Law Commons^™

Creditors, Keepers: Passive Retention Of Estate Property And The Automatic Stay, Caitlin M. Mcauliffe

Vanderbilt Law Review

The automatic stay provision is one of the most important provisions in the Bankruptcy Code. Until recently, however, it has remained unclear if passive retention of property of the bankruptcy estate must be immediately turned over to the debtor under the automatic stay provision. The Supreme Court decided in City of Chicago v. Fulton that passive retention does not violate the automatic stay, saving creditors from the consequences of retaining estate property. The debate about the stay, however, is far from over. Many circuit courts were already concerned about the policy issues deriving from the City of Chicago maintaining possession …

Rejection Hurts: Trademark Licenses And The Bankruptcy Code, Amanda E. James

Vanderbilt Law Review

Section 365 of the Bankruptcy Code empowers debtors to reject burdensome executory contracts. From 1988 until May 2019, the effect of such a rejection on trademark licenses was unclear. The Supreme Court’s recent decision in Mission Product Holdings, Inc. v. Tempnology, LLC settled the matter definitively: all rejections under § 365(g) operate exactly as a breach would outside the bankruptcy context. As such, if the trademark license would allow the licensee to continue using the mark after a breach, the licensee may continue to use the mark after a rejection. While this decision comports with the language of the Code …

Consumer Bankruptcy, Nondischargeability, And Penal Debt, Abbye Atkinson

Vanderbilt Law Review

This Article examines the issue of categorically nondischargeable debts in the Bankruptcy Code. These debts are excepted from discharge ostensibly because they indicate that the debtor incurred the debt through some misconduct, there is an important public policy at play that requires the debt to be excepted from discharge, or a discharge of certain state-imposed debts raises federalism concerns. Using penal debt as its lens, this Article critiques these analytical frames, arguing that they do not do much work to help explain why some debts are treated as categorically nondischargeable while others that seem to implicate the same concerns are …

The Geography Of Bankruptcy, Laura N. Coordes

Vanderbilt Law Review

Companies routinely file bankruptcy cases in venues that have no meaningful connection to the company, its operations, or its stakeholders. This practice (1) divorces bankruptcy and venue from their ties to location; (2) disrupts the fundamental balance underlying the Bankruptcy Code by shifting the focus exclusively to the needs of sophisticated parties; and (3) shuts out parties who have a right to participate in bankruptcy proceedings, which contravenes due process and raises fairness concerns. To solve these problems, this Article proposes new procedures that mandate a thorough discussion of venue considerations in bankruptcy cases. By requiring parties to justify their …

Federalizing Principles Of Donative Intent And Unanticipated Circumstances, Reid K. Weisbord

Vanderbilt Law Review

This Comment identifies a central tenet of wealth transfer law that should guide federal actors when operating in this area: Wealth transfer law facilitates donative intent by responding to circumstances unanticipated by the donor. Wealth transfer law performs this intent- fulfilling function by supplying opt-outs, presumptions, and default rules to solve problems created by the donor's inability to predict or respond to future events. To illustrate that principle, this Comment will focus on one such rule, disclaimer rights, which refer to a donee's refusal to accept a donative transfer. In "Disclaimers and Federalism," Professor Adam J. Hirsch identifies several settings …

Trademarked For Death? A Licensee's Trademark Rights After An Executory Contract Is Rejected In Bankruptcy, Philip L. Lu

Vanderbilt Law Review

In 1872, a young man named Claudio Alvarez Lefebre began manufacturing and selling high-quality rum in Cuba under the brand name "Ron Matusalem." In 1948, as the family-run business prospered, the company registered a trademark and corporate logo in the United States. Upon his death, Lefebre left the business-and the secret formulas for making his rum-to his wife and children. By the early 1960s, Lefebre's wife and children had immigrated to the United States, and they split the rum-making business into two separate corporations. These two distinct entities negotiated an executory contract in the form of a franchise agreement with …

Special Topic Bankruptcy, Robert K. Rassmusen

Vanderbilt Law Review

This issue of the VANDERBILT LAW REVIEW contains two outstanding student pieces on bankruptcy law. Few would be surprised by this observation. As to the quality of the works, they fall in with a long tradition of outstanding student scholarship published by the REVIEW. The choice of topic-bankruptcy law-also does not raise eyebrows. After all, Congress has recently enacted the most sweeping changes to the Bankruptcy Code since its original enactment in 1978. This legislation was the culmination of a more than decade long effort to revise our nation's bankruptcy law. Any major reform effort of this scope surely generates …

Sovereign Debt Reform And The Best Interest Of Creditors, William W. Bratton, G. Mitu Gulati

Vanderbilt Law Review

This Article is about boilerplate language located at the back of contracts drafted by the world's largest law firms. The clauses in question are process provisions that regulate the amendment of sovereign debt contracts. These paragraphs have been drafted and redrafted by generations of corporate lawyers, yet they have changed little in their broad outlines in more than a century of use. Now they take center stage in the global financial arena, where they govern billions of dollars (and pounds, euros, and yen) of sovereign debt in default and billions more in imminent risk of default. Officials, academics, and even …

Why Are Delaware And New York Bankruptcy Reorganizations Failing?, Lynn M. Lopucki, Joseph W. Doherty

Vanderbilt Law Review

Before 1990, the United States Bankruptcy Court for the District of Delaware was a sleepy backwater. During the entire decade of the 1980s, Phoenix Steel-whose only plant was located in Delaware-was the only large, public company to file there. In 1990, two large, public companies-Continental Airlines and United Merchants and Manufacturers-filed in Delaware. They constituted 7% of the twenty-nine large, public companies filing in the United States that year. From 1990 to 1996, Delaware's market share steadily increased to 87% (thirteen of fifteen cases).' In just seven years, Delaware had become the bankruptcy reorganization capital of the United States.

Lynn …

Chapter 11 Reorganization Cases And The Delaware Myth, Harvey R. Miller

Vanderbilt Law Review

Since the mid-1990s, there has been a spirited debate concerning the emergence of the United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court") as the virtual Chapter 11 capital for distressed debtor corporations. The "Delawarization" of corporate reorganizations under title 11 of the United States Code (the "Bankruptcy Code"), which occurred during the 1990s as a result of the migration of Chapter 11 cases of large enterprises from other venues to Delaware, has provoked a stream of academic articles debating the consequences of Delaware's emergence. Armed with statistics purporting to demonstrate a high rate of recidivism …

Corporate Governance Reform And Reemergence From Bankruptcy: Putting The Structure Back In Restructuring, Charles M. Elson, Paul M. Helms, James R. Moncus

Vanderbilt Law Review

A company's descent into bankruptcy may result from one or more troubling factors. Often the failing enterprise has adopted a poor business model, been led by deficient management, or labored under an unworkable capital structure. More often than not, a business failure is also accompanied by a less-than-ideal corporate governance structure within the organization. The failure to adopt an effective corporate governance model often leads to a sterile, inactive board of directors and may hasten a firm's demise. Conversely, proper corporate governance may prevent a business's slide into Chapter 11. Indeed, several studies have demonstrated a strong relationship between corporate …

Fourt (Or Five) Easy Lessons From Enron, Douglas G. Baird, Robert K. Rasmussen

Vanderbilt Law Review

Temptation. It lies at the heart of financial swindles. The promise of 50% returns in three months can lure thousands of investors-so too can a stock that soars 500% in three years. But those who are tempted are often skeptical. Before they invest, they want to know how one can enjoy such supracompetitive returns. The answer usually is a facially plausible story, though with a bit of mystery attached. The mystery is often touted as the reason that the investment opportunity is exclusive to the entrepreneur who discovered it. It is what ensures that the gains are not competed away. …

Bankruptcy, Just For The Rich? An Analysis Of Popular Fee Arrangements For Pre-Petition Legal Fees And A Call To Amend, Kerry H. Ducey

Vanderbilt Law Review

The scenario is typical. An individual sits amid a pile of overdue bills. He calculates and recalculates only to verify what he has already suspected-his debt far exceeds his monthly income. Meanwhile, creditors and collection agencies demand payment while threatening repossession and other legal action. With no ready source of additional income, the debtor ultimately decides to file for bankruptcy. He consults an attorney, and the two agree to file a consumer no-asset Chapter 7 bankruptcy petition.' The lawyer then promises to use her best efforts to secure relief for the debtor. All she needs is a retainer. A retainer? …

The Failure Of Public Company Bankruptcies In Delaware And New York: Empirical Evidence Of A "Race To The Bottom", Lynn M. Lopucki, Sara D. Kalin

Vanderbilt Law Review

Commentators sometimes recognize Delaware's preeminence in corporate law, but they almost invariably treat Delaware's recent popularity as a bankruptcy venue choice as raising entirely different issues. In fact, the two are integrally related. Specifically, just as the efforts of Delaware and other states to attract corporations--a process often referred to as "charter competition'-has induced Delaware to regulate corporate law in a generally efficient manner, the same forces will have a beneficial effect on Delaware's bankruptcy judges

. -Professor David Skeet'

Textualism's Failures: A Study Of Overruled Bankruptcy Decisions, Daniel J. Bussel

Vanderbilt Law Review

Judges and legal scholars are engaged in a contentious, wide- ranging, and long-running debate over methods of statutory interpretation. Stripping the debate of some of its nuance without misrepresenting its essence, there are two camps: the "textualists" and the "pragmatists." Cass Sunstein recently argued that the question of interpretive method should be considered in light of evidence whether textualist methods work better or worse than pragmatic ones. To date, however, only limited empirical evidence has been systematically brought to bear on this question.

This Article presents new empirical evidence gleaned from twenty years of interpretation of the United States Bankruptcy …

Re-Reading Reading: "Fairness To All Persons" In The Context Of Administrative Expense Priority For Postpetition Punitive Fines In Bankruptcy, Stephen D. Hurd

Vanderbilt Law Review

Who gets the money when there isn't enough to go around? This is the practical question that the bankruptcy system seeks to answer every day.' In answering this question, the Bankruptcy Code draws a particularly bright line at the filing of a bankruptcy petition. The filing of a petition creates the bankruptcy estate, which is a distinct legal entity from the debtor. Creditors with claims against the debtor arising before filing ("prepetition) receive payment of their claim, if at all, through bankruptcy's collective distribution scheme. In contrast, persons whose claims arose after filing ("postpetition"), but before completion of the bankruptcy …

An Evolutionary Theory Of Corporate Law And Corporate Bankruptcy, David A. Skeel, Jr.

Vanderbilt Law Review

In this Article, Professor Skeel argues that the important recent literature exploring historical and political influences on American corporate law has neglected a crucial component of corporate governance: corporate bankruptcy. Only by appreciating the complementary relationship between corporate law and corporate bankruptcy can we understand how corporate governance operates in any given nation.

To show this, the Article contrasts American corporate governance with that of Japan and Germany. America's market-driven corporate governance can only function effectively if the bankruptcy framework includes a manager-driven reorganization option. The relational shareholding that characterizes Japanese and German corporate governance, by contrast, requires a much …

Offensive Uses Of The Bankruptcy Stay, Daniel Keating

Vanderbilt Law Review

One of the most significant features of the 1978 Bankruptcy Reform Act was markedly broadened versions of the automatic and postdischarge stays. If bankruptcy is the refuge for the honest but unfortunate debtor,' then the stay is the specific tool that makes the refuge meaningful. Indeed, more than one court has characterized the stay as a shield that gives the corporate debtor an opportunity to reorganize and affords the individual debtor a chance for the proverbial fresh start. Even courts mindful of the debtor-protection function of the stay, however, are careful to note that the debtor should use the stay …

Substantive Consolidation In Bankruptcy: A Primer, J. Stephen Gilbert

Vanderbilt Law Review

Substantive consolidation is a powerful vehicle in bankruptcy by which the assets and liabilities of one or more entities are combined and treated for bankruptcy purposes as belonging to a single enterprise.Because substantive consolidation vitally affects the rights and interests of parties involved in bankruptcy proceedings, it is termed a matter"pregnant with consequence"' and should be used with caution. Substantive consolidation is not a common occurrence because it exacts strict requirements in order to protect the parties that it affects. Be-cause substantive consolidation lacks clear statutory guidance, however,courts examine the facts of each case closely to ascertain whether consolidation is …

Good Intentions, Bad Economics: Retiree Insurance Benefits In Bankruptcy, Dan Keating

Vanderbilt Law Review

One of the emerging corporate problems of the 1980s, retiree insurance benefits, has met face to face with an increasingly common corporate solution, Chapter 11 reorganization. The intersection of these two phenomena first gained national attention with the July 1986 bankruptcy filing of the LTV Steel Corporation. Immediately after seeking bankruptcy court protection, LTV informed its 68,000 retirees that the company temporarily would cease to pay the medical and life insurance benefits that it had promised these former workers when they retired.

Prompted by tragic stories of LTV retirees and their spouses who were forced to postpone critical medical treatment, …

Bankruptcy Valuation Under Selected Liquidation Provisions, Steven L. Pottle

Vanderbilt Law Review

Chapter 7 of the Bankruptcy Code' (the Code) serves a distributive function; it is designed to distribute equitably a debtor's assets from the bankruptcy estate to creditors. All nonexempt as-sets owned by a debtor at the time of filing a petition for bankruptcy become part of the bankruptcy estate and subsequently are distributed to creditors. Generally, debtor transactions prior to the filing escape the purview of Chapter 7. If, however, a debtor distributes assets during the applicable statutory period, giving preference to some creditors' or defrauding other creditors,' the Code empowers the bankruptcy trustee to avoid those transfers.After filing, a …

Toxic Torts And Chapter 11 Reorganization:The Problem Of Future Claims, Anne Hardiman

Vanderbilt Law Review

Recently, the toxic tort phenomenon has emerged as a vital concern to manufacturers, employers, and consumers as Agent Orange,' DES, Dalkon Shield, and asbestos victims have litigated toxic tort claims. Toxic torts are unique because any number of victims may be exposed to a toxic substance from which they may contract a disease as far as twenty years in the future. Toxic tort claims typically involve large sums of money and an inestimable number of plaintiffs. The potential for tremendous, financially crippling, liability for these injuries has prompted some asbestos companies to file for reorganization under Chapter 11 of the …

Belly Up Down In The Dumps: Bankruptcy And Hazardous Waste Cleanup, Katherine S. Allen

Vanderbilt Law Review

In recent years, the critical risks of improper storage and disposal of hazardous and toxic substances have become frighteningly apparent,' and the regulation of hazardous waste disposal has become increasingly comprehensive and complex, on both the federal and state level. On the federal level, the Resource Conservation and Recovery Act (RCRA) and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, or the Super fund Act) together provide a comprehensive statutory and regulatory scheme designed to cleanup existing hazardous waste disposal sites and to prevent the growth of future dangerous sites. Other federal statutes address in a more general way …

The Concept Of A Voidable Preference In Bankruptcy, Vern Countryman

Vanderbilt Law Review

A bankruptcy trustee is armed by statute with a number of powers to avoid prebankruptcy transfers made by the now bankrupt debtor. Probably none of these powers is of more concern to prebankruptcy transferees than the trustee's power to avoid preferential transfers. This Article examines the content of and the reasons for the concept of a preferential transfer as it has evolved over the centuries.We inherited the notion of the preferential transfer from Eng-land; but, as elsewhere, we frequently have concluded that we could improve on the English model. Substantial differences exist,therefore, between the English law of voidable preferences and …

The Continuing Puzzle Of Secured Debt, Alan Schwartz

Vanderbilt Law Review

In 1981, I wrote an article showing that no good answer had been given to the question why corporations issue some debt on a secured basis and other debt on an unsecured basis.' This showing had normative implications because claims that the institution of personal property security is efficient or otherwise desirable must be impeached if the actual purposes that security serves are unknown. Consequently, the law's favorable treatment of secured debt-for example, giving it first place in bankruptcy distributions--is without plausible support. My article did not advocate repealing the privileges attached to secured debt, however, because then--current knowledge also …

The Cost Of Realization By A Secured Creditor In Bankruptcy, J. Hobson Presley, Jr.

Vanderbilt Law Review

In October 1974, business failures increased by eighteen percent, reaching the highest level in any month since March 1971. The number of business failures for that month was the highest in eighty years.' As creditors seek to realize on their security interests, and encounter the problem of who should bear the expense incurred, they may discover that the term "secured" does not adequately describe the ability to recover advances made to the bankrupt debtor. Despite the confusing state of the law in this area, the increasingly inordinate expense of foreclosure in bankruptcy, and the pressures of the current economy, the …

Recent Cases, Law Review Staff

Vanderbilt Law Review

Antitrust--Horizontal Territorial Restraint--Allocation of Territories Among Members of Cooperative Purchasing Association Is Per Se Violative of Section 1 of the Sherman Act

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Antitrust--Robinson--Patman Price Discrimination Act--Complaint Charging That Profits Derived from Interstate Sales Were Used To Underwrite Allegedly Discriminatory Intrastate Price-Cutting Practices States a Cause of Action Under Section 2(a)

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Bankruptcy--Corporate Reorganization-Trustee in Reorganization Lacks Standing To Sue Indenture Trustee on Behalf of Debenture Holders

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Constitutional Law--Commerce Clause--Exactions on Airport Users by Local Governments Measured by Number of Enplaning Passengers Are Constitutionally Valid

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Constitutional Law--Right to Speedy Trial--State-Imposed Five-Year Delay Does Not Abridge Right to Speedy …

Section 60c Of The Bankruptcy Act: Inadequate Protection For The Running Account Creditor, E. Hunter Taylor, Jr.

Vanderbilt Law Review

Although the unsecured creditor long has occupied a precarious position, the widespread passage of article 9 of the Uniform Commercial Code has created additional perils for him by making virtually all of his debtor's assets available to a secured lender.' The Bankruptcy Act, while not so one-sided, also contains snares and pitfalls for the unsecured creditor. One potential trap is contained in the seemingly straightforward declaration of section 60c... This article focuses upon, and proposes a means for the elimination of, the unnecessary paradoxes implicit in section 60c's treatment of an unsecured creditor who extends continuing credit to a debtor …

Recent Cases, Law Review Staff

Vanderbilt Law Review

Bankruptcy--Transfers--Drawee Bank Not Liable for Payment of Depositor's Check After His Voluntary Petition in Bankruptcy Where Notice Is Not Given to Bank

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Constitutional Law--States Must Apply Federal Harmless--Error Standard to Federal Constitutional Error

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Juvenile Courts--Juveniles in Delinquency Proceedings Accorded Same Rights as Adults in Criminal Trials

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Taxation--Federal Income Taxation--Section 267 of the IRC Applies to Involuntary Sale

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Torts--Right of Privacy--Rule of New York Times v. Sullivan Extended to Actions for Invasion of Privacy

Bankruptcy As An Occasion For Restitutionary Claims, William F. Young Jr.

Vanderbilt Law Review

Whether we are concerned with claims against the estate or with voidable transfers, it is essential to note that the Bankruptcy Act makes the filing of a bankruptcy petition a decisive event: a transaction occurring after the filing is likely to have consequences far different from what would have ensued if it had occurred before. The date of filing is, indeed, one of the very meanings of the word "bankruptcy" as it appears in the act. This point of distinction must be observed in each part of the discussion that follows. In the main, Part II concerns restitutionary principles in …