THE following is from the verbatim official court transcript of Bankruptcy Judge Robert J. Faris’ initial comments at the July 27 Retirement Fund bankruptcy hearing in the CNMI District Court.
Many people still believe the fees were too high, the law firms too active. This responds to both charges, and comes from a respected, experienced authority. Faris is chief bankruptcy judge for the U.S. Bankruptcy Court/District of Hawaii. He was appointed to the Bankruptcy Court for a 14-year term in 2002; he was named outstanding bankruptcy judge in 2006 in a special report by Turnarounds & Workouts, a journal published by the Beard Group, a company serving the legal profession.
EXCERPT FROM THE FEDERAL BANKRUPTCY COURT TRANSCRIPTS (7/27/12):
JUDGE FARIS: “Well, let me start by telling you what I think tentatively, based on the papers, in the hope that will focus the argument.
This, of course, is tentative and subject to oral argument. My inclination is to say that after the adjustments proposed by the Brown Rudnick firm, the amounts requested are all well within the range of reasonableness.
Most of the objections go to the Brown Rudnick application, so I’ll focus on that also, and most of those objections come from the government and the government agencies. I think that’s ironic, to say the least.
It’s touching that the government is taking a concern with the financial condition of the Fund. But the Fund would not be in a problem if the government had simply paid what the government owes to the Fund. The government argues that there ought to be an 85 percent discount, based on the government’s estimate that there was a 15 percent chance of success. In the first place, I don’t think that’s a logical argument. If the logic of that argument were true, and you had a case that were 95 percent likely to succeed, there should still be a 5 percent deduction on the fees. And since I don’t think there is such a thing as a 100 percent case, a case that’s absolutely certain to succeed, no attorney would ever get paid the full amount of the fees if that logic were followed.
I also don’t think there’s any basis for the estimate of 15 percent. I’m interested in hearing — if anybody is willing to defend it — where that figure came from. I’ve been doing this kind of work for a long time. I wouldn’t pretend to be able to predict the success of this kind of case in a numerical fashion, and I think using numbers makes predictions seem more accurate than they really are, and therefore, tend to mislead people.
There’s specific objections to specific tasks in time sheets. I think those are more than overcome by the adjustment the firm’s agreed to. Before the adjustments, I did have some concern about the fees for the adversary proceedings that were started in this court and removed to this court, because it seemed to me that work didn’t have to necessarily be done at that point, but I think the deductions more than take care of that concern.
Some of the people have suggested that debtor [the Fund] should have basically done nothing until the eligibility issue was settled. That’s just not realistic in a Chapter 11 case. Chapter 11 cases have to move. The debtor can’t do anything outside the ordinary course of business without court approval. So it’s just not realistic to say that the debtor should have stood still while the eligibility issue was up in the air.
[T]here’s an argument that the deduction agreed to by the firm shows a consciousness of guilt. It strikes me that, if anybody in this case ought to have a guilty conscience in this case, it’s the commonwealth. But in any event, trying to reach a compromise in a disputed case of litigation should not be criticized. That’s a good thing. People should be encouraged to work out their differences outside of court and not criticized for that.
There’s also an argument that this case was a “Hail Mary” pass. I think that’s probably true. This was a difficult case from the beginning. But to continue with the football analogy, sometimes the “Hail Mary” pass is the only play you have when the situation is difficult enough; when there’s no other realistic alternatives and no other way to try and make the game, make the score even, and I think that probably is a pretty good description of this case.
Yes, there was a question of eligibility from day one. The debtor knew it, I believe. But there really wasn’t anything else the debtor could try that it hadn’t already tried to restore its funding.
So I don’t criticize the debtor for having tried this, because the potential benefits were substantial. Chapter 11, if the debtor had been eligible for Chapter 11, might have been a very good way to resolve the problems that this Fund faces….
So that’s what I think. You can tell, I hope, that I have thought about this quite a bit. So it’s tentative, but I’ll hear from anybody that wishes to be heard, but there’s no need to repeat what you’ve already written, because I’ve read that very carefully.”
RUTH L. TIGHE
Tanapag, Saipan
Note: from Letter to the Editor posted here: http://mvariety.com/cnmi/cnmi-news/letters-to-the-editor/48659-farris-on-the-funds-bankruptcy-filing.php
ruth,
it seems like you may be overlooking the fact that the judge, too (along with the hotheads), took notice of the unnecessary adversarial filings. he mentions, that although they may have been unneeded, instead of going through and detailing how much they wasted on those procedures, he figured that the reduction from BR covered it.
i have seen you come down on those who have “hotheadly” protested the initial fee applications (over 1,038,000 total to Brown Rudnick alone) and the fees in general, yet i have never seen you thank any of the few “hotheads” for making such an issue of the fees which directly led to Brown Rudnick reassessing their initial filing and altering it (pre court hearing) to the tune of a saving of $270,000 for your pension plan.
i find it hard to understand how you can state that you have no faith in the Federal Roe/Doe case getting anything achieved and have even openly protested the Roe/Doe case for vague reasons in the past, but you had no problem openly supporting a Federal Bankruptcy case that had almost no chance of progressing or achieving anything other than a colossal waste of funds in a flash instance. the Roe/Doe attorneys at least attempted to consult the CRA and the retirees prior to filing in order to explain all the details. the Roe/Doe attorneys have not sent any direct billings to the NMIRF. the Roe/Doe case has always been in the Federal Courtroom setting (a setting you now feel is the best for success). the Bankruptcy was secretive, a long shot and costly. how do you resolve that obvious double standard?
i have also detailed and pointed out as Donna’s notes confirm (and the minutes from the NMIRF) that the Federal Roe/Doe case was proceeding. as a matter of fact the board voted on a motion that referenced Tydingco-Gatewood considering appointing someone like Munson to handle Federal Mediation proceedings. the ironic thing (or disgusting) is that they did that at the same meeting in which they agreed to file bankruptcy thus halting and staying that Roe/Doe case. talk about double talk being blatantly showcased by the NMIRF.
ruth, do you have a detailed breakdown of where exactly the 36% discount that BR gave the Fund came from? or was that 36% figure just as ambiguous as the 15% figure that the judge criticized for being illogical. he said, “I also don’t think there’s any basis for the estimate of 15 percent. I’m interested in hearing — if anybody is willing to defend it — where that figure came from.” i would think the same focus and detail should have been applied to the reduction of the 36%. where did that come from? or was it, as has been noted by some a “pad and cut” hagglers move?
i hope you see all these double standards.
i agree that we should move on with bigger issues. no on criticized the judge’s background or standing. i don’t even think that many people have come out against his decision. have you heard people going against it? have people been attacking the judge for his stance on accepting the reduced fee from BR? i have not been privy to those conversations if they were occurring. please excuse my ignorance if they did.
just my regular two cents that aint worth a wooden nickle.
Glen
It would be nice if someone at the NMIRF would provide us with an accounting of the $250,000 advance payment to Brown Rudnick! I do not think that this amount was included in the law firm’s original or amended application because it was spent prior to the date of the Chapter 11 filing. If I am wrong , I stand corrected!
I doubt that any of the 11 attorneys and paralegals at Brown Rudnick who were involved in the Bankruptcy proceeding will be volunteering this information after payment is received.
Another related question remains unanswered. Was Judge Farris ever made aware of the advance payment to Brown Rudnick? The “Bankruptcy Fiasco” is over and it is time to move on , but I do believe that we retirees are entitled to know how the $250,000 was spent as the Judge did not address the issue. Again, if I am wrong, I stand corrected!
A “Hothead” and proud of it,
David L Price