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Back in the early ’60s, few graduates of Ivy League law schools turned to bankruptcy law as a career. The practice was considered undesirable and many law firms questioned the very use of Chapter 11. But Ivy League grad Harvey Miller was an exception. Today, Miller, the head of restructuring at Weil, Gotshal & Manges in New York, is known as the “dean” of bankruptcy lawyers. He began a bankruptcy practice at Weil Gotshal, building it from three attorneys in 1970 to roughly 80 today. Through a long career, Miller has put his own unique stamp on the practice of bankruptcy law, both as a pioneer of legal doctrines and as a dealmaking lawyer who represents both debtors and creditors. “Harvey has been very, very aggressive and a tough, effective fighter for his clients, but he also understands when to make a deal and how to manage a compromise,” said Myron Trepper, co-chair of Willkie, Farr & Gallagher in New York and head of its restructuring unit. Miller, 68, backed into bankruptcy practice after joining Ballon, Stoll & Levine in New York in 1959, his first job after graduating from Columbia Law School. At Ballon, he was assigned to the Chapter 11 filing for retailer Wise Shops Inc. Despite the stigma surrounding bankruptcy cases, Miller quickly became fascinated by bankruptcy and restructuring, and in 1963 he moved to Seligson & Morris, one of just a few law firms specializing in bankruptcy reorganization. That move gave Miller the chance to concentrate on the field. He became a prot�g� of Charles Seligson, who also taught bankruptcy law at New York University. “He taught me to have a broad perspective, to consider all the interests and to be fair,” Miller said. After he moved to Weil Gotshal, that education proved supremely valuable. “I made representation of debtors respectable by successfully explaining to boards and management that Chapter 11 was not a death knell but a viable alternative for a distressed company.” Miller’s legal pioneering has led to doctrines that are common today. In the 1980s, he dug into the history of railroad restructurings to pull out the six-month rule, which said that after filing, a debtor could pay creditors for bills due six months prior to bankruptcy. He extended that to create what is known today as the doctrine of necessity, which allows debtors to pay vendors that provide critical supplies to help a debtor ward off liquidation. He applied the doctrine of necessity in the Eastern Airlines’ Chapter 11 filing in 1989 that created exceptions to the rule that pre-petition debt isn’t paid until the debtor emerges from bankruptcy. “It was essential in Eastern Airlines that certain supplier-creditors would be paid because there were no other alternative suppliers and failure to pay them would have been disastrous,” Miller said. Those innovations represented a major shift in bankruptcy practice. The doctrine of necessity was a pivotal step away from the strict application of the 1978 Bankruptcy Code in which pre-petition debt could only be paid as part of a reorganization plan. “Harvey played a major role in what became a major change that added flexibility to bankruptcy practice in what is really a balancing issue that still has not been reflected in a change in the law,” Trepper said. An adjunct professor of law at NYU, Miller was at the forefront of the move to bend the Code by pushing for pre-petition wage payments. Trepper, who worked closely with Miller in the Texaco, Eastern Airlines, Donald Trump and Pennzoil filings, also noted that Miller helped expand the doctrine to include service and trade vendors who were crucial to a debtor’s continued operations. While reorganization and restructuring were always part of the bankruptcy landscape from the 1898 Bankruptcy Act, it was only in the Depression that a reorganization section was inserted into that statute. To hone his own ideas and look for examples of how to aid companies in distress, Miller studied the history of the Reconstruction Financial Corp., one of the Roosevelt administration’s attempts to alleviate the business crisis of the 1930s. “Harvey is encyclopedic when it comes to bankruptcy law, and that knowledge brings historical perspective grounded in law that is very important,” said Todd Snyder, managing director in New York at investment bank Rothschild Inc. Snyder, whom Miller trained in 1988-94 as part of Weil Gotshal’s bankruptcy practice, said Miller also has the verbal talent to tell a story and then persuade the court, as a court of equity, that it can bend certain statutes if it’s in the interests of the parties. One of a few attorneys whose experience bridges the time before and after the 1978 Bankruptcy Code, Miller helped legitimize bankruptcy practice, noted Henry Miller, chief restructuring officer at Dresdner Kleinwort Wasserstein, the international investment banking division of Dresdner Bank. (Several officers of Dresdner Kleinwort Wasserstein are general partners in the fund that owns The Deal LLC.) Henry Miller (no relation to Harvey) says Miller has been particularly adept at negotiating with the often warring factions in a complex case. “Bankruptcy is unique in the sense that bankruptcy lawyers do the negotiations and also argue the cases in court, and Harvey’s good both in the courtroom and working behind the scenes to get the best possible deal,” he said. “The whole bankruptcy and restructuring field isn’t a three-ring circus, it’s more like a five-ring circus, with multiple competing interests, and Harvey is particularly adept at balancing these interests in what is often a difficult legal situation. He’s a smart, knowledgeable bankruptcy lawyer who has a reputation as a lion in the industry, and I think that helps him because the judges respect him and it helps him get clients.” What changes would Miller like to see now? The language in the Code that spells out the crucial requirement for disinterestedness for employment of Chapter 11 professionals “is too amorphous and should be tightened up.” The current standard that a professional must not have any adverse interest is defined too loosely, he asserts, and that looseness has created problems in filings for the past 15 years. “The language has a two-pronged test that a professional has no adverse interest and, beyond that, disinterestedness is defined very loosely to include: one, a material adverse interest and two, for ‘any other reason,’” Miller said. “But what does ‘any other reason’ really mean? And the inability to quickly answer that question is precisely why the language should be tightened up.” Chapter 11 cases have changed significantly since the mid-’90s, Miller said. Merger mania created conglomerates in diverse lines of business and expanding technology developed a rash of startup businesses, companies often with fat market caps but no profits. Once the bankruptcies began, professionals had to try to help companies that were far different than the often fundamentally sound companies that filed in the early ’90s primarily because they were saddled with large debt loads. “We live in a credit-intensive society where there’s going to be failure, and bankruptcy is marked by the balancing of the public’s interest, the creditors’ interest, the debtor’s and its employees’ interest and often the interests of the government,” Miller said. “A company that files for bankruptcy is like a sick animal that goes to court, almost like a patient being in intensive care, and the Code is based on the concept of giving that sick company as an entity a fresh start.” Miller particularly worries about two provisions in a pending bankruptcy reform bill that has passed both houses of Congress but which is expected to die in a conference committee while Congress turns to more pressing issues. The current bill is potentially harmful to debtors if it resurfaces either in this or in future congressional sessions, Miller said, because it would cap the exclusivity period for debtors to file a reorganization plan. The clause counteracts the concept of a debtor’s fresh start under Chapter 11, Miller stressed, “because it would put an arbitrary limit of 18 months for a debtor to come up with a reorganization plan, and parties could theoretically resort to stalling tactics under such a time limit.” The provision could harm debtors, he said, particularly if some creditors seek quick distribution of assets under a liquidation instead of giving the debtor sufficient time to reorganize. The bill would cut that exclusivity period from its current 120 days and end the discretion of a judge to extend it indefinitely to give the debtor the breathing room often needed to craft a viable reorganization plan, he said. Another clause in the bill is “almost ludicrous,” Miller said, because it would give utility companies struggling to pay their bills the right to require a one-year security deposit from debtors. Utilities typically contract with several utilities in multiple locations. He favors continuing the current 20-day period in which utilities are required to return to the court and seek payment for continuing services. “Judges have generally been against security deposits because a debtor’s working capital would be gone if a utility could always come back and seek payment whenever it thinks payment is appropriate,” Miller said. A conversation with Miller suggests how rich and varied the problems and potential solutions of individual bankruptcy cases can be. Not bad for a former backwater. “A bankruptcy case is like a panorama that involves thousands of people with different interests, and the challenge is to try and balance those multiple interests,” Miller said. “You have two parties in a typical legal case, while bankruptcy reorganization can involve the interests of a whole community, and you really have to learn to balance those competing interests if you’re going to succeed.” Copyright (c)2001 TDD, LLC. All rights reserved.

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