A Judge Who Reshaped the Corporate LandscapeHon. Arthur J. Gonzalez '82 in The New York Times Dealbook (blog), December 29, 2011
Many judges are lucky to handle just one era-defining case during their tenures on the bench. In his 16 years as a federal bankruptcy judge, Arthur J. Gonzalez has handled three.
The first, Enron, came up in late 2001. Eight months later, WorldCom followed, forcing the judge to handle both cases simultaneously. And the last, Chrysler, arrived in 2009.
Now, Judge Gonzalez, 64, is set to retire in March as the chief of the United States Bankruptcy Court in Manhattan. His career has been a vivid illustration of the important role that the court, located in a Beaux-Arts courthouse at the southern end of Manhattan, has played in helping reshape corporate America.
The Chrysler case proved in some ways to be the most difficult one of them all.
He recalled how he approved the sale of Chrysler’s core assets to Fiat of Italy just after 11 p.m. on June 1, 2009, after three days of marathon hearings and more than 300 objections. Almost immediately, however, Chrysler bondholders appealed, and within 10 days the matter rose to the Supreme Court.
“If you had asked me at the beginning of the case, I wouldn’t have thought it would have gone to the Supreme Court,” he said in an interview. “But this decision was important for the case to get done.”
After brief deliberations, the Supreme Court declined to hear the case, essentially reaffirming Judge Gonzalez’s decision.
On the bench, the judge has a quiet and subdued demeanor, keeping proceedings moving and rarely cracking jokes. Off the bench, however, his mood lightens considerably. During a conversation in his office, which has a dozen Hess toy trucks that he has collected over the years, he points fondly to the numerous pictures of his beloved Brooklyn Dodgers hanging on the wall.
Becoming a bankruptcy judge was not what Judge Gonzales, a Brooklyn native, had planned. After graduating from Fordham in 1969, Judge Gonzalez became a New York schoolteacher, teaching in East New York. (A photo from 1973 in his office shows him with seven of his students from Public School 189, with a thick mass of curly, dark hair.)
His interest in the law was stoked by his role as a representative for the United Federation of Teachers. After taking night classes at Fordham Law, Judge Gonzalez left teaching to take up a position at the Internal Revenue Service. After brief stints at two private firms, he joined the Justice Department’s trustee division, eventually being named to the bench in 1995.
Retirement, he says, should mean shorter work days than the 12 hours he now averages. (He arrives before 6 a.m. and generally leaves around 7 p.m. or 8 p.m.)
And it could leave more time to pursue his favorite pastime, running. He has run 30 of the last 32 New York City marathons, missing two because of injury.
Even now, he runs in triathlons and the annual 86-flight sprint up the Empire State Building. And he regularly runs with a fellow bankruptcy judge, Martin Glenn, who is overseeing MF Global’s Chapter 11 proceedings. Judge Gonzalez finished this year’s marathon at 4:45, far from the 3:26 he ran in 1980 but not exactly where he wants to be.
Judge Gonzalez said he was unlikely to take the well-worn route of former judges (and that of his daughter, a recent law school graduate) of joining a major law firm. Instead, he plans to continue teaching at New York University’s law school.
“If I decide I want to go home, I can go home,” he said. “I have control of my life.”
To those who argued before him, the judge has proved to be an efficient conductor of bankruptcy proceedings.
“He has a demeanor that exuded fairness, but was also very decisive and wrote brilliant decisions at a fairly rapid clip,” said Martin Bienenstock, who worked as Enron’s lead bankruptcy lawyer.
Of the three mammoth bankruptcy cases Judge Gonzalez handled, Enron was the first, filed over the weekend on Dec. 2, 2001. The judge came in early the next day and was told shortly afterward by a clerk that “the wheel,” the court system that assigns cases, had selected him to oversee the matter.
As Enron’s efforts to reorganize failed, quickly dissolving into an extensive liquidation, Judge Gonzalez’s time was consumed in grappling with a mounting investigation into accounting issues. The court allowed him to forgo new cases for six months.
“I think I spent the first six weeks of Enron on the bench every day,” he said.
In May 2002 Judge Gonzalez started accepting new cases again. Two months later, the wheel landed on him, impelling him to handle two of the country’s biggest bankruptcy cases at the same time.
“By the time WorldCom came in, I felt that yes, I could handle both at the same time,” he said. “Enron was not coming to me every day looking for relief.”
Though it was huge — WorldCom was the biggest Chapter 11 case on file until Lehman Brothers collapsed in September 2008 — Judge Gonzalez said that it was easier to manage. WorldCom successfully reorganized within 15 months, in October 2003, and Enron finally emerged from bankruptcy nine months afterward.
Still, the two cases produced reams of paperwork and required scores of opinions to be written, and Judge Gonzalez did not take on new matters for six years.
Then came Chrysler in May 2009. While Enron and WorldCom were the subject of numerous federal investigations, the carmaker posed its own challenge: politics. Bondholders had battled with the Obama administration over its plan to sell the bulk of Chrysler to Fiat, using the bankruptcy process to shed billions of dollars in debt owed to investors, dealers and accident victims.
Judge Gonzalez acknowledged that it was tough to ignore the cloud of politics surrounding the case, and knew that his decisions would be hotly contested by irate bondholders.
“It was a big political issue of whether the government should be involved,” he said. “But that wasn’t an issue before the bankruptcy court.”