Nov. 15 (Bloomberg) -- Thomas B. Bennett, the Birmingham, Alabama-based judge overseeing the biggest U.S. municipal bankruptcy, comes to court ready to rule, said attorneys who have appeared before him in his 16 years on the federal bench.
Bennett, chief bankruptcy judge for the Northern District of Alabama, was selected last week to manage the case of Jefferson County, whose seat is Birmingham, the state’s biggest city. He asserted his style the first day the county and its major creditors appeared in court on Nov. 10.
That day, he denied a bid by creditors, who are owed more than $3 billion, for extra time to prepare for a hearing about whether the municipality is eligible for bankruptcy court protection. In a soft voice that forced listeners in the courtroom to strain to hear, Bennett told lawyers to be prepared to work weekends and holidays.
“The idea that holidays are necessarily going to slow this process is wrong,” Bennett said. “You should expect that you will have a full time job, at least for the next 30 days.”
The decision didn’t surprise Alabama attorneys who know Bennett. He doesn’t like to put off decisions or allow cases to be delayed, said attorney Buddy Oldshue, a shareholder in charge of the bankruptcy and creditors’ rights section of the law firm Rosen Harwood PA in Tuscaloosa, Alabama.
“Judge Bennett doesn’t have a problem ruling from the bench,” Oldshue said in an interview, referring to oral orders instead of written decisions. Lawyers who are unprepared or try to delay for another reason don’t find much sympathy, he said.
Jefferson County’s Chapter 9 case leaves creditors including JPMorgan Chase & Co., the biggest U.S. bank by assets, facing hundreds of millions of dollars in losses. The move also could saddle county residents with higher sewage fees to repay the debt that led to the financial debacle.
This is the first municipal bankruptcy Bennett has handled as a judge. He was involved in two Chapter 9 bankruptcies as a lawyer, in which the clients were special purpose tax districts. Like most bankruptcy judges, the majority of his cases are bankruptcies by individuals.
Jefferson County supplanted Orange County, California, as the largest municipal bankruptcy. Orange County entered court protection in 1994 after losing $1.7 billion on interest-rate bets. While its petition initially listed more debt than Jefferson County, much of that liability was reduced in the early weeks of the case and the loss was later reduced through successful lawsuits against Orange County’s banks and advisers.
Bennett was appointed to oversee the bankruptcy by the acting chief judge for the U.S. Court of Appeals in Atlanta, as is required under Chapter 9 of the U.S. Bankruptcy Code. In almost all other types of bankruptcy cases, the judge is selected at random.
The filing by Alabama’s most-populous county, with about 660,000 residents, came after state lawmakers, creditors and the county failed to implement a September agreement that would have cut about $1 billion off sewer-system debt of more than $3 billion. Governor Robert Bentley and local leaders worked unsuccessfully for two months to rally support for the deal.
Bennett’s warning about working through holidays was not surprising to Leonard N. Math, an attorney with Chambless, Math & Carr PC of Montgomery Alabama.
“His point is a good one, which is this is going to be a big case and we need to move it along,” Math said in an interview.
Bennett, 62, was born in Philadelphia and grew up in the city’s Penn Valley suburb, according to information provided by the court. He attended high school at the Girard College, a 164- year-old school in Philadelphia for underprivileged children grades 1-12.
He went to college at West Virginia University, where he earned bachelors and masters degrees in economics. He graduated from West Virginia University School of Law in 1976 and, after working as a law clerk in Houston for the chief judge of the federal appeals court there, became the 12th attorney at the law firm of Bowles, Rice, McDavid, Graff & Love, of Charleston, West Virginia. The firm now employs more than 120 attorneys.
Bennett rose to become head of the firm’s section handling commercial litigation and debtor and creditor rights. Among his clients was Don Blankenship, former chairman and chief executive officer of AT Massey Coal Co., which is now Massey Energy Co. Bennett defended the coal company in various lawsuits and represented Blankenship in a civil racketeering case.
Bennett also represented burlesque performer Blaze Starr and the coauthor of her autobiography in negotiating the rights to make a movie about the stripper’s life. He joined the federal bench in Alabama in 1995.
Bennett was elected President of the National Conference of Bankruptcy Judges in 2007 and testified before the U.S. Congress twice, once related to a bill on mortgage reform and once on a proposal related to small business bankruptcies.
As a judge, Bennett handled the first asbestos bankruptcy case in which creditors with serious health problems related to the toxic industrial substance got control of the company through a trust set up for their benefit, according to information provided by the bankruptcy court.
When he began as a judge, he had about 10,000 cases a year, including cases that he inherited from the judge he replaced. Today that is down to about 3,000 a year, in part because he made an effort to reduce the backlog and in part because fewer consumers have sought bankruptcy after rules changed in 2005.
The judge, who provided information from his resume, declined to comment for this story.
Jefferson County’s lead bankruptcy attorney Kenneth Klee and Mike Paslay, an attorney for creditor Bank of New York Mellon, did not immediately respond to e-mails requesting comment.
Bennett has told lawyers in court that his judicial philosophy was shaped by his time as a busy private attorney, according to information provided by the bankruptcy court.
“My rule is I don’t write opinions to say something that somebody else has already said,” Bennett said.
The case is In re Jefferson County, 11-05736-9, U.S. Bankruptcy Court, Northern District of Alabama (Birmingham).
--Editors: Peter Blumberg, John Pickering
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