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 …

Do Payday Loans Cause Bankruptcy?, Paige M. Skiba

Vanderbilt Law School Faculty Publications

An estimated ten million American households borrow on payday loans each year. Despite the prevalence of these loans, little is known about the effects of access to this form of short-term, high-cost credit. We match individual-level administrative records on payday borrowing to public records on personal bankruptcy, and we exploit a regression discontinuity to estimate the causal impact of access to payday loans on bankruptcy filings. Though the size of the typical payday loan is only $300, we find that loan approval for first-time applicants increases the two-year Chapter 13 bankruptcy filing rate by 2.48 percentage points. There appear to …

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 …

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 …

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 …

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'

Whither The Race? A Comment On The Effects Of The Delawarization Of Corporate Reorganizations, Randall Thomas, Robert K. Rasmussen

Vanderbilt Law School Faculty Publications

Recent empirical work has demonstrated that large, publicly held firms tend to file for bankruptcy in Delaware. In our previous work, we have documented this trend, and argued that it may be efficient for prepackaged bankruptcies, while it unclear if it is efficient for traditional Chapter 11 cases. In this piece, we respond to LoPucki and Kalin's assertion that Delaware bankruptcy court performs worse than others. They base this claim on the observation that firms that file for bankruptcy in Delaware are more likely to file for bankruptcy a second time than are firms that file in another jurisdiction. We …

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 …

Self-Settled Spendthrift Trusts: Should A Few Bad Apples Spoil The Bunch?, Gideon Rothschild, Daniel S. Rubin, Jonathan G. Blattmachr

Vanderbilt Journal of Transnational Law

It is unfortunate, but perhaps not terribly surprising, that the first two reported cases to consider the application of conflict of laws principles to self-settled spendthrift trusts both involved "bad facts" from an asset protection planning standpoint. In this regard, the adage "bad facts produce bad law" is not a slight on the courts, but rather an acknowledgment of a court's primary duty to do substantial justice to the parties immediately before it. However, in an effort to do substantial justice to the parties immediately before them, the Portnoy and Brooks courts have forged what may well become the first …

Roundtable Discussion, David Aronofsky, Barry S. Engel, Eric Henzy, Gideon Rothschild, Jeffrey A. Schoenblum

Vanderbilt Journal of Transnational Law

Welcome to the Roundtable panel discussion. Each of the speakers is going to open with a few minutes statement. And then we're going to pose some questions to open discussion, so it will take people through the whole asset protection route from beginning to end, hopefully. And then, any questions you may have we believe we'll have sufficient time to ask those questions and have them answered. You may get very different views. And then we've just decided that the jury will decide whether asset protection trusts are a good thing or a bad thing. Okay. So pay attention.

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 …

Public Policy Concerns Prevent Application Of Comity To Foreign Bankruptcy Proceedings That Discriminate Against Tax Obligations Owed To The United States Government, Michael P. Bigelow

Vanderbilt Journal of Transnational Law

This Case Comment explores the application of comity to foreign bankruptcy proceedings, particularly when comity would render the Internal Revenue Service a general unsecured creditor in bankruptcy. The United States Court of Appeals for the Fifth Circuit held on public policy grounds that comity should not be accorded to a Luxembourg bankruptcy proceeding that discriminated against tax obligations owed to the United States government. This Case Comment discusses the factual setting for the instant decision and presents a brief history of transnational insolvency law. The author finds that the law of transnational insolvency is inconsistent and underdeveloped and that the …

International Environmental Bankruptcy: An Overview Of Environmental Bankruptcy Law, Including A State's Claims Against The Multinational Polluter, Rick M. Reznicsek

Vanderbilt Journal of Transnational Law

This Note focuses on current environmental bankruptcy law in the United States. It analyzes the claims of a state against a corporate polluter when the corporation discharges a toxic substance in violation of the state's environmental laws, refuses to clean up the waste, and then files bankruptcy in lieu of paying for the cleanup.

This Note analyzes the court decisions subsequent to the United States Supreme Court opinions in Ohio v. Kovacs and Midlantic National Bank v. New Jersey Department of Environmental Protection to evaluate the current status of United States bankruptcy law on the issues of the automatic 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 …

The Enterprise Bankruptcy Law Of The People's Republic Of China (For Trial Use): A Translation, Henry R. Zheng

Vanderbilt Journal of Transnational Law

Art. 1. This law is enacted to meet the need for development of the planned socialist commodity economy and for economic reform, to promote the independence of business management of the enterprises under the ownership by the whole people, to strengthen the system of economic responsibility and democratic management, to improve business management and economic performance, and to protect the lawful rights and interests of debtors and creditors. Art. 2. This law applies to enterprises under the ownership of the whole people.

Art. 3. Enterprises that sustain serious loss due to inappropriate management and that are unable to pay off …

Case Comment, Laura F. Howard

Vanderbilt Journal of Transnational Law

SCOPE OF REVIEW IN EXTRADITION PROCEEDINGS: The Government Cannot Appeal A Denial of Extradition Request Based on the Declaratory Judgment Act --United States v. Doherty, 786 F.2d 491 (2d Cir. 1986).

BANKRUPTCY--Section 304 Of The Bankruptcy Code Is Not An Exclusive Remedy In A Nonbankruptcy Court, Cunard Steamship Co.Ltd. v. Salen Reefer Serv. A.B., 773 F.2d 452 (2d Cir. 1985).

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 …