Spring 2012 • Issue 43, page 13

David A. Gill: Pioneer Insolvency Problem Solver

By Phelps, Kathy Bazoian*

A founding member of the bankruptcy boutique firm of Danning, Gill, Diamond & Kollitz, LLP, David A. Gill was admitted to the California Bar in 1961, and is a graduate of UCLA and, following army service, of Stanford Law School. He has been a bankruptcy trustee since 1965, and a receiver since about that time. During that time, he has also represented trustees and receivers, as well as debtors, creditors, committees, including representation of the creditors’ committee of Maxicare (the first of the two filings by that company). David also sat on the Creditors’ Committee in the matter of Orange County, representing bondholders.

As a trustee, he has administered, or represented administrators of, cases running the gamut from individuals - in the days when debtor examinations were held before the judge - to significantly larger cases. He has run many businesses as trustee, including hotels such as Hayward Manor and motels (one with 150% occupancy, which he could not explain to the judge), a mortuary, convalescent and general hospitals. He has also run larger cases such as the parent of American Savings & Loan, a national manufacturer of aircraft equipment selling to the military, and a manufacturer providing key materials to the Space Station program.

As a State Court receiver, he has handled many cases. The most interesting, he says, were the liquidations of the law firm Wyman, Bautzer, Kuchel & Silbert and other professional associations and Physicians Interindemnity Trust, which involved the liquidation of a medical malpractice insurance-like arrangement. With virtually no money in the bank at the start, he separately sued 764 physician members, and recovered over $60 million, resulting in payment in full of principal due all creditors plus 10% annual interest, and even made substantial payments to equity. He represented the receiver in the famous case of Gold v. Gold. In the U.S. District Court, he is currently engaged in two SEC-initiated liquidations of Ponzi scheme debtors, including Diversified Lending Group, Inc.

In 1971, David wrote a CEB book on then Chapter XIII and has written various other articles over the years on matters relating to trusteeships and receiverships. He has lectured at many programs over the years, most recently concerning the potential liability of receivers and the interface between receivership and bankruptcy. David has also been a periodic speaker at the Loyola programs produced by the California Receivers Forum, of which he is a Board member.

When he first became a bankruptcy administrator, under the tutelage of his partner, Curtis B. Danning, the Chandler Act of 1938 was still in effect. He says he still can’t unlearn the old Act citations. In those days, receivers and, later, trustees, were appointed in all chapter cases. He comments that during that period there were never insolvent administrations because the bankruptcy administrators could analyze prospects dispassionately and had a professional stake in controlling such situations. He recalls that Danning had one such case where it turned out that the administration was in fact insolvent. Horrified, Danning, wrote a check to cover the difference.

In those early days, the Bankruptcy Referees (so-called because the District Court referred bankruptcy matters to them) actually countersigned all checks and closely administered estates. These days, David notes the transfer back to the District Courts of many bankruptcy matters in light of the recent Stern v. Marshall decision.1 Early in his career, there were but a few, mostly very able, bankruptcy admin-istrators, such as Danning, A.J. Bumb, George Daniels, Gilbert Robinson, Irving Sulmeyer, Irving Bass, Sam Jonas, “Fuzzy” Wiley, and others. The referees were mostly former assistant U.S. Attorneys, and the practice was somewhat more roughshod than it is today. There were very few state court receivers active in Los Angeles, the principal ones being R. E. Allen and, later, a young David Ray. When the Bankruptcy Reform Act of 1978 was adopted, Gill joined the Los Angeles panel of trustees and has served continuously since then under all of the local U.S. Trustees.

He recalls that when he first became involved in the practice, there were still remnants of ethnic and religious discrimination, and it was highly unusual for a large firm to deign to deal with bankruptcy matters. Small cases could be administered cheaply, unnecessary paperwork was often avoided, and small matters could be litigated at non-prohibitive cost. Significantly, the courts knew the bar, and the members knew each other. He says it would be an exaggeration to say that everyone trusted everyone, but that certainly everyone knew who could be trusted. However shocking this may be to counsel in this day and age, at least in Southern California, the courts were more likely to accept representations in lieu of proof where they knew the counsel making the representations. It wasn’t unusual for counsel to have a drink with the judge after (and sometimes prior to) a hearing.

He started as a state court receiver for Judge Robert Wenke, which he found to be in many ways procedurally much simpler than bankruptcy administration, because of the lack of the ever-increasing procedural requirements in bankruptcy administration. It took him a while to understand the difference between the powers of equity and rents receivers, who had no power not granted to them by the appointing judge, and bankruptcy administrators, who had their own statutory rights. After 1978, David had to unlearn the axiom that he had earlier been taught, that the primary job of the receiver is to protect the judge. He says that he stopped saying that in court when a judge suggested that it was disrespectful to suggest that a judge needed to be protected, especially by such a humble functionary.

He serves as an equity receiver in federal court matters, particularly enjoying Ponzi cases. He is also an active mediator in the Bankruptcy and U.S. District Courts and has served as a provisional director on appointment of the Superior Court. He has been chair of the Commercial Law and Bankruptcy Section of the Los Angeles County Bar, and has served on various local and national committees. He is a Fellow of the American College of Bankruptcy.

On a personal level, he is married to the former Elaine Ostro. They have four sons and seven grandchildren. He has for many years been involved in Jewish community activities in Los Angeles, in Israel, and in Eastern Europe. He and his wife are erstwhile musicians and like to participate in choral music.

1 What goes around, etc. See Stern v. Marshall, 131 S. Ct. 2594 (2011).

*Kathy Bazoian Phelps, Esq. is a partner in the Los Angeles office of Diamond McCarthy LLP. She has special expertise in all areas of bankruptcy and receivership law and in representing trustees and receivers in large-scale litigation involving fraudulent and Ponzi schemes. She is a Board Member of the Los Angeles/Orange County Chapter of the California Receivers Forum.