Law Commons^™

Discharging Equity: Harrington V. Purdue Pharma L.P. And The Validity Of Nonconsensual Third-Party Releases, Andrew Klauber

Duke Journal of Constitutional Law & Public Policy Sidebar

In September 2019, Purdue Pharma L.P. petitioned for bankruptcy in the Southern District of New York. Purdue, which the Sackler family had owned and operated for decades, developed and aggressively marketed addictive opioid products, contributing to the modern opioid epidemic. The tsunami of litigation arising from the opioid epidemic gave rise to claims against Purdue and the Sackler family estimated to total more than $40 trillion, causing Purdue to petition for Chapter 11 bankruptcy.

In Purdue’s plan of reorganization, it employed a nonconsensual third-party release to discharge claims against the Sackler family. Nonconsensual third-party releases controversially enjoin parties to a …

A Bona Fide Dispute: Can Bankrupt Debtors Sell Assets Free And Clear Of Federal Civil Forfeiture Claims?, Joseph Peter Gomez

Fordham Journal of Corporate & Financial Law

Auctions are wheeling-dealing extravaganzas in which frenzies of bidders fight over shiny objects. What would happen if the government busted down the doors of the auction house, took the shiny objects, and sold them online? An asset sale through section 363(b) of the Bankruptcy Code provides a court-supervised opportunity to maximize economic value for the bankruptcy estate. To sell estate assets, the debtor must either (1) pay off each creditor holding an interest in the assets or (2) strip the creditor’s interest and attach it to the proceeds of the sale. When the government asserts a civil forfeiture claim against …

Exceptions To The Rule: When Non-Debtor Entities Are Protected By The Automatic Stay, Isabella Benchetrit

Bankruptcy Research Library

(Excerpt)

In most cases, the automatic stay, under section 362 of title 11 of the United States Code (the "Bankruptcy Code"), stays all creditors from pursuing litigation against debtors. Nonetheless, non-debtor entities can obtain the protection afforded to debtors by the automatic stay in limited circumstances. There are two primary ways of staying litigation against a non-debtor. First, through demonstrating that there are exceptional circumstances to extend section 362 to a non-debtor. Second, through satisfying the standard for an injunction pursuant to section 105 of the Bankruptcy Code.

This Article considers the circumstances by which a non-debtor entity may receive …

Bankruptcy, Taxes, And The Primacy Of Irs Refund Offsets: Copley V. United States, Michelle Lyon Drumbl

Scholarly Articles

The Bankruptcy Code and the Internal Revenue Code (I.R.C.) are statutory labyrinths of federal law. Copley v. United States called on the Fourth Circuit to resolve a question that arose when respective provisions of each collided. At the heart of Copley was a married couple seeking a fresh start with an expected $3,208 income tax refund. The Copleys wished to resolve their outstanding debts in bankruptcy and maximize the relief afforded to them under the Virginia homestead exemption provision, as permitted by the Bankruptcy Code. On the other side of the proverbial table was the Internal Revenue Service (IRS) armed …

Grinding Gears: Meshing Maine Mortgage Foreclosure Law And The Bankruptcy Code, Daniel L. Cummings

Maine Law Review

In Maine interesting and unresolved questions often arise when a mortgagor files for bankruptcy after a judgment of foreclosure has been entered in state court but before a foreclosure sale has occurred. Specifically, what rights does the mortgagor have in the real property? And are the mortgagee's subsequent steps to complete the sale barred by the automatic stay of the Bankruptcy Code (“Code”)? These questions are made more difficult because Maine is a title theory state and because the foreclosure sale occurs after the expiration of the statutory redemption period rather than, as in most states, before it. Because a …

Grinding Gears: Meshing Maine Mortgage Foreclosure Law And The Bankruptcy Code, Daniel L. Cummings

Maine Law Review

In Maine interesting and unresolved questions often arise when a mortgagor files for bankruptcy after a judgment of foreclosure has been entered in state court but before a foreclosure sale has occurred. Specifically, what rights does the mortgagor have in the real property? And are the mortgagee's subsequent steps to complete the sale barred by the automatic stay of the Bankruptcy Code (“Code”)? These questions are made more difficult because Maine is a title theory state and because the foreclosure sale occurs after the expiration of the statutory redemption period rather than, as in most states, before it. Because a …

The Limited Power Of Federal Bankruptcy Courts To Stay Enforcement Of State Environmental Regulations, David A. Brenningmeyer

Maine Law Review

Over the course of the past few decades, public awareness of privately created environmental hazards has risen. As a result, state and federal legislatures have been moved to enact comprehensive environmental laws that serve both to remedy past harms and to prevent future ones. Today, environmental statutes seek to correct and prevent public health hazards as diverse as groundwater contamination, toxic waste disposal, soil contamination, destruction of native plant and animal habitats, and air pollution, to name but a few. In addition, state and federal courts have permitted the invocation of common law theories, such as nuisance and trespass, to …

Puerto Rico V. Franklin California Tax-Free Trust, Brittney E. Ciarlo

Ohio Northern University Law Review

No abstract provided.

Cybergenics Ii: Precedent And Policy Vs. Plain Meaning, Nancy A. Haller

Maine Law Review

On September 20, 2002, the U.S. Court of Appeals for the Third Circuit issued a panel opinion concluding that a court may not authorize a creditors' committee to commence an avoidance action in the trustee's name, on behalf of a bankruptcy estate. The decision shocked the bankruptcy bar and raised such a stir that many commentators raised it to the status of one of the “top cases of the year.” Furthermore, within two months, the Second Circuit came down with a squarely contrary decision, reaffirming the validity of the practice within the Second Circuit and failing to even acknowledge recent …

The Bankruptcy Of Refusing To Hire Persons Who Have Filed Bankruptcy, Terrence Cain

Faculty Scholarship

In 1978, Congress made it illegal for government employers to deny employment to, terminate the employment of, or discriminate with respect to employment against a person who has filed bankruptcy. In 1984, Congress extended this prohibition to private employers by making it illegal for such employers to terminate the employment of, or discriminate with respect to employment against a person who has filed bankruptcy. Under the law as it currently exists, private employers can refuse to hire a person who has filed bankruptcy solely because that person has filed for bankruptcy. Meanwhile, employers have substantially increased their use of credit …

Who Gets Paid? Section 365(N) Royalty Payments Under "Zombie Licenses" After A Sale Of Ip, Christopher G. Bradley

Christopher Bradley

This short article discusses the Bankruptcy Code's unusual treatment of certain intellectual property licenses. First, it gives a brief overview of § 365(n) of the Bankruptcy Code. It then provides a short analysis of a difficult but important question: If a licensee of a debtor’s intellectual property opts to retain its license rights under § 365(n), who should receive the stream of licensing payments in the event that the IP is sold: the buyer of the IP, or the debtor in bankruptcy? The answer that has emerged in some of the case law is somewhat surprising -- after providing nuanced …

Who Gets Paid? Section 365(N) Royalty Payments Under "Zombie Licenses" After A Sale Of Ip, Christopher G. Bradley

Law Faculty Popular Media

This short article discusses the Bankruptcy Code's unusual treatment of certain intellectual property licenses. First, it gives a brief overview of § 365(n) of the Bankruptcy Code. It then provides a short analysis of a difficult but important question: If a licensee of a debtor’s intellectual property opts to retain its license rights under § 365(n), who should receive the stream of licensing payments in the event that the IP is sold: the buyer of the IP, or the debtor in bankruptcy? The answer that has emerged in some of the case law is somewhat surprising -- after providing nuanced …

Health Savings Accounts And The Bankruptcy Estate, Michelle Nicotera

Bankruptcy Research Library

(Excerpt)

Section 541 of the Bankruptcy Code defines “property of the estate” to include “all legal or equitable interests of the debtor in property as of the commencement of the estate.” Consistent with a policy of expanding the bankruptcy estate, the property listed under section 541 is available to the trustee to satisfy the estate’s creditors once a petition has been filed. This aggregation provides the debtor an opportunity for a fresh start and ensures effective distribution among creditors and thus “promotes the fundamental purpose of the Bankruptcy Code.” Although section 541(a) defines “property of the estate” broadly, section 541(b) …

Bankrupting The Faith , Pamela Foohey

Missouri Law Review

This Article examines the institutions’ characteristics, reasons for filing, and case outcomes to investigate what benefits Chapter 11 brings to the organizations and whether bankruptcy is an effective solution to their financial problems. Based on the successful reorganizations and continued operations of some of the debtors in the study, it finds that Chapter 11 has the potential to provide a productive means for addressing their financial problems by offering religious organizations an avenue to rehabilitate their operations following economic downturns, failures and transitions in leadership, and standstills in negotiating with creditors. In exploring these Chapter 11 cases, this Article not …

Turnover Actions And The “Floating Check” Controversy, David R. Hague

Faculty Articles

When a debtor files for Chapter 7 bankruptcy, a Chapter 7 trustee is appointed and is charged with collecting and reducing to money the property of the bankruptcy estate. One of the most basic collection methods a trustee possesses is its turnover power under § 542(a) of the Bankruptcy Code. Pursuant to § 542(a), an entity in possession, custody, or control, during the bankruptcy case, of property that the trustee may use, sell, or lease, must deliver to the trustee, and account for, such property or the value of such property.

An interesting issue has arisen that is placing debtors …

Epic Fail: An Institutional Analysis Of Financial Distress, Jonathan C. Lipson

Jonathan C. Lipson

This paper presents an institutional analysis of financial distress. “Institutional analysis” compares the effectiveness of large-scale processes, such as markets, courts, and governments, at solving social problems. Although financial distress is one of our most acute problems, there has been virtually no effort to analyze it from an institutional perspective. This paper begins to fill that gap.

Institutional analysis shows that, contrary to conventional wisdom, financial distress is not a problem that courts, such as bankruptcy courts, usually solve by themselves. Instead, it is increasingly a problem that political organs (whether elected or regulatory) both create and purport to resolve. …

Debtors Beware: The Expanding Universe Of Non-Assumable/Non-Assignable Contracts In Bankruptcy, Michelle Harner, Carl Black, Eric Goodman

Michelle M. Harner

No abstract provided.

Federal Oil Price Controls In Bankruptcy Cases: Government Claims For Repayment Of Illegal Overcharges Should Not Be Subordinated And “Penalties” Under 11 Usc §726(A)(4), Thomas Schweitzer

Thomas A. Schweitzer

No abstract provided.

Behind Closed Doors: The Influence Of Creditors In Business Reorganizations, Michelle M. Harner, Jamie Marincic

Michelle M. Harner

General corporate law delegates the power to manage a corporation to the board of directors. The board in turn acts as a fiduciary and generally owes its duties to the corporation and its shareholders. Many courts and commentators summarize the board’s primary objective as maximizing shareholder wealth. Accordingly, one would expect a board’s conduct to be governed largely by the interests of the corporation and its shareholders. Yet, anecdotal and increasing empirical evidence suggest that large creditors wield significant influence over their corporate debtors. Although this influence is most apparent as the corporation approaches insolvency, the strength of the creditors’ …

Behind Closed Doors: The Influence Of Creditors In Business Reorganizations, Michelle M. Harner, Jamie Marincic

Faculty Scholarship

General corporate law delegates the power to manage a corporation to the board of directors. The board in turn acts as a fiduciary and generally owes its duties to the corporation and its shareholders. Many courts and commentators summarize the board’s primary objective as maximizing shareholder wealth. Accordingly, one would expect a board’s conduct to be governed largely by the interests of the corporation and its shareholders. Yet, anecdotal and increasing empirical evidence suggest that large creditors wield significant influence over their corporate debtors. Although this influence is most apparent as the corporation approaches insolvency, the strength of the creditors’ …

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 …

Panel 3: Bankruptcy & Restructuring Of Financial Institutions, Barry E. Adler, William A. Ackman, Marcia L. Goldstein, Arthur J. Gonzalez, Michael J. Krimminger, Edward R. Morrison

Faculty Scholarship

Barry Adler: Thank you all for being here. It is an honor for me to be on this panel and an honor to moderate it. Let me introduce our panel before we get started. William A. Ackman, the founder and CEO of Pershing Square Capital Management; Marsha Goldstein, a partner and chair of the business finance and restructuring department at Weil, Gotshal; the Honorable Arthur Gonzalez, a judge in the U.S. Bankruptcy Court for the Southern District of New York; and Ed Morrison, the Harvey Miller Professor of Law and Economics at Columbia Law School. Also on this panel is …

Setting Things Straight: Adding A Provision To Allow Damages For Emotional Distress In The Bankruptcy Code Could Clear Up A Lot Of Confusion, Nathan M. Priestaf

Missouri Law Review

This Comment details the history of the automatic stay, the differing treatment of the statute in various jurisdictions, and the potential ramifications to debtors. Clearly, much of the time-consuming analysis performed by courts could be avoided if the Bankruptcy Code expressly permitted recovery for emotional distress, something most courts already permit, albeit only after considerable hand-wringing and strained reasoning. As a result, this Comment proposes a statutory addition to § 362(k) that addresses the dual concerns of bankruptcy courts: (1) allowing a legitimately injured debtor to recover for emotional distress damages while (2) providing a standard and burden of proof …

D&O Insurance In Bankruptcy: Just Another Business Contract, Elina Chechelnitsky

Fordham Journal of Corporate & Financial Law

No abstract provided.

Forward: Symposium On Interdisciplinary Perspectives On Bankruptcy Reform, Michelle A. Cecil

Faculty Publications

In 2003, over 1.6 million consumers filed for bankruptcy protection, surpassing the previous record of 1.5 million bankruptcy filings set just one year earlier. In an effort to reverse the spiraling upward trend of consumer bankruptcies, and to prevent abusive debtors from using the bankruptcy system to avoid paying their debts, in April, 2005, Congress voted overwhelmingly in favor of passing the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Widely heralded as the most sweeping bankruptcy reform legislation in over a quarter of a century, BAPCPA was designed in large part to force debtors with the ability …

Debtors Beware: The Expanding Universe Of Non-Assumable/Non-Assignable Contracts In Bankruptcy, Michelle M. Harner, Carl E. Black, Eric R. Goodman

Faculty Scholarship

No abstract provided.

Derivatives And The Bankruptcy Code: Why The Special Treatment?, Franklin R. Edwards, Edward R. Morrison

Faculty Scholarship

The collapse of Long Term Capital Management (LTCM) in Fall 1998 and the Federal Reserve Bank's subsequent efforts to orchestrate a bailout raise important questions about the structure of the Bankruptcy Code. The Code contains numerous provisions affording special treatment to financial derivatives contracts, the most important of which exempts these contracts from the "automatic stay" and permits counterparties to terminate derivatives contracts with a debtor in bankruptcy and seize underlying collateral. No other counterparty or creditor of the debtor has such freedom; to the contrary, the automatic stay prohibits them from undertaking any act that threatens the debtor's assets. …

Whither The Race? A Comment On The Effects Of The Delawarization Of Corporate Reorganizations, Robert K. Rasmussen, Randall S. Thomas

Vanderbilt Law Review

The war is over and Delaware has won. The "Delawarization" of bankruptcy law appears complete. The reorganization of a large, publicly held corporation under Chapter 11 of the Bankruptcy Code today will more likely take place in the Delaware Bankruptcy Court than in any other jurisdiction.' The bankruptcy judges and lawyers in Delaware are no doubt pleased with this state of affairs, while many of their counterparts in other jurisdictions look to Delaware with envy. While few question that Delaware is the preferred forum for public corporations seeking to reorganize, it remains hotly contested whether that is a good thing. …

But Can She Keep The Car? Some Thoughts On Collateral Retention In Consumer Chapter 7 Cases, Marianne B. Culhane, Michaela M. White

Fordham Journal of Corporate & Financial Law

No abstract provided.

Interpreting The Bankruptcy Code: An Empirical Study Of The Supreme Court's Bankruptcy Decisions, Karen Gebbia

Publications

The Supreme Court has issued forty-eight bankruptcy decisionsin the two decades since the Bankruptcy Code became law. In at least thirty of these cases, the Supreme Court granted certiorari to mediate conflicts among the circuit courts of appeal.

This article studies the Court's interpretive methods. Studies of lower court bankruptcy decisions might also provide valuable information concerning interpretive method, particularly if such studies examine whether conflicting decisions arise from conflicting interpretive methods, whether appellate courts and bankruptcy courts apply divergent interpretive methods, and whether textual or non-textual decisions are more frequently overruled by higher courts or legislative action.