Philadelphia Reflections

Day in Court

President Mansion 9th and Market

On the spot where the mansion for the President of the United States once stood at 9th and Market Streets (although no president ever occupied what had been built by Philadelphia in a vain effort to persuade the nation's capital to remain here) now is found the Bankruptcy Court. Until a few years ago, the location held the Federal Building. It then contained thirty or forty postal windows on the first floor, and Federal Courtrooms in the top five stories of gleaming white marble; stirring messages still are carved there. Right now, economic times are hard, so about three-quarters of the building is occupied by bankruptcy courts. September 23, 2010, had been set as the day for the final auction of Philadelphia's daily newspapers, on the second floor. There was concern about demonstrations or worse by local unions for reasons to be described, so the judge had passed the word that only bidders and the public were to be admitted, with the press excluded. When visitors accordingly assembled at 9 AM, there seemed to be some mix-up. The bailiffs were quite vigorous in excluding everybody except bidders and the press. Business cards would not suffice: to enable entrance, a visitor had to display a press card. This session would be conducted by U.S. Chief Bankruptcy Judge Stephen Raslavitch so security rules may have changed. The courtrooms are windowless in the center of the building; across the hall on the window side, are conference rooms and visitors waiting for areas. So, those visitors who wished to remain were able to sit in the waiting area and chatter as they pleased, while news of the proceedings was brought to their door during frequent periods of recess, and announced in stage whispers. It's not exactly as vivid as being inside the courtroom, but although closed-circuit television would be better, this is not too bad. The main disadvantage is the possibility of some confused news leaker getting facts mixed up.

It's sort of like a Broadway play. At unexpected moments, the door to a conference room bursts open, and well-dressed gentlemen troop in public view into the courtroom looking grim but sweaty, and then silently disappear into the courtroom. A lawyer among the waiting visitors informs those around him that in each posse cluster there were eight lawyers; this process was probably costing each bidder eight thousand dollars an hour. In a bankruptcy, lawyers get first cut at available cash, but the judge can reduce the fees, so the lawyers are particularly attentive to the judge's every wish. No Egyptian Pharoh was ever treated with more deference. The comment was heard that you have to sell a lot of newspapers to make $8000 profit. Of course, there were many more lawyers than eight. In this particular case, the participants were extremely well tailored and probably manicured. But the vast majority of passers-by in the intervening corridor were associated with other bankruptcy cases along the hallway. Looking at these others, one could immediately recognize facial expressions the French artist Daumier was attempting to portray. His depiction still seems very apt.

Raymond and Ruth Perelman

In previous episodes of this particular sad controversy there had been a number of bidders. Today there were only two left: the creditors who had lost roughly $318 million supporting the failing enterprise for which they originally paid $550 million, and the management, who had assembled backers to purchase the property at a greatly reduced price, and perhaps make a go of it with less debt burden and more tax write-offs. Suddenly, recess. Someone burst out headed for the bathroom, announcing that the management team had bid $50 million, the creditors had bid $105 million. Visitor assessment: actual price was really $139 million because it included the Inquirer Building, but visitors in the waiting room were unanimous that the building was not worth $39 million. A multimillionaire backer of the management team, Raymond G. Perelman aged 93, was next reported to have said he would raise his contribution to $85 million, but that was tops. Management was still $20 million short; cell phones were seen to be in active employment. Whether the Carpenters Union Pension Fund had offered some of that was unclear. There was some logic to that idea. Presumably, the union movement might consider it a good investment to use part of its pension fund to save the jobs of members, but to do so might well be unpopular with some of the rank and file. Much of this case had to do with unions.

Teamsters

The total contribution of the newspapers toward union defined-benefit pensions was rumored to be $155 million -- more than the sale value of the whole newspaper corporation. This pension contribution was considered to be too heavy to bear, the newspaper would not be viable unless it switched to a so-called defined contribution plan (without a fixed promise of its eventual payout). Consequently, although each union agreed to switch its pension system if any other union got defined benefits, the deal was off. If any union got defined benefits, they all got it. Right, that's the deal. The Teamsters, unfortunately, refused to agree to defined contribution, so $155 million depended on how it came out. The newspaper might well cease publication, costing a lot of jobs. No doubt, the other unions attempted to apply persuasion to the Teamsters but had apparently been rebuffed. At least, that was what was being said in the corridor. Just how many people shouting about it could begin to define the difference between defined contribution and defined benefit -- was open to question. It was very clear that if the Teamsters agreed to defined contribution in this contract, they might get pressured to extend it to unrelated contracts. At some point, some domino of defined benefit would start a serial tumble that eliminated the concept from the whole national labor scene. The question, in this case, was whether the nation had already crossed that line, and the Teamster position was just a futile nuisance. For this to happen in a recession, a month before national elections, added still more drama. Newspapers feared they would disappear as an industry, unions also feared they might vanish from private industry. Neither side was being hysterical.

What was unmentioned was that the former Philadelphia Bulletin was being printed in New Jersey without union labor, and the management of the revived Bulletin was talking with the creditors. Maybe the Inquirer could be published if the creditors won the bidding, but not with unrealistic union contracts. And of course, maybe those bankers didn't care. Most of the money for the purchase was supplied by banks, and banks can sometimes do funny things. Somewhere in this, the Teamsters were in mortal conflict with the Pressmen, for who knows what reason. The 2010 mid-term Congressional and Gubernatorial elections are to be held in a month, perhaps that was the issue. Some of the union people hanging around the courthouse looked as though they were unafraid of violence.

As we passed out of the street doors of the courthouse on the ground floor, the guards were unusually jolly and friendly to visitors. That's a striking feature of legal life that Daumier seems to have overlooked. Half of the people passing before these guards have just lost nearly everything, and the other half is better off. In fact, all of the lawyers are better off.

Originally published: Thursday, September 23, 2010; most-recently modified: Thursday, May 16, 2019