Spring 2014 • Issue 51, page 1

An Interview with the Honorable Dennis Montali

By Oliner, Ron*

The Honorable Dennis Montali has served as a United States Bankruptcy Judge for over 20 years in the Northern District of California. He is, among other things, one of the best known and highly respected bankruptcy judges in the country. The Receivership News is extremely pleased to present the following interview with Judge Montali, conducted by Ron Oliner, a bankruptcy lawyer in Northern California and member of the Receivership News’ Editorial Board.

Judge Montali attended Bishop O’Dowd High School in the Oakland and went on to attend college at the University of Notre Dame. After graduation, Judge Montali served in the United States Navy for four years before attending law school at Boalt Hall, University of California at Berkeley. In the following interview, Judge Montali reveals much about his legal career, as well as a few interesting things you would not have known about him otherwise.

Ron: Tell me a little about your legal career before you took the bench.

Judge Montali: I was in my third year of law school at Boalt when I interviewed with a small bankruptcy firm called Rothschild and Phelan. One of the interviewers was Lloyd King. I got the job over my competition because I agreed to come and work part time as a third year law student doing gopher work. I started at Rothschild and Phelen as a law student on the day Martin Luther King was killed in April, 1968. I graduated two months later, a few days after Robert Kennedy was killed. I returned to the firm in September of 1968 and was admitted to the bar the following January. I practiced with August Rothschild, Robert Phelan and Lloyd King until December, 1975, when Lloyd was appointed as the bankruptcy judge (then Referee in Bankruptcy) in San Francisco. I stayed at what was then Rothschild Phelan & Montali until early 1980, when I joined another firm and then another firm a few months after that. I stayed there until I was appointed to the bench.

Ron: You have been a federal judge for nearly 21 years. Can you think back on any particularly large or interesting cases that you presided over in that time period.

Judge Montali: Well, large and interesting are two different categories, obviously. The largest case, the monster case, was PG&E (Pacific Gas & Electric Company) that was filed in April of 2001. It was the largest utility bankruptcy in the nation’s history. It was a fascinating experience, and dominated my professional life for quite a while, and it was a tremendously interesting case in many respects.

There are also many interesting cases just involving individuals, cases of first impression. And in the last several years, I’ve been presiding over several law firm bankruptcies. They are unfortunate and sad cases in the sense that they involve established institutions here in the Bay Area, but fascinating because of the cutting edge legal issues presented. They are sad experiences too, because I see people that I used to know or practice with in legacy San Francisco firms that have gone into bankruptcy. It is pure coincidence that I have been assigned the two San Francisco firms and a third one, Howrey, from Washington, DC.

Ron: Without asking you to opine about your rulings in those cases or really what is going on in the dockets, why do you think these venerable law firms in the Bay Area find themselves in bankruptcy?

Judge Montali: Well, it’s not just unique to the cases that I have. I watched national law firms and accounting firms go out of business, either formal bankruptcy or not. It’s the same story – the assets go home at night. They’re people. There are no underlying assets. There are no patents. There are no proprietary software programs. There are no production lines. There is no equipment or inventory. These cases have proven to me that professional associations are fragile institutions, and they can’t stand the strain of major departures or major disruptions. I was in a small law firm in 1980 that broke up and I saw what happened. And when they break up there’s no there, there. I don’t think it’s unique to lawyers. It can happen and it has happened with other professionals. I have seen it with small medical practices, accounting firms, and architecture firms.

Ron: What would you say you spend most of your time on the bench doing? What kinds of cases are you spending time presiding over?

Judge Montali: Well, the volume in Northern California has been heavily consumer in the last several years, largely real estate driven. What I mean by that is that the downturn in real estate values that we all experienced nationally and locally gave rise to numerous bankruptcies. Many chapter 11s were filed by individuals who really, in my view, should have been in chapter 13, but were above the statutory cap. They are regular people struggling to keep either their homes or rental units or vacation properties. Whether it be in chapter 13 or chapter 11, there’s a lot of case activity. That doesn’t necessarily mean long courtroom hours for me as a judge except when we have trials on feasibility or valuation, for example, competing real estate appraisers testifying as to value, or things of that nature. That’s what we spend most of the time on, or where I spend most of my time.

But some of these law firm cases take a fair amount of time just because of the complexity of the legal issues presented. Certainly in PG&E way back a few years ago, there were a few instances that I had to just go out and deal with things that no one had ever dealt with before, and I learned new law. And, by the way, one more extended portion of this answer. BAPCPA opened up a large number of new legal questions. Either at the trial level or on my service on the BAP, I had the advantage of being right there to deal with interpretations of first impression, because of that new law.

Ron: You know that’s a great segway because my next question is going to be about your service on the Bankruptcy Appellate Panel (“BAP”). So, in addition to over 20 years as a bankruptcy court judge at the bankruptcy court level, you have done at least one stint on the BAP, and did you not also preside over the BAP?

Judge Montali: I did. The way BAP is structured, a judge can be appointed by the judicial council of the Ninth Circuit for a seven-year term and then that judge is eligible for one three-year extension if he or she wishes. I did the ten year stint. My term went from May of 2000 to May of 2010. BAP generally follows the tradition of the judge with the longest service acting as the chief. So, when the judge who had longer service than I left, I became the chief, and I was the chief of the BAP for nearly two years of my total ten.

Ron: I assume you have found it enjoyable presiding in an appellate court?

Judge Montali: It’s a whole different experience. It’s almost unprecedented. The BAP is unusual because it is one judicial system of judges who are one day trial judges and then the next day are appellate judges of their brothers and sisters who are trial judges. There were days when I would sit on the panel to review a decision of someone who the next day was on the panel reviewing a decision of mine. We are not, of course, permitted to hear cases from our own district so that means lots of traveling. But, it’s a second job. It’s done gratis. There’s no extra pay. The only tangible benefit is that the BAP judge gets an extra law clerk, and because we travel a lot, we get a lot of miles on Southwest or other airlines. But, no, there’s no adjustment in calendar load or anything else. It happens that I got appointed to the BAP right around the same time I got the PG&E case. And right around the same time, I was appointed to a national committee on bankruptcy administration, so I suddenly had quite a number of things to do and spent a lot of time traveling. It was a wonderful experience because it, again, put me in a different position to study bankruptcy law, and I hope it made me a better trial judge to be able to look at things from the point of view of an appellate judge, making the record, being clear on the rulings and things of that nature.

Ron: I know from experience that getting you overturned isn’t an easy thing.

Judge Montali: We have a saying that just because you’re reversed on appeal doesn’t mean you were wrong.

Ron: Can you give us a sense on how the Bar looks to you, lawyers who have come before you, the level of practice in the Northern District of California?

Judge Montali: Well, I hear stories from other judges who have complained about the lack of civility and maybe commenting that a particular lawyer is difficult. You know, sure, there are some lawyers who are difficult and some who are not very civil but, generally I don’t see that as much as my colleagues, and I like to think that if you set the bar high in the courtroom, the bar stays high. In other words, if you don’t yell at people, maybe people don’t yell at you or opposing counsel. If you don’t criticize people or make fun of them (maybe I do, but unintentionally), and you don’t tolerate mischief, then the word gets out that it doesn’t pay to be critical or mischievous in the courtroom.

The bankruptcy community, and you Ron are certainly a member of it, has a wonderful reputation for getting things done and not worrying about turf battles but rather accomplishing the goal in a bankruptcy setting of finding a solution to a problem. So perhaps that’s why maybe it’s a different world than in the civil litigation generally. Actually, I’m told that criminal bar gets along well, but you’re dealing with different stakes there. Here in the bankruptcy court generally, the good creditors’ lawyers know that, and the good debtors’ lawyers know that a resolution rather than litigation is a better result. So, as a judge, I get the benefit of that. Generally, I love to see the lawyers at work and see their clients being well served by them, and hopefully I am contributing to that process.

Ron: I know from long experience that you have a very even temperament on the bench, but I think what might interest the readers, younger lawyers in particular, is hearing something about your particular pet peeves. What are common mistakes, what do you like to see from counsel’s table or at the lectern, and what in particular is very bothersome?

Judge Montali: One of the most bothersome things is the lawyer who says, ”With all due respect.” Because I believe the lawyer should act with respect as the judge should act with respect, and when a lawyer says, ”With all due respect,” I usually respond by saying, ”Well in my humble opinion”, and then point out that both of us are fibbing a bit. It’s like saying, “I’m acting in good faith.” Well, why do you have to say you’re acting in good faith if you’re acting in good faith. Or “To tell the truth.” Why, aren’t you supposed to tell the truth? Oddly enough though, Ron, I read a couple of transcripts of Supreme Court arguments, recently, including, you know, the bankruptcy ones. Apparently, it is traditional at the Supreme Court to say, “with respect,” or “with all due respect.” That surprised me because I’ve heard many judges caution lawyers not to say that.

And treat the clients with respect. I sometimes find it awkward when a lawyer tends to be dismissive of his or her client. You know, that’s why the lawyer is there in the first place, and that’s why we judges are there, to serve those members of the public. So, I would say treat the client with respect, treat the opposing counsel with respect, but don’t say, ”With all due respect.”

A few other things. Be prepared, obviously. Know what’s in your brief, know what’s in the papers, and don’t let the judge tell you something that he or she has learned from the record that you the lawyer shouldn’t forget. And one other small point. I’m amazed, and other judges are, when lawyers who are unfamiliar with our specialty come to court and say, that they’re not familiar with bankruptcy law. Well, why are they here in the first place? Why are they admitting it? That’s not to say that lawyers who aren’t bankruptcy specialists are not welcome here, but they shouldn’t admit to their shortcomings. They should overcome them before they come here or get help from experienced bankruptcy practitioners.

Ron: Finally, judge, apart from the practice of law and your service on the bench, what particular personal experience or experiences do you have that are most memorable and important to you outside of the practice of law?

Judge Montali: There’s the usual: I love my wife and love my children, getting married, and having those children, having grandchildren, etc. Apart from those experiences that most everyone has, the most unique and memorable for me was a sailboat named “Ellen,” named after my mother. In 1957, when I was only 17 years old, my mother Ellen, my father, my younger sister, and two other young men sailed in the Transpac Race from Los Angeles to Hawaii. I, at the ripe age of 17, was the navigator and got us there on the first try. We spent 15 days on a 40 foot boat with 90 gallons of water. It was an incredible experience and more memorable than anything else.

*Ron Mark Oliner is a partner at the San Francisco office of Duane Morris LLP.

*Hon. Dennis Montali is a United States Bankruptcy Judge sitting in the San Francisco Division of the Northern District of California.