Whitley Basks In Familiar Surroundings As He Begins Third Term On Bankruptcy Bench
Walking around the federal courthouse and annex in Charlotte with Judge J. Craig Whitley feels like taking a tour of his home.
In many ways, it is.
The longtime U.S. Bankruptcy Judge for the Western District of North Carolina, who was recently reappointed to his third 14-year term, has occupied these familiar surroundings on West Trade Street over parts of five decades. Including his time as a clerk to Judge Marvin Wooten, Whitley has been associated with the bankruptcy court almost as long as it has been in existence.
A native of Belmont in neighboring Gaston County, where he also resides now, Whitley has never strayed too far from home. He received his undergraduate degree from Davidson College and his law degree from Wake Forest University School of Law.
“I always envisioned I would come back and practice law here,” Whitley said, “but I never envisioned that I would be a judge or do litigation. I thought I’d do what we called corporate work then; I guess it’s called transactional now.”
Following his second year of law school, Whitley found summer work in Charlotte, and the rest is pretty much history.
“There were not a lot of jobs around,” Whitley said, “but I saw an ad on the bulletin board for a small law firm here in town that was looking for a summer clerk – a group called Jordan, Durham and Wilson, the Wilson being Sam Wilson who at one time was the governor’s attorney.
“They did not have a pure corporate lawyer, but what they did have was a young and very good Chapter 11 lawyer, a reorganization attorney, a fellow by the name of Al Durham, who is in our Bankruptcy Section and a Lifetime Achievement Award recipient.”
Whitley literally followed Durham around all summer, and they soon found their way to the fledgling U.S. Bankruptcy Court.
“It was just perfect for what I was interested in,” Whitley recalls. “It was this great combination of business work and litigation and everything that goes with that. There was a judge there named Marvin Wooten who was already turning himself into a legend in North Carolina judicial circles.
“Bottom line, I spent the summer watching them, hoping I would get a job offer from the firm. What I did not know was they were about to split up and go their separate ways. However, Al knew that Judge Wooten’s law clerk was leaving. I had met Judge Wooten over the summer and Al basically told him I was looking and put in a good word for me. Judge Wooten hired me sight unseen, but with a very interesting caveat: I could have a job as long as he did. But Wooten wasn’t sure he would have one himself.”
The Bankruptcy Court, Whitley explains, was initiated in 1979 as a separate entity from the U.S. District Court, and he completed law school in 1984.
“That five-year period was just long enough for the whole system to be declared unconstitutional in a 1982 decision called Marathon Pipe Line,” Whitley said in regard to Northern Pipeline Construction Company v. Marathon Pipe Line Company, 458 U.S. 50 (1982). “It was an interesting way that this all came about.
“The bankruptcy courts had been held unconstitutional, but the Supreme Court stayed the Marathon decision to give Congress time to fix the jurisdictional problems with this high horsepower, broad jurisdiction, Article I court. And Congress didn’t. The Supreme Court extended its stay again, and Congress didn’t act. There was a really serious concern that they were going to do away with the whole system and start again or do it through the District Court.”
As Whitley considered his options, he was joined in that regard by law school classmate David M. (Dink) Warren, who was hoping to clerk for Judge Thomas Milton (Mickey) Moore of the U.S. Bankruptcy Court for the Eastern District of N.C. Warren, incidentally, now serves as chief judge of that court.
“I had already sat for the bar exam and was wondering where I was going to go to look for the next job,” Whitley said. “I really wanted to do this. In any event, Congress enacted the reform law, Dink and I got sworn in a couple of weeks later, and off we went.”
For Whitley, the two years he spent as Judge Wooten’s law clerk were a remarkable experience.
“Judge Wooten was one of those people – I don’t know exactly how to put this for publication – God only made so many people like him,” Whitley laughs. “He was incredibly smart. He was no-nonsense, blunt speaking, had a tender heart; he was what I would call the ‘poor man’s last friend.’ He was tremendous, and a great person to learn from.
“The Bankruptcy laws had to be rewritten, and no one knows what it means. There is no legislative history. For the first year, he, I and the clerk of court would get in his office before court, and we would argue over what the law was supposed to mean in the cases that were coming up and how to implement it. I got a very advanced education very quickly.”
Following his clerkship, Whitley renewed his working relationship with Al Durham. They practiced together for seven memorable years in a variety of small firms, culminating in partnership with Rebecca Henderson, who went on to serve as chair of the Bankruptcy Section, in Durham, Whitley & Henderson.
“At that point,” Whitley said, “I was very close to Judge Wooten, and knew his intentions about retirement. When he decided to hang it up, I threw my hat into the ring. I guess that was audacious, the sort of audacity you can only have when you’re young because you don’t know enough to know you’re probably not qualified for the job.
“I was 34 years old when the Circuit Court picked me, and 10 days before I started, I turned 35. There were 35 applicants, and I figure they decided, ‘if we can’t have Judge Wooten, we’ll take the knockoff.’ I had always practiced with people 10-15 years older than me, so I never really gave the age business much thought. The lawyers didn’t seem to care that I was very young, so it never really was much of an issue.”
Whitley began his first term in 1994, was reappointed in 2008, and served seven years – the maximum term permitted – as chief judge from 2005-12. He says that he knew early on, dating back to his clerkship under Judge Wooten, that this was where he wanted to be.
“I’m a one-trick pony,” Whitley said. “Bankruptcy Court sounds gruesome, but if you are a business lawyer, there is nothing better. It is interesting, and we get a great variety of legal work. Anything as small as a wage earner who is behind on his mobile home payments to something as large as J.A. Jones, which at one time was the 11th largest construction firm in the world.
“And now we have gotten into the asbestos manufacturer bankruptcy cases – we have several of these larger cases. Those tend to be about a half-billion-dollar to a couple of billion-dollar cases. For a month, I had the J&J baby powder spinoff, and who knows how much that case is worth. There was two billion dollars on the table the first day of the case, and the claimants were offended at that number.”
Whitley believes his affinity for serving on the bankruptcy bench stems from growing up in a working-class family.
“I think all of us would love to have the chance to serve the country in some meaningful capacity,” Whitley said. “But to do that and have the chance to help people who are down on their luck, that makes it all the better.
“Bankruptcy has a stigma, and you hear a lot of suggestions of how people game their creditors and walk away from their debts. There is some of that, but not very much. There are a thousand ways you end up in bankruptcy court and most of them don’t involve any wrongdoing or any imprudence on your part. It’s nice to have the chance to help a little bit.”
Every case is different, Whitley explains, although general categories such as medical bills and a lack of health insurance are common causes of bankruptcy filings. Job loss, he adds, tends to be another significant driver during an economic downturn.
“When I started this,” Whitley said, “textiles was playing out in our area, so we were getting both the mills and the individuals. It’s tough if you’re 55 years old and all of a sudden you are out of work and need to be retrained to do something else. There are a lot of things of that nature that lead to personal bankruptcies. And there are some folks who have just been a little too aggressive in financing their consumer purchases.
“Particularly running up to about 2007, a lot of people were taking on more and more consumer debt and living more leveraged than they had before, even with things such as home equity loans. Never mind your credit cards and financed cars and leased cars and the like – people were taking dollars out of their homes and spending them – effectively pushing themselves into living more paycheck to paycheck than any American generation had ever done before.”
Eventually, Whitley continues, it catches up with you.
“When something unexpected happens, when someone gets sick or there’s a death in the family that was not expected, all of a sudden you’re scrambling and you’re over the edge,” Whitley said. “That’s one of the areas in which the system works well – giving the debtors time to cool off, get situated, and try to do the best they can to pay their creditors as much as they can, and basically rehabilitate folks so they can be productive going forward.
“It’s the same thing with small businesses. A lot of times small businesses tend to be ‘Mom and Pop’ operations, and they are subject to buffeting by economic winds that they did not create. Sometimes Chapter 11 can give them a little bit of a break so they can preserve their businesses and keep the jobs that come with small entities.”
Have you seen more filings because of COVID-19?
“Just the opposite,” Whitley responded. “Bankruptcy filings are at historic lows. When I got a position as a law clerk in 1984, I think there were about 1,790 bankruptcy cases in the western third of North Carolina that year. By the time I became a judge it was up around five thousand. We spent most of the first decade of the new millennia, let’s say from 1998 to 2007, with anywhere from about eight thousand cases to as many as thirteen thousand cases.
“But from 2012 when the economy got to full employment, with cheap money and low interest rates, the case filings started dropping. And now we are about as low as we were when I was a law clerk.”
Whitley doesn’t expect the decline in filings to continue.
“I think it is artificial,” Whitley said. “With all of the government stimulus money and the like, businesses and individuals have really had a payment holiday. And the state courts have been closed down, or were at least backed up much of the last two years.
“Well, you don’t file bankruptcy if no one is trying to foreclose on you or evict you from your apartment. What I am expecting, as most people are, is that there are a lot of pent-up financial problems and soon this is going to turn.”
Bankruptcy business tends to lag six to eight months behind the general economy, but it’s getting harder and harder to predict in this state.
“Frankly, North Carolina has become such a destination for people to move to, we are a little bit insulated from some of the travails that other areas of the country have experienced,” Whitley said. “During recessions, we get bankruptcy filing increases, but it is a lot easier to get a new job in Charlotte than it is in a lot of places.
“I expect sometime over the next 12 to 24 months, given the supply shocks that we have seen and what is going on with the war in Ukraine, the economic conditions are aligning up for bankruptcy filings to come raging back. We’re going to be very busy.”
Perhaps now more than ever, Whitley and his colleagues find themselves paying closer attention to the news and world events.
“I think because the work has been so slow, for so long now, bankruptcy lawyers generally, have been paying more attention than usual,” Whitley said. “Most of my career I wouldn’t have noticed at all because there was just such a constant stream, and as consumer and corporate debt levels kept increasing, you’re always going to have a certain percentage of insolvency cases.
“As of late, it is an irony that bankruptcy lawyers are struggling. They don’t have enough work. Many are recasting themselves into other practice areas. Personal interests aside, that is a little bit of a concern, frankly. The Bankruptcy Court was created in 1979 and a lot of young lawyers got into the business at that time period. Well those folks have retired or are retiring, so I am concerned that our bankruptcy bar will be diminished when we need the maximum number of attorneys doing this kind of work. The timing is not good.”
The NCBA Bankruptcy Section and the bankruptcy bar in general have always done their part to encourage new lawyers to consider this practice area, and to support those who have chosen to practice bankruptcy law.
“Over the years the Section has done things like putting on introductory seminars and publishing the Bankruptcy Practice Manual,” Whitley said. “The bar has always been very welcoming to new folks who are coming in. We have a mentoring program here locally, as most bankruptcy courts do, trying to help young attorneys get established –
before they get in trouble doing something they didn’t know was wrong. I think the section pays a lot of attention to helping integrate new attorneys into the practice area.”
Owing perhaps to his own experience under Judge Wooten, Whitley does not employ permanent law clerks.
“A lot of judges do,” Whitley said, “and it is a wonderful convenience for the judge, because once you get someone trained up, your productivity goes sky high. I’ve always rotated my law clerks every one to two years, and frankly some of it was because I knew we were going to need more lawyers.
“I’ve had maybe 18-19 law clerks, and 60 percent of them are practicing bankruptcy law here in Western North Carolina. It helps repopulate our bar.”
Throughout his career, Whitley has been a big believer in the value of membership in the North Carolina Bar Association and the NCBA Bankruptcy Section.
“Absolutely,” Whitley exclaimed. “I have never missed a state bankruptcy seminar except the ones that were cancelled due to Covid. I’ve been in the section since I was a law clerk … and I can remember when the Bar Association was jammed into that tiny little building … my, how things have grown!
“And I think with us experiencing such a growth phase in this state and in the legal practice, it is important to have a strong bar association to help define the practice and support the attorneys. I am very proud of that membership. A lot of judges don’t belong to the voluntary organizations because they don’t have a firm paying the membership dues, but that one has never been a problem for me to justify.”
Whitley, who turns 63 just 10 days before his new term officially begins on June 27, shows no signs of slowing down. Considering how much he loves his work, why should he?
“Whether I work a full 14-year term, I am not sure,” Whitley said, “but this never gets old. I will do something in a case next week that I have never done before, in an area of law about which I know nothing about.
“The variety is endless. The context is always the same – the procedural aspects of it – but as in any industry, any endeavor, can land you in debt, it’s an endless variety of financial disputes. Even after 28 years of doing it, I get up in the morning ready to come to work because it’s always fresh.”
Like the smell of newly painted walls on a courthouse that feels like home.
Russell Rawlings is director of external affairs and communications for the North Carolina Bar Association.