Volume XXIV, No. 11 Spring 2013 Reflections of a Retiring Judge By Douglas O. Tice Jr.1

My decision to retire is one of the tender age of 42, looking for a job most difficult I have made this past 25 as a Virginia lawyer. Unable to find years. My reluctance is not difficult to employment, I found a couple of law- explain. Service as a bankruptcy judge yers with offices on East Main Street has been highly gratifying in itself, who took me in to help pay the rent. and I cannot leave such a post without I wanted to build a law practice misgivings. However, what I will miss that did not include domestic rela- most are the people who make up the tions or criminal law and thought court ─ the judges, my personal staff to try my hand as a trustee in bank- including law clerks, past and pres- ruptcy. Then, as now, the Eastern ent, other court employees, practicing District of Virginia had four judicial attorneys, and, yes, I will even miss divisions. Spread among the divisions Contents Reflections of a Retiring Judge.. 1 (most of) the debtors. I will elaborate were three referees in bankruptcy, By Douglas O. Tice Jr. on these thoughts later in this article. Henry D. Evans in Richmond, Martin V.B. Bostetter in Alexandria, and Judge Tice Holiday Lunch ...... 2 The Early Years. Hal J. Bonney in Norfolk-Newport Message from the Editor ...... 3 I followed a circuitous route to News. After opening my new office, by Mark C. Leffler the bench. I grew up in Greensboro, I sought out the Richmond referee, North Carolina, and attended the Henry Evans, who was an old friend Message from the Chair ...... 4 University of North Carolina for both from government service. When I by Douglas M. Foley undergraduate and law school. In knew him previously, Henry had been Annual Joint Meeting 1961, I moved to Richmond from a a federal probation officer. At that of Judges ...... 9 real estate law practice in Raleigh and time he was a law school graduate but became an Internal Revenue Service had never taken a Bar exam. It is fairly Clerk’s Corner ...... 10 by John W. L. Craig, II attorney. After nine years, I left IRS in common knowledge that as Henry 1970 to become corporate counsel to neared retirement age, District Judge The “Marital Adjustment” in a real estate developer in Richmond. Robert R. Merhige Jr. told him that if Chapters 13 and 7 ...... 11 by Marshall M. Slayton, Esq. This employment ended in 1975 he would pass the Virginia Bar Exam, after my employer filed a Chapter XII Judge Merhige would appoint him Case Summaries ...... 16 real property arrangement under the referee in bankruptcy, a position that By Sarah B. Boehm Bankruptcy Act. At the time, it was would improve his retirement annuity. Virginia State Bar Bankruptcy said to be the largest bankruptcy fil- This was Henry Evans’ path to becom- Law Section 2012-2013 ing in Virginia history. So, in August ing a referee in bankruptcy. Board of Governors ...... 27 1975, I was cast on the street at the Catching Henry on the street at Law News Committee Listing ...... 28 Continued on page 2 Spring 2013 Volume XXIV, No. 11 Reflections of a Retiring Judge the bankruptcy courtroom, a small room on the third Continued from page 1 floor of Richmond’s Federal Courthouse on East Main lunch one day, I asked him if Richmond could use Street. Creditor meetings then were essentially court a new bankruptcy trustee. Demonstrating the casual sessions, presided over by the judge, and the debtors approach of bankruptcy practice in those days, Referee (or bankrupts as they were then known) were called Evans approved me on the spot and instructed me to in turn, sworn, and examined in a witness box. After train for the job by attending one or two first meet- questions from the judge, the trustee examined the ings of creditors. In particular, he told me to observe a debtor, asking questions primarily about assets that meeting when Richmond lawyer Blackwell N. Shelley may have been omitted from the schedules. One was to be trustee of the day. characteristic of those early creditor meetings was the So it was that soon after beginning my law prac- presence of creditors’ lawyers who were actively seek- tice in Richmond, I was being assigned cases as trustee ing to have the trustee endorse relief from stay orders, in bankruptcy under the Bankruptcy Act of 1938.2 usually for delinquent auto loans. It was not unusual At that time, first meetings of creditors were held in Continued on page 5

Judge Tice 2012 holiday lunch for law clerks and court personnel.

Seated: Judge and Martha Tice. Standing, left to right: Law Clerks: Laurie Ross, John Maddock, Paula Beran, Brian Goodman, Lynn Tavenner, Mollie Lennarz, Sarah Boehm, John Smith, Michael Knight, Douglas Foley, Jennifer McLemore, Katrina Forrest, Shannon Pecararo, Darmesh Vashee, Judicial Assistant, Jane Nuttall, Courtroom Deputies, Peggy Rintye-Gibbs, Gail Fathergill (ret.).

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Message from the Editor

have edited the Bankruptcy Law News for about three years now. Before serving as Editor-in-Chief, I edited the Case Summaries for Iover two years. An editor’s job, in essence, is to evaluate and cri- tique. Editing taught me how easy it is to find fault in another’s work. The editor’s challenge is to convey criticism in a way that encourages the writer. Like many lawyer, I also write. When I write, I feel a sense of owner- ship of my work product, as if I’ve poured in healthy measures of my own blood, sweat, and tears. For this reason, I confess that I sometimes have struggled not to take criticism of my writing personally. The writer’s challenges lies in separating the sacrifice of blood, sweat, and tears from the resulting work, and in embracing criticism in a way that fosters growth. This is my last issue as editor of the Bankruptcy Law News. Upon reflecting, I think this experi- ence has made me both a better writer and a better editor. Editing the Law News was made easy by the excellent writers – the practitioners, members of the bench, and court staff - who have donated their time and talents to the Law News. My red editor’s pen rarely needed a heavy hand for Law News articles, and I like to think my own writing has improved by studying what these talented colleagues submitted for publication. This final issue for me is bittersweet. We feature a truly wonderful article by Judge Douglas O. Tice, Jr., but the occasion giving rise to the article is his retirement. In terms of my legal career, I was raised in Judge Tice’s courtroom, where he taught attorneys how to practice with civility and comity. Judge Tice welcomed everyone who entered his courtroom both well-prepared and ready to play fair. He recognized and rewarded those lawyers who made efforts to raise the level of practice, and who demonstrated respect for the court, its staff, and other members of the bar. We will greatly miss you, Judge Tice. Judge Tice has also contributed pictures for this issue of his past and present clerks as well as a pic- ture recently taken of the Bankruptcy Court Judges of the Eastern and Western District of Virginia. The second article contained in this issue is on means testing issues presented when a married debtor files bankruptcy but his or her spouse does not join in the case. It is written by Charlottesville prac- titioner Marshall Slayton and is bursting at the seams with valuable tips and references to key cases. W.L. “Chip” Craig, II, Bankruptcy Court Clerk for the Western District, reports on the state of the Clerk’s Office in the Western District, and includes an update on challenges the federal budget presents. Finally, Sarah Boehm prepared her final section as Case Summaries editor. Sarah’s tenure as the Case Summaries Editor was short-lived, though, as she graciously agreed to be my successor as Editor of the Bankruptcy Law News. Replacing Sarah as editor of the Case Summaries section will be Kelly M. Barnhart of the firm of Roussous, Lassiter, Glanzer, and Barnhart, in Norfolk. I trust you will enjoy this issue of the Bankruptcy Law News. I am truly honored to have served the Bankruptcy Section of the Virginia State Bar through this valuable publication. Mark Leffler

Bankruptcy Law News Page 3 Spring 2013 Volume XXIV, No. 11

Message from the

Chair of the Section Douglas Foley

“We Virginians do not go to the storied shrines of the past to do worship but rather to gain inspiration.” ~ Douglas Southall Freeman

As my term comes to a close on the Board notwithstanding the modest financial compen- of Governors I want to take this opportunity sation. I have tried to employ what I learned to extend my heartfelt thanks to Lynn Ta- that year throughout my years of practicing venner, my immediate predecessor, and Steve bankruptcy law. One of the many lessons Judge Ramsdell, my successor. They are not only Tice teaches all of his clerks – and exemplifies excellent bankruptcy attorneys and consum- to all practitioners that appear before him – mate professionals, but also reliable and trusted is professionalism and integrity. Judge Tice is colleagues who already have made substantial truly “a lawyer’s judge” in that he expects much contributions to the Bankruptcy Section of the from those who practice before him, but also Virginia State Bar for many years. It has been exerts the same effort and energy in his role as my privilege to serve with them on the Board mentor and jurist. In short, he has personified and I look forward to working with them in the leadership throughout his tenure on the bench future as part of this organization and beyond. in the Eastern District of Virginia and has been I also would be remiss if I did not take this op- an inspiration to all the lawyers that clerked portunity in my final message to comment on for him as well as the many practitioners that the impending retirement of Judge Tice. have appeared before him – including attorneys Most people who have practiced before from other jurisdictions. We are all fortunate Judge Tice know he is an excellent jurist with to have had the benefit of his wisdom, patience impeccable temperament. Many also know and experience over the past twenty-seven that he is a student of history – and a supreme- years as a Judge, colleague, mentor, and friend. ly knowledgeable one at that. His reflections He will be greatly missed from the bench when in this newsletter are a prime example of that he retires. We all owe him a tremendous debt and a great history lesson for us all. Several of of gratitude for his long, faithful and diligent us had the honor of clerking for Judge Tice. I service to the public and the bar, and I wish was fortunate enough to have done so when he him Godspeed in his future endeavors. was still the junior Judge in the District “rid- ing circuit” throughout the Eastern District of Virginia. It made my clerkship all the more enriching and allowed my mentorship with Judge Tice to prosper. I have always said, and maintain to this day, that my year clerking for Judge Tice was the best job I have ever had –

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Reflections of a Retiring Judge appointment or supervision of trustees. The new code Continued from page 2 sought to lift the field of bankruptcy law in other, during a debtor’s examination for a lawyer to tug on more subtle ways, such as in matters of professional the trustee’s sleeve and ask for his endorsement of an compensation. Under the Act, compensation had order. Momentarily distracted, the trustee, returning been held down due to a supposed lack of resources to his examination of the debtor, might unknowingly in cases of insolvency. Under the Code, professional be facing a different debtor than the one he had just compensation was to be comparable to that in other been examining. areas of the law. (It might be argued that the Code In early 1976, within several weeks after I joined went too far in this regard, given the routinely huge the trustee ranks, Referee Evans retired, and the fees in modern chapter 11 cases.) district judges appointed Blackwell N. Shelley as the Of course, there have been significant amend- new Richmond referee, effective February 2, 1976. ments to the Code since 1978, notably in 1984 when Judge Merhige liked to tell the story that it was Congress attempted to remedy the jurisdictional prob- only when he was administering the oath to Referee lems addressed by the Supreme Court in the Marathon Shelley that he learned Blackwell Shelley’s middle Pipe Line Co. case (holding that bankruptcy judges name was Nixon. When this was revealed, Judge could not constitutionally exercise the expanded Merhige, who had been appointed by a Democratic powers provided by the Code) and the 2005 amend- President, said, jokingly, “Nixon ─ you didn’t tell ments affectionately known as BAPCPA. One of the me your name is Nixon ─ I may have to reconsider ironies of 1978 Code history is the fact that Chief this.” Due to a rule change, within a year or so after Justice Warren Burger urged President Carter to veto Blackwell Shelley took office, referees in bankruptcy the legislation; however, in the Marathon case, the became bankruptcy judges, a change made official in Chief Justice voted to uphold the expanded authority the 1978 Bankruptcy Code. given bankruptcy judges in the 1978 Code as enacted. The 1978 Code incorporated a pilot program for a The 1978 Bankruptcy Code. United States Trustee system within the Department In 1970, Congress formed a commission to review of Justice for general oversight of bankruptcy cases. the bankruptcy laws of the United States. Extensive Congress designated the Eastern District of Virginia Congressional hearings were held to consider all among the first pilot districts to incorporate the aspects of then existing bankruptcy law. Collier On program, which later became permanent nationwide Bankruptcy reports that Congress found significant except in two states. In my opinion, the presence of problems with the law in that the bankruptcy referees’ the Office of U.S. Trustee was a welcome addition to appointment and supervision of trustees presented an the bankruptcy system and particularly to consumer appearance of favoritism, the referees were perform- bankruptcy trustees because of the guidance and sup- ing nonjudicial administrative functions, and, by pre- port the office could provide. Under the prior law a siding over creditors meetings, referees were able to trustee often had to rely largely on the practice advice hear evidence that in court might be inadmissible.3 of other trustees, and I can recall cases where it was The commission’s work during the 1970s resulted difficult to get a good answer on how to handle a par- in the enactment of the 1978 Bankruptcy Code on ticular transaction. November 6, 1978, to be effective on October 1, It is beyond my purpose to review the history of 1979. The 1978 Act sought to modernize American the 1978 Code except to observe in a general way bankruptcy law, and it remains the basis for our cur- how it has impacted bankruptcy law practice. With rent bankruptcy laws. At the time of enactment, it the advent of the new Code beginning in October was written that the 1978 Code was modeled after the 1979, the practice of consumer bankruptcy law under Internal Revenue Code (obviously a model of clarity). new chapters 7 and 13 opened up and became more The new code established the bankruptcy courts as fluid both for trustees and attorneys. Most of us who adjuncts of the district court with expanded powers were trustees under the Bankruptcy Act continued as to enter final orders. Judges were to perform judicial chapter 7 trustees, although some soon dropped out. functions only and were no longer involved in the Continued on next page

Bankruptcy Law News Page 5 Spring 2013 Volume XXIV, No. 11

Initially we worked under the supervision of Francis stock broker who had embezzled client funds and P. Dicello, who was the first U.S. Trustee appointed later served a prison term. When his misdeeds were for the region that included the Eastern District. The uncovered, he disappeared from Richmond for sev- individual chapter 7 trustees replaced the judge in eral weeks to intense media attention. Mr. Pitchford conducting meetings of creditors for cases assigned eventually gave himself up to the FBI and returned. to them. (Code section 341 dropped the term, “first His section 341 meeting was my only one that was meeting of creditors.”) Chapter 7 trustees could pretty initially scheduled to be held in Richmond city jail. much operate on their own in liquidating small asset The auction of Pitchford’s personal property, held in cases. Under the Code’s notice provisions, a trustee a basketball arena, received national media attention, could sell or abandon assets without prior approval by and Motley’s Auctions raised nearly $100,000. the judge, a liberal procedure still not fully utilized by trustees. Of course it took some time for the profes- Becoming a Bankruptcy Judge. sionals to get used to the new system. The increased filings of bankruptcy cases placed An early and persistent criticism of the 1978 Code a strain on the courts, which Congress addressed in was that it removed the stigma of bankruptcy and 1986 by passing legislation to significantly increase made it too easy for debtors to discharge debt. There the number of authorized bankruptcy judgeships. is probably some truth in this. There was another Included in the legislation was a fourth judge for the significant change in the practice of bankruptcy law Eastern District of Virginia. As provided in the 1984 from the Act. It was fairly common under the Act Code amendments, bankruptcy judges were to be for lawyers who were general practitioners handling appointed by the courts of appeals to serve terms of 14 all types of cases, criminal, domestic, collections, years. This led, in December 1986, to my submitting etc., to also represent debtors in bankruptcy filings. an application to the Fourth Circuit for appointment This soon changed. In Richmond, Judge Shelley held to the new position. The process, then as now, was for lawyers strictly accountable for compliance with the the court of appeals to appoint a merit selection panel Bankruptcy Code and Rules. He was also known for of attorneys and judges to interview applicants and his close scrutiny of attorney fee requests. The truth make a recommendation for the position to the court. was that the new Code had raised the difficulty level I went through this process and was fortunate enough of bankruptcy practice, which in turn made it dif- to be appointed a bankruptcy judge of the Eastern ficult for an attorney to be a part-time practitioner District of Virginia, effective September 2, 1987. in the field. In my opinion, Judge Shelley’s strictness It was understood by the applicants for this under the Code transformed the Bankruptcy Bar. position that the new judge would “swing,” that He instilled a much higher level of professionalism is, travel and hold court in all four divisions of the in bankruptcy practice that remains with us today. Eastern District. The judges agreed that I should be I believe the same can be said of Judge Bostetter in assigned 25 percent of the case filings in each divi- Alexandria and the late Judge Bonney in Tidewater. sion. Accordingly, for a period of approximately ten For whatever reasons, the number of bankruptcy years following my appointment, and in addition to case filings began to rise after enactment of the 1978 my Richmond docket, I traveled to hold court almost Code, and the bankruptcy trustees were kept busy every other week in either Alexandria or Norfolk and in the consumer cases. In the early 1980s in the once a month in Newport News. Richmond division there were probably a half dozen During my early years, I traveled with my law chapter 7 trustees and one standing chapter 13 trustee. clerks to Alexandria by train, leaving Richmon