Law Commons^™

In The Midst Of Bankruptcy: How Cryptocurrency's Classification Affects Creditors Who Were Once Customers, Mia Qu

Washington Law Review

In 2022, Congress proposed the Digital Commodities Consumer Protection Act to amend the Commodity Exchange Act and define a new type of commodity: digital commodity. The definition of digital commodity encompasses cryptocurrency and provides the Commodity Futures Trading Commission with jurisdiction over digital asset transactions. This definition of digital commodity has two important implications. First, it signals the lawmakers’ tendency to generalize cryptocurrency as a commodity. Second, it brings complications into how creditors—especially individual crypto account holders—can recover in the recent bankruptcy cases involving prominent crypto companies. This Comment contains four components. First, it provides a brief explanation of cryptocurrency …

Hostile Restructurings, Diane L. Dick

Washington Law Review

The conventional wisdom holds that out-of-court loan restructurings are mostly consensual and collaborative. But this is no longer accurate. Highly aggressive, nonconsensual restructuring transactions—what I call “hostile restructurings”—are becoming a common feature of the capital markets. Relying on hypertechnical interpretations of loan agreements, one increasingly popular hostile restructuring method involves issuing new debt that enjoys higher priority than the existing debt; another involves transferring the most valuable collateral away from existing lenders to secure new borrowing.

These transactions are distinguishable from normal out-of-court restructurings by their use of coercive tactics to overcome not only the traditional minority lender holdout problem, …

The Secret Life Of Priority: Corporate Reorganization After Jevic, Jonathan C. Lipson

Washington Law Review

Academics have long debated whether the order of bankruptcy distributions should be “absolute” or “relative.” Should courts have the flexibility to scramble priority to serve some greater good? The Supreme Court’s recent decision in Czyzewski v. Jevic Holding Corp. holds that the answer is “no”: priority is absolute absent the consent of affected creditors. “Consent” is not self-defining, however, and is largely ignored in debates about priority. This is a problem because consent is hard to pinpoint in corporate reorganizations, a type of aggregate proceeding that can involve hundreds or thousands of creditors and shareholders. Although the Jevic majority …

Jevic'S Promise: Procedural Justice In Chapter 11, Pamela Foohey

Washington Law Review Online

This piece is a response to Jonathan C. Lipson, The Secret Life of Priority: Corporate Reorganization after Jevic, 93 Wash. L. Rev. 631 (2018).

Jevic'S Promise: Procedural Justice In Chapter 11, Pamela Foohey

Washington Law Review Online

This piece is a response to Jonathan C. Lipson, The Secret Life of Priority: Corporate Reorganization after Jevic, 93 Wash. L. Rev. 631 (2018).

Taking Bankruptcy Rights Seriously, Rafael I. Pardo

Washington Law Review

Perhaps more so than any other area of law affecting individuals of low-to-moderate means, bankruptcy poignantly presents an affordability paradox: the system’s purpose is to relieve individuals from financial distress, yet it simultaneously demands a significant commitment of resources to obtain such relief. To date, no one has undertaken a comprehensive study of the complexities and costs of the litigation burden that Congress has imposed on self-represented debtors who seek a fresh start in bankruptcy. In order to explore the problems inherent in a system that sometimes necessitates litigation as the path for vindicating a debtor’s statutory right to a …

Taxes And Ability To Pay In Municipal Bankruptcy, John Patrick Hunt

Washington Law Review

Scholars and commentators have argued that municipalities can and should use bankruptcy to shed unwanted liabilities, particularly employee healthcare and pension commitments. Courts increasingly have agreed: Detroit’s approved bankruptcy plan cut pensions, and the bankruptcy court overseeing the bankruptcy of Stockton, California brought down barriers to pension-cutting. Both courts found their way around state provisions arguably protecting municipal pensions. Now that pension-cutting in bankruptcy has momentum, we can expect to hear arguments for using bankruptcy not just in cases like Detroit and Stockton where the municipality cannot meet all its obligations, but also in cases where residents or politicians come …

Taxes And Ability To Pay In Municipal Bankruptcy, John Patrick Hunt

Washington Law Review

Scholars and commentators have argued that municipalities can and should use bankruptcy to shed unwanted liabilities, particularly employee healthcare and pension commitments. Courts increasingly have agreed: Detroit’s approved bankruptcy plan cut pensions, and the bankruptcy court overseeing the bankruptcy of Stockton, California brought down barriers to pension-cutting. Both courts found their way around state provisions arguably protecting municipal pensions. Now that pension-cutting in bankruptcy has momentum, we can expect to hear arguments for using bankruptcy not just in cases like Detroit and Stockton where the municipality cannot meet all its obligations, but also in cases where residents or politicians come …

Capital Structure, Creditor Composition, And Insolvency Law In Japan, Benjamin T. Jones

Washington International Law Journal

This article identifies potential relationships between the methods by which large firms in the business sector are externally financed and creditors’ determinations to resolve business failure through private negotiation or formal insolvency proceedings. Prior to the deregulation of Japan’s capital markets in the 1980s, large firms relied heavily on bank debt as a source of external capital. Consequently, their capital structures and their creditor compositions were relatively homogenous. Japanese banks appeared to primarily resolve the failure of their borrowers through private reorganizations or liquidations rather than court proceedings, and evidence suggests that creditor homogeneity was a favorable condition for the …

State Default And Synthetic Bankruptcy, Richard M. Hynes

Washington Law Review

An insolvent state does not need bankruptcy if sovereign immunity would protect it from lawsuits and other collection efforts. To the extent that a state is not judgment-proof and needs bankruptcy, we may not need to modify the Federal Bankruptcy Code to allow it to file. First, a substantial share of state spending flows through their municipalities, and these municipalities have substantial obligations of their own. Unlike states, municipalities can file for bankruptcy under current law, and a state could substantially reduce the cost of accomplishing its own fiscal goals by forcing its municipalities to file. Second, states may be …

The Structural Exceptionalism Of Bankruptcy Administration, Rafael I. Pardo, Kathryn A. Watts

Articles

The current system of administration of the Bankruptcy Code is highly anomalous. It stands as one of the few major federal civil statutory regimes administered almost exclusively through adjudication in the courts—not through a federal regulatory agency. This means that rather than fitting bankruptcy into a regulatory model, the U.S. Congress has chosen to give the courts primary interpretive authority in the field of bankruptcy, delegating to courts the power to engage in residual policymaking.

Although scholars have noted some narrow aspects of the structural exceptionalism of bankruptcy administration, Congress’s decision to locate responsibility for bankruptcy policymaking almost exclusively with …

Selling It First, Stealing It Later: The Trouble With Trademarks In Corporate Transactions In Bankruptcy, Xuan-Thao Nguyen

Articles

Why does AI get two bites of the “Apple” trademark? Should AI be allowed to grant the right to use the trademark “perpetual and exclusive” with the sale of the music division and steal it back for free, ten years later? This article is part of an ongoing and broader inquiry into the intersection of trademark, contract and bankruptcy laws. This article argues that recent bankruptcy decisional law, notably the In re Exide Technologies decision, misunderstands the “perpetual and exclusive” trademark transaction, deeming it as an ordinary “license” when it is truly an outright sale. This article explains that the …

Keeping The Faith: The Rights Of Parishioners In Church Reorganizations, Theresa J. Pulley Radwan

Washington Law Review

Faced with significant potential liability to victims of sexual abuse at the hands of church personnel, four archdioceses and dioceses of the Roman Catholic Church have filed for Chapter 11 bankruptcy protection. The bankruptcy proceedings present a multitude of novel issues, including valuation of tort claims against the church and determination of the property available to pay those claims. While each issue has the potential to affect parishioners of the church, the issue of property ownership may have a particularly strong effect. Under both canon law and state incorporation statutes, an archdiocese or diocese owns all assets of its churches. …

Keeping The Faith: The Rights Of Parishioners In Church Reorganizations, Theresa J. Pulley Radwan

Washington Law Review

Faced with significant potential liability to victims of sexual abuse at the hands of church personnel, four archdioceses and dioceses of the Roman Catholic Church have filed for Chapter 11 bankruptcy protection. The bankruptcy proceedings present a multitude of novel issues, including valuation of tort claims against the church and determination of the property available to pay those claims. While each issue has the potential to affect parishioners of the church, the issue of property ownership may have a particularly strong effect. Under both canon law and state incorporation statutes, an archdiocese or diocese owns all assets of its churches. …

A Failure Of Expression: How The Provisions Of The U.S. Bankruptcy Code Fail To Abrogate Tribal Sovereign Immunity, Greggory W. Dalton

Washington Law Review

Sections 106(a) and 101(27) of the U.S. Bankruptcy Code use the general phrase "other foreign or domestic government" to abrogate sovereign immunity without specifically referencing Indian tribes. The U.S. Supreme Court has not yet decided whether these sections of the Code abrogate tribal sovereign immunity, and lower court decisions have come to varying conclusions. As a general rule, Indian tribes are immune from suit due to their inherent sovereignty. Congress, however, may abrogate the sovereign immunity of tribes by unequivocally stating its intent to do so in a statute. When interpreting abrogation provisions in a statute, courts have only found …

Australian Insolvency Law And The 1992 Isda Master Agreement—Catalyst, Reaction, And Solution, Christopher J. Mertens

Washington International Law Journal

The reverberations of Enron’s financial collapse were heard on an international scale. Indeed, Enron Australia’s liquidation set off a flood of concern and speculation about the International Swaps and Derivatives Association’s (“ISDA”) model documentation for derivative transactions. A December 2003 opinion of the Supreme Court of New South Wales exposed a flaw in the ISDA 1992 Master Agreement. Two provisions of the agreement operate in tandem, creating a result which operates contrary to the clear meaning of the terms. This volatile interaction of the provisions effectively shifts the risk from the parties to the swap contract to the creditors of …

Bankrupting Trademarks, Xuan-Thao Nguyen

Articles

The explosive growth of technology in the last two decades has vastly expanded intellectual property jurisprudence and elevated intellectual property to a heightened status in the marketplace. Indeed, a company's intellectual property assets may now be its most valuable corporate assets. Moreover, the property value of some trademarks is significantly greater than that of the trademark owner's physical assets.

The term “intellectual property” is commonly understood to include patents, trade secrets, copyrights, and trademarks. Yet a paradigm has been constructed and enforced over the last fifteen years wherein only patents, trade secrets, and copyrights are included. The paradigm specifically excludes …

Sovereign Impunity: The "Uniform Laws" Theory Tries (And Fails) To Take A Bankruptcy-Sized Bited Out Of The Eleventh Amendment, Cecily Fuhr

Washington Law Review

Sovereign immunity represents the principle that a state cannot be subjected to suit without its consent. In bankruptcy proceedings, it is sometimes necessary for a debtor to file an adversary proceeding against a creditor to determine the dischargeability of a debt. When the creditor is a state, the exercise of sovereign immunity by that state can pose an obstacle to the total discharge of debts contemplated by the bankruptcy system. Courts have found unconstitutional recent attempts by Congress to abrogate states' sovereignty in § 106(a) of the Bankruptcy Code. In response, some courts have adopted a "uniform laws" theory. This …

Taming The Bankruptcy Code's Toothless Tiger, 11 U.S.C. § 521(2), Julio M. Zapata

Washington Law Review

Federal appellate courts are divided on whether a debtor who files a Chapter 7 bankruptcy petition and is current on the underlying contractual obligation secured by collateral is able to retain the collateral without redeeming it or reaffirming the debt under section 521(2) of the Bankruptcy Code. The Fourth and Tenth Circuits hold that the Code's options are not exclusive. Thus, the debtor may retain the collateral and continue under the terms of the contract as long as the payments are current In contrast, the Seventh and Eleventh Circuits hold that a debtor's only options are those listed in section …

Desperate Times And Desperate Measures: The Troubled State Of The Ordinary Course Of Business Defense—And What To Do About It, Lawrence Ponoroff

Washington Law Review

The ordinary course of business defense to the bankruptcy trustee's preference avoiding power has been controversial since its enactment in 1978. Burdened with a cryptic legislative history concerning its underlying goals, this preference exception has gone through multiple reinterpretations at the hands of Congress and the U.S. Supreme Court. In recent years, faced with a potentially expansive reading of the ordinary course defense that threatened to eclipse the rule, courts have used the "ordinary business terms" element of the defense to engraft an objective requirement that the party asserting the defense establish conformity of the challenged transfer with prevailing industry …

Avoidability Of Foreclosure Sales Under Section 548(A)(2) Of The Bankruptcy Code: Revisiting The Transfer Issue And Standardizing Reasonable Equivalency, Vic Sung Lam

Washington Law Review

Federal courts consider the 1984 amendments to the Bankruptcy Code to have conclusively defined "transfer" to include foreclosure sales under section 548(a)(2). This Comment questions this widely accepted interpretation. Moreover, federal courts have strongly disagreed on the meaning of "reasonably equivalent value" under section 548(a)(2) of the Bankruptcy Code for the purpose of avoiding a foreclosure sale as a constructive fraudulent transfer. This Comment examines the three dominant but divergent approaches to determining reasonable equivalency. It concludes that both the Durrett 70-percent rule and the Madrid state-procedural approach are inappropriate standards because they fail to comport with the statutory language …

Property Of The Estate After Confirmation Of A Chapter 13 Repayment Plan: Balancing Competing Interests, Vickie L. Vaska

Washington Law Review

Under Chapter 13 of the Bankruptcy Code, it is unclear whether property of the estate and protection of the automatic stay continue after confirmation of debtor's repayment plan. Courts use diverse approaches to determine whether property of the estate exists after confirmation, resulting in confusion for trustees, debtors, and creditors. This Comment proposes that bankruptcy courts use their equitable powers and adopt a test that balances the competing interests of debtor and creditor

Software Distribution Agreements And Bankruptcy: The Licensor's Perspective, J. Dianne Brinson

Washington Law Review

This Article addresses a special problem within the software-industry—licensee bankruptcy and the need to protect the rights of licensors in the software. Although federal law now protects the rights of a software licensee in the technology when a licensor undergoes bankruptcy, little guidance exists as to the effects of licensee bankruptcy upon the software licensor. This Article thoroughly reviews the relevant bankruptcy and copyright law as they relate to the computer software area, and then discusses why a licensor should consider avoiding the possibility of a software license being treated as an executory contract. The author concludes by offering practical …

The Effect Of Recent Federal Cases On Suspension Of The Washington General Assembly Law By Operation Of The Federal Bankruptcy Act, Warren Shattuck

Washington Law Review

Since Armour & Co. v. Becker the Washington court has made clear its position on suspension of our general assignment law by the Bankruptcy Act. In Tacoma Grocery Co. v. Doersch on authority of the Armour case and Interational Shoe Co. v. Pinkus a non-assenting creditor was permitted to garnishee the assigned property in the hands of the assignee. A few months later in Anderson v. Zelensky a creditor who had not taken under a general assignment recovered judgment on his claim despite the debtor's discharge pursuant to Rem. Com. Stat. sec. 1100. The only conclusion which can be drawn …

Deferred Cash Payments To Secured Creditors In Cram Down Of Chapter 11 Plans: A Matter Of Interest, Waltraud S. Scott

Washington Law Review

What is the present value of deferred payments made to secured creditors under a Chapter 11 reorganization plan? Courts agree that the present value depends on the interest rate that is used to compute the payments' value. They cannot agree, however, on how the proper interest rate should be determined. In their attempts to set a proper interest rate, most courts travel down the dead-end road of market rate analysis. Bogged down in the intricacies of this analysis, courts frequently ignore their fundamental role in bankruptcy proceedings: Resolving the tension between giving creditors protection while giving debtors a chance to …

Deferred Cash Payments To Secured Creditors In Cram Down Of Chapter 11 Plans: A Matter Of Interest, Waltraud S. Scott

Washington Law Review

What is the present value of deferred payments made to secured creditors under a Chapter 11 reorganization plan? Courts agree that the present value depends on the interest rate that is used to compute the payments' value. They cannot agree, however, on how the proper interest rate should be determined. In their attempts to set a proper interest rate, most courts travel down the dead-end road of market rate analysis. Bogged down in the intricacies of this analysis, courts frequently ignore their fundamental role in bankruptcy proceedings: Resolving the tension between giving creditors protection while giving debtors a chance to …

Bankruptcy—Financial Responsibility Laws—Effect Of Discharge Of Automobile Judgment Upon Driver's License Suspensions—Perez V. Campbell, 402 U.S. 637 (1971), Anon

Washington Law Review

Adolfo Perez, driving a car registered in his name, was involved in an automobile collision in Arizona. Mr. Perez was not carrying automobile liability insurance at the time of the accident. The minor who was driving the second car and her parents sued Mr. and Mrs. Perez in an Arizona state court for personal injuries and property damage. Judgment was entered against them. Mr. and Mrs. Perez filed petitions in bankruptcy and were discharged from all their provable debts, including the judgment arising from Mr. Perez's driving mishap. During the pendency of the bankruptcy proceedings, their driver's licenses and automobile …

Triumph Or Tragedy? The Bankruptcy Act Amendments Of 1966, Harold Marsh, Jr.

Washington Law Review

Professor Marsh analyzes in detail the 1966 amendments to the Bankruptcy Act. Addressing the question whether these amendments have accomplished anything, he concludes that they have done little but complicate an already intolerably complicated statute. Although he points out many drafting failures, he particularly condemns the failure of Congress to ask or answer the underlying questions of policy—whether tax liens and state statutory liens should be given priority. Professor Marsh concludes that whatever good the amendments may do "is not worth the mess they have made."

Triumph Or Tragedy? The Bankruptcy Act Amendments Of 1966, Harold Marsh, Jr.

Washington Law Review

Professor Marsh analyzes in detail the 1966 amendments to the Bankruptcy Act. Addressing the question whether these amendments have accomplished anything, he concludes that they have done little but complicate an already intolerably complicated statute. Although he points out many drafting failures, he particularly condemns the failure of Congress to ask or answer the underlying questions of policy—whether tax liens and state statutory liens should be given priority. Professor Marsh concludes that whatever good the amendments may do "is not worth the mess they have made."

Bankruptcy—Discharge—Effect Of False Financial Statement Upon Prior Indebtedness, Anon

Washington Law Review

In the 1961 case of Household Fin. Corp. v. DeShazo, the Washington Supreme Court held that section 17(a)(2) of the Federal Bankruptcy Act limited a creditor to recovery of the amount of an additional loan made in reliance upon a false financial statement, and did not permit recovery of prior indebtedness—not initially obtained by fraud—which was refinanced in the same transaction and included in the total amount of a new note.