Law Commons^™

A Bona Fide Dispute: Can Bankrupt Debtors Sell Assets Free And Clear Of Federal Civil Forfeiture Claims?, Joseph Peter Gomez

Fordham Journal of Corporate & Financial Law

Auctions are wheeling-dealing extravaganzas in which frenzies of bidders fight over shiny objects. What would happen if the government busted down the doors of the auction house, took the shiny objects, and sold them online? An asset sale through section 363(b) of the Bankruptcy Code provides a court-supervised opportunity to maximize economic value for the bankruptcy estate. To sell estate assets, the debtor must either (1) pay off each creditor holding an interest in the assets or (2) strip the creditor’s interest and attach it to the proceeds of the sale. When the government asserts a civil forfeiture claim against …

The Lease Of All Evils: How A Middle-Ground Approach Can Resolve The Bankruptcy Code Conflict Between Section 363(F) Sales And Section 365(H) Lessee Protections, Kate Christensen

Fordham Journal of Corporate & Financial Law

The Fifth Circuit’s recent decision in In re Royal St. Bistro, LLC has awakened an unsettled issue in the Bankruptcy Code that has divided the bankruptcy community for over two decades. The question examined by the Fifth Circuit was whether a non-debtor lessee with a right to continued possession through section 365(h) of the Bankruptcy Code loses this right if the debtor-lessor can sell its property “free and clear” under section 363(f). While early decisions held that section 365(h) always protects lessees against debtors’ free and clear sales, some subsequent decisions created a circuit split by ruling that section 365(h) …

Dirty Dancing: Is The Texas Two-Step A Bad Faith Filing?, Katharine H. O'Neill

Fordham Law Review

The Texas Two-Step is both a style of line dancing and a legal maneuver used by several large, profitable companies to enable a newly created entity to access the bankruptcy system and, thus, discharge the tort liabilities of its predecessor. This type of filing has been criticized by some as a tool used by healthy companies to evade responsibility for their tortious conduct and lauded by others as an efficient means to achieve a global resolution of crushing mass tort liability. Whether Texas Two-Step filings may properly access the bankruptcy courts is a question governed by § 1112(b) of the …

Harsh Creditor Remedies And The Role Of The Redeemer, Christopher D. Hampson

Fordham Law Review

The concept of the judgment-proof or collection-proof debtor is fundamental to our understanding of civil law and of what distinguishes it from criminal law. But when civil creditors can threaten unduly harsh or cruel debt collection measures (whether legally or not), they extend their reach into the pockets of those whom this Article calls “redeemers,” third parties with a familial or quasi-familial relationship to civil debtors who have reason to pay on their behalf. This Article examines four such measures—imprisonment, homelessness, destitution, and deportation—remedies that sound like they come from another time and place, but which are threatened by some …

Without Reservation: Ensuring Uniform Treatment In Bankruptcy While Keeping In Mind The Interests Of Native American Individuals And Tribes, Connor D. Hicks

Fordham Journal of Corporate & Financial Law

The Bankruptcy Code (“Code”) exists as a mechanism for good faith debtors to discharge debts and seek a “fresh start” in life and finance. 11 U.S.C. § 106(a) ensures that not only are all debtors treated uniformly, but that all creditors, including governmental creditors which may otherwise enjoy immunity from suit, are equally subject to the jurisdiction of Bankruptcy courts and bound to the provisions of the Code.

However, a recent circuit split has demonstrated one niche yet significant instance in which a debtor may not receive the same treatment as their counterparts. While § 106 contains an express waiver …

Dissonance And Distress In Bankruptcy And Mass Torts, Andrew D. Bradt, Zachary D. Clopton, D. Theodore Rave

Fordham Law Review

This Essay reviews the highly successful Fordham Law Review symposium entitled Mass Torts Evolve: The Intersection of Aggregate Litigation and Bankruptcy, held in 2022. The symposium brought together judges, scholars, and practitioners who work on multidistrict litigation (MDL), bankruptcy, or both. The symposium was successful because it brought these groups into conversation at a time when high-profile mass tort defendants are increasingly turning to bankruptcy to escape MDL, while others involved in the MDL process seek to keep them in. The symposium was also successful—and distressing, in our view—because it highlighted disturbing trends in complex litigation.

This Essay makes …

Due Process Alignment In Mass Restructurings, Sergio Campos, Samir D. Parikh

Fordham Law Review

Mass tort defendants have recently begun exiting multidistrict litigation by filing for bankruptcy. This new strategy ushers defendants into a far more hospitable forum that offers accelerated resolution of all state and federal claims held by both current and future victims. Bankruptcy’s structural, procedural, and substantive benefits also provide defendants with unique optionality.

Bankruptcy’s resolution promise is alluring, but the process relies on a very large assumption: that future victims can be compelled to relinquish property rights in their cause of action against the corporate defendant and others without consent or notice. Bankruptcy builds an entire resolution structure on the …

Aggregation And Abuse: Mass Torts In Bankruptcy, Edward J. Janger

Fordham Law Review

Bankruptcy courts have become the favored forum for large corporate defendants who seek global resolution of mass tort liability claims. Whether this forum choice benefits the victims of those mass torts or facilitates their exploitation is unclear. The features of bankruptcy law that have made bankruptcy court attractive to defendants can be efficiency enhancing, but they can also be used opportunistically and beyond their proper scope. As a result, their use must be subject to safeguards. The good news is that, where torts of the debtor itself are concerned, the U.S. Bankruptcy Code already contains the necessary tools. This Essay …

Covid-19 Aggregate Litigation: The Search For The Upstream Wrongdoer, Robert H. Klonoff

Fordham Law Review

The COVID-19 pandemic has generated many suits—including thousands of class actions—in which plaintiffs claim that defendants caused economic or health-related harm. Although the COVID-19 context may have led many plaintiffs’ lawyers to believe that the cases would be received with great sympathy, courts thus far have been very cautious, focusing closely—as they do in non-COVID cases—on whether the defendant has breached clear contractual commitments or has engaged in tortious or other wrongdoing. If anything, courts have been more skeptical and cautious in the COVID-19 context, recognizing that everyone has suffered due to the pandemic and that, in many instances, defendants …

The New Mass Torts Bargain, Samir D. Parikh

Fordham Law Review

Mass torts create a unique scale of harm and liabilities. Corporate tortfeasors are desperate to settle claims but condition settlement on the resolution of substantially all claims at a known price—commonly referred to as a global settlement. Without this, corporate tortfeasors are willing to continue with protracted and fragmented litigation across jurisdictions. Global settlements can be elusive in these cases. Mass torts are oftentimes characterized by heterogeneous victim groups that include both current victims and future victims—individuals whose harm has not yet manifested and may not do so for years. Despite this incongruence, future-victim claims must be aggregated as part …

The Constitutional Problem Of Nondebtor Releases In Bankruptcy, Adam J. Levitin

Fordham Law Review

In recent years, nondebtor releases have become a common feature of big-case Chapter 11 bankruptcy practice. Nondebtor releases involve the release of creditor claims against third-party nondebtors pursuant to a bankruptcy plan confirmation order. Some nondebtor releases are consensual, meaning that they are done with the assent of the releasing creditor, but some are not.

This Essay argues that all nonconsensual nondebtor releases in bankruptcy are unconstitutional. The constitutional infirmities of nondebtor releases are layered: all non debtor releases—consensual or nonconsensual—are outside the scope of Congress’s authority under an original understanding of the Bankruptcy Clause; all nonconsensual nondebtor releases are …

Riding The Wave: Fairness For Foreign Investors In India’S Impending Insolvency Tsunami, Nicole Mecca

Fordham Journal of Corporate & Financial Law

Reminiscent of the warning signs of a tsunami, bankruptcy and insolvency courts across the globe have been eerily calm despite unprecedented conditions during the COVID-19 pandemic. The full extent of the pandemic’s effect, including a tidal wave of wide-spread corporate and financial sector harm and wide-spread economic distress, remains to be seen. Much like victims of natural disasters, unsuspecting and increasingly delayed courts will find themselves totally overwhelmed. The inconvenience felt by the courts is distinct, however, from potential harm to financial investors. Although investors could also be harmed by these judicial conditions, they knowingly assumed certain financial risk when …

Emerging Circuit Split Over Modification Of Mortgages On Multi-Use Real Properties, Michal Zabadal

Fordham Journal of Corporate & Financial Law

For many decades, healthy levels of residential mortgage loans (“RMLs”) and their regulation have been among the major drivers of the economy. Because of the importance of RMLs for the condition of the national financial system and the general well-being of the society, it is essential that lenders are reasonably incentivized to originate these loans. A well-designed promise of higher recovery on RMLs in times of distress can be a compelling motivator. The Bankruptcy Code seeks to deliver on that promise by treating RMLs more favorably. It does that by barring the debtor-in-bankruptcy from modifying a claim secured by a …

Third-Party Bankruptcy Releases: An Analysis Of Consent Through The Lenses Of Due Process And Contract Law, Dorothy Coco

Fordham Law Review

Bankruptcy courts disagree on the use of third-party releases in Chapter 11 bankruptcy plans, the different factors that circuit courts consider when deciding whether to approve a third-party release, and the impact of the various consent definitions on whether a release is or should be binding on the creditor. Affirmative consent, “deemed consent,” and silence are important elements in this discussion. Both contract law and due process provide lenses to evaluate consent definitions to determine whether nondebtor third-party releases should bind certain creditor groups. This Note proposes a solution that follows an affirmative consent approach to protect against due process …

Restoring Bankruptcy’S Fresh Start, Jonathan S. Hermann

Fordham Law Review

The discharge injunction, which allows former debtors to be free from any efforts to collect former debt, is a primary feature of bankruptcy law in the United States. When creditors have systemically violated debtors’ discharge injunctions, some debtors have attempted to challenge those creditors through a class action lawsuit in bankruptcy court. However, the pervasiveness of class-waiving arbitration clauses likely prevents those debtors from disputing discharge injunction violations outside of binding, individual arbitration. This Note first discusses areas of disagreement regarding how former debtors may enforce their discharge injunctions. Then, it examines the types of disputes that allow debtors to …

Up The Chute, Down The Ladder: Shifting Priorities Through Structured Dismissals In Bankruptcy, Bethany K. Smith

Fordham Law Review

In a structured dismissal of a Chapter 11 bankruptcy case, a bankruptcy court approves case dismissal alongside a stakeholder agreement as to the manner in which the estate is to be dealt with once the case has been dismissed. Such orders are controversial in that they are not explicitly authorized through the U.S. Bankruptcy Code (“the Code”) and are especially controversial where the accompanying agreement seeks to distribute estate property in contravention of the priority scheme laid out in § 507 of the Code. Where the agreement violates this so-called waterfall payment method, bankruptcy courts are faced with difficult questions: …

No Misrepresentation Needed: Excepting Discharge For Actual Fraud Under 11 U.S.C. § 523 Without Misrepresentation, Morgan Green

Fordham Law Review

Imagine buying a game from a seller and promising to repay him at a later date. However, instead of repayment, you decide to give the game to your friend, who in turn allows you to use it. Then your friend declares bankruptcy to discharge the price of the game from his debts, thus allowing you both to use it without paying. This repayment runaround is the issue that the First and Fifth Circuits were asked to decide in two recent cases. Specifically, the question was whether a debt incurred by “actual fraud” may be discharged by the recipient of the …

Ethics For Examiners, Daniel J. Bussel

Fordham Law Review

The inquisitorial bankruptcy examiner is sui generis in our system. He faces unique ethical quandaries and considerations, which require a code of ethics tailored to his role if he is to achieve fully the promise of improving Chapter 11 through the introduction of inquisitorial investigative methods. This Article attempts to point the way toward guidelines that will regulate the conduct of examiners to mitigate real, potential, and perceived abuses.

Making Assignments For The Benefit Of Creditors As Easy As A-B-C, Carly Landon

Fordham Urban Law Journal

No abstract provided.

An Analysis Of The Treatment Of Employees Pension And Wage Claims In Insolvency And Under Guarantee Schemes In Oecd Countries: Comparative Law Lessons For Detroit And The United States, Paul M. Secunda

Fordham Urban Law Journal

No abstract provided.

The Detroit Bankruptcy, Pre-Eligibility, Melissa B. Jacoby

Fordham Urban Law Journal

No abstract provided.

Response To Professor Paul Secunda's Comparatice Analysis Of The Treatment Of Employment Claims In Insolvency Proceedings And Guarantee Schemes In Oecd Countries, Israel Goldowitz

Fordham Urban Law Journal

No abstract provided.

Zombieland/The Detroit Bankruptcy: Why Debts Associated With Pensions, Benefits, And Municipal Securities Never Die. . . And How They Are Killing Cities Like Detroit, Christine Sgarlata Chung

Fordham Urban Law Journal

No abstract provided.

Resolving The Public Pension "Crisis", Jack M. Beermann

Fordham Urban Law Journal

No abstract provided.

Modifying Or Terminating Pension Plans Through Chapter 9 Bankruptcies With A Focus On California, Joanne Lau

Fordham Urban Law Journal

No abstract provided.

Felonious, Erroneous, It’S All Odious: A Story Of Debt Gone Wrong, Virginia M. Brown

Fordham Law Review

Iraq is paying off debt from Saddam Hussein’s rule. South Africa is paying off debt obligations incurred under apartheid rule. Argentina is renegotiating debts that can be traced back to a de facto military-civilian regime that was ousted in 1976. There are numerous examples in which sovereigns are paying off debts that previous governing regimes incurred while oppressing their citizens. Should sovereigns be obligated to pay these debts? Were the debts really incurred by the sovereign or were they incurred by the governing regime in question? What if the lender knew in advance what the proceeds would be used for? …

Time For An Update: A New Framework For Evaluating Chapter 9 Bankruptcies, Michael J. Deitch

Fordham Law Review

Municipal bankruptcies have been making national news since the “Great Recession.” Municipalities like Stockton, Vallejo, and Jefferson County gained notoriety for the record scale of their bankruptcy filings, only to be surpassed by Detroit shortly thereafter as the largest and most populous municipal bankruptcy filing. Historically, municipal bankruptcy occurred infrequently, leaving the nuances of many critical issues, including insolvency, asset utilization, and good faith, unexplored in case law. For example, how should a bankruptcy court analyze Detroit’s cityowned art museum that houses billions of dollars of art when bondholders, pensioners, and other unsecured creditors have unpaid claims? And how should …

Restructuring A Sovereign Bond Pari Passu Work-Around: Can Holdout Creditors Ever Have Equal Treatment?, Natalie A. Turchi

Fordham Law Review

The rise of vulture fund investing in sovereign bonds has created additional hurdles to successful restructuring in an already fragile ad hoc process. Recent litigation in NML Capital, Ltd. v. Argentina has proven courts’ willingness to utilize powers of equity to enforce a ratable payment interpretation of the pari passu clause—the equal treatment provision commonly found in sovereign bond contracts—creating much uncertainty on how the ruling will affect future restructuring efforts. By looking to the tension in interpretations of the pari passu clause, discrepancies in remedial relief awarded, and international institutions’ proposed solutions, this Note analyzes the role of the …

What We “Know” About Chapter 11 Cost Is Wrong, Stephen J. Lubben

Fordham Journal of Corporate & Financial Law

Among the collective wisdom about large corporate bankruptcy cases, the following points are almost undisputed: Longer chapter 11 cases cost more; prepackaged chapter 11 cases cost less; cases filed in New York or Delaware cost more; and fee examiners control the costs of big chapter 11 cases. But each of these points is wrong, and in most cases entirely backward. This Article provides empirical evidence to show why. Ultimately, I argue that the complexity of the bankruptcy and the compensation structure of the professionals retained (which may itself reflect further aspects of complexity) are the key determinants of cost. The …

Bankruptcy’S Protection For Non-Debtors From Securities Fraud Litigation, John M. M. Wunderlich

Fordham Journal of Corporate & Financial Law

Given the recent economic climate, the judiciary faces an all too familiar challenge: navigate through the web that is bankruptcy and securities fraud. So far, bankruptcy has evolved into a tool to resolve mass tort litigation, like securities fraud. However, this Article explores bankruptcy as a tool to resolve securities litigation against non-debtors, those that never file for bankruptcy protection. The protection the Bankruptcy Code provides to non-debtors, like officers and directors, goes largely unnoticed, much to the detriment of securities fraud victims. Mindful that we now are in the midst of another financial crisis and that attention will slowly …