughts of the expert family law practitioners we canvassed:

Nan Elder – Bowman Moos & Elder, LLP

I think the principle benefit of the impending statutory change lies in the fact that it provides some scaffolding around which alimony awards can be negotiated and structured.  But the amount is only “some,” and the structure only “scaffolding” because the legislation also provides significant opportunity for deviation and modification – the exercise of judicial discretion – and it will take some years and quite a bit of litigation and appellate work to better clarify the full structural outlines.  For shorter term marriages, it may provide more guidance and definition sooner, and thus enable more ready resolution of them.   Longer term marriages will, however, quite probably still raise significant issues regarding its application.  This will be especially true in both new divorces and modifications for those “traditional” cases where one spouse has been the primary wage or salary earner and the other the caretaker and homemaker, often in expectation of, reliance on, and even with the express understanding between spouses of, the indefinite continuation of this family model.

As with any change of such magnitude, the transition will be arduous in a number of respects.   For litigants, it presents both an opportunity for relief and resolution for some and a source of reopening of wounds and the burdensome expense of extended or renewed litigation for others.  For lawyers, it presents an opportunity for some really creative thinking and lawyering, as well as for providing a framework for advising clients – but cynics might also suggest it presents an unexpected or unwarranted bonanza of new work.  For the courts, its implementation risks further burdening an already broken system.  Although the legislation staggers the availability of modifications of alimony judgments predating its effective date in March 2012, most practitioners I’ve talked with expect a flood of requests in addition to the uncertainty and litigation that will inevitably ensue as the statutory structure is fleshed out.

While the transition and implementation may well be both lengthy and rocky, the end result will hopefully provide some measure of clarity, if not certainty, especially for shorter term marriages.

Jennifer Rivera-Ulwick – Middlesex Probate & Family Court

The benefit of the proposed changes is the potential sense of predictability and consistency in determining alimony which will allow people to resolve this issue without seeking court intervention at the trial level.   Like the Child Support Guidelines, the law will provide a roadmap of sorts in formulating the appropriate alimony award, if any, based on the circumstances of the parties.  Given the new scheme for setting the duration, amount and form of alimony awards, I anticipate not only a decrease in the number of cases tried over alimony but also an increase in modifications being filed with the court to adjust prior alimony orders in accordance with the new legislation.  The roll-out dates, which determine when a modification may be filed as a result of the change in the law, will initially help relieve the courts from being overburdened with modification filings although the number of filings may depend in part on the level of awareness of the changes on the part of alimony obligors which is sure to increase each year after the law becomes effective.

Anita Robboy – Prince, Lobel & Tye, LLP

Massachusetts is long overdue for a critical look at Section 34 as our Commonwealth is very much out of line with nearly every state in the duration of alimony awards.  The Bill has clear guidelines regarding expected points of termination.  The major change will be that attorneys can no longer state that a Probate and Family Court judge lacks the power to terminate alimony.  The Bill specifically enables judges to limit the duration of alimony and to amend prior judgments that had no termination point.  The interplay between alimony awards, if any, and the division of assets is forever altered.  The recipient of alimony has lost an important ‘chit’: the value of future alimony.  The payor can rely on obtaining termination upon the happening of certain events, such as age, the length of alimony already received in relation to the marriage, and cohabitation.  Counsel must now advise clients that alimony comes, if at all, in a variety of flavors.  It will be important to strategize which form of alimony is applicable and/or most advantageous.

John Fiske – Healy, Fiske, Richmond & Matthew

As a mediator, I see the greatest benefit of the alimony bill as analogous to the Child Support Guidelines: it gives clients a good idea of what a court would do without their having to go to court.  In my 32 years of mediating divorces, the uncertainty of the length of alimony has been the most challenging obstacle for many husbands and wives.

I will tell [my clients] I want them to make informed choices, and to read the law, or any available summary of the law including my own, to get an idea of what a court would do before they choose their own solution.  The outcome of many of my cases would not be very different [had the reforms been in place previously], but the process of getting there will be more efficient. The outcome in some of my cases will be different, probably reducing the number of cases where clients define alimony for a certain period and then agree to leave open the question of whether to continue alimony in some amount after that date.  This law will be beneficial to just about everybody: clients, children, lawyers, mediators, judges, probation officers and financial planners for example.

-Michael Bouton

Government Relations Department

Boston Bar Association

Still Proud to Be First!

Recently, New York became the latest state to legalize same-sex marriage when Governor Andrew Cuomo signed the Marriage Equality Act into law in June.  A 62-member Senate had approved the bill by a vote of 33-29.  The bill officially took effect July 24th, which marked 30 days since Governor Cuomo signed it into law.

However, this monumental decision by the New York State Assembly did not come without a fight. Lawmaker Daniel O’Donnell, the first openly gay member of the New York State Assembly, introduced a same-sex marriage bill in 2007, which was approved by the Assembly three times in five years, but subsequently rejected by the Senate each time. The final push towards legalization came with a switch in the opinion of four of the New York representatives (three Democrats and one Republican).  Some of the representatives admitted that they were swayed by the public opinion in their districts while others revealed a change in their moral stance on the issue.

Following the Supreme Judicial Court’s 2004 ruling in Goodridge v. Department of Public Health, Massachusetts became the first state to legalize same-sex marriage. The Boston Bar Association filed an amicus brief in support of the plaintiffs in the case, seven same-sex couples who argued that Massachusetts law subjected them to discrimination by denying them the right to obtain civil marriage licenses.   When the Massachusetts law officially took effect on May 17, 2004, we became the sixth jurisdiction in the world to legalize same-sex marriage after the Netherlands, Belgium, Ontario, British Colombia, and Quebec.  Since then, several U.S. jurisdictions (Connecticut, the District of Columbia, Iowa, New Hampshire, Vermont, and now New York) have joined Massachusetts in enacting similar measures to legalize same-sex marriage.

President Obama’s 2011 decision to direct the Justice Department to stop defending the Defense of Marriage Act (DOMA) against lawsuits challenging its constitutionality marked a significant shift in the political atmosphere surrounding the issue. There are currently two cases challenging the constitutionality of DOMA in the First Circuit: Commonwealth of Massachusetts v. U.S. Dept. of Health and Human Services and Gill v. Office of Personnel Management.

The BBA takes pride in its record of supporting equal rights and universal access to justice as the issue of same-sex marriage progresses.  We will continue to monitor same-sex marriage issues throughout Massachusetts and in Washington.

-Michael Bouton

Government Relations Department

Boston Bar Association

Celebrations in the Senate Before the Summer Recess

In the days and even hours leading up to the legislature’s unofficial summer recess last week, there was a flurry of activity in the State House.  In the hubbub of lawmaking that took place, there were a few no-brainer bills that passed, but more contentious ones – like the court reorg bill– came down to the wire.  Among the bills passed was the long awaited and widely supported alimony reform law.  Sailing through with unanimous support in both branches of the legislature, it will make its way to the governor’s desk once agreement is reached between House and Senate differences in the bill.  Also receiving a unanimous vote in the Senate was the bill to provide post-conviction access to DNA.

To an outside observer, or any of the tourists trying to peek their heads inside the jam-packed upper gallery of the Senate Chamber last Thursday, it may have seemed like just another formal session in the Senate.  Senators milled around the chamber, staff came and went.  At 1 p.m., the Senate convened and immediately went into a recess.  Thirty minutes later, Senate President Murray was at the rostrum long enough to recite the pledge of allegiance before recessing again for a few moments.  Over the next hour, after a whirl of activity on various Senate bills, alimony reform was finally taken up and engrossed by a roll call vote of 36-0.  Applause broke out in the Senate Gallery and in the hallway outside.

Next up: access to DNA.  Senator Cynthia Creem took the floor and spoke in support of the bill.  She recognized Betty Anne Waters and the BBA for their contribution to this legislative effort, drawing members of the Senate to stand and applaud their work.  Seven amendments to the bill were then taken up.  Of those seven, two were withdrawn, one was rejected, and the remaining four were adopted.  When the roll call was taken, the bill passed 37-0.

It may have looked easy and effortless, but it actually felt chaotic.  The day before, Senate Ways & Means released the access to DNA bill with improvements and changes.  After reading through the revised bill, the BBA had a few suggestions and asked Senator Creem to file an amendment, to which she agreed.  On the morning of the scheduled Senate debate, other senators filed even more amendments to the bill.  These last minute amendments sparked discussions in the Senate hallways and on email.  Even in the moments before the start of the Senate session we were still trying to fix loopholes that the additions to the bill had opened up.

Then, finally…a signal from the Senate floor.  A senior Senate staffer looked towards the gallery and flashed a thumbs up. Just like that, it was over.  The bill had passed unanimously, capping off a monumental afternoon for those who had labored for years on this issue.  While pausing to take in what had just happened, it was nice to see the House sponsor, Representative John Fernandes, waiting one floor down outside the Senate Chamber.  Rep. Fernandes indicated that he is looking forward to taking this issue up on the House side once the legislature comes back from its summer recess.

 

-Kathleen Joyce

Government Relations Director

Boston Bar Association