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104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-569

                    BANKRUPTCY JUDGESHIP ACT OF 1995


  May 9, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


 Mr. Hyde, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 2604]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 2604) to amend title 28, United States Code, to 
authorize the appointment of additional bankruptcy judges, and 
for other purposes, having considered the same, report 
favorably thereon without amendment and recommend that the bill 
do pass.

                          Summary and Purpose

    Bankruptcy courts are an essential element of the Federal 
Judiciary and the American economic system. Unfortunately, 
total bankruptcy filings are now increasing in every judicial 
district in the nation. Additional resources are needed in 
certain districts if the bankruptcy courts are to continue to 
perform their vital role efficiently and effectively.
    H.R. 2604 is intended to provide those resources where 
needed. The bill authorizes five permanent and six temporary 
bankruptcy judgeships in eight Federal judicial districts, 
increasing the total number of judgeships to 337. This 
represents a reassessment and reduction from the 1993 Judicial 
Conference request for 19 new positions, which was not acted on 
by the 103d Congress. It also more faithfully reflects 
Congressional policy in favor of creating temporary as opposed 
to permanent judgeships whenever possible and appropriate as a 
means of limiting future costs.

                Background and Need for the Legislation

    Bankruptcy judges serve as judicial officers of the United 
States District Courts.1 By contrast with Article III 
judges, who are nominated by the President and confirmed by the 
Senate to lifetime positions, bankruptcy judges are selected by 
the regional United States Courts of Appeals and serve 14-year 
terms, with eligibility for reappointment.2
    \1\ 28 U.S.C. Sec. 152(a)(1).
    \2\ Id.
    At this time there are 326 authorized bankruptcy judgeships 
nationwide. The most recent increase took place when the 
Bankruptcy Judgeship Act of 1992 authorized 25 permanent and 10 
temporary judgeships.3 Reflecting Congressional concern 
regarding an appropriate distribution of judicial resources, 
that Act also directed the Judicial Conference, on a biennial 
basis, to assess the continuing need for bankruptcy judgeships 
and to submit any recommendations for the elimination of 
    \3\ Pub. L. No. 102-361, 106 Stat. 965.
    In 1994, the Conference recommended that no authorized 
positions be eliminated but endorsed leaving some judgeships 
unfilled based on need related considerations. Its 1996 
recommendations may reflect, among other developments, the 
sharp decline in farm bankruptcies in the midwest. As an 
efficiency measure, nine authorized positions are currently 
being kept vacant due to reduced workloads in certain 
districts. At any given time, furthermore, an estimated six to 
ten bankruptcy judges are temporarily serving outside of their 
districts in order to assist with heavier caseloads elsewhere.
    The Judicial Conference bases its recommendations for new 
bankruptcy judgeships on a comprehensive analysis of each 
court's caseload statistics and an on-site review of its 
workload and procedures by a survey team. The weighted caseload 
is the first factor considered in this process and is similar 
to that used for allocating district court judgeships. It 
signifies the average amount of judicial time required over the 
life of a case to handle a matter in a particular category. 
This system was developed by the Federal Judicial Center 
following a detailed quantitative study of the workloads 
carried by virtually all bankruptcy judges in active service 
between October 1988 and October 1989. It assigns a time value 
to each of 17 different categories of bankruptcy cases so that 
the sheer number of cases alone does not constitute the 
workload profile. A Chapter 7 non-business liquidation case 
with assets under $50,000, for instance, is given a weighted 
value of 5.34 minutes, while every Chapter 11 corporate 
reorganization case with assets of at least $1 million is given 
a value of 11.234 hours. Adversary proceedings--separate 
lawsuits filed within bankruptcy cases--are also assigned case 
    A billion dollar corporate reorganization case, of course, 
generally would present a far greater but statistically 
unacknowledged burden on a bankruptcy court. The inability of 
the current weighted caseload method to fully reflect the 
burden placed on the courts by multi-million dollar Chapter 11 
``mega-cases'' is, therefore, suggestive of a significant 
weakness, and the Committee reiterates its view that this 
problem merits attention by the Judicial Conference.4
    \4\ The Committee directs the attention of the Judicial Conference 
to the following statement in its report on the Bankruptcy Judgeship 
Act of 1992:
    ``The Committee believes that the `weighted caseload' approach can 
achieve its full potential as a reliable indicator of the need for 
additional bankruptcy judgeships only if the system accurately reflects 
the impact of very large cases.''
    H.R.Rep. No. 825, 102d Cong., 2d Sess. 9 (1992).
    The Judicial Conference requires a district to meet a per 
judge weighted caseload average of 1,500 hours as a threshold 
for considering additional judgeships--except in unusual 
circumstances. This threshold is exceeded in each of the 
districts that would receive additional judges under H.R. 2604. 
The national weighted caseload average from July 1994 to June 
1995 was 1,149 hours per judge, and the weighted caseloads in 
the eight districts that would benefit under the bill exceed 
that average by percentages that range from 31.1 percent up to 
72.5 per cent.5 The weighted hours do not reflect judicial 
time that cannot be attributable to an individual case, such as 
travel and administrative matters, which amount to nearly 700 
hours of additional work per judge per year.6 In addition, 
the case weights are assigned for the year in which a case is 
filed, while much judicial work is actually performed in 
subsequent years, and they may also reflect unusual filing 
patterns, such as a large number of objections to discharge 
filed in a particular case.
    \5\ Bankruptcy Division of the Administrative Office of the United 
States Courts, ``Additional Support for 11 Recommended Bankruptcy 
Judgeships,'' November 1995.
    \6\ ``Bankruptcy Judgeship Act of 1995: Hearing Before the Subcomm. 
on Commercial and Administrative Law of the House Comm. on the 
Judiciary,'' 104th Cong., 1st Sess. 8 (testimony of Paul A. Magnuson, 
    Other pertinent factors that the Judicial Conference must 
take into account in formulating its recommendations include 
the nature and mix of the court's caseload; historical caseload 
data and filing trends; geographic, economic, and demographic 
factors; the effectiveness of the court's case management 
efforts; the availability of alternative solutions and 
resources for handling the court's workload; and the impact 
that the requested additional resources would have on the 
court's per judgeship caseload.
    After a brief respite in 1993 and 1994, bankruptcy filings 
are now increasing in all 91 judicial districts throughout the 
country. In calendar year 1994 there were 832,829 bankruptcy 
filings and in calendar year 1995 there were 926,601, an 11.3 
per cent annual increase. A month-to-month comparison of 1994 
with 1995 shows that nationally there was a 25.5 percent 
increase in all filings in October (from 70,131 to 87,995 
cases), a 22 percent increase in November (from 67,310 to 
82,130 cases), and a 15.9 percent increase in December (from 
64,291 to 74,492 cases). Overall, filings in the fourth quarter 
of 1995 were 21 percent higher than in the fourth quarter of 
1994. Business bankruptcies, particularly Chapter 11 
reorganization cases, declined over the last three years until 
the fourth quarter of 1995, when they were up 8.7 percent over 
the fourth quarter of 1994.7
    \7\ Bankruptcy Division of the Administrative Office of the United 
States Courts, ``Bankruptcy Trends in the Nation,'' March 1996.
    H.R. 2604 authorizes additional judicial positions for the 
bankruptcy court system in eight districts where the Judicial 
Conference--to the satisfaction of this Committee--has 
demonstrated the greatest need. The five year temporary 
judgeship concept, to be utilized in six of the 11 new 
appointments, represents a fiscally prudent option that 
reflects the realities of current Federal budget constraints. 
It provides the supplemental resources needed to deal with 
present expanding caseloads without burdening taxpayers with 
the continual expense of permanent judgeships that may become 
unnecessary as bankruptcy filings decline.
    In February 1996, the Administrative Office of the United 
States Courts estimated that the total cost associated with 
each new bankruptcy judgeship is $735,530 for the first year 
and $614,631 per year thereafter. These figures include a 
bankruptcy judge's current annual salary of $122,912, which is 
set by statute at 92 percent of the compensation received by a 
United States District Judge.
    H.R. 2604 was introduced on November 9, 1995, by Mr. Gekas, 
Chairman of the Subcommittee on Commercial and Administrative 
Law, at the request of the Judicial Conference of the United 


    The Committee's Subcommittee on Commercial and 
Administrative Law held a hearing on H.R. 2604 on December 7, 
1995. Testimony was received from: the Honorable Paul A. 
Magnuson, Chief Judge, United States District Court, District 
of Minnesota, and Chairman of the Judicial Conference Committee 
on the Administration of the Bankruptcy System; the Honorable 
Paul Mannes, Chief Bankruptcy Judge, District of Maryland, and 
Chairman of the Judicial Conference Advisory Committee on 
Bankruptcy Rules; the Honorable William A. Anderson, Bankruptcy 
Judge, Western District of Virginia, on behalf of the National 
Conference of Bankruptcy Judges; and Mr. Harry D. Dixon, Jr., 
Chairman of the Board of the American Bankruptcy Institute.

                        Committee Consideration

    On February 29, 1996, the Subcommittee on Commercial and 
Administrative Law met in open session and ordered reported the 
bill H.R. 2604, without amendment by voice vote, a quorum being 
present. On March 12, 1996, the Committee met in open session 
and ordered reported the bill H.R. 2604 without amendment by 
voice vote, a quorum being present.

                         Vote of the Committee

    There was one rollcall vote on an amendment offered during 
full Committee markup of H.R. 2604. The amendment offered by 
Mr. Reed was to restrict recommendations by the Judicial 
Conference for additional bankruptcy judges and to provide 
greater flexibility in transfers. This was defeated by a vote 
of 10-11.
        YEAS                          NAYS
Mr. Chabot                          Mr. Hyde
Mr. Conyers                         Mr. Moorhead
Mr. Frank                           Mr. Gekas
Mr. Boucher                         Mr. Smith (TX)
Mr. Reed                            Mr. Schiff
Mr. Nadler                          Mr. Canady
Mr. Scott                           Mr. Goodlatte
Mr. Watt                            Mr. Bono
Ms. Lofgren                         Mr. Bryant (TN)
Ms. Jackson Lee                     Mr. Flanagan
                                    Mr. Barr

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(C)(3) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth, with respect to the bill, H.R. 2604, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 18, 1996.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2604, the 
Bankruptcy Judgeship Act of 1995.
    Enacting H.R. 2604 would affect direct spending. Therefore, 
pay-as-you-go procedures would apply to the bill.
    If you wish further details on this estimate, we will be 
pleased to provide them.
                                         June E. O'Neill, Director.

               Congressional Budget Office--Cost Estimate

    1. Bill number: H.R. 2604.
    2. Bill title: Bankruptcy Judgeship Act of 1996.
    3. Bill status: As ordered reported by the House Committee 
on the Judiciary on March 12, 1996.
    4. Bill purpose: H.R. 2604 would establish five permanent 
and six temporary bankruptcy judgeships in eight federal 
judicial districts. The temporary judgeships would be 
authorized for a minimum of five years from the confirmation 
date of the temporary judge.
    5. Estimated cost to the Federal Government: Enacting H.R. 
2604 would increase discretionary spending, subject to 
appropriations of the necessary funds, and also would increase 
mandatory spending as shown in the following table. Additional 
costs would total $7 million to $8 million a year by 1998.

                [By fiscal year, in millions of dollars]                
                                   1996    1997    1998    1999    2000 
Estimated authorization level...  ......       2       6       5       5
Estimated outlays...............  ......       2       6       5       5
                       CHANGES IN DIRECT SPENDING                       
Estimated budget authority......  ......   (\1\)       2       2       2
Estimated outlays...............  ......   (\1\)       2       2       2
\1\ Less than $500.000.                                                 

    The costs of this bill fall within budget function 750.
    6. Basis of estimate: Based on information from the 
Administrative Office of the United States Courts (AOUSC), CBO 
expects that enacting this bill would increase both 
discretionary and mandatory costs associated with the salaries 
and benefits of bankruptcy judges and their support personnel. 
Expenses required to support the additional personnel also 
would increase. Judges' salaries and benefits, which total 
about $150,000 a year for each judge, are not subject to 
appropriations, and thus a change in the number of judges 
affects direct spending. Salaries and benefits of support 
personnel and other expenditures related to a judgeship total 
about $450,000 a year, after certain initial costs. This 
spending would require appropriation action.
    Based on information from the AOUSC and taking into account 
the time it takes to nominate and confirm judges, CBO estimates 
that enacting H.R. 2604 would result in about $6 million in 
mandatory spending from 1997 through 2000 for salaries and 
benefits of judges. (Under current law, total spending for 
salaries and benefits of bankruptcy judges during that period 
would average about $55 million a year.) Our estimate of 
additional costs assumes that all of the 11 judgeships 
authorized under the bill would be filled by 1998. CBO also 
assumes that while the appointment process for these judgeships 
may begin in 1996, any additional costs that would be incurred 
in this year would be insignificant. Other costs, subject to 
appropriations of the necessary amounts, would total about $18 
million over the 1997-2000 period.
    7. Pay-as-you-go considerations: Section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts through 1998. CBO estimates that enactment 
of H.R. 2604 would increase direct spending by less than 
$500,000 in 1997 and by $2 million in 1998. The following table 
shows the estimated pay-as-you-go impact of this bill.

                [By fiscal year, in millions of dollars]                
                                                 1996     1997     1998 
Change in outlays............................        0        0        2
Change in receipts...........................    (\1\)    (\1\)    (\1\)
\1\ Not applicable.                                                     

    8. Estimated impact on state, local, and tribal 
governments: H.R. 2604 contains no intergovernmental mandates 
as defined in Public Law 104-4 and would impose no direct costs 
on state, local, or tribal governments.
    9. Estimated impact on the private sector: This bill would 
impose no new private sector mandates, as defined in Public Law 
    10. Previous CBO estimate: None.
    11. Estimate prepared by: Federal Cost Estimate: Susanne S. 
Mehlman, State and Local Government Impact: Karen McVey, 
Private Sector Impact: Matthew Eyles.
    12. Estimate approved by: Robert A. Sunshine for Paul N. 
Van de Water, Assistant Director for Budget Analysis.

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee estimates that H.R. 
2604 will have no significant inflationary impact on prices and 
costs in the national economy.

                      Section-by-Section Analysis

    Section 1 of the bill states the short title.
    Section 2 increases the number of permanent bankruptcy 
judgeships by four in the central district of California and by 
one in the district of Maryland.
    Section 3 establishes temporary bankruptcy judgeships in 
the southern district of Florida, the eastern district of 
Michigan, the district of New Jersey, the eastern district of 
New York, the northern district of New York, and the eastern 
district of Pennsylvania. The first vacancy in the office of a 
bankruptcy judge in each of the six districts--resulting from 
the death, retirement, resignation or removal of a bankruptcy 
judge five or more years after the date of an appointment to 
one of the new temporary positions--will not be filled. The 
increased number of judges, therefore, will continue only until 
such a vacancy occurs, at which point the number of positions 
will revert to the current figure. When a vacancy occurs by 
reason of the expiration of an incumbent judge's term, however, 
that judge will be eligible for reappointment. A person 
appointed to a temporary judgeship, therefore, may serve a full 
14-year term and be eligible for reappointment, just as a 
person appointed to a ``permanent'' judgeship.
    Section 4 makes a technical correction to make clear that 
the United States Courts of Appeals appoint bankruptcy judges 
in districts located in their respective circuits.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):


Sec. 152. Appointment of bankruptcy judges

  (a)(1) [The United States court of appeals for the circuit 
shall appoint bankruptcy judges for the judicial districts 
established in paragraph (2) in such numbers as are established 
in such paragraph.] The bankruptcy judges established in 
paragraph (2) for a judicial district shall be appointed, in 
such number as are established in such paragraph, by the United 
States court of appeals for the circuit in which such district 
is located. Such appointments shall be made after considering 
the recommendations of the Judicial Conference submitted 
pursuant to subsection (b). Each bankruptcy judge shall be 
appointed for a term of fourteen years, subject to the 
provisions of subsection (e). However, upon the expiration of 
the term, a bankruptcy judge may, with the approval of the 
judicial council of the circuit, continue to perform the duties 
of the office until the earlier of the date which is 180 days 
after the expiration of the term or the date of the appointment 
of a successor. Bankruptcy judges shall serve as judicial 
officers of the United States district court established under 
Article III of the Constitution.
  (2) The bankruptcy judges appointed pursuant to this section 
shall be appointed for the several judicial districts as 
     * * * * * * *
     * * * * * * *
    Central...................................................   [21] 25
     * * * * * * *
Maryland......................................................     [4] 5
     * * * * * * *
                            ADDITIONAL VIEWS

    While we do not quarrel with the need for additional 
judicial resources in the 11 districts that are to gain 
judgeships, we nonetheless regret that the Judiciary Committee 
has missed an opportunity to take a more careful look at the 
way in which Congress allocates bankruptcy judgeships to ensure 
that bankruptcies are handled efficiently and expeditiously 
    It is clear that there is room for improvement. Last year, 
in one judicial district, bankruptcy judges handled a caseload 
of 252 weighted filings per judge. In another district, the 
caseload is almost eight times as high: 1,982 filings per 
judge. These disparities are commonplace.
    The citizens in the state where each judge has 1,982 
weighted cases per year are not getting the same level of 
service as the citizens of the state where each judge handles a 
caseload \1/8\th the size. The solution provided by the 
Committee--additional judges to some of the most underserved 
areas without considering other means of transferring or 
reallocating existing resources--is not fair to the taxpayer.
    The number of bankruptcy judgeships cannot keep escalating 
without some scrutiny of areas where resources exceed demand. 
Last year, a Judicial Conference survey found five districts 
where the caseload, even if one judge were removed or 
transferred, would not be over 1,000 hours (still less than the 
national average). The Judicial conference has begun utilizing 
a variety of methods to address the disparity in caseloads, 
including the use of visiting judges. These efforts are to be 
encouraged. We believe Congress must give the Judicial 
Conference the flexibility to adapt to regional shifts in 
bankruptcy caseload while at the same time providing incentives 
to use existing resources more efficiently. In an era of 
widespread budget cutbacks, no area of government can be 
    In particular, we regret that the Committee rejected an 
amendment offered by Mr. Reed, the Ranking Member of the 
Commercial and Administrative Law Subcommittee, that would have 
given the Judicial Conference greater authority to reallocate 
judicial resources from districts in which authorized 
judgeships exceed current needs to those requiring additional 
judgeships. Rep. Reed's proposal would have allowed the 
Judicial Conference to address the increasing workload in 
certain districts without increasing the total number of 
bankruptcy judges nationwide.
    Under current law, the Judicial Conference is required to 
make recommendations for the elimination of judgeships in every 
even numbered year. However, while it has kept some positions 
vacant as a result of this review, it has not eliminated any 
authorized slots. The Conference does not have the authority to 
transfer the vacant slots to needy areas. By granting this 
authority while at the same time requiring the Conference to 
combine requests for expansion with recommendations for the 
elimination of underutilized slots, the amendment offered by 
Mr. Reed would have provided an incentive to transfer 
judgeships and equalize workload. It also would enable the 
Judicial Conference to provide faster relief to over-burdened 
districts, which must now wait for Congressional action to 
receive additional assistance.
    This is an idea that has great merit. Clearly, the current 
trend to reinvent government has demonstrated that it is 
possible to deliver better quality governmental services using 
fewer resources more efficiently. Reallocating existing 
judgeships to meet current needs rather than creating new 
judgeships would seem to be a reasonable application of this 
    We are also concerned that districts whose dockets are 
characterized by extremely large Chapter 11 filings are not 
receiving adequate resources to handle their caseloads.
    There was, in fact, little disagreement among members of 
the Committee that the Judicial Conference's current system for 
measuring workload does not adequately reflect real world 
conditions. As a Majority Staff memorandum noted,

          The case weight figures do not fully reflect the 
        amount of judicial work in districts that receive a 
        disproportionate share of extremely large Chapter 11 
        filings, such as the District of Delaware and the 
        Southern District of New York.\1\
    \1\ Memorandum from Charles E. Kern II, Counsel, to Members of the 
Subcommittee on Commercial and Administrative Law 3 (February 27, 

    The weighted case hours method of measuring workload, under 
which 17 different categories of bankruptcy case are assigned a 
different time value, attempts to ensure that the sheer number 
of cases alone does not constitute the workload profile. 
Unfortunately, the largest unit of measure in this system is a 
$1 million Chapter 11 case, which is assigned a value of 11.234 
hours. Thus, for example, again as the Majority memorandum 
notes, ``A billion dollar bankruptcy would be a far greater, 
but statistically unacknowledged burden on the court.'' \2\
    \2\ Id. at 3.
    Rep. Nadler offered an amendment that would have directed 
the General Accounting Office to study the way in which the 
Judicial Conference measures judicial workload and the need for 
additional judicial resources. The amendment would also have 
directed the GAO to review and recommend different ways of 
dealing with an increasing workload, including automatic 
reallocation of resources and the use of non-judicial 
resources. Finally, the amendment would have directed the GAO 
to estimate the impact of the current allocation of bankruptcy 
judges on the efficiency of all bankruptcy judges, the costs to 
the parties, and the costs to the taxpayers of administering 
this system.
    Rep. Nadler withdrew the amendment during full committee 
markup with the assurance from Chairman Hyde that the Chairman 
would cooperate with Mr. Nadler in exploring a GAO study 
examining these issues. We believe such a study is warranted 
and hope it can be requested by the full committee on a 
bipartisan basis.
    Providing adequate resources to the bankruptcy courts is 
important not just to the parties, but to the economy. We hope 
that the important issues raised during the Committee's 
consideration of this legislation will not go unaddressed.

                                   Jack Reed.
                                   Robert C. ``Bobby'' Scott.
                                   Zoe Lofgren.
                                   Melvin L. Watt.
                                   Jerrold Nadler.
                                   John Conyers, Jr.
                                   Patricia Schroeder.