Law Commons^™

Ability To Avoid Successor Liability Pursuant To A §363 Sale In Bankruptcy, Julie Lavoie

Bankruptcy Research Library

(Excerpt)

In a case filed under chapter 11 of title 11 of the United States Code (“the Bankruptcy Code”), the company entering bankruptcy, the debtor, usually files a reorganization plan that articulates how the debtor’s assets will be addressed and creditors will be treated. Once a plan is confirmed and becomes effective, the debtor “emerges from bankruptcy with its liabilities restructured along certain parameters.” This process, however, can take years. Conversely, a sale of substantially all of the debtor’s assets, pursuant to 11 U.S.C. § 363, will often “occur on a very expedited basis.” In the case of the GM …

All Talk, But No Action Leads To The Loss Of Ground Breaking Cancer Research, Nicholas Marcello

Bankruptcy Research Library

(Excerpt)

Each year, the government awards millions of dollars in federal grants to fund scientific research. Despite this huge allocation of resources, the government’s claim in such funded research may be limited should the receiving institution become a debtor in bankruptcy. Last year, the United States Bankruptcy Court for the District of Massachusetts allowed the destruction of government funded research to benefit the debtor estate.

Creditor’S Failure To File A Proof Of Claim Is Inexcusable Where Potential Danger Of Prejudice To Debtor Exists, Meghan Lombardo

Bankruptcy Research Library

(Excerpt)

The Federal Rules of Bankruptcy Procedure provide that when an act is required … to be done at or within a specified period … the court for cause shown may at any time in its discretion… on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect. Rule 9006 grants a pardon for late filings that were caused by neglect. The Supreme Court has defined neglect as “‘giv[ing] little attention or respect’ to a matter or… ‘to leave undone or unattended to especially …

The Nondischargeability Of Government Cleanup Orders, Christina Mavrikis

Bankruptcy Research Library

(Excerpt)

One of the primary purposes of title 11 of the United States Code (the “Bankruptcy Code”) is to provide debtors with a financial fresh start. Upon the filing of a bankruptcy petition by or against the debtor, section 362(a) of the Bankruptcy Code provides that all entities are barred from actions to collect, assess, or recover any pre-petition claims against the debtor. In general, the automatic stay serves to halt any pending legal proceedings against the debtor so that the pre-petition claims can be managed and discharged by the bankruptcy court. There are, however, exceptions to the automatic stay. …

Confirmed Bankruptcy Plan Supersedes Applicable Finra Rules, Derek Piersiak

Bankruptcy Research Library

(Excerpt)

In the United States, the Financial Industry Regulatory Authority (“FINRA”) is authorized by the SEC to adopt and administer the Uniform Practice Code (“UPC”), the rules governing secondary market securities transactions. UPC Rule 1140 determines which unitholders are entitled to a distribution by setting a record date and an ex-date. The record date is the date fixed by the issuer for the purpose of determining which holders of securities are entitled to receive dividends or other distributions. A debtor can also set a record date in their bankruptcy plan. The ex-date is set by FINRA and is “the date …

Not My Client, Not My Problem: The Duty Of Attorneys To Non-Clients, Daniel Quinn

Bankruptcy Research Library

(Excerpt)

Pursuant to the Professional Code of Responsibility, lawyers owe a certain legal duty to their clients throughout the span of their representation. In certain circumstances this duty can be extended to non-clients. The issue of liability to non-clients was recently addressed following the actions of Mayer Brown, LLP (“Mayer Brown”), and the resulting malpractice suit filed against Mayer Brown which was based upon Mayer Brown’s inadvertent termination of certain liens granted by General Motors (“GM”) in favor of J.P. Morgan Chase (“JPM”). Specifically, the allegations of misconduct arose form actions in connection with a loan and the related “Term …

Substantive Consolidation Of Debtor And Non-Debtor Entities, Eileen Ornousky

Bankruptcy Research Library

(Excerpt)

Based on section 105’s grant of equitable powers, bankruptcy courts have the power to substantively consolidate debtors. Substantive consolidation pools the assets of separate legal entities and treats them as one, allowing each entity’s liability to be satisfied out of the common pool. Although it has been accepted that courts have the power to consolidate a debtor with other related debtors, it its less clear when courts can consolidate a debtor with a non-debtor, or if courts have the authority to do so at all.

Even though most courts have determined that they do have the power to substantively …

Do Foreign Representatives Need To Satisfy The Recognition Requirement?, Parm Partik Singh

Bankruptcy Research Library

(Excerpt)

A foreign representative must obtain recognition of a foreign proceeding pursuant to section 1517 of title 11 of the United States Code (the “Bankruptcy Code”) prior to applying directly to a court in the United States for any relief such as operating the debtor’s business operations in the U.S. or seeking assets and discovery from U.S. entities. However, under section 1509(f), a foreign representative may sue in a United States court to collect or recover a claim which is the property of the debtor without first obtaining recognition. The scope of this exception, though, remains unclear.

This memorandum explores …

Critical Differences Between Key Employee Retention Plans And Key Employee Incentive Plans, Sumaya Ullah Restagno

Bankruptcy Research Library

(Excerpt)

Section 503(c) of the United States Bankruptcy Code (the “Bankruptcy Code”) imposes strict limitations on companies in chapter 11 who want to make bonus payments to retain employees. In particular, section 503(c) limits a chapter 11 debtor’s ability to favor employees over the interests of the estate to ensure that any bonus payment is designed for the overall benefit of the bankrupt estate. This memo details the differences between bonus payments under sections 503(c)(1) and 503(c)(3) and explains how a chapter 11 debtor should design bonus payments to employees to ensure those payments pass scrutiny under these provisions.

Limiting The Scope Of The Value Defense Under 11 U.S.C. § 548(C) In Avoidance Litigation, Allison Smalley

Bankruptcy Research Library

(Excerpt)

Today, most people are aware of, or have at least heard of, the notorious Bernard Madoff Ponzi scheme. Other than the scheme originally perpetrated by Charles Ponzi in the 1920s, the man whom the scheme was named after, the elaborate Madoff Ponzi scheme has become one of the most infamous fraudulent schemes of our time. Bernard Madoff operated this scam using newly deposited customer funds to support the business and make “profit” payments to older customers who then withdrew these “profits,” which were in excess of the principal amounts they invested. Essentially, there were no actual profits being made; …

The Inconsistent Application Of Section 1113 To Expired Collective Bargaining Agreements, Courtney Creighton Sokol

Bankruptcy Research Library

(Excerpt)

The United States Bankruptcy Code (the “Bankruptcy Code”) allows a trustee a debtor-in-possession (“DIP”) to assume or reject a collective bargaining agreement (“CBA”). Courts are split on whether a trustee or DIP may reject an expired collective bargaining agreement under section 1113 of the Bankruptcy Code. In general, a collective bargaining agreement may be rejected notwithstanding the labor standards afforded to employees by the National Labor Relations Act (“NLRA”). In particular, under the NLRA, an employer that is party to a CBA is obligated to bargain with its employees until the employer either enters into a new contract or …

Courts Override Underlying Contractual Obligations In The Chapter 11 Surrender And Abandon Of Aircraft Equipment And Vessels, Lisa Strejlau

Bankruptcy Research Library

(Exceprt)

When chapter 11 airline debtors seek to abandon and surrender collateral under a financing agreement, they are not required to do so in any particular condition under the Bankruptcy Code. This leaves the question of who bears the burden of associated costs unresolved. This memo will discuss how courts interpret the issue of costs associated with the surrender and return of aircraft and related equipment.

Financers of aircraft and related equipment receive special privileges under section 1110 of the Bankruptcy Code (“the Code”). Section 1110 permits a party to take possession of an aircraft in the custody of a …

Section 546(E) Safe Harbor Defense: When To Utilize And When To Preclude, Amanda Tersigni

Bankruptcy Research Library

(Excerpt)

The Bankruptcy Code allows trustees and debtors-in-possession to invoke certain provisions of the United States Bankruptcy Code (“Bankruptcy Code”) to “avoid” particular types of transfers. The types of transfers that a debtor can “avoid” are defined rather broadly. However, one significant exception to this “avoidance power” is section 546(e) and its safe harbor defense. Courts have often wrestled with how to settle the meaning of section 546(e) and how to define the boundaries of the provision’s safe harbor defense. First and foremost, it is important to note that Congress enacted section 546(e) as the safe harbor defense statute in …

The Fresh Start Canon, Jonathon S. Byington

Faculty Law Review Articles

A primary policy of bankruptcy law is to give consumer debtors a “fresh start” by discharging their debt. A rival policy is that the discharge of debt is a selectively conferred privilege that is not granted in some situations. For example, society is unwilling to pardon debt related to embezzlement or a domestic-support obligation. This “discharge restrictions” policy is manifested in part by the Bankruptcy Code’s exceptions to discharge. The U.S. Supreme Court has repeatedly recognized the tension between the fresh start and discharge restriction policies. It has sought to achieve a fair balance between these policies by applying a …

Beyond The Great Divide: Federalism Concerns In Municipal Insolvency, Andrew B. Dawson

Articles

No abstract provided.

Tripping The Light Fantastic: A Comparative Analysis Of The European Commission's Proposals For New And Interim Financing Of Insolvent Businesses, Jennifer Payne, Janis P. Sarra

All Faculty Publications

The European Commission published a draft Directive in November 2016, with the aim of ensuring that all Member States have in place an effective mechanism for dealing with viable, but financially distressed, businesses. The draft Directive includes provisions designed to encourage financing for the debtor company, both interim financing to “keep the lights on” for a brief period while the debtor negotiates with its creditors for a resolution to its financial distress, and where possible, to finance implementation of a restructuring plan, called “new financing” in the draft Directive. Creating such a financing regime is a complex and difficult issue, …

Puerto Rico And The Netherworld Of Sovereign Debt Restructuring, Mitu Gulati, Robert K. Rasmussen

Faculty Scholarship

Puerto Rico has incurred debt well beyond its ability to repay. It attempted to address its fiscal woes through legislation allowing the restructuring of some its debt. The Supreme Court put a stop to this effort, holding that Congress in the Bankruptcy Code barred the Commonwealth from enacting its own restructuring regime. Yet all agreed that the Bankruptcy Code did not provide anything in its place. While Congress quickly enacted PROMESA in an attempt to address the Puerto Rico’s fiscal ills, we explore in this paper whether Congress has the power to bar Puerto Rico from enacting a restructuring mechanism …

Cracking The Code: An Empirical Analysis Of Consumer Bankruptcy Outcomes, Sara Sternberg Greene, Parina Patel, Katherine M. Porter

Faculty Scholarship

Chapter 13 is a cornerstone of the bankruptcy system. Its legal requirements strike a balance between the rehabilitation of debtors through keeping assets and reducing debt, and the repayment of creditors over a period of years. Despite the accolades from policymakers, the hard truth is that the majority of the half-million families each year that seek refuge in chapter 13 bankruptcy will not achieve the debt relief of a discharge. Prior research found that those who drop out of bankruptcy quickly endure the serious financial struggles that they had before bankruptcy—now even worse off for having spent thousands of dollars …

"No Money Down" Bankruptcy, Pamela Foohey, Robert M. Lawless, Katherine Porter, Deborah Thorne

Articles by Maurer Faculty

This Article reports on a breakdown in access to justice in bankruptcy, a system from which one million Americans will seek help this year. A crucial decision for these consumers will be whether to file a chapter 7 or chapter 13 bankruptcy. Nearly every aspect of their bankruptcies — both the benefits and the burdens of debt relief — will be different in chapter 7 versus chapter 13. Almost all consumers will hire a bankruptcy attorney. Because they must pay their attorneys, many consumers will file chapter 13 to finance their access to the law, rather than because they prefer …

Giving And Creating: The Legacy Of Keith J. Shapiro, G. Ray Warner

Faculty Publications

(Excerpt)

Some take; others give. Tonight’s honoree, Keith J. Shapiro, is a giver.

Many of the giants in our field have received this award during its almost 20-year history, and each of them richly deserved it. But of all the recipients, Keith is the person most deserving of this particular award. This is, after all, the Emory Bankruptcy Developments Journal lifetime achievement award and Keith and the Journal are inextricably linked. Not only did this journal launch Keith’s lifetime of stellar bankruptcy achievement, but one of his achievements was pushing this Journal to the success and preeminence that it now …

Courts As Institutional Reformers: Bankruptcy And Public Law Litigation, Kathleen G. Noonan, Jonathan C. Lipson, William H. Simon

Faculty Scholarship

This article compares two spheres in which courts induce and oversee the restructuring of organizations that fail systematically to comply with their legal obligations: bankruptcy reorganization and public law litigation (civil rights or regulatory suits seeking structural remedies). The analogies between bankruptcy and public law litigation (PLL) have grown stronger in recent years as structural decrees have evolved away from highly specific directives to “framework” decrees designed to induce engagement with stakeholders and make performance transparent. We use the comparison with bankruptcy, where the value and legitimacy of judicial intervention are better understood and more accepted, to address prominent criticisms …

Bankruptcy On The Side, Kenneth Ayotte, Anthony J. Casey, David A. Skeel Jr.

All Faculty Scholarship

This article provides a framework for analyzing side agreements in corporate bankruptcy, such as intercreditor and “bad boy” agreements. These agreements are controversial because they commonly include a promise by one party to remain silent – to waive some procedural right they would otherwise have under the Bankruptcy Code – at potentially crucial points in the reorganization process.

Using simplified examples, we show that side agreements create benefits in some instances, but parties to a side agreement may have incentive to contract for specific performance or excessive stipulated damages that impose negative externalities on non-parties to the agreement. A promise …

Attorneys' Fees And Chapter Choice: Exploring "No Money Down" Chapter 13 Bankruptcy, Pamela Foohey, Robert M. Lawless, Katherine Porter

Articles by Maurer Faculty

In a forthcoming article in the Southern California Law Review, the authors use new data from the ongoing Consumer Bankruptcy Project (CBP) to explore the "no money down" bankruptcy. This article summarizes that article and discusses the law that influenced the creation of "no money down" chapter 13s, which households are more likely to file with "no money down," and why this type of chapter 13 case might be less than optimal for the consumer bankruptcy system. Both studies draw data from a debtor's bankruptcy court records and written questionnaires mailed to the debtors to collect demographic information and details …

Lender Discrimination, Black Churches And Bankruptcy, Pamela Foohey

Articles by Maurer Faculty

Based on my original empirical research, in this Article, I expose a disparity between the demographics of the roughly 650 religious congregations that have filed for chapter 11 bankruptcy during part of the last decade and congregations nationwide. Churches with predominately black membership — Black Churches — appeared in chapter 11 more than three times as often as they appear among churches across the country. A conservative estimate of the percentage of Black Churches among religious congregation chapter 11 debtors is 60%. The likely percentage is upward of 75%. Black Churches account for 21% of congregations nationwide.

Why are Black …

When Social Enterprises Fail, Jonathan Brown

Elisabeth Haub School of Law Faculty Publications

This Article identifies the conflicts between social enterprise legislation and bankruptcy law and presents a normative argument for a legal regime that would harmonize the two. Focusing on benefit corporations, the most widely adopted social enterprise form, this Article observes that existing law leaves uncertainty as to the role of directors at a time of financial distress and will produce outcomes that are at odds with the core goals of social enterprise legislation. Then, drawing on academic proposals for contract-based systems of bankruptcy, this Article argues that just as a firm may opt out of a corporate governance norm of …

Guest Editorial: Personal Insolvency – A Fresh Start, Rosalind Mason, Jason Kilborn, Stephanie Ben-Ishai, Joseph Spooner

Articles & Book Chapters

No abstract provided.

Consumer Bankruptcy Pathologies, Edward R. Morrison, Antoine Uettwiller

Faculty Scholarship

This paper questions several long-standing descriptions of consumer bankruptcy in the United States. We focus on Chapter 13, which discharges debts after consumers pay disposable income to creditors for up to five years. Many studies document pathologies, including high failure rates, racial disparities, low creditor recoveries, and attorney biases. We observe the same patterns in new data drawn from Cook County, Illinois, but show that these pathologies are central tendencies that ignore substantial heterogeneity across consumers. Several pathologies are driven by subsets of consumers; some disappear once we take account of consumer heterogeneity. We present new evidence that some pathologies …

Disciplinary Legal Empiricism, Lynn M. Lopucki

UF Law Faculty Publications

This Article reports on an empirical study of one hundred and twenty empirical legal studies published in leading, non-peer-reviewed law reviews and in the peer-reviewed Journal of Empirical Legal Studies. The study is the first to compare studies by disciplinary empiricists – defined as Ph.D. holders – with those by non-disciplinary empiricists – defined as J.D. holders who are not also Ph.D. holders. Three differences identified in the study suggest that Ph.D. hiring is on a collision course with the demands of legal educators, the organized bar, and students that the law schools better prepare students for practice. First, disciplinary …

The Apps For Justice Project: Employing Design Thinking To Narrow The Access To Justice Gap, Lois R. Lupica

Faculty Publications

The lack of available resources to make civil justice available to all, coupled with the fact that existing strategies fail to account for the research on cognitive capacity and other deployment challenges faced by the poor, explain in large part why a high percentage of low-income individuals facing legal problems fail to take action to respond to their legal problems. Such a failure to respond in a timely fashion to a nascent legal problem can lead to an escalation of the initial problem and the emergence of new ones.

The access-to-justice community has begun to respond to this intensifying crisis …

Reexamining The Doctrine Of Equitable Mootness In Light Of The Detroit Bankruptcy, Nicole Langston

Vanderbilt Law School Faculty Publications

Garnering debate, and sometimes harsh criticism, the doctrine of equitable mootness has been a focal point for academic debates among legal scholars for decades. "Unlike the constitutional doctrine of mootness, which bars consideration of appeals because no Article III case or controversy remains, the doctrine of equitable mootness is a pragmatic judicially-created principle, grounded in the notion that, with the passage of time after a judgment in equity and implementation of that judgment, effective relief on appeal becomes impractical, imprudent, and therefore inequitable. Applied principally in bankruptcy proceedings because of the equitable nature of bankruptcy judgments, equitable mootness is often …