Law Commons^™

Creditors, Shareholders, And Losers In Between: A Failed Regulatory Experiment, Albert H. Choi, Jeffery Zhang

Law & Economics Working Papers

In the aftermath of the 2007-08 Global Financial Crisis, regulators encouraged many of the world’s largest banks to hold a new type of regulatory instrument with the goal of improving their safety and soundness. The regulatory instrument was known as a “CoCo,” short for contingent convertible bond. CoCos are neither debt nor equity. They are something in between, designed to give the bank a shot in the arm during times of stress. Many of the largest international banks have issued CoCos worth hundreds of billions of dollars. After more than ten years—a decade that includes the collapse of Credit Suisse …

Modular Bankruptcy: Toward A Consumer Scheme Of Arrangement, John A. E. Pottow

Law & Economics Working Papers

The world of international bankruptcy has seen increasing use of the versatile scheme of arrangement, a form of corporate reorganization available under English law. A key feature of the scheme is its modularity, whereby a debtor can restructure only a single class of debt, such as bond indentures, without affecting other debt, such as trade. This is the opposite of chapter 11 of the U.S. Bankruptcy Code’s comprehensive reckoning of all financial stakeholders. This article considers a novel idea: could the scheme be transplanted into the consumer realm? It argues that it could and should. Substantial benefits of more individually …

Love Hertz: Corporate Groups And Insolvency Forum Selection, John A. E. Pottow

Law & Economics Working Papers

The Hertz bankruptcy got a lot of attention, including for its bizarre equity trading. A less heralded but more significant legal aspect of that insolvency, however, was its complex interaction of cross-border insolvency proceedings.

This article discusses the “centripetal” and “centrifugal” forces in the Hertz case that counselled a U.S.-based centralized solution for an international enterprise comprising over 10,000 branches centripetally but also accommodated centrifugal European resistance to subject directors to the consequences of filing their entities in a foreign jurisdiction. This not uncommon constellation of incentives required not a COMI shift but what this article terms a jurisdiction shift …

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 …

Rethinking Criminal Contempt In The Bankruptcy Courts, John A. E. Pottow, Jason S. Levin

Law & Economics Working Papers

A surprising number of courts believe that bankruptcy judges lack authority to impose criminal contempt sanctions. We attempt to rectify this misunderstanding with a march through the historical treatment of contempt-like powers in bankruptcy, the painful statutory history of the 1978 Bankruptcy Code (including the exciting history of likely repealed 28 U.S.C. § 1481), and the various apposite rules of procedure. (Fans of the All Writs Act will delight in its inclusion.) But the principal service we offer to the bankruptcy community is dismantling the ubiquitous and persistent belief that there is some form of constitutional infirmity with "mere" bankruptcy …

Beyond Carve-Outs And Toward Reliance: A Normative Framework For Cross-Border Insolvency Choice Of Law, John A. E. Pottow

Law & Economics Working Papers

Choice of law in cross-border insolvency is gaining increased attention, not just by lowly academics but by policymakers who actually matter. I argue it is time to bring some normative guidance to the burgeoning reform efforts. At the highest level of theoretical purity, universalism seems to have (rightly) captured the biggest following. But it has been scaled back by what I call “second-order” considerations of pragmatics to its lesser, modified form. I take that retrenchment as necessary and note how it has been deployed through a carveout-based regime of subject-specific exceptions from lex fori concursus. Given that lay of the …

Sovereign Defaults Before International Courts And Tribunals, John A. E. Pottow, Emily Himes Iversen

Law & Economics Working Papers

This book review probes Michael Waibel’s new book, Sovereign Defaults Before International Courts and Tribunals. Waibel's project is ambitious, exploring international attempts to address sovereign defaults over the past century and a half. Through painstaking and comprehensive historical analysis, Waibel shows how we've been here before -- a sober reminder for those thinking Argentina is simply part of a new fad in financial default. With the UN now turning its attention to sovereign debt issues, this study is especially timely. Although somewhat disappointing in the lightness of its normative content, the book should nevertheless prove helpful to those considering the …

The Rise In Elder Bankruptcy Filings And Failure Of U.S. Bankruptcy Law, John A. E. Pottow

Law & Economics Working Papers

Recent empirical legal scholarship on the consumer bankruptcy system has uncovered a marked rise in the proportion of elder Americans filing for relief under the Bankruptcy Code. But these studies have not probed the reasons behind that rise, an omission this Article seeks to address. Professor John Pottow and colleagues recently assembled the new dataset of the Consumer Bankruptcy Project (CBP), the largest national sample of consumer debtors in this country, which he uses to explore the sources of elder bankruptcy. The findings are both striking and ominous. While multiple factors, such as health problems and medical debts, contribute to …