Judge Kaplan on NJ Bankruptcy Court Getting Its Due: Q&A (1)

Michael B. Kaplan, the chief judge for the US Bankruptcy Court for the District of New Jersey, has handled some of the district’s most recent large, high-profile reorganizations. He has presided over cases including cryptocurrency firm BlockFi Inc. and multiple asbestos-related bankruptcies, including the back-to-back Chapter 11 cases of Johnson & Johnson’s talc liability subsidiary, LTL Management LLC.

The judge served as a Chapter 13 bankruptcy trustee before joining the bench in 2006, and previously was an attorney in private practice. Before serving as a trustee, Kaplan was mayor of the Borough of Norwood in New Jersey from 2004 to 2006.

Kaplan spoke with Bloomberg Law recently about why he thinks New Jersey is finally getting its due in the corporate bankruptcy world, how he approaches his job, how the court is grappling with an ongoing rise in Chapter 11 cases, and which US Supreme Court justice’s writing style he admires. The conversation has been edited for length.

The New Jersey bankruptcy court has been gaining a reputation as a potential hot spot for large, complex Chapter 11s. Do you think that’s true, and why?

It is true. I think there’s more of a comfort level with our district. And I believe it’s because lawyers on a national level—our local lawyers have always been comfortable—but, you know, the larger cases are usually handled by law firms on a national level. And I think what they can see is that the cases are being handled well and there’s a predictability.

Unlike a lot of jurisdictions, we haven’t had a changeover in our judges. We haven’t had a change in our bench probably in seven to eight years. And so we have a history of how our judges address issues and how they handle cases, how they handle first-day matters, how they handle confirmation issues. I think it’s becoming more notable.

As a chief judge, I have made a pointed effort in trying to reach out when I’m at conferences and networking events to speak with attorneys, always with the effort of trying to find out, you know, what can we do better?

I don’t believe there’s a court that tries to solicit work. In all of the cases you’ve mentioned, they have a New Jersey connection. That they either incorporated, certainly LTL, BlockFi, the asbestos case I had today, Whittaker Clark & Daniels—that’s another one—they were 50 years in New Jersey. So it’s not as if I’m trying to find a case in Iowa and bring it to New Jersey. It’s just that maybe for the first time we’re trying to address the Jersey cases here in New Jersey and there’s a comfort level now with national firms and local firms that we could do it.

It always hurt a little to see Party City go to Texas. Or, Toys ‘R’ Us go to the Eastern District of Virginia. These were New Jersey through and through companies—incorporated, operated. But at that point we recognized that lawyers felt more stability or they had a comfort level with the judges, whether it be in Eastern District of Virginia or Delaware, or Southern District of Texas. I think we’re approaching that level now here in New Jersey. At least I’m hoping so.

Could you speak to your approach to being a judge?

I approach it in a very, what I view as, pragmatic fashion. I want to solve the problems. I don’t necessarily want to write a precedential opinion or make law. If I have that opportunity, wonderful. But I’d rather find a way to solve it.

Sometimes I have to solve it by coming up with my own solutions. Sometimes I just have to rule on the competing arguments. But if I can draw the parties back into chambers—and I do it a lot—to say, okay, you’ve made your argument. Before I rule, or even before you make your argument, can we sit? Let’s talk about what’s going on here and if there’s a way we can strike a resolution.

I strive not to be biased, pro-creditor, pro-debtor. I try not to be biased in favor of commercial cases versus consumer cases, or certainly not hometown versus outside of jurisdiction lawyers. That, I think, is important.

I want to give the lawyers their opportunity to make argument. I think oral argument is important. I don’t believe there’s any judge that goes into a hearing not having some preconceived notions about the case, or leanings. But judges who then after oral argument come out and then whip out a decision right away—kind of disrespectful at times to the advocates.

Are you and your fellow judges prepared to take on an uptick in big Chapter 11 cases?

We’ve had many discussions over the past year and a half. We have a great clerk of court, Jeanne Naughton, who with her chief deputy, Andrew Dickson, we work to rework each of the courtrooms as far as technology, because you have to be able to handle these cases. You have to hear these cases at times remotely, on short notice, with maybe 400 lawyers who want to at least watch, or more. So you need that capacity. Over the last two years plus, we have worked to upgrade our courtrooms, upgrade our staffing, develop procedures to handle these cases.

The work gets spread around. Meaning it’s not just one judge in one court or—other courts have taken that approach and they welcome it where two judges are going to handle every large mega case. And that works because the lawyers know who’s going to handle it.

We don’t have to do that because we’re confident that the lawyers will see that we have any of our judges. And to date, I think when you’ve read the list, Judge [Christine] Gravelle got David’s Bridal, Judge [Vincent] Papalia got Bed Bath & Beyond. I have the two asbestos cases and BlockFi.

How are cases assigned in the district?

For the bulk, 98% of the cases are random based on the zip code, where they’re incorporated or if it’s an individual, or where the residence is. So that tells us whether it’s going to be a Newark case, a Trenton case or Camden. But for the larger mega cases, it can’t be as random because you need to know a judge’s caseload, workload, where they’re going to be next week.

You have first-day matters that may be scheduled in the next day. So you need to be able to have that flexibility. So for those, we’ve all agreed that we’re going to try to be as flexible as possible.

Is there a Supreme Court justice you agree with, or look to as an example?

Anybody who knows me would probably be able to answer. If they’ve gotten to my chambers they see many of Justice Scalia’s and Bryan Garner’s books. And it’s not for politics. Not for social issues, but I’ve always enjoyed his approach to opinion writing—there’s another person who had no filter with a dissent, with a pen—if he took issue with a colleague or he took issue with the majority.

And I think it’s important because it, it opens the door. How should I phrase it? So when you look at one of the more controversial cases, look at LTL and the talc cases, there are—I’ve written opinions that people find horrid and detest for that outlook or ends up just as many who support it. But what I think is important is in writing it, I brought issues as far as how mass torts are handled in our judicial system to the forefront.

I always thought Scalia would do the same—did the same—by being a bit controversial, by being unafraid to challenge the orthodoxy. He brings issues. You might not agree with him. So be it. But I think it gets people talking.