Law Commons^™

Milking The Estate, David R. Hague

Faculty Articles

Recent Chapter 7 bankruptcy cases are exposing a widespread problem. Chapter 7 trustees are retaining their own law firms to represent them and then in clear breach of their fiduciary duties to creditors-requesting illegitimate legal fees to be paid by the estate. This practice is immoral and particularly harmful to creditors. Indeed, every dollar paid to the trustee and his firm is a dollar that will not be distributed to creditors. The Bankruptcy Code, remarkably, allows a trustee to retain his own law firm to represent him in his capacity as a trustee. But this inherently conflicted arrangement is not …

Bankruptcy Fiduciary Duties In The World Of Claims Trading, John A.E. Pottow

Articles

In earlier work, I explored the role of fiduciary duties in the bankruptcy trustee's administration of a debtor's estate, noting the absence of any explicit demarcation of those duties in the Bankruptcy Code. In this piece, I report the highlights of that analysis and see to what extent (if any) fiduciary duties can inform policy prescriptions for the issue of bankruptcy claims trading, colorfully referred to by some as the world of "bankruptcy M&A." My initial take is pessimistic. Fiduciary duties, at least as traditionally conceived in bankruptcy, are unlikely to provide much help. But there is still a source …

The Curious Policy Implications Of In Re Semcrude: Do Crude Oil Markets Need A Volcker Rule?, Joseph A. Schremmer

Faculty Scholarship

In the summer of 2008 the nation's largest and fastest growing midstream crude oil purchaser, SemCrude, declared bankruptcy. SemCrude's demise was not the result of a bear market but of its taste for risky options trading. The bankruptcy pitted the competing liens of thousands of unpaid oil and gas producers and royalty owners who sold their crude oil to SemCrude at the wellhead against those of SemCrude's lenders and the claims of downstream purchasers. The Bankruptcy Court for the Federal District of Delaware found none of the producers' lien rights to be perfected under applicable law and awarded priority to …

Check Clearing And Voidable Preference Law Under The Bankruptcy Code, David G. Carlson

Articles

Every business practice must withstand the critique of federal voidable preference law. This article surveys how well check clearing system fares under this adjunct to the principle that unsecured creditors should share equally in a bankruptcy proceeding. Check clearing involves extending short-term credit by depositary banks to their customers. Banks routinely extend unsecured and secured credit. The fate of a bank in its customer's bankruptcy differs, depending on what kind of credit is extended. In the case of an overdraft, banks have preference risk, but they also have powerful defenses to muster against liability. In the case credit is advanced …

Reflections On Two Years Of P.R.O.M.E.S.A., David A. Skeel Jr.

All Faculty Scholarship

This Essay draws both on my scholarly and on my personal experience as a member of Puerto Rico’s oversight board to assess the first two years of the Board’s existence. I begin in a scholarly mode, by exploring the question of where P.R.O.M.E.S.A., the legislation that created the Board, came from. P.R.O.M.E.S.A.’s core provisions are, I will argue, the product of two historical patterns that have emerged in responses to the financial distress of public entities in the United States. The first dates back to the 1970s crisis in New York City, while the second is much more recent. If …

A New Approach To Executory Contracts, John A.E. Pottow

Articles

This Article will proceed as follows. First, it will offer an abbreviated explanation of the treatment of executory contracts under the Code, chronicling the development of the concept of executoriness and the subsequent challenges of its effects. Second, it will explain a new approach that embraces and makes its peace with executoriness by focusing on the proper treatment of non-executory contracts. Third, it will address some of the anticipated counterarguments to the new approach. Finally, it will offer a quick road test to demonstrate how the new approach would have more easily resolved a major litigated precedent in this field.

Brief For Professors, Lamar, Archer & Cofrin, Llp V. R. Scott Appling As Amicus Curiae, Laura Spitz

Faculty Scholarship

This brief is concerned with the Petitioner’s misinterpretation of §523(a)(2) of the United States Bankruptcy Code, 11 U.S.C. §101, et seq., which wrongly maintains that a false oral statement describing a single asset gives rise to a non-dischargeable debt. This brief shows Congress understood that §523(a)(2) simply re-enacted statutory language already having a completely settled understanding that a statement about a single asset was a “statement respecting financial condition” which must be in writing in order to give rise to a nondischargeable debt. This brief also submits that even if, arguendo, Petitioner were correct that a statement respecting financial condition …

Fiduciary Duties In Bankruptcy And Insolvency, John A. E. Pottow

Law & Economics Working Papers

Insolvency law (bankruptcy law to some) moves so quickly in the cross-border realm that this piece's discussion, started in 2015, is probably already outdated. Nonetheless, I publish it unrepentently because it turns overdue attention to the role of soft law in this domain. Building on earlier work in which I address the role of incrementalism, I discuss the marked success of the UNCITRAL Model Law on Cross-Border Insolvency and its cognate Insolvency Regulation in the EU (the latter now into its "Recast"). As predicted/hoped, the EU Recast, joining other contemporaneous reform projects, is building upon the scaffolding of legal doctrines …

Tracing Equity: Realizing And Allocating Value In Chapter 11, Edward J. Janger, Melissa B. Jacoby

Faculty Scholarship

No abstract provided.

Corporate Bankruptcy Hybridity, Melissa B. Jacoby

Faculty Publications

No abstract provided.

Tracing Equity, Melissa B. Jacoby, Edward J. Janger

Faculty Publications

No abstract provided.

Bankruptcy Law—Rethinking The Discharge Of Late Filed Taxes In Consumer Bankruptcy, Justin H. Dion, Barbara Curatolo

Faculty Scholarship

The 2005 amendments to the Bankruptcy Code, Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was enacted in order to improve bankruptcy law. However, BAPCPA has made the issue of whether late-filed taxes are dischargeable even murkier than before the amendments. After BAPCPA, some courts continued to analyze claims as they had before the amendment. Others used a “one-day-late rule” that prevented late-filed taxes from being dischargeable—even if the taxes were filed only one day late. This Article suggests a different approach. It argues that the legislature intended tax debt associated with late-filed income tax returns be dischargeable if the …

Modularity In Cross-Border Insolvency, Andrew B. Dawson

Articles

No abstract provided.

Section 704(B)(2) - The Back Door Into Chapter 7 For The Above-Median Debtor, Laura B. Bartell

Law Faculty Research Publications

No abstract provided.

Section 704(B)(2) - The Back Door Into Chapter 7 For The Above-Median Debtor, Laura B. Bartell

Law Faculty Research Publications

No abstract provided.

The Rise And Fall Of Fear Of Abuse In Consumer Bankruptcy: Most Recent Comparative Evidence From Europe And Beyond, 96 Tex. L. Rev. 1327 (2018), Jason Kilborn

UIC Law Open Access Faculty Scholarship

Prepared for a symposium celebrating the groundbreaking career of Jay Westbrook, this Article examines recent evidence of fear of abuse of the benefits of consumer bankruptcy and the gradual abatement of that fear in modern consumer insolvency law reform. It marshals evidence of a recent and accelerating retreat in both the judicial discretion that Westbrook attributed to lawmakers' fear of abuse and other more direct techniques to avoid abusive recourse to consumer discharge. Fear of abuse appears to be diminishing with accumulated experience as indicated by recent liberalizing reforms in Denmark, Slovakia, Poland, Austria, Russia, and Romania. At the same …

Reforming The True-Sale Doctrine, Heather Hughes

Articles in Law Reviews & Other Academic Journals

No abstract provided.

Bankruptcy Schedules Will Not Be Treated As Judicial Admissions In Court, Charles Akinboyewa Jr.

Bankruptcy Research Library

(Exceprt)

When an individual debtor files for bankruptcy, it must file bankruptcy schedules listing, among other things, the creditors that hold claims against the individual. The information contained on the schedules may have ramifications on the debtor and its creditors. Specifically, often debtors unknowingly fail to list certain claims, which may affect the debtor’s right to discharge a creditor’s right to a recovery. Part I of this memo discusses bankruptcy schedules and claim dischargeability. Part II illustrates the distinction between judicial and evidentiary admissions. Part III explores cases that have held bankruptcy schedules to be admissions and others that have …

A Chapter 7 Trustee’S Qualified Right Of Immunity May Be No Shield For Intentional, Negligent, Or Grossly Negligent Conduct: Analyzing And Applying The Three-Way Circuit Split, Nataniel E. Arabov

Bankruptcy Research Library

(Excerpt)

Quasi-judicial immunity is best understood as a blessing and a curse. A bankruptcy trustee is appointed to act as trustee through an order of the bankruptcy court. In Antoine v. Byers & Anderson, the Supreme Court provided a two-part test to analyze how far judicial immunity extends to persons who perform quasi-judicial functions in connection with their appointment. This test explains whether a judicial appointee is absolutely immune from personal liability to the estate or others. Under the test, a court (1) must decide whether the functions of the individual were historically adjudicative in nature, and (2) must …

Bankruptcy Tourism: How A Comi Change Can Serve As Ammunition In Debt Wars, Taylor Anderson

Bankruptcy Research Library

(Excerpt)

In general, Chapter 15 of title 11 of the United States Code (the “Bankruptcy Code”) provides a mechanism to recognize a “foreign proceeding.” Upon recognition of a foreign proceeding, the foreign representative will be allowed to sue and be sued in the United States. However, Chapter 15 distinguishes between “foreign main proceedings” and “foreign nonmain proceedings.” Upon recognition of a “foreign main proceeding” section 1520 of the Bankruptcy Code provides for certain automatic relief, including an automatic stay of proceedings against the debtor in the United States. There is no automatic relief conferred upon recognition of a foreign nonmain …

Balancing Principles Of Cooperation And Public Policy In Applying Comity, Kristen Barone

Bankruptcy Research Library

(Excerpt)

Comity is a common law legal principle that allows U.S. courts to afford deference to foreign judgments. Comity is utilized as a basis for granting extraterritorial effect to judgments of foreign courts. This principle plays an integral role in a number of cross-border bankruptcy proceedings and has been adopted as a predominate legal principal in the Model Law on Cross-Border Insolvency (the “Model Law”), promulgated by the United Nation’s Commission on International Trade, and Chapter 15 of title 11 of the United States Code (the “Bankruptcy Code”).

Although American courts have long recognized the need to extend comity to …

Effects Of Licensors’ Duty To Maintain Control Over A Trademark On Licensees’ Ability To Assert Rights Provided Under Section 365 Of The Bankruptcy Code, Arianna Clark

Bankruptcy Research Library

(Excerpt)

Under title 11 of the United States Code (the “Bankruptcy Code”), a debtor may reject or assume an executory contract, including a license for intellectual property. The definition of intellectual property does not include the term “trademark.” Consequently, it is not clear whether a non-debtor licensee can continue using a trademark if the debtor-licensor rejects it. Moreover, there appears to be a consensus forming among courts in that a debtor-licensee cannot assign a license to a third-party without the consent of the licensor. Regardless of which party initiates bankruptcy proceedings, there is a special consideration contemplated by courts– the …

A Union's Duty In Bankruptcy Cases To Fairly Represent Its Constituency, Denise Dessel

Bankruptcy Research Library

(Excerpt)

Under the National Labor Relations Act (“NLRA”), a union, as the sole representative of its workers, has a duty to fairly represent them. This duty entitles a union to fairly represent all employees, “whether members of the union or not, fairly.” A union breaches this duty when its conduct or decisions are arbitrary, discriminatory, or committed in bad faith.

The terms “arbitrary,” “discriminatory,” and “bad faith” have been interpreted through case law. Part I of this memorandum discusses the interpretation of arbitrary conduct; Part II addresses how courts have defined discriminatory conduct; and Part III analyzes how bad faith …

Bankruptcy Court Jurisdiction: Are Libel And Slander Personal Injury Torts?, Joseph Collini

Bankruptcy Research Library

(Excerpt)

A bankruptcy court may adjudicate tort claims, including libel and slander against a debtor, if it concludes that it has jurisdiction over those claims. The statutes governing a bankruptcy court’s jurisdiction, including title 11 of the United States Code (“The Bankruptcy Code”) and title 28 of the United States Code, are ambiguous. Consequently, the bankruptcy courts are divided as to their jurisdiction over libel and slander claims.

At the heart of this issue is the personal injury tort exception under 28 U.S.C.A. §157(b). The exception specifically limits the jurisdiction of the bankruptcy courts and states that personal injury torts …

Exercising Dominion And Control; An Initial Transferee’S Liability For Avoidable Transfers, Shelley Fredericks

Bankruptcy Research Library

(Excerpt)

Under section 550(a)(1) of the Bankruptcy Code, a bankruptcy trustee may collect the full amount of an avoidable transfer from the initial transferee of a fraudulent or avoidable transfer. Specifically, it provides that, “[e]xcept as otherwise provided in this section, to the extent that a transfer is avoided…the trustee may recover, for the benefit of the estate, the property transferred or…the value of such property, from the initial transferee of such transfer or the entity for whose benefit such transfer was made.” This section of the Bankruptcy Code gives power to bankruptcy trustees seeking to collect improperly transferred funds, …

Circumstances In Which A Fee Is An Excise Tax Entitled To Priority, Valerie Hammel

Bankruptcy Research Library

(Excerpt)

Title 11 of the United States Code (the “Bankruptcy Code”) enumerates several categories in which claims are entitled to receive priority. Indeed, Section 507(a)(8)(E) grants governmental units priority on obligations that are “excise tax[es] on a transaction.” The Bankruptcy Code, however, does not define the universe of circumstances necessary to fall within the excise tax priority category. Governmental units therefore spend considerable efforts litigating to ensure that their claims are granted priority under the Bankruptcy Code. Ultimately, the success of a claim will hinge on how narrowly or broadly a court interprets Section 507(a)(8)(E). Part I of this memorandum …

Conflicts Counsel Is Not A Cure All; It Does Not Overcome An Actual Conflict Of Interest, Stephanie Kenn

Bankruptcy Research Library

(Excerpt)

The Sixth Amendment of the Constitution guarantees the right to assistance of counsel. With this right comes many nuances, including the right of an individual to obtain counsel of his or her choice in civil matters if they choose to engage in such matters. The lawyer-client relationship is a fiduciary one and it carries many responsibilities on the attorney’s part. For example, a lawyer must provide “undivided loyalty” to his or her clients. This means that a lawyer must be aware of any conflicts of interest that may arise in the ordinary course of business. Lawyers must take the …

Evidentiary Support Needed For Successful Proof Of Claim Against Affiliated Debtors, Madeline Mallo

Bankruptcy Research Library

(Excerpt)

According to title 11 of the United States Code (the “Bankruptcy Code) and the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), a debtor must file schedules of the debtor’s assets and liabilities. A debtor’s schedules would include a list of all known claims against the debtor and list the claims as disputed, contingent or unliquidated.

If an entity believes they have a claim against the debtor that the debtor has not included on a schedule, or the claim is disputed, contingent, or unliquidated, that party can file a proof of claim. A proof of claim in a bankruptcy …

Stop Right There! Assessing The Role Of Collateral Estoppel In A Fraud Proceeding Against A Debtor And A Debtor-Owned Business, Brandon Dorman

Bankruptcy Research Library

(Excerpt)

In an adversary proceeding, under section 523(a)(2)(A) of title 11 of the United States Code (the “Bankruptcy Code”), to determine the non-dischargeability of a debt based upon fraud, a state courts finding of fraud against a debtor-owned business may collaterally estop the debtor in the adversary proceeding from relitigating the issue of fraud. Essential to this issue is the timing at which the debtor filed for bankruptcy. Timing is critical in determining whether the prior decision against the debtor-owned business in the state court action collaterally estopped the litigation against the debtor or whether the debtor was afforded the …

Adversary Proceeding Not Required For Bankruptcy Courts To Determine Lien Status, Justin Korenblatt

Bankruptcy Research Library

(Excerpt)

In Wells Fargo Bank, N.A. v. AMH Roman Two NC, LLC, the Fourth Circuit denied Wells Fargo’s motion to set aside an order canceling its mortgage because the motion was not timely. In 2002, Wells Fargo extended a mortgage to the debtors on a property in Pendleton, North Carolina. Two years later, debtors refinanced the property with PNC Bank. Although PNC fully repaid Wells Fargo’s loan, Wells Fargo allowed the debtors’ line of credit to remain open, and permitted the debtors to take advances totaling over $300,000. Then, in 2012, debtors filed voluntary petitions for relief under chapter …