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Full-Text Articles in Law
Assessing The Chrysler Bankruptcy, Mark J. Roe, David Skeel
Assessing The Chrysler Bankruptcy, Mark J. Roe, David Skeel
Michigan Law Review
Chrysler entered and exited bankruptcy in forty-two days, making it one of the fastest major industrial bankruptcies in memory. It entered as a company widely thought to be ripe for liquidation if left on its own, obtained massive funding from the United States Treasury, and exited via a pseudo-sale of its main assets to a new government-funded entity. The unevenness of the compensation to prior creditors raised concerns in capital markets, which we evaluate here. We conclude that the Chrysler bankruptcy cannot be understood as complying with good bankruptcy practice, that it resurrected discredited practices long thought interred in the …
Chrysler's Bankruptcy: Money Laundering On A Grand Scale, James J. White
Chrysler's Bankruptcy: Money Laundering On A Grand Scale, James J. White
Articles
The interesting issue in Chrysler is not the lawyers’ manipulation of the law; it is the politicians’ use of the bankruptcy to launder money. Had the President simply announced that the federal government would give $4 billion to the UAW, the public, even the public in the UAW’s home state of Michigan, would have been up in arms. By laundering the money through the Chapter 11 process, the administration disguised the payment and avoided the outrage.
Bankruptcy Vérité, Lynn M. Lopucki, Joseph W. Doherty
Bankruptcy Vérité, Lynn M. Lopucki, Joseph W. Doherty
Michigan Law Review
In the empirical study we report in Bankruptcy Fire Sales, we compared the recoveries from the going-concern bankruptcy sales of twenty-five large, public companies with the recoveries from the bankruptcy reorganizations of thirty large, public companies. We found that, controlling for the asset size of the company and its presale or pre-reorganization earnings ("EBITDA"), reorganization recoveries were more than double sale recovenes. We are honored that Professor James J. White has chosen to comment on our study. White is an eloquent defender of the status quo, pulls no punches, and always has something interesting to say. Bankruptcy Noir is …
Bankruptcy Noir, James J. White
Bankruptcy Noir, James J. White
Articles
In Bankruptcy Fire Sales, Professor LoPucki and Dr. Doherty do two things. First, they present provocative data about the relative payoff to be had in Chapter 11 by a full reorganization compared with the payoff from a section 363 sale without a full reorganization. Second, they give a yet more provocative explanation for their data. Taking a page from Professor LoPucki's recent book, they blame the meager return that they observe on 363 sales on the unprincipled behavior of the lawyers, managers, creditors, investment bankers, and even judges involved in the sales. Messrs. LoPucki and Doherty's data appear to …
Absolute Priority And New Value, James J. White
Absolute Priority And New Value, James J. White
Articles
This paper is based on a lecture given on December 6, 1990 ast the Second Annual Robert E. Krinock Lecture. The absolute priority rule is a specific application of the broader doctrine that reorganization plans must be "fair and equitable." Both have their origins in the railroad reorganization cases of the early 20th century. The general doctrine is now codified in section 1129(b)(2) of the Bankruptcy Code and the rule is codified in subsection 1129(b)(2)(B)(ii) which provides that the debtor must pay a nonconsenting class of unsecured creditors in full or "the holder of any claim or interest that is …
Municipal Bankruptcy: The Need For An Expanded Chapter Ix, Daniel J. Goldberg
Municipal Bankruptcy: The Need For An Expanded Chapter Ix, Daniel J. Goldberg
University of Michigan Journal of Law Reform
New York City's default crisis in 1975 presented to Congress and the nation the possibility of a major municipality's entering the federal bankruptcy court. Chapter IX of the Bankruptcy Act, as recently amended by Congress, provides the exclusive remedy by which local governmental units may obtain relief from burdensome indebtedness. Unlike certain other chapters of the Bankruptcy Act, Chapter IX is limited to a voluntary composition or extension of indebtedness. In recent years municipalities have developed complex systems of financing, while experiencing unprecedented expansion in the services which they must provide. Accordingly, a mere composition of municipal indebtedness is no …
The Solely-For-Voting-Stock Requirement In "B" Reorganizations Satisfied By Cash Payments For Fractional Shares-Mills V. Commissioner, Michigan Law Review
The Solely-For-Voting-Stock Requirement In "B" Reorganizations Satisfied By Cash Payments For Fractional Shares-Mills V. Commissioner, Michigan Law Review
Michigan Law Review
The Internal Revenue Code requires recognition of gains or losses realized upon a sale or exchange of property. An exception to this general rule is found in section 354(a)(1), the basic nonrecognition provision for stock-for-stock reorganizations. This section provides that a stockholder need not recognize gains or losses "if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization." However, before section 354 can be reached, the exchange must satisfy one of the …
Federal Priority Statute Gives United States Nontax Priority In Chapter X Corporate Reorganizations-United States V. Anderson, Michigan Law Review
Federal Priority Statute Gives United States Nontax Priority In Chapter X Corporate Reorganizations-United States V. Anderson, Michigan Law Review
Michigan Law Review
In a proceeding under Chapter X of the Bankruptcy Act for the reorganization of an insolvent corporation, the United States claimed first priority for nontax debts under the federal priority statute, Revised Statutes § 3466. The trustee of the corporation contested the claim to priority on the ground that section 199 of Chapter X, which in effect provides the United States in Chapter X proceedings with priority only for tax and customs claims, is exclusive and therefore R.S. § 3466 does not apply. The district court denied the claim to priority. On appeal to the Court of Appeals for the …
Insider Securities Dealings During Corporate Crises, Victor Brudney
Insider Securities Dealings During Corporate Crises, Victor Brudney
Michigan Law Review
The problem of assuring the fidelity of corporate insiders to the public investors in their enterprises figured prominently in legal literature and law reform proposals twenty-five or thirty years ago. In recent years, that question has attracted relatively less attention-in part because of the appearance or recognition of more significant problems in the relationship of publicly-held corporate enterprise to the national well-being, but in part also because of the development by courts, legislatures and administrative agencies-and to some extent by the insiders' community itself-of more exacting standards of loyalty. Recognition of broader obligations to their corporations and to public investors …
Taxation-Federal Income Taxation-Examination Of Certain Problems Under Section 335, Roger B. Harris S.Ed.
Taxation-Federal Income Taxation-Examination Of Certain Problems Under Section 335, Roger B. Harris S.Ed.
Michigan Law Review
Stock and securities of controlled corporations may be distributed to shareholders, tax free, in cases of corporate separations which qualify under section 355 of the Internal Revenue Code of 1954. A corporate separation is effected by the transfer of part of a corporation's assets to a subsidiary, the stock of which is distributed to the parent's stockholders. Such distributions are generally classified into three categories: spin-off, split-off, and split-up. A spin-off occurs when corporation A forms corporation B to which A transfers certain assets, receiving in exchange, the stock of corporation B. A then distributes the stock of …
Taxation- Federal Income Tax-Status Of Stock-For-Stock Exchange Where Boot Is Involved, Roger B. Harris S. Ed
Taxation- Federal Income Tax-Status Of Stock-For-Stock Exchange Where Boot Is Involved, Roger B. Harris S. Ed
Michigan Law Review
Taxpayer was the sole stockholder of International Dairy Supply Company. In 1952, Foremost Dairies, Inc. acquired from taxpayer all his stock in Supply Company in exchange for 82,375 shares of Foremast's common stock and 3,000,000 dollars cash. Taxpayer reported as gain from the transaction only the 3,000,000 dollars "boot" received, less allowable expenses. The Commissioner determined a deficiency of 278,823 dollars, asserting that the nonrecognition provision of the 1939 Code counterpart of section 356 (a) (1) was inapplicable and therefore taxpayer's entire gain realized on the disposition must be recognized. The Tax Court upheld taxpayer's contention that by virtue of …
Business Purpose And The Subchapter S Inspired Reorganization, Eugene C. Roemele
Business Purpose And The Subchapter S Inspired Reorganization, Eugene C. Roemele
Michigan Law Review
The potentially advantageous treatment under subchapter S permitting certain corporations to elect to pass through corporate income and losses to the shareholder, and to avoid the corporate tax, is the result of two different pressures. Tax collector and taxpayer have long been at odds over the purported double taxation of corporate earnings. The limited disregard of the corporate entity as a taxpaying entity then becomes another phase in the cycle begun in 1936, when dividends were subjected to full taxation at the shareholder level. The more recent concern for small business and the small business man has resulted in the …
"Fair And Equitable" Distribution Of Voting Power Under The Public Utility Holding Company Act Of 1935, Leo W. Leary
"Fair And Equitable" Distribution Of Voting Power Under The Public Utility Holding Company Act Of 1935, Leo W. Leary
Michigan Law Review
In the Public Utility Holding Company Act of 1935 Congress gave the Securities and Exchange Commission the task of investigating voting power distribution among security holders in electric and gas holding companies and their subsidiaries. If the Commission finds that the corporate structure or continued existence of any company in a holding company system "unfairly or inequitably" distributes voting power among the investors in the system, it is the Commission's duty to order the offending corporation to take "such steps as the Commission shall find necessary" to cure this condition. This paper is an attempt to ascertain what the Commission …
Federal Procedure-Applicability Of State Decisional Law Interpreting State Statutes Of Limitations Under Section 11 (E) Of The Bankruptcy Act, Charles E. Oldfather S.Ed
Federal Procedure-Applicability Of State Decisional Law Interpreting State Statutes Of Limitations Under Section 11 (E) Of The Bankruptcy Act, Charles E. Oldfather S.Ed
Michigan Law Review
Plaintiff is the trustee in bankruptcy of a Virginia corporation whose petition for reorganization under chapter X of the Bankruptcy Act was approved by a Virginia federal district court in 1942. Plaintiff filed this action in a New York federal district court under section 11 (e) of the Bankruptcy Act against defendant, the principal stockholder, and others for breach of fiduciary duty. The alleged breaches of duty occurred in 1927 and 1929. The defendant pleaded the New York statute of limitations and contended that it should be applied as interpreted by New York decisions, which hold that the statute begins …
Trusts-Corporate Trustee's Duty Of Loyalty-Merger Of The Trustee Corporation With A Corporation In Which The Trust Held Shares, Nancy J. Ringland
Trusts-Corporate Trustee's Duty Of Loyalty-Merger Of The Trustee Corporation With A Corporation In Which The Trust Held Shares, Nancy J. Ringland
Michigan Law Review
Securities delivered to the trustee under provisions of a will included stock in the corporate trustee and in a bank. Subsequently, the bank and the trust company affiliated, under an agreement whereby the bank acquired substantially all the stock of the trust company, to be held for the benefit of the shareholders of the bank. The holders of the trust stock and the old bank stock exchanged their shares for new stock in the bank. The trust authorized the trustee to retain stocks in the trust estate, to invest in securities other than of the character prescribed by law for …
Bankruptcy-Corporate Reorganization-Power Of Court To Order Interim Payments While Petition Is Pending Under Chapter X Of Bankruptcy Act, William F. Snyder S.Ed.
Bankruptcy-Corporate Reorganization-Power Of Court To Order Interim Payments While Petition Is Pending Under Chapter X Of Bankruptcy Act, William F. Snyder S.Ed.
Michigan Law Review
A petition for reorganization was filed, pursuant to Chapter X of the Chandler Act, October 3, 1947, which was adjudged on the same day to be in good faith and within the terms of the act. The corporation was clearly solvent, in the sense that its assets exceeded its liabilities, but needed financial adjustment to meet the principal on outstanding income notes due the following June. Thereafter, and before a plan was approved, the court entered an order directing the trustee of the debtor to pay 6% to the holders of the first mortgage bonds as an interim distribution to …
A New Phase Of The Antitrust Law, Robert W. Harbeson
A New Phase Of The Antitrust Law, Robert W. Harbeson
Michigan Law Review
The divergence between the economic and legal concepts of monopoly and the consequences thereof have been emphasized by various writers in recent years. Monopoly in economics means control of the market; that is, the ability of a seller by increasing or decreasing his output to affect the price of the product sold. Moreover, monopoly is recognized as being a matter of degree, depending upon the number of buyers and sellers of a commodity and the availability of adequate substitutes, ranging from pure monopoly through duopoly, oligopoly and monopolistic competition. By contrast, as Professor Mason has pointed out, "The term monopoly …
Taxation-Income Tax-Deductions-Dividends Or Interest, Milton D. Solomon S.Ed.
Taxation-Income Tax-Deductions-Dividends Or Interest, Milton D. Solomon S.Ed.
Michigan Law Review
The difficulty of determining whether payments made by a corporation on its securities are dividends or interest has been highlighted by two recent cases, involving substantially similar facts, which came before the Supreme Court on review.
Bankruptcy-Effect Of Rule Of Erie Railroad V. Tompkins On Priorities In Federal Bankruptcy Proceedings, Michigan Law Review
Bankruptcy-Effect Of Rule Of Erie Railroad V. Tompkins On Priorities In Federal Bankruptcy Proceedings, Michigan Law Review
Michigan Law Review
A company engaged in the mortgage-guaranty business became bankrupt, the respondent being the successor company resulting from reorganization proceedings under section 77B of the Bankruptcy Act. The original company had loaned money secured by a bond and mortgage and then sold certificates to the public representing undivided shares in the mortgage, the certificates being guaranteed by the same company. The mortgagor having defaulted, the controversy in the principal case arose because the now bankrupt company had before bankruptcy repurchased two of the certificates, acquired title to a third, and held the balance of the loan for which no certificates had …
Corporations - Receivers - Rights Of Creditors Or Receiver To Raise An Objection To Corporate Action Which Would Be Open To Shareholders, Jerome J. Dick
Corporations - Receivers - Rights Of Creditors Or Receiver To Raise An Objection To Corporate Action Which Would Be Open To Shareholders, Jerome J. Dick
Michigan Law Review
The writer will attempt to show that the courts, in spite of their language of fraud and breach of trust, are not applying the legal rules of fraud and trust relationship in allowing recovery to the creditor. The cases brought by the receiver for the benefit of creditors can be roughly divided into three broad groups: (1) instances where the court speaks of a trust relationship, holding that the corporation has breached the duty of trust to the creditors; (2) situations where the court speaks of some hazy principle of "fraud" on the creditors; (3) cases where the court forgets …
Bankruptcy - Corporate Reorganization - Section 77b - Chapter X Of The Chandler Act - Boyd Case Rule, Edmund O'Hare
Bankruptcy - Corporate Reorganization - Section 77b - Chapter X Of The Chandler Act - Boyd Case Rule, Edmund O'Hare
Michigan Law Review
A subsidiary of the defendant corporation filed a reorganization petition under Section 77 B of the Bankruptcy Act and defendant presented a claim of over nine million dollars as a creditor, the claim being grounded upon moneys paid by defendant to the subsidiary for its benefit, management and supervision fees, rental and interest charges, and declared but unpaid dividends. Defendant owned about ninety-eight per cent of the common stock of the subsidiary. As the result of objections by the trustee and preferred stockholders of the subsidiary, defendant's claim was compromised at five million dollars. The reorganization plan provided in part …
Corporations - Modification Provisions Of Corporate Mortgages And Trust Indentures, Charles H. Haines Jr.
Corporations - Modification Provisions Of Corporate Mortgages And Trust Indentures, Charles H. Haines Jr.
Michigan Law Review
As early as the late 1800's it was not uncommon to find included in corporate mortgages and trust indentures provisions looking to the modification of the rights of the bondholders by action of a given majority of such holders. Ordinarily the power conferred could not be exercised by the holders of less than seventy-five per cent in value of the outstanding bonds; the modification authorized might be the alteration of security rights, the deferment of payments of interest or principal, the reduction of interest, or even the reduction of the debt. Inasmuch as the same equitable doctrines limit their use, …
Public Utility Holding Company Act - Corporate Simplification And Geographic Integration Under Section Ii, Brackley Shaw
Public Utility Holding Company Act - Corporate Simplification And Geographic Integration Under Section Ii, Brackley Shaw
Michigan Law Review
Section II of the Public Utility Holding Company Act of 1935, the so-called "death sentence" clause, carries the specifications for achieving two of the government's main objectives in passing the act: corporate simplification and geographical integration of the large utility holding company systems.
Taxation - Income Taxation Of Stock Dividends, Wallace Mendelson
Taxation - Income Taxation Of Stock Dividends, Wallace Mendelson
Michigan Law Review
In 1929 a stock dividend was paid to the holders of common stock in preferred stock of the dividend paying corporation, which had both common and preferred stock outstanding at the time the stock dividend was declared and paid. The taxpayer, as a holder of common stock, received his pro rata share of the dividend and subsequently within the same taxable year sold the preferred stock which he had so received as a dividend. Held, that under the Revenue Act of 1928, (1) the receipt of the stock dividend was not a taxable occasion, and ( 2) the basis …
Corporations-Right Of Officers To Purchase Claims Against The Corporation And Enforce Them At Their Face Value
Michigan Law Review
Defendant was enlisted by one of the insolvent corporation's creditors, a holder of preferred stocks and debentures, to buy up landlord's claims against the corporation. These claims were large in number and amounts and were crucial elements in a successful reorganization. By means of the stock vote of the creditor, defendant was elected director of the corporation and remained as such for one month, though during this time he was not active in acquiring landlord's claims. Upon resignation as director, defendant was successful in buying up most of the landlord's claims, it being a fair inference from the facts that …
Bankruptcy-Receivership As Basis For Action Under Section 77b
Bankruptcy-Receivership As Basis For Action Under Section 77b
Michigan Law Review
The Bankruptcy Act, Section 77B (a), provides that creditors with more than a fixed minimum of claims may file a petition proposing a corporate reorganization and stating "that such corporation is insolvent or unable to meet its debts as they mature and, if a prior proceeding in bankruptcy or equity receivership is not pending, that it has committed an act of bankruptcy within four months . . . . " On a petition which alleged no prior proceeding in bankruptcy nor any act of bankruptcy within four months but did allege the appointment of receivers in an action in the …
Corporations-Right Of Stockholder To Inspect Stock Book Of Bankrupt Corporation Under Section 77b
Corporations-Right Of Stockholder To Inspect Stock Book Of Bankrupt Corporation Under Section 77b
Michigan Law Review
Petitioner was the controlling stockholder of B corporation, which had its petition for reorganization under Section 77B of the National Bankruptcy Act approved. Being dissatisfied with the present board, he applied to the district court for an order directing the trustees of B to permit him to examine the stock book for the purpose of securing names of stockholders in order to call a meeting to elect a new board. Application was denied by the district court on the ground that calling a meeting would impede rapidity of reorganization. On appeal, held, application should have been granted, for Section …
Bankruptcy- Preferred Stockholders As Creditors For Accrued Dividends Under Section 77b Of The Bankruptcy Act
Michigan Law Review
Preferred stockholders were "beguiled" into purchasing their stock, and paid, as part of the subscription price, for accrued dividends at the rate of 6 per cent per annum from June 1, 1933, to the date of their respective subscriptions, upon the "virtual promise of refund" on December 1, 1933, the next dividend date. No dividend was declared or paid. Such stockholders seek to file a petition for the reorganization of the corporation under Section 77B of the Bankruptcy Act as "creditors" within the meaning of the word as employed in that section. Held, they are "creditors" within the meaning …
Constitutional Law--Mortgages--Frazier-Lemke Act
Constitutional Law--Mortgages--Frazier-Lemke Act
Michigan Law Review
In 1922 and 1924 appellee mortgaged property worth $18,000 to secure a loan of $9,000 from appellant which was to be repaid in installments over a period of thirty-four years. Default being made on the covenants in the mortgage, the mortgagee declared the full amount due and brought a suit to foreclose. Proceedings were stayed when the appellee sought relief under Section 75 of the Bankruptcy Act, but he was unable to obtain the requisite majority in number and amount to the composition proposed. The state court entered a foreclosure judgment and ordered a sale. The mortgagor then sought relief …
Corporations-Section 77b Of The Bankruptcy Act-To What Corporations It Applies
Corporations-Section 77b Of The Bankruptcy Act-To What Corporations It Applies
Michigan Law Review
Creditors of a title and mortgage company which had gone into receiver's hands petitioned for a reorganization of the company under Section 77B of the Bankruptcy Act. Held, that the company was an insurance corporation. Insurance corporations are not amenable to Section 77B. Petition for reorganization dismissed. In re New York Title and Mortgage Co., (D. C. N. Y. 1934) 9 F. Supp. 319.