Law Commons^™

Kaplan V. Dutra, 132 Nev. Adv. Op. No. 80 (Dec. 1, 2016) (En Banc), Hayley Cummings

Nevada Supreme Court Summaries

The Court, sitting en banc, reviewed a certified question from the United States Bankruptcy Court, determining that under NRS 21.010(1)(u) a debtor is entitled to a personal injury exemption of $16,150 for each personal injury claim.

Brief For Professors, Czyzewski V. Jevic Holding Corp. As Amicus Curiae, Laura Spitz

Faculty Scholarship

We urge that the decision of the Circuit Court should be affirmed because Petitioners were not injured or prejudiced by the settlement--they are not worse off than if the settlement had been rejected. Aside from that, the remaining issue is whether the bankruptcy court had discretion to approve the instant settlement even though it did not strictly follow the priority rule. We believe that the courts correctly decided not to apply the absolute priority rule under the circumstances of this case. We urge that the Rule need not be followed by a bankruptcy court in approving a settlement. Alternatively, if …

Art & The “Public Trust” In Municipal Bankruptcy, Brian L. Frye

Law Faculty Scholarly Articles

In 2013, the City of Detroit filed the largest municipal bankruptcy action in United States history, affecting about $20 billion in municipal debt. Unusually, Detroit owned its municipal art museum, the Detroit Institute of Arts (“DIA”) and all of the works of art in the DIA collection, which were potentially worth billions of dollars. Detroit’s creditors wanted Detroit to sell the DIA art in order to satisfy its debts. Key to the confirmation of Detroit’s plan of adjustment was the DIA settlement, under which Detroit agreed to sell the DIA art to the DIA corporation in exchange for $816 million …

Brief For Amici Curiae Law Professors In Support Of Petitioners, In Re Jevic (Czyzewski V. Jevic Holding Corp.), Melissa B. Jacoby, Jonathan C. Lipson

Faculty Publications

Question Presented:

Whether a bankruptcy court may approve a contested settlement agreement that distributes assets in violation of the Bankruptcy Code’s statutory priority rules and that departs from long-held absolute priority principles underlying the American bankruptcy system.

Tower Homes V. Heaton, Nev. Adv. Op. 62, (Aug. 12, 2016), Sydney Campau

Nevada Supreme Court Summaries

The Nevada Supreme Court determined that granting creditors control over a debtor’s legal malpractice claim and any proceeds resulting from the action constituted an improper assignment of a legal malpractice claim that was contrary to public policy.

Randomly Distributed Trial Court Justice: A Case Study And Siren From The Consumer Bankruptcy World, Gary G. Neustadter

Faculty Publications

Between February 24, 2010 and April 23, 2012, Heritage Pacific Financial, L.L.C. (“Heritage”), a debt buyer, mass produced and filed 218 essentially identical adversary proceedings in California bankruptcy courts against makers of promissory notes who had filed Chapter 7 or Chapter 13 bankruptcy petitions. Each complaint alleged Heritage's acquisition of the notes in the secondary market and alleged the outstanding obligations on the notes to be nondischargeable under the Bankruptcy Code’s fraud exception to the bankruptcy discharge. The notes evidenced loans to California residents, made in 2005 and 2006, which helped finance the purchase, refinancing, or improvement of California residential …

What Bankruptcy Law Can And Cannot Do For Puerto Rico, John A. E. Pottow

Articles

This article is based on a February 2016 keynote address given at the University of Puerto Rico Law Review Symposium “Public Debt and the Future of Puerto Rico.” Thus, much of it remains written in the first person, and so the reader may imagine the joy of being in the audience. (Citations and footnotes have been inserted before publication ‒ sidebars that no reasonable person would ever have inflicted upon a live audience, even one interested in bankruptcy law. Rhetorical accuracy thus yields to scholarly pedantics.) The analysis explains how bankruptcy law not only can but will be required to …

Courts And Sovereigns In The Pari Passu Goldmines, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

U.S. federal court rulings against Argentina since 2012 have turned the pari passu clause in sovereign bond contracts into the most promising debt collection tool against immune governments since the days of gunboat diplomacy. The large literature on pari passu (“equal step” in Latin) assumes that the clause had not been used for enforcement before the late 1990s, and that it was first construed by a Belgian court in a case against Peru in the year 2000. The Belgian decision was criticized for wrongly concluding that pari passu promised ratable payment to all holders of Peru’s external debt. A decade …

Micro, Small And Medium Enterprise (Msme) Insolvency In Canada, Janis P. Sarra

All Faculty Publications

Insolvency law is broadly recognized as an essential tool in well-functioning economies. A balance of mechanisms that allow for timely and effective liquidation, but also for a “fresh start” for individual entrepreneurs and the rehabilitation of viable businesses, tends to enhance creditor recoveries and lender confidence. This study examines the treatment of micro, small and medium enterprises (“MSME”) under the Canada Bankruptcy and Insolvency Act. It undertakes a qualitative examination of 200 business insolvencies in 2015, in order to try to understand the reasons for insolvency, types of debt, and outcomes of proceedings. The study reports on the results of …

A Two-Step Plan For Puerto Rico, Clayton P. Gillette, David A. Skeel Jr.

All Faculty Scholarship

Few still believe that Puerto Rico is capable of meeting all of its financial obligations and continuing to provide basic services. The territory is already in default, and conditions are rapidly deteriorating. Is there a way forward? We think there is. In this short article, we outline a two-part plan for correcting Puerto Rico’s most urgent fiscal and financial problems.

The first step is to create an independent financial control board that has authority over Puerto Rico’s budgets and related issues. Notwithstanding concerns that an externally imposed financial control board (FCB) may interfere with the decision making processes of democratically …

Disciplining Corporate Boards And Debtholders Through Targeted Proxy Access, Michelle M. Harner

Faculty Scholarship

Corporate directors committed to a failed business strategy or unduly influenced by the company’s debtholders need a dissenting voice—they need shareholder nominees on the board. This article examines the bias, conflicts, and external factors that impact board decisions, particularly when a company faces financial distress. It challenges the conventional wisdom that debt disciplines management, and it suggests that, in certain circumstances, the company would benefit from having the shareholders’ perspective more actively represented on the board. To that end, the article proposes a bylaw that would give shareholders the ability to nominate directors upon the occurrence of predefined events. Such …

Treating The New European Disease Of Consumer Debt In A Post-Communist State: The Groundbreaking New Russian Personal Insolvency Law, 41 Brook. J. Int'l L. 655 (2016), Jason J. Kilborn

UIC Law Open Access Faculty Scholarship

This article examines the tumultuous transition from restrictive Communism to the debt-fueled consumer economy of modern Russia. In particular, it surveys Russia’s legal response to severe debt distress, situating it in the context of nearly one thousand years of historical development. Effective 1 October 2015, Russia finally joined most of its European neighbors in adopting a personal bankruptcy law, with characteristics that reflect both evolving international best practices and a series of lessons not learned. This article offers the first detailed exposition in English of the two steps forward represented by this new law, as well as an evaluation of …

Changes To Bankruptcy Forms And Pending Bankruptcy Rule Changes, Kathleen Klepfer

Law Faculty Publications

Nearly every form used by the bankruptcy courts went through a significant overhaul in December as part of a seven-year project designed to streamline the filing process. The voluntary petition—old Form B1—has now been split into three separate forms: B101 for individual debtors, B201 for nonindividual debtors, and B401 for foreign proceedings. This overhaul altered the format of most additional forms and schedules, including the internal “director’s forms,” all of which are now available on the court’s main form page. Because most form numbers changed as well, the courts have provided a conversion chart that aligns the old and new …

Regulating The Moneychangers, Jerry W. Markham

Faculty Publications

No abstract provided.

In Re Skymall: The Crash Of Skymall And The Take Off Of 363(B) Sales, Spencer Cook, Garett Franklyn

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Wellness International Network V. Sharif: Minimizing The Jurisdictional Impact Of Stern Through Consent Of Bankruptcy Litigants, Ishaq Kundawala

Articles

Without conducting an official poll, it can safely be said that a majority of lawyers, judges, and scholars agree the nature and scope of bankruptcy jurisdiction is quite confusing and at times uncertain. There has always been—and perhaps always will be—a tug-of-war between the legislative and judicial branches of government over the proper scope of bankruptcy jurisdiction, with one side expanding the reach of bankruptcy jurisdiction legislatively and the other side limiting that reach judicially. This poses a classic separation of powers struggle between the two branches, which has certainly played out in recent bankruptcy jurisprudence.

When Congress created the …

Sovereign Debt: Now What?, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

The sovereign debt restructuring regime looks like it is coming apart. Changing patterns of capital flows, old creditors’ weakening commitment to past practices, and other stakeholders’ inability to take over, or coalesce behind a viable alternative, have challenged the regime from the moment it took shape in the mid-1990s. By 2016, its survival cannot be taken for granted. Crises in Argentina, Greece, and Ukraine since 2010 exposed the regime’s perennial failures and new shortcomings. Until an alternative emerges, there may be messier, more protracted restructurings, more demands on public resources, and more pressure on national courts to intervene in disputes …

A Horse Divided: Colt's Second Bankruptcy, Samuel C. Louderback, Preston D. Matthews, Joshua R. Nunnally

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Forest Park Medical At Frisco, Llc.: The Decline Of One Structure And The Rise Of Another, Lori Lynn Millsaps

Chapter 11 Bankruptcy Case Studies

This paper discusses the bankruptcy and restructuring that Forest Medical Center at Frisco (Texas) recently underwent in order to return the hospital to profitability. The discussion begins with a summary of the hospital’s corporate history and founding and an introduction to the key players in the restructuring process, including the relevant circumstances and management figures responsible for the considerable financial problems that led Forest Medical Center to have to make a Chapter 11 filing. The paper provides an account of the bankruptcy proceedings from the hospital’s pre-petition plan to the court’s confirmation of the debtor’s re-organization strategy. The paper concludes …

Schwab Industries: Competing And Shifting Interests In Chapter 11 Bankruptcy, Trey Buckley, Hannah Kay Hurt, Hunter Threet

Chapter 11 Bankruptcy Case Studies

No abstract provided.

Fiduciary Capacity And The Bankruptcy Discharge, Jonathon S. Byington

Faculty Law Review Articles

Bankruptcy law has fiercely competing policies. A primary one is the debtor's fresh start. Another is that discharge of debt is a selectively conferred privilege rather than an unlimited right. This latter policy is manifested in part by the Bankruptcy Code's exceptions to discharge. One exception involves a debt "for . . . defalcation while acting in a fiduciary capacity."1 In 2013, the Supreme Court addressed the meaning of the term "defalcation" and established a new, heightened mental standard based on the Model Penal Code's definition of recklessly.2 The meaning of the term "fiduciary capacity" is not clear. This Article …

Regulating Public Offerings Of Truly New Securities: First Principles, Merritt B. Fox

Faculty Scholarship

The public offering of truly new securities involves purchases by investors in sufficient number and in small enough blocks that each purchaser’s shares can reasonably be expected to be freely tradable in a secondary market that did not exist before the offering. Increasing the ability of small and medium-sized enterprises (SMEs) to make such offerings has been the subject of much recent discussion.

At the time that a firm initially contemplates such an offering, unusually large information asymmetries exist between its insiders and potential investors. These can lead to severe adverse-selection problems that prevent a substantial portion of worthy offerings …

Designing Corporate Bailouts, Antonio E. Bernardo, Eric L. Talley, Ivo Welch

Faculty Scholarship

Although common economic wisdom suggests that government bailouts are inefficient because they reduce incentives to avoid failure and induce excessive entry by marginal firms, in practice bailouts are difficult to avoid for systemically significant enterprises. Recent experience suggests that bailouts also induce litigation from shareholders and managers complaining about expropriation and wrongful termination by the government. Our model shows how governments can design tax-financed corporate bailouts to reduce these distortions and points to the causes of inefficiencies in real-world implementations such as the Troubled Asset Relief Program. Bailouts with minimal distortion depend critically on the government’s ability to expropriate shareholders …

The Unconfirmable Modified Chapter 13 Plan - The Disposable Income Test Of Section 1325(B) And Plan Modifications, Laura B. Bartell

Law Faculty Research Publications

No abstract provided.

Inside Safe Assets, Anna Gelpern, Erik F. Gerding

Publications

“Safe assets” is a catch-all term to describe financial contracts that market participants treat as if they were risk-free. These may include government debt, bank deposits, and asset-backed securities, among others. The International Monetary Fund estimated potential safe assets at more than $114 trillion worldwide in 2011, more than seven times the U.S. economic output that year.

To treat any contract as if it were risk-free seems delusional after apparently super-safe public and private debt markets collapsed overnight. Nonetheless, safe asset supply and demand have been invoked to explain shadow banking, financial crises, and prolonged economic stagnation. The economic literature …

Governmental Intervention In An Economic Crisis, Robert K. Rasmussen, David A. Skeel Jr.

All Faculty Scholarship

This paper articulates a framework both for assessing the various government bailouts that took place at the onset of Great Recession and for guiding future rescue efforts when they become necessary. The goals for those engineering a bailout should be to be as transparent as possible, to articulate clearly the reason for the intervention, to respect existing priorities among investors, to exercise control only at the top level where such efforts can be seen by the public, and to exit as soon as possible. By these metrics, some of the recent bailouts should be applauded, while others fell short. We …

Governance Reform And The Judicial Role In Municipal Bankruptcy, Clayton P. Gillette, David A. Skeel Jr.

All Faculty Scholarship

Recent proceedings involving large municipalities such as Detroit, Stockton, and Vallejo illustrate both the utility and the limitations of using the Bankruptcy Code to adjust municipal debt. In this article, we contend that, to truly resolve the distress of a substantial city, municipal bankruptcy needs to do more than simply provide immediate debt relief. Debt adjustment alone does nothing to remedy the fragmented decision-making and incentives for expanding municipal budgets that underlie municipal distress. Unless bankruptcy also addresses governance dysfunction, the city may slide right back into financial crisis. Governance restructuring has long been an essential element of corporate bankruptcy. …

A No-Tribunal Sdrm And The Means Of Binding Creditors To The Terms Of A Restructuring Plan, Charles W. Mooney Jr.

All Faculty Scholarship

The paper addresses two discrete but related and essential attributes of a sovereign debt restructuring mechanism (SDRM). It first considers the merits and feasibility of an SDRM that would provide a procedure for proposing and adopting a restructuring plan for a sovereign debtor’s debt which would not involve any tribunal or administrator (a No-Tribunal SDRM). The No-Tribunal SDRM would undertake the restructuring as if the sovereign debtor and its creditors were subject to the Model CAC regime. In addition to embodying a novel and interesting structure for an SDRM—and one that eliminates the difficult hurdle of identifying a satisfactory tribunal—adoption …

Better Than Bankruptcy?, Andrew B. Dawson

Articles

According to many in the bankruptcy field, small business debtors are increasingly turning to state debtor-creditors laws as an alternative to federal bankruptcy relief. One particularly popular state law is the assignment for the benefit of creditors. The conventional wisdom is that these procedures provide a state law alternative to liquidate a business.

This article reports the results of an original empirical study that challenges this conventional wisdom. Gathering data from every assignment for the benefit of creditors in a major metropolitan area over a three-year period, this study shows that debtors and their secured creditors are using these procedures …

Class Warfare: The Disappearance Of Low-Income Litigants From The Civil Docket, Myriam Gilles

Faculty Articles

In recent years, much attention has been paid to the startling disparities in income and wealth in contemporary U.S. society. The enormous concentration of economic power in the top 1% is the culmination of decades of significant income and wealth gains for the top, combined with stagnant or decreasing growth for the majority - a trend that continues apace. But nowhere is the gap more glaring than in the civil docket, where class actions brought by or on behalf of low-income consumers and employees are on the verge of disappearing.

To be sure, the decline in class actions is only …