Bankruptcy Law Commons^™

The Future Claims Representative In Mass Tort Bankruptcy: A Preliminary Inquiry, Frederick Tung

Faculty Scholarship

Mass torts have becomemoved center stage in the courts, the academy, and the popular press. The plight of mass tort victims—asbestos victims, Dalkon shield users, breast implant recipients, among others—has become standard fare in the media., and cCourts and commentators have struggled for several decades attempting to craft just and workable solutionsresolutions of mass tort liabilities. The challenge is to save the business, restructuring its debts, while providing fair treatment to future claimants and achieving a final resolution of their rights against the business.

Limited Liability And Creditors' Rights: The Limits Of Risk Shifting To Creditors, Frederick Tung

Faculty Scholarship

In this Symposium, we were asked to identify and articulate the nature of our passion for teaching corporate law. My passion-a bit odd in this context, perhaps-is bankruptcy. In addition to teaching the basic Corporations course, I also teach Corporate Reorganization and Bankruptcy, and my research has focused primarily on corporate reorganization issues. As I say, my particular passion may seem out of place in the context of this Symposium. The corporation is an engine for maximizing wealth. Yet we bankruptcy types obsess about financial ruin. We pray for the next recession. We sell short. Our chips sit on the …

Optimal Timing And Legal Decisionmaking: The Case Of The Liquidation Decision In Bankruptcy, Douglas G. Baird, Edward R. Morrison

Faculty Scholarship

Until the firm is sold or a plan of reorganization is confirmed, Chapter 11 entrusts a judge with the decision of whether to keep a firm as a going concern or to shut it down. The judge revisits this liquidation decision multiple times. The key is to make the correct decision at the optimal time. This paper models this decision as the exercise of a real option and shows that it depends critically on particular types of information about the firm and its industry. Liquidations take place too soon if we merely compare the liquidation value of the assets with …

Taking Future Claims Seriously: Future Claims And Successor Liability In Bankruptcy, Frederick Tung

Faculty Scholarship

Treatment of contingent tort liabilities when a business is sold presents a particular challenge for corporate and bankruptcy law. In this article, I focus on the precarious position of future tort claimants-those who may be harmed by a manufacturer's defective product after the manufacturer has sold its business and disappeared. By the time the future claimant's injury occurs, she may be left with no means of recovery. While the article focuses primarily on the bankruptcy sale context, a discussion of the nonbankruptcy context provides important background.

In the article, I make two claims. First, I address recent proposals suggesting that …

Brandeis, Progressivism, And Commercial Law: Rethinking Benedict V. Ratner, Edward J. Janger

Faculty Scholarship

No abstract provided.

Strategies For Preserving The Bankruptcy Trustee's Avoidance Power Against States After Seminole Tribe, Edward J. Janger

Faculty Scholarship

No abstract provided.

Strategies For Preserving The Bankruptcy Trustee's Avoidance Power Against States After Seminole Tribe, Edward J. Janger

Faculty Scholarship

No abstract provided.

The Truth About Secured Financing, Robert E. Scott

Faculty Scholarship

The debate over the social value of secured credit (and the appropriate priority for secured claims in bankruptcy) is entering its nineteenth year. Yet the continuing publication of succeeding generations of articles exploring the topic have yielded precious little in the way of an emerging scholarly consensus about the nature and function of secured credit. Put simply, we still do not have a theory, of finance that explains why firms sometimes (but not always) issue secured debt rather than unsecured debt or equity. Moreover (and perhaps because of the lack of any plausible general theory), we lack any persuasive empirical …

Corporate Debt Restructurings In Mexico: For Foreign Creditors, Insolvency Law Is Only Half The Story, Kimberly D. Krawiec

Faculty Scholarship

No abstract provided.

Strategy And Force In The Liquidation Of Secured Debt, Ronald J. Mann

Faculty Scholarship

The question of why parties use secured debt is one of the most fundamental questions in commercial finance. The commonplace answer focuses on force: A grant of collateral to a lender enhances the lender's ability to collect its debt by enhancing the lender's ability to take possession of the collateral by force and sell it to satisfy the debt. That perspective draws considerable support from the design of the major legal institutions that support secured debt: Article 9 of the Uniform Commercial Code and the less uniform state laws regarding real estate mortgages.

Both of those institutions are designed solely …

Protective Orders In The Bankruptcy Court: The Congressional Mandate Of Bankruptcy Code Section 107 And Its Constitutional Implications, Michelle M. Harner, William T. Bodoh

Faculty Scholarship

No abstract provided.

Confirmation And Claims Trading, Frederick Tung

Faculty Scholarship

The buying and selling of claims against companies in financial distress is not a new phenomenon. In times of financial distress, liquidity has always commanded a profit. However, the late 1980s and early 1990s saw the first significant trading of claims under Chapter 11 of the Bankruptcy Code, our relatively new and novel system of corporate reorganization. Traditionally scorned by the financial establishment, distress investment came into vogue with the "megabankruptcies" that followed in the wake of the leveraged buyout boom of the 1980s. With its prospects for huge profits, claims trading in Chapter 11 became a Wall Street staple. …

The Fdic's Fraudulent Conveyance Power Under The Crime Control Act Of 1990: Bank Insolvency Law And The Politics Of The Iron Triangle, Edward J. Janger

Faculty Scholarship

No abstract provided.

The Denial Of Future Tort Claims In In Re Piper Aircraft: Will The Court's Quick-Fix Solution Keep The Debtor Flying High Or Bring It Crashing Down?, Michelle M. Harner

Faculty Scholarship

No abstract provided.

Bankruptcy And The Entitlements Of The Government: Whose Money Is It Anyway?, Ronald J. Mann

Faculty Scholarship

A debate between two groups of scholars has dominated bankruptcy scholarship for the past decade. The first group, often referred to as the creditors' bargain theorists, argues that creditors' agreements with debtors create entitlements to payment the proper role of the bankruptcy system, therefore should be to benefit creditors by enforcing rules to which creditors would have agreed before bankruptcy. The second group of scholars contends that the goals of the bankruptcy system should not be limited to the interests of creditors. Instead, they maintain that the bankruptcy system, as a part of our country's wider system of social protection, …

Hail Britannia?: Institutional Investor Behavior Under Limited Regulation, John C. Coffee Jr., Bernard S. Black

Faculty Scholarship

A central puzzle in understanding the governance of large American public firms is why most institutional shareholders are passive. Why would they rather sell than fight? Until recently, the Berle-Means paradigm – the belief that separation of ownership and control naturally characterizes the modern corporation – reigned supreme. Shareholder passivity was seen as an inevitable result of the scale of modern industrial enterprise and of the collective action problems that face shareholders, each of whom owns only a small fraction of a large firm's shares.

A paradigm shift may be in the making, however. Rival hypotheses have recently been offered …

Bondholder Coercion: The Problem Of Constrained Choice In Debt Tender Offers And Recapitalizations, John C. Coffee Jr., William A. Klein

Faculty Scholarship

The past decade saw the flourishing of risky, high-yield corporate debt, often called "junk" bonds. Too many companies took on too much debt, and the chickens are now coming home to roost as these bonds have begun to default with increasing frequency.The magnitude of the problem is potentially enormous; by one estimate, $318 billion of debt has either defaulted already or trades at yields indicating the market's skepticism that it will be repaid on maturity.

Facing the prospect of default, corporate issuers are seeking to restructure or recapitalize their financial structures at a correspondingly increased pace. The market force driving …

What Can Be Done About Stock Market Volatility, Tamar Frankel

Faculty Scholarship

Volatility is as old as the financial markets. The bull market of 1986 and the crash that followed in 1987 were but the latest of periodic market gyrations that started with the South Sea Bubble and the Lombard Street run on commercial paper and have continued ever since.' Volatility in the financial markets would not be very important if market activity simply mirrored economic activity. Volatility would be much less important if the markets moved independently of the economy. But if we believe, as I do, that the markets and the economy are interdependent, and that their volatility is generally …

Sharing The Risks Of Bankruptcy: Timbers, Ahlers, And Beyond, Robert E. Scott

Faculty Scholarship

Bankruptcy policy appears to be in disarray. Recent decisions by the United States Supreme Court have only served to reinforce the uncertainties that mar the bankruptcy process. In United Savings Association of Texas v. Timbers of Inwood Forest Associates, Ltd., the Court held that an undersecured creditor was not entitled to interest on its collateral as compensation for the opportunity costs of delay caused by the bankruptcy process. Timbers thus supports the argument that secured creditors should be forced to share the burdens of bankruptcy with other claimants. Conversely, in Norwest Bank Worthington v. Ahlers, the Court held …

On The Nature Of Bankruptcy: An Essay Of Bankruptcy Sharing And The Creditor's Bargain, Thomas H. Jackson, Robert E. Scott

Faculty Scholarship

Finance theorists have long recognized that bankruptcy is a key component in any general theory of the capital structure of business entities. Legal theorists have been similarly sensitive to the substantial allocational and distributional effects of the bankruptcy law. Nevertheless, until recently, underlying justifications for the bankruptcy process have not been widely studied. Bankruptcy scholars have been content to recite, without critical analysis, the two normative objectives of bankruptcy: rehabilitation of overburdened debtors and equality of treatment for creditors and other claimants.

The developing academic interest in legal theory has spurred a corresponding interest in expanding the theoretical foundations of …

(Part 1) Chapter 7 Cases: Do Erisa And The Bankruptcy Code Conflict As To Whether A Debtor's Interest In Or Rights Under A Qualified Plan Can Be Used To Pay Claims, Donna Litman

Faculty Scholarship

No abstract provided.

(Part 2) Chapter 7 Cases: Do Erisa And The Bankruptcy Code Conflict As To Whether A Debtor's Interest In Or Rights Under A Qualified Plan Can Be Used To Pay Claims, Donna Litman

Faculty Scholarship

No abstract provided.

The Election Of Directors And Chapter 11--The Second Circuit Tells Stockholders To Walk Softly And Carry A Big Lever, Michael A. Gerber

Faculty Scholarship

No abstract provided.

Basics Of Business Reorganization In Bankruptcy, Steven L. Schwarcz

Faculty Scholarship

In this article, Steven Schwarcz offers an overview of Chapter 11 bankruptcy. In addition to beginning a Chapter 11 case, he also discusses administration of these cases and the plan of reorganization that a debtor must consider.

Through Bankruptcy With The Creditors' Bargain Heuristic, Robert E. Scott

Faculty Scholarship

It is a commonplace, but nonetheless true: the study of bankruptcy has attained a new respectability in American law schools. After years of modest enrollments and few genuine scholarly contributions, bankruptcy courses are now fully subscribed and many young academics are turning their attention to the technical complexities and conceptual underpinnings of modern bankruptcy law. A number of factors contribute to this new-found glamour. Most obviously, the enactment of the new Bankruptcy Code has fueled scholarly interest in reporting its modifications and changes and in exploring its theoretical unity. Simultaneously, there has been increasing resort to the bankruptcy process to …

"Value" Judgments: Accounts Receivable Financing And Voidable Preference Under The New Bankruptcy Code, Neil B. Cohen

Faculty Scholarship

No abstract provided.

Nonjudicial Foreclosure Under Deed Of Trust May Be A Fraudulent Transfer Of Bankrupt's Property: Durrett V. Washington National Insurance Co., Franklin G. Snyder

Faculty Scholarship

In theory, the substantive rights of secured creditors such as mortgagees are affected much less by bankruptcy proceedings than those of unsecured creditors. In practice, however, bankruptcy proceedings have affected mortgagees. Filing a bankruptcy petition automatically stays pending foreclosures. Trustees in bankruptcy also can set aside foreclosures of certain liens obtained by unsecured creditors and certain mortgages and deeds of trust executed in the year preceding bankruptcy. The decision in Durrett adds yet another weapon to the bankruptcy trustee's arsenal: the power to void nonjudicial foreclosure sales even though the sale is proper and final under state law.

Section 4 Of The Bankruptcy Act: The Excluded Corporations, Michael I. Sovern

Faculty Scholarship

Section 4 of the Bankruptcy Act excludes from both voluntary and involuntary bankruptcy municipal, railroad, insurance and banking corporations and building and loan associations, and excludes from involuntary bankruptcy corporations that are not "moneyed, business or commercial." The exclusion of railroad and municipal corporations lost much of its significance when special reorganization provisions were enacted for those corporations. Insurance and banking corporations and building and loan associations, on the other hand, are excluded from the Bankruptcy Act's corporate reorganization chapters as well as from straight bankruptcy; and creditors can no more compel a corporation that is not moneyed, business or …