The Day the Music Died

By Hank Hildebrand, MDTN

I never set out to be a bankruptcy lawyer, much less a trustee.

It was always my intent to be trial lawyer. The thrill of victory, the agony of defeat, and the captive audience of a jury; having to think fast on your feet was exciting. Facing jurors and witnesses with a modicum of confidence was what my view of a lawyer should be. Growing up, I had visions of being Perry Mason, the universally successful defense attorney, skillfully navigating cross-examination and a poker face, leading to witnesses confessing guilt while testifying in open court. Ah, the consummate advocate.

I got plenty of trial work in my early career at the Tennessee Attorney General’s Office. Prison conditions, antitrust, pursing questionable non-profits were my bailiwick. Among my assigned tasks was representing the Alcoholic Beverage Commission (an interesting story in and of itself in that our governor did time for selling liquor licenses to his friends) and, when a realignment of attorneys was made, I decided to seek out opportunities outside of state employment.

I was recruited by a firm that did a lot of alcohol regulatory work but also did quite a bit of bankruptcy. Having had only one exposure to bankruptcy (there lies another story for another day), I advised the firm that, while comfortable with litigating or going to court, I was not anxious to venture into the bankruptcy world. Nonetheless, this firm took me in and of necessity I got to experience some of their bankruptcy cases as they represented Chapter 11 trustees and debtors-in-possession. Never allowed to venture to a matter under Title 11, I was relegated to adversary proceedings based on non-bankruptcy law which resembled a conventional trial.

All this was upset when the lawyer that recruited me calmly announced at a firm meeting that he was seeking appointment as a bankruptcy judge in the Middle District of Tennessee. We all wished Keith Lundin well, but his demotion to become the youngest federal judge in the country left us with a dilemma. Keith advised the firm that he would no longer serve as Chapter 13 trustee and that one of the lawyers in the firm should take that job on themselves, given that the cost of moving the trusteeship would be significant and not many people would be interested in the position of trustee. In those days, the compensation of a Chapter 13 trustee was roughly comparable to the salary of a starting secretary at the Department of Justice, albeit without benefits of any kind. I agreed to at least explore the idea. I would need to meet with the Chief Bankruptcy Judge (at that time, the paleolithic period of bankruptcy, trustees were appointed by the bankruptcy judges, not by the United States Trustee which was still just a pilot program in a few selected districts).

I met with the chief judge and advised of my comfort in meeting many of the tasks of a trustee – how to operate an office, going to court, handling numbers, and dealing with lawyers and debtors. What I felt uncomfortable with was the substantive field of bankruptcy law. I always had a suspicious view of bankruptcy, it was a practice that was “not normal.” The chief judge confided to me that when he applied to the district court for appointment as bankruptcy judge, he, too, had little experience in bankruptcy and that if I were appointed he and I would learn the bankruptcy system together.

After returning from a short vacation, I found sitting on my desk an order, one paragraph long, issued by the chief judge appointing me as trustee and requiring me to post a $5 million dollar bond (the dinner conversation with my spouse was somewhat uncomfortable).

Two pieces of advice were given to me by the judge when he appointed me. First, he said, make no changes in the operation of the trustee’s office for at least a year. Second, I should definitely attend the next meeting of the National Association of Chapter Thirteen Trustees since the only people who would have any idea as to how to operate a trustee’s office would be other trustees.

I traveled to the NACTT (then the conference was small enough to be held in motels rather than convention hotels) and, as I walked into the conference, dazzled by the many bankruptcy luminaries and confounded by the jargon that so easily flowed between them. Two trustees, Ken Still and Jody Troxler (then Kinlaw) asked me if I was the unfortunate that had been appointed to replace Keith Lundin as the bankruptcy trustee. When I replied in the affirmative, they cleared a space for me on the lobby sofa and told me to sit down because they would need to instruct me on the proper way to be a trustee, and how to avoid the bad habits of my predecessor.

Having looked to the east, I turned westward and sought advice and suggestions from the trustee in Memphis, George Stevenson. I traveled to Memphis and found the trustee’s office sitting atop a Holiday Inn hotel (back then almost all of the hotels in Memphis were Holiday Inns). George was appointed the same day that I was and we had a lot in common – except I noticed his desk was totally clear. I envied his ability to handle and dispose of matters that hit his desk but, in 40 years I have never been able to duplicate that.

George did have his own computer system, one that had been developed in Memphis, and it was really impressive. Like most trustees, I inherited the EPI system of hand coding, two-part copies, and funny codes. I was jealous of the fact that his employees had their OWN COMPUTER MONITORS!! I wanted that too.

What I did not expect was that George offered me the computer software that he had developed without cost! Who does that? I knew that I would need to tweak the software that he had to conform to my idealized image of an up to date, technologically driven trustee’s office. “No problem,” he told me, I could use the program and modify it. The one condition was that the software that he created and that we tweaked had to be made available to any trustee that wanted it. While they may have to pay the software team for support, the basic computer software was without cost. And from the collaboration of George Stevenson and a programmer named Mark Goldstein, Bankruptcy Software Systems was born.

Initially, the trusteeship was exciting (although I was very anxious to make changes to the office within the year). However, a few short months after my appointment, the Supreme Court of the United States threw me a curve ball. They held that the bankruptcy system under the purview of bankruptcy judges, was unconstitutional. In the N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S. Ct. 2858, 73 L. Ed. 2d 598 (1982) case, the fact that the bankruptcy code had conferred great powers on bankruptcy judges without providing them lifetime tenure, meant that bankruptcy judges were patently unconstitutional. This was the day that the music died.

Wisely, SCOTUS deferred the effect of its ruling until Christmas Eve 1982. “Ah,” I thought, “this will give plenty of time for Congress to remedy the situation and life can go on.” How wrong I was.

Come Christmas Eve, after no remedy was passed by Congress, bankruptcy judges were unconstitutional, powerless to exercise the powers in Title 11, and no further delay would be forth coming in the implementation of the Supreme Court’s decision.

I was in a quandary. As I read the opinion, the decisions made by these powerless, unconstitutional judges were highly suspect. Thus, cases that I was administering with plans confirmed by an unconstitutional court, might not be valid without a specific blessing from the district court. I pulled out my appointment order and, lo and behold, it was only signed by a (now illegal) bankruptcy judge. An unconstitutional bankruptcy judge. I was convinced that this would be the end of a very short-lived trustee career.

I received a call from the Chief Bankruptcy Judge that advised me that the administrative office had come up with a novel solution. All bankruptcy judges would be designated as “special masters” and would serve the function of a bankruptcy judge but sending up recommendations to the district court. A very neat solution indeed. The problem, the judge continued, was that the district court had to send notice to everyone that was involved in a bankruptcy case. It turns out that I had the only computer data base with every creditors’ name and address in the Chapter 13 cases. Thus, the bankruptcy court crafted an order that would designate bankruptcy judges as special masters to handle bankruptcy cases. This order was (theoretically) electronically signed by the three district court judges in the Middle District.

I sent this order out to every creditor in my data base, every attorney that had filed a bankruptcy case, and every debtor that had an active Chapter 13 case. Thirty-five thousand mailings later, I figured we were home free. Then, disaster struck.

The chief judge of the United States District Court wrote me a letter on his small personal stationery which advised me that I had illegally forged his name on an order and that I was one of the most dangerous people in the State of Tennessee. The letter went on to state that I should show cause why I should not be summarily removed from the position of Chapter 13 trustee.

I was astonished. After all, the Chief Bankruptcy Judge had instructed me to send this order out. I called the chief judge. I told him what the letter had said, what we had done, and there was a long pause. His next words convinced me that my life in bankruptcy was over.

“Sometimes you just have to take one for the team.”

I traveled to the district court’s chambers, an hour and a half away from Nashville. When I walked in to meet the district court judge, he proceeding to loudly rail at me while simultaneously smoking two cigarettes and would not listen to any explanation or justification concerning the issuance of the special master order. He ordered me to leave his chambers immediately. I complied. What followed was the longest hour and a half drive back to Nashville ever.

The next day I went to visit the other two district judges in the Middle District. I figured it was only right that I confront this inevitable termination of my employment with my head held high. After all, if I wasn’t going to be a trustee, I’d be appearing in federal court on a regular basis.

The two judges in Nashville were angry. They hit the tops of their desks. I knew my days were numbered. They looked at each other and one of them said, “What makes that #?@!* think he is the United States District Court. He’s only one of three members and he can’t do this.” I sheepishly walked out of the judges’ chambers and never heard a word again. From any of them.

Well, trustees have come a long way since then. Now appointed by the bureaucracy in Washington, D.C. instead of the court, trustees are given instructions in a comprehensive handbook, and elevated to a leadership position in their own bankruptcy bars. The Chapter 13 Bankruptcy Program has grown and flourished (at least until COVID).

One thing remains constant. Just as Ken Still and Jody Troxler pulled me aside to tell me the “right way to do it”,and George Stevenson provided the tools needed to computerize the office, it is the trustees that reach out to each other to provide assistance, cooperation, and information. If there is one thing that I learned from that first year as a trustee, it is my respect, admiration, and reliance upon my fellow trustees. So, we should all learn to seek, accept and share advice with each other. That is what makes this job the best in the system.

_________________________

HHildebrand150v2Henry E. Hildebrand, III has served as Standing Trustee for Chapter 13 matters in the Middle District of Tennessee since 1982 and as Standing Chapter 12 Trustee for that district since 1986. He also is of counsel to the Nashville law firm of Belcher Sykes Harrington, PLLC. Mr. Hildebrand graduated from Vanderbilt University and received his J.D. from the National Law Center of George Washington University. He is a fellow of the American College of Bankruptcy and the Nashville Bar Foundation. He is Board Certified in consumer bankruptcy law by the American Board of Certification and serves on its faculty committee. He is Chairman of the Legislative and Legal Affairs Committee for the National Association of Chapter 13 Trustees (NACTT). He is on the Board of Directors for the NACTT Academy for Consumer Bankruptcy Education, Inc. and is an adjunct faculty member for the Nashville School of Law and St. Johns University School of Law. In addition, he served as a commissioner to the American Bankruptcy Institute’s Commission on Consumer Bankruptcy.

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