Misquoted by a Federal Bankruptcy Judge?

Much to my surprise and dismay, it appears that I have been badly misquoted by Federal Bankruptcy Judge (and former law professor) Bruce Markell regarding my testimony before the Senate Judiciary Committee regarding BAPCPA. Not only did Judge Markell grossly take my words out of context in a published judicial opinion but I understand that he did the same thing in a recent speech to the a local bankruptcy lawyers association (as reported to me by a person present at the talk). Now I have tracked down the full transcript of the Hearing, so I wanted to set the record straight here.

Here's what Judge Markell wrote in his opinion in In re Kane, 336 B.R. 477 (Bankr. D. Nev. 2006) (I couldn't find the opinion on-line other than in Westlaw) at page 481:

This court concurs with Judges Mark and Riegle--the cap applies to all debtors who do not satisfy the 1,215-day rule--but for different reasons than either of them advanced. Whether the text is ambiguous or not, it is still possible to consider and implement what Congress unambiguously intended and to overcome the drafters' unfortunate choice of words. [FN7]

FN7. Section 522(p) is one of many examples of poor drafting in the new bankruptcy law, which Professor Todd Zywicki assured the Senate Judiciary Committee was "fine as it is," adding, "There is no word that I would change in this particular piece of legislation." SEN. JUD. COMMITTEE, Hearing on S. 256: Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 109th Cong., unofficial transcript (March 10, 2005).

Judge Markell quotes me as suggesting that I somehow created a warranty with respect to the exact drafting of the statute (which was about 400 pages long as enacted). It is clear from reading the full transcript and the context in which this exchange took place that Judge Markell has crudely taken my comments out of context. In fact, my comments referred to a completely different question, namely whether the fact that the bankruptcy reform legislation had been pending for eight years at the time of the hearing meant that the draft was obsolete in light of changes in the economy and the bankruptcy system during that time. There was no discussion at all about particular drafting glitches or errors, either in Senator Feingold's questions or my responses.

Here's the relevant passages from the Hearing transcript.

SENATOR FEINGOLD: Professor Zywicki, as you know, I have mentioned that the Bankruptcy Act was fist introduced eight years ago, and you have long supported it. However, as Professor Warren has stated, the eight years since this bill was introduced have seen many developments with significant implications for bankruptcy law. Furthermore, we now have significatly more data about who files for bankruptcy and why they do than when the bill was first introduced.

Given all of the things that have changed since the original bill was drafted and given all the new information that has emerged sicne that time, is there anything about this bill that you think should be changed, or do you endorse S. 256 without any adjustments whatsoever?

There are two key contextual points here. First, the argument that "the world has changed in the past eight years" was the key procedural element of Professor Warren's testimony during this Hearing and a point made repeatedly by opponents of the bill during the Hearing and legislative process. Her testimony is available here. In particular, it was noted that during that period of time after the legislation was originally introduced (1997) had all of the big Chapter 11 "scandal" bankruptcies, such as WorldCom and Enron, which the bankruptcy reform legislation didn't address in a major way. Second, the reference to "significantly more data on who files bankruptcy" refers to the "Health Related Bankruptcies" paper that Professor Warren published right before these Hearings and which was the main substantive of the critics of the legislation during this particular Hearing. I discuss the study here and a new critique of the study is available here (subscription).

So the main attacks on the legislation during the last go-around were (1) during the intervening eight years new problems arose in the bankruptcy system that were not accounted for in the legislation, and (2) during that time new evidence of the supposed causes of bankruptcy filings had been discovered which should lead to a reconsideration of the basis for the legislation.

Here's my answer:

MR. ZYWICKI: Senator, first, let me clarify that I believe that the majority of bankruptcy filers are legitimate, honest bankruptcy filers, and I would not endorse this bill if I believed that in trying to eliminate fraud and abuse we would be harming people, the honest, innocent people for whom bankruptcy is intended.

Having said that, this bill has been around for eight years. The problems that this bill attacks have not disappeared during eight years; they have worsened during that eight-year period. There may be new abuses that have come on the scene, additional new problems that have come on the scene [TZ: Here I am referring to the possibility of further reforms in the future to deal with Chapter 11 scandals such as Enron]. But that is not, I don't believe, a reason to ignore the fact that this bill targets real problems. It targets the homestead exemption abuses, it targets fraud and those sorts of things. So this bill responds to problems that are still endemic in the system.

SENATOR FEINGOLD: What about my question? Are there any changes to the bill that need to be made at all or is it exactly the way it should be? We are making [TZ: I think this is a typo in the transcript, it should be "marking"] this thing up next week. This is it. The train is leaving the station, apparently, and there is not going to be another bankruptcy bill probably for a very long time. This is it. Should this bill be changed?

MR. ZYWICKI: I believe this bill is fine as it is.


MR. ZYWICKI: There is no word that I would change in this particular piece of legislation.

SENATOR FEINGOLD: Well, Mr. Chairman, I know my time is up, but the idea that after eight years and all the economic changes in this country that there wouldn't--

CHAIRMAN SPECTER: If you need some more time, Senator Feingold, go ahead.

SENATOR FEINGOLD: Let me just say that after eight years, the notion thatt there wouldn't be anything different about the Bankruptcy Code--with all of ht eeconomic changes and dislocations, that there wouldn't be a word to change is not credible to me and is a further reason why I am very cincerned about the speed with which this bill is moving.

Thank you for the extra time, Mr. Chairman.

The reference to "economic changes and dislocations" is a third contextual point--earlier in the Hearings Senator Feingold had expressed dismay about the decline of the manufacturing sector in his home state of Wisconsin during the eight year period that the legislation was pending, which he argued meant that it was bad policy to tighten the bankruptcy laws.

Here's Senator Specter's closing remarks, picking up where Senator Feingold left off about whether the passage of time had made the bill obsolete:

CHAIRMAN SPECTER: Thank you, Seenator Feingold.

The timing on the bill has been set. We are moving ahead. This hearing was designed to give us opinions of experts in teh field on problems in teh bill. We will have many communzues from insterested citizens in all walks of life, and when the Judiciary Committee meets next Thursday to consider the bill, there will be time between that sesion and the full floor debate. So there is time for consideration of any changew taht ought to be made.

Looking at all of this in context, it is quite clear that both subjectively and objectively I was not in any way making any respresentations about the particular drafting of every single word in the bankruptcy reform legislation. This exchange is focused on one central point--should the legislation be reconsidered because of changes in the economy and bankruptcy system during the eight-year period between the time the legislation was first introduced and actually enacted. My argument is straightforward--no, even if new abuses have manifested themselves in large Chapter 11 cases, that does not change the essential need for this legislation as it applies to consumer bankruptcies because the problems and abuses were still present and weren't going to solve themselves.

There is simply no reasonable way to read this passage as suggesting that I was endorsing the drafting of every single word in the legislation (or any particular word for that matter in this particular exchange) and I know subjectively that I was not providing such a warranty. It seems equally clear that Senator Feingold was not asking that question, and moreover, no other Senators or other people testifying raised detailed and particular questions about drafting provisions of the legislation. That was not the purpose of the Hearing and it was not the purpose of my exchange with Senator Feingold.

Obviously a piece of legislation of this complexity is going to have unanticipated drafting problems as applied to particular factual circumstances. Heck, the 1978 Code was declared unconstitutional after it was enacted. I certainly had no anticipation that legislation would turn out to be perfect in every possible term. But that wasn't the question I was answering.

To suggest, as Judge Markell does, that I was vouching for the drafting of the exact language of the bankruptcy reform legislation seems grossly sloppy about reading the proper context here at best. At worst, this is a willful distortion of what I said. Perhaps Judge Markell was saimply misled by someone else who excerpted my quote out of context. I'm sorry that Judge Markell's misuse of my quote made it into a published opinion in the first place. At the very least, I hope he will refrain from using this noncontextual quote in the future.