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Mass Tort Bankruptcy Goes Public, William Organek -- Assistant Professor Of Law

Vanderbilt Law Review

Large companies like 3M, Johnson & Johnson, Purdue Pharma, and others have increasingly, and controversially, turned from multidistrict litigation to bankruptcy to resolve their mass tort liability. While corporate attraction to bankruptcy’s unique features partially explains this evolution, this Article reveals an underexamined driver of this trend and its startling results: government intervention. Governments increasingly intervene in high-profile bankruptcies, forcing firms into insolvency and dictating the outcomes in their bankruptcy cases. Using several case studies, this Article demonstrates why bankruptcy law should subject such governmental actions to greater scrutiny and procedural protections. Governments often assume multiple incompatible roles in these …

The Law Of Last Resort, Barry E. Adler

Vanderbilt Law Review

A financially distressed individual or corporation employs the bankruptcy process only as a last resort. The study of bankruptcy law, however, need not, and should not, be an afterthought. The traditional bodies of law that compose private ordering are the laws of property, contract, and tort. Property law establishes private entitlements that can be specifically enforced against the world. Contract law permits individuals to exchange obligations and thus invest one another with entitlements. Tort law creates its own set of entitlements and imposes liability for unwanted interference with those or other entitlements. These bodies of law are often presented as …

State Defiance Of Bankruptcy Law, Eric Winston

Vanderbilt Law Review

Bankruptcy is the principal device by which failing businesses and financially-troubled families get one last chance to reorganize their affairs back to financial health. It is also the graveyard for business failures, the place where we bury dead corporations and divide their remaining assets among their surviving creditors. In the last decade, the bankruptcy system has given seven million middle-class families a way to start over-an opportunity to save their homes from foreclosure, rid themselves of overwhelming debts, and reintegrate themselves into the workforce as productive citizens. It has also been the way that 10,000 corporations have restructured their way …

State Defiance Of Bankruptcy Law, Kenneth N. Klee, James O. Johnston, Eric Winston

Vanderbilt Law Review

Bankruptcy is the principal device by which failing businesses and financially-troubled families get one last chance to reorganize their affairs back to financial health. It is also the graveyard for business failures, the place where we bury dead corporations and divide their remaining assets among their surviving creditors.

In the last decade, the bankruptcy system has given seven million middle-class families a way to start over-an opportunity to save their homes from foreclosure, rid themselves of overwhelming debts, and reintegrate themselves into the workforce as productive citizens. It has also been the way that 10,000 corporations have restructured their way …

Behavioral Economics, The Economic Analysis Of Bankruptcy Law And The Pricing Of Credit, Robert K. Rasmussen

Vanderbilt Law Review

Bankruptcy has been a fertile ground for the economic analysis of law. A significant portion of bankruptcy scholarship during the past fifteen years applies the basic assumptions of standard economic theory to the problems caused by financial distress. This scholarship begins with the premise that people make choices in a rational manner in order to maximize their individual utility. It applies this axiom to questions ranging from when do individuals file for bankruptcy to how bankruptcy laws affect firms' investment decisions. As it has in most other areas of law (especially private law), law and economics has both reshaped our …

A Theory Of The Regulation Of Debtor-In-Possession Financing, George G. Triantis

Vanderbilt Law Review

The profile of Chapter 11 of the Bankruptcy Code in public consciousness has surged recently. Other than the automatic stay on the enforcement of claims, the most publicized feature of bankruptcy reorganizations is debtor-in-possession (DIP) financing. Indeed, along with the bankruptcy stay, DIP financing is the motivation for many Chapter 11 filings. Under Section 364 of the Code, a firm in bankruptcy (the debtor in possession) can finance its ongoing operations and investments by issuing new debt that enjoys any one of various levels of priority, all of which rank higher than the firm's prepetition unsecured debt.' The debtor's financing …

The Undersecured Creditor In Reorganizations And The Nature Of Security, Theodore Eisenberg

Vanderbilt Law Review

For better or for worse, bankruptcy law generally recognizes secured creditors' state law rights in collateral. The decision to honor secured creditors' state law interests and the need to modify those interests in bankruptcy generate an essential tension of bankruptcy law. Much of the Bankruptcy Act's complexity and several of its most controversial provisions arise from congressional efforts to resolve this tension.

In trying to walk the fine line between taming and preserving secured creditors' rights, Congress created one of the most extraordinary provisions in the history of bankruptcy law. Section 1111(b) of the Bankruptcy Act of 19781 suspends two …

Lifting The Cloud Of Uncertainty Over The Repo Market: Characterization Of Repos As Separate Purchases And Sales Of Securities, William F. Hagerty, Iv

Vanderbilt Law Review

In light of the actual and potential financial harm that repo investors faced after failures of several repo market participants,this Note proposes a new legal characterization of repos and argues for adoption of proposed Bankruptcy Code amendments pertaining to repos. Both of these suggestions would give repo investors significant future financial protection without destroying the financially attractive characteristics of repurchase agreements.

Part II of this Note begins laying the foundation for this proposal by discussing current repo market problems that the failures of several repoissiers have exposed.

Part II discusses new policies concerning the appropriate uses of the collateral securities …

Efficiency Justifications For Personal Property Security, James J. White

Vanderbilt Law Review

It is always more interesting to challenge the received wisdom than to defend it. Yet in this case, a careful analysis of the facile assertions about the expansion of credit by the granting of security and about the other presumed efficiencies of security produces arguments and evidence that strengthen rather than weaken the efficiency arguments. In the first place, it appears that the granting of security does in fact expand the credit granted to risky debtors and thus that any efficiency equation must consider the probable benefits of such expansion. Second, a close examination of the actual experience not only …