Remembering Judge Larry Kelly

Several hundred people, including many members of the bankruptcy bar, judges and former judges gathered to remember the life of Larry Kelly at First United Methodist Church on March 22, 2014.  I counted at least ten current or former bankruptcy judges in attendance as well as many of his former law clerks and law partners.    

Just the Facts

Larry Kelly was born on January 9, 1946.  Beginning in June 1966, he served as a communications specialist in the Navy for three and a half years.   He married Suzanne Velluva in March 1969 and she joined him in Puerto Rico while he finished his military service.

Judge Kelly graduated from Baylor Law School in 1974.   He practiced with Pakis, Cherry, Beard and Giotes until he was appointed to the bench in 1986.    He retired due to health problems in 2006 after completing twenty years’ service as a bankruptcy judge, including a stint as Chief Bankruptcy Judge for the Western District of Texas.   

He served as an adjunct professor at Baylor Law School from 1984 until his death.   (More on that later).   

After retiring from the bench, he practiced with Beard, Kultgen, Bostwick, Dickson and Squires.

Larry Kelly passed away on March 19, 2014.   He is survived by his wife of 45 years, Suzanne; three children, Ryan Kelly and wife, Andi, Kevin Kelly and wife, Jennifer, and Michael Kelly and fiancé, Ellen Eoff; two grandchildren, his mother, Frances Galbraith and husband, Charles; sister, Norma Franklin; brother Jim Hillin and wife, Kim; and mother-in-law, Dorothy Velluva.   

The Service

Rev. Stephen Ramsdell set the tone for the service when he noted that Judge Kelly loved the law and loved justice.   

Rev. Jimmy Dorrell emphasized Judge Kelly’s work with Mission Waco, missionwaco.org, an organization which seeks to “empower the poor and marginalized” and “mobilize middle-class Americans to become more compassionately involved among the poor.”   According to Rev. Dorrell, Judge Kelly didn’t like “the outward appearance of religion,” but instead believed in “defending the rights of the poor and needy.”  Rev. Dorrell also stressed how proud Larry was of his sons and how important his wife was to him.

Carlton Willis, a family friend, sang a beautiful rendition of The Lord’s Prayer.  It was appropriate that he used the alternative text, “forgive us our debts as we forgive our debtors.”   

Dean Brad Toben of Baylor Law School recalled his long friendship with the Kellys, which included Thanksgiving dinners at which the loser of the UT vs. OU football game had to sing the fight song of the victor.   He described walks after dinner where they would smoke cigars and greet neighbors.    

As Dean of Baylor Law School, he praised Judge Kelly’s work ethic, but also noted that he “could be cranky at times” and once quit because the Practice Court teacher would keep students past the start of Judge Kelly’s bankruptcy course.    Nevertheless, he came back and his wife turned in his final grades shortly before he passed away.   Dean Toben said that he now tells his professors that they had better be on their deathbed if they can’t get their grades in on time because Judge Larry Kelly was on his deathbed and he still got his grades in on time.

Dean Toben remarked that Larry Kelly’s “circumstances changed but he did not.”   “While he was dealing with end things, his character showed through.”   Dean Toben said that Judge Kelly’s life embodied John Wesley’s advice to “do all the good you can for as long as you can.” 

  

Remembrances

After the service, I was able to talk with many people who knew Larry Kelly.   

Former law-clerk (and now Standing Chapter 13 Trustee) Deborah Langehennig said:

Judge Kelly was a very thoughtful person, a very conscientious judge and a wonderful teacher.   As he taught his students at Baylor Law, he also taught his law clerks (especially those of us fresh out of law school) everything he knew about bankruptcy law, procedure and due process.   I remember spending a lot of time across the desk from him absorbing his insights on the law and the particular circumstances of the cases pending in his court.   He always emphasized the importance of notice and due process in bankruptcy cases.  It was a wonderful opportunity to work with him on the larger Ch. 11 cases in Austin.   At the same time, he gave as much study and thought to the issues that arose in his consumer cases, always recognizing the direct impact those cases have on the lives of distressed individuals.

I traveled the District with Judge Kelly, handling cases in El Paso, Midland and Waco in addition to our Austin docket.   He even volunteered to take the Beaumont docket when Judge Abel died suddenly and so we traveled to Beaumont once a month for several months until Judge Parker was appointed.   As Chief, he enjoyed visiting all the divisions and working with attorneys in each division.   It was fun to travel with Judge Kelly – he was always up for the adventure.    He was very sociable with the bar in each of the divisions he covered and I think the lawyers genuinely enjoyed sharing drinks and stories with him.  And of course, we will all always remember his standard intro to a story:  “Long story made short” – as he would go on to share what was never a “short” story.

 Dave Dickson, who practiced with Judge Kelly at Beard Kultgen said that:

Judge Kelly was a natural teacher.  If you listened to his rulings, it was like reading a hornbook on that area of the law. He was impeccably intellectually honest in his reasoning.

He greatly enjoyed his role as an Adjunct Professor at Baylor Law School, where he taught bankruptcy for many years.  He finished grading his last set of finals about ten days before he died.  Many of us offered to take on that task, including a couple of former bankruptcy judges; he steadfastly refused.

He never  lost touch with who he was and  where he came from.  He  always judged people based on their character and ability , not their prestige, wealth or social standing.  We are all lucky to have known him.

My partner, Barbara Barron, said:

The good news and the bad news with Judge Kelly was that you always knew where you stood with him.

 Judge Kelly was the first bankruptcy judge that I ever appeared in front of.   He took the bench the same year that I was licensed.   I was very intimidated by him at first.  However, I finally came to realize that when he would push lawyers, he was looking for them to push back.   He enjoyed a vigorous give and take with the attorneys who practiced before him.   Sometimes I persuaded him and other times and I headed back to the office with my tail between my legs.   However, he always challenged me to be a better lawyer.  In a day before cases were available online, he could be counted on to ask about a Fifth Circuit case that had come out in the advance sheets the day before.    

Remembering Judge Kelly’s Opinions

Judge Kelly’s tenure spanned the period between the chaotic 1980s and the electronic age of the 21^st century.     Judge Kelly’s first written opinion, In re Playa Development Corporation, 68 B.R. 549 (Bankr. W.D. Tex. 1986), was cited by the Supreme Court for the proposition that it was permissible to lift the automatic stay during the first year of a chapter 11 case, United Savings Association of Texas v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365 (1988).   Thus, Judge Kelly’s jurisprudence was recognized by the high court within a few years of his taking the bench.    

Judge Kelly managed to save retirement plans from a Catch-22 in In re Volpe, 100 B.R. 840 (Bankr. W.D. Tex. 1989), a result which was ultimately affirmed by the Supreme Court (although on different grounds).   Volpe concerned whether a retirement account was exempt.   Texas law allowed the exemption of retirement plans (and still does).   However, clever creditors argued that ERISA pre-empted the Texas exemption statute.  This was a problem because the Fifth Circuit had previously found that the anti-alienation language in ERISA was neither a federal exemption nor an exclusion from the estate in In re Goff, 706 F.2d 574 (5th Cir. 1983).  If the creditor's argument had succeeded, then retirement plans would be subject to creditor claims despite two statutes trying to protect them.  Judge Kelly found that the Property Code was not pre-empted and was affirmed by the Fifth Circuit in In re Volpe, 943 F.2d 1451 (5th Cir. 1991).   When the issue reached the Supreme Court in another case in Patterson v. Shumate, 504 U.S. 753 (1992), the Court disagreed with the Fifth Circuit and held that the anti-alienation language in ERISA was a federal exemption statute.    Although the Supreme Court got there by a different route, its ruling nevertheless protected retirement accounts.

Judge Kelly’s cases brought him into contact with public officials, such as former Texas Governor John Connally, whose deferred compensation check was determined to be property of the estate, In re Connally, 94 B.R. 908 (Bankr. W.D. Tex. 1989) and State Rep. Betty Denton, whose bank account containing campaign contributions was also brought into the estate, In re Denton, 169 B.R. 608 (Bankr. W.D. Tex. 1994).  

  

Judge Kelly also heard some of the most important cases of his day.   He ruled that filing a complaint for foreclosure of a mechanic’s lien violated the automatic stay in In re Nash Phillips Copus, Inc., 78 B.R. 798 (Bankr. W.D. Tex. 1987), the case of the largest homebuilder to file bankruptcy at the time.    He wrote two influential opinions on lease rejection damages in In re Mr. Gatti’s, Inc., 164 B.R. 929 (Bankr. W.D. Tex. 1994) and 162 B.R. 1004 (Bankr. W.D. Tex. 1994)(although his colleague Frank Monroe disagreed with one of them and referred to it as the law on the other side of the hall).    Judge Kelly held days of valuation hearings in Circle C Joint Venture only to have the results undermined when the City of Austin adopted restrictive environmental regulations during the middle of the hearing.    

Larry Kelly wrote many opinions on the homestead exemption.   He held that Texas law did not allow a Debtor to claim a homestead in Brazil, In re Peters, 91 B.R. 401 (Bankr. W.D. Tex. 1988) and that  a servicewoman from South Carolina did not forfeit her homestead there when she was stationed at Fort Hood for a period of three years,  In re Anderson, 240 B.R. 254 (Bankr. W.D. Tex. 1999)(the case involved the federal exemptions).

Judge Kelly also experienced the weirdness that can sometimes pop up in bankruptcy court.  He was once sued by a pro se debtor who claimed that the judge failed to removed non-compliant flags from the courtroom and refused to sign a contract with the debtor reaffirming his oath of office.    Wyatt v. Kelly, 1998 U.S. Dist. LEXIS 6671 (W.D. Tex. 1998).    He also ruled on a discharchageability by a mother against her daughter, In re Holland, 2007 Bankr. LEXIS 308 (Bankr. W.D. Tex. 2007) and refused to dismiss a dischargeability complaint filed against a corporate chapter 12 debtor with regard to alleged fraud in an emu transaction, In re JRB Consolidated, Inc., 188 B.R. 373 (Bankr. W.D. Tex. 1995).    

A handful of other significant opinions includes In re Bairrington, 183 B.R. 754 (Bankr. W.D. Tex. 1995)(an important opinion dealing with the collateral estoppel effect of jury findings on alternate grounds); In re Halbert, 146 B.R. 185 (Bankr. W.D. Tex. 185)(no new period for objecting to exemptions when case converted from chapter 11 to chapter 7); and In re Rancho Chamberino, Inc., 77 B.R. 555 (Bankr. W.D. Tex. 1987)(contract for deed was an executory contract which could not be modified in a plan).

Finally, after retiring, Judge Kelly, who was now appearing as Mr. Kelly, succeeded in defending a debtor in a non-dischargeability case based on section 523(a)(4) and the Texas Construction Trust Fund Act, a rare accomplishment.   In re Pledger, 2013 Bankr. LEXIS 802 (Bankr. W.D. Tex. 2013).    

Larry Kelly will surely be missed but his influence will remain with us.