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Full-Text Articles in Law

Hostile Restructurings, Diane L. Dick Dec 2021

Hostile Restructurings, Diane L. Dick

Washington Law Review

The conventional wisdom holds that out-of-court loan restructurings are mostly consensual and collaborative. But this is no longer accurate. Highly aggressive, nonconsensual restructuring transactions—what I call “hostile restructurings”—are becoming a common feature of the capital markets. Relying on hypertechnical interpretations of loan agreements, one increasingly popular hostile restructuring method involves issuing new debt that enjoys higher priority than the existing debt; another involves transferring the most valuable collateral away from existing lenders to secure new borrowing.

These transactions are distinguishable from normal out-of-court restructurings by their use of coercive tactics to overcome not only the traditional minority lender ...


Pandemic Hope For Chapter 11 Financing, David A. Skeel Jr. Nov 2021

Pandemic Hope For Chapter 11 Financing, David A. Skeel Jr.

Faculty Scholarship at Penn Law

One of the biggest surprises of the recent pandemic from a bankruptcy perspective has been the ready availability of financing. A variety of factors—such as an estimated $2.5 trillion in available funding at the outset of the crisis and the buoyant stock market—may have contributed. In this Essay, I focus on a less widely appreciated factor, a striking shift in the capital structure of many corporate debtors. Rather than borrowing from one group of lenders, debtors now often borrow from multiple groups of diverse lenders. Although the new capital structure complexity has downsides, it also could counteract ...


The “P” Isn’T For Privacy: The Conflict Between Bankruptcy Rules And Hipaa Compliance, Sophie R. Rogers Churchill Apr 2021

The “P” Isn’T For Privacy: The Conflict Between Bankruptcy Rules And Hipaa Compliance, Sophie R. Rogers Churchill

Washington and Lee Law Review

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) included a now-ubiquitous provision designed to protect the privacy of patients’ protected health information. The provision prohibits covered entities, including health care providers and their agents, from disclosing any demographic information that may identify a patient and that relates to that patient’s medical care. The provision is broad and can include such simple information as which doctor a patient consults or the date of a patient’s consultation with a physician.

Unfortunately, such protections become impracticable in the bankruptcy setting. When a health care provider files bankruptcy, it files ...


Bankruptcy For Banks: A Tribute (And Little Plea) To Jay Westbrook, David A. Skeel Jr. Jan 2021

Bankruptcy For Banks: A Tribute (And Little Plea) To Jay Westbrook, David A. Skeel Jr.

Faculty Scholarship at Penn Law

In this brief essay, to be included in a book celebrating the work of Jay Westbrook, I begin by surveying Jay’s wide-ranging contributions to bankruptcy scholarship. Jay’s functional analysis has had a profound effect on scholars’ understanding of key issues in domestic bankruptcy law, and Jay has been the leading scholarly figure on cross-border insolvency. After surveying Jay’s influence, I turn to the topic at hand: a proposed reform that would facilitate the use of bankruptcy to resolve the financial distress of large financial institutions. Jay has been a strong critic of this legislation, arguing that financial ...


The Debtor’S Conduct At The Time Of Filing Controls In Determining Whether A Debtor Is Eligible To Convert Their Existing Case To A Case Under Subchapter V Of The Bankruptcy Code, Eric Silverstein Jan 2021

The Debtor’S Conduct At The Time Of Filing Controls In Determining Whether A Debtor Is Eligible To Convert Their Existing Case To A Case Under Subchapter V Of The Bankruptcy Code, Eric Silverstein

Bankruptcy Research Library

(Excerpt)

Congress passed the Small Business Reorganization Act of 2019 (the “SBRA”) to give small businesses a better chance to successfully reorganize under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). One of the SBRA’s most important amendments was the addition of Subchapter V to Chapter 11 of the Bankruptcy Code, which was designed to reduce the cost and complexity of a small business reorganization. Because the statute’s express terms do not address its application to existing debtors, courts have been forced to address issues of conversion and eligibility. Generally, conversion of a ...


Loopholes For The Affluent Bankrupt, David R. Hague Jan 2020

Loopholes For The Affluent Bankrupt, David R. Hague

Faculty Articles

Recent bankruptcy cases are exposing a problem. Affluent individuals filing for bankruptcy are treated more favorably under the Bankruptcy Code than those debtors with little to no means of financial sustenance or income. Did Congress intend this result? The legislative history is unclear. But one thing seems certain: The United States Bankruptcy Code contains a set of loopholes that appear to be designed for the well-to-do segment of society. Courts throughout the United States are either overlooking these provisions or simply condoning their utilization under the defensible conviction that the Bankruptcy Code permits it.

In this Article, I argue that ...


Distorted Choice In Corporate Bankruptcy, David A. Skeel Jr. Jan 2020

Distorted Choice In Corporate Bankruptcy, David A. Skeel Jr.

Faculty Scholarship at Penn Law

We ordinarily assume that a central objective of every voting process is ensuring an undistorted vote. Recent developments in corporate bankruptcy, which culminates with an elaborate vote, are quite puzzling from this perspective. Two strategies now routinely used in big cases are intended to distort, and clearly do distort, the voting process. Restructuring support agreements (RSAs) and “deathtrap” provisions remove creditors’ ability to vote for or against a proposed reorganization simply on the merits.

This Article offers the first comprehensive analysis of these new distortive techniques. One possible solution is simply to ban distortive techniques, as several scholars advocate with ...


Bankruptcy’S Role In The Covid-19 Crisis, Edward R. Morrison, Andrea C. Saavedra Jan 2020

Bankruptcy’S Role In The Covid-19 Crisis, Edward R. Morrison, Andrea C. Saavedra

Faculty Scholarship

Policymakers have minimized the role of bankruptcy law in mitigating the financial fallout from COVID-19. Scholars too are unsure about the merits of bankruptcy, especially Chapter 11, in resolving business distress. We argue that Chapter 11 complements current stimulus policies for large corporations, such as the airlines, and that Treasury should consider making it a precondition for receiving government-backed financing. Chapter 11 offers a flexible, speedy, and crisis-tested tool for preserving businesses, financing them with government funds (if necessary), and ensuring that the costs of distress are borne primarily by investors, not taxpayers. Chapter 11 saves businesses and employment, not ...


Bankruptcy’S Class Act: Class Proofs Of Claim In Chapter 11, Tori Remington Oct 2019

Bankruptcy’S Class Act: Class Proofs Of Claim In Chapter 11, Tori Remington

Dickinson Law Review

When a business files for protection under Chapter 11 bankruptcy, it must begin to pay off its debt by reorganizing or liquidating its assets. Oftentimes, both processes include terminating employees to reduce the business’s expenditures. As a result of these terminations, former employees might file a “class proof of claim” against the business to preserve any claims of unpaid wages or violations of federal law.

Whether a group may file a class proof of claim against a debtor in bankruptcy remains unclear. The Tenth Circuit has rejected the class proof of claim in bankruptcy. The remaining circuit courts that ...


Relational Preferences In Chapter 11 Proceedings, Brook E. Gotberg Jul 2019

Relational Preferences In Chapter 11 Proceedings, Brook E. Gotberg

Faculty Publications

It is no secret that creditors hate so-called "preference" actions, which permit a debtor to recover payments made to creditors on the eve of bankruptcy for the benefit of the estate. Nominally, preference actions are intended to equalize the extent to which each unsecured creditor must bear the loss of a bankruptcy discharge, or to discourage creditors from rushing to collect from the debtor in such a way that will push an insolvent debtor into bankruptcy. But empirical evidence strongly suggests that, at least in chapter 11 reorganization proceedings, preference actions do not fulfill either of these stated goals. Interviews ...


Is It Fair To Discriminate In Favor Of Pensioners In A Chapter 11 Plan?, Summer B. Chandler Apr 2019

Is It Fair To Discriminate In Favor Of Pensioners In A Chapter 11 Plan?, Summer B. Chandler

Summer Chandler

“A number of U.S. cities are plagued with debt obligations that cannot be met. As municipalities1 have turned to chapter 9 protection to ease their financial burdens, various creditor constituencies have found themselves pitted against each other as they realize that they might be forced to share a finite amount of assets and funds that are insufficient to cover all of the a municipality’s debts. The ultimate goal of a chapter 9 filing is the confirmation of an adjustment plan that implements a feasible and comprehensive restructuring of a municipality’s obligations. A municipality’s proposed plan ...


The Lehman Brothers Bankruptcy H: The Global Contagion, Rosalind Z. Wiggins, Andrew Metrick Mar 2019

The Lehman Brothers Bankruptcy H: The Global Contagion, Rosalind Z. Wiggins, Andrew Metrick

The Journal of Financial Crises

When Lehman Brothers filed for bankruptcy on September 15, 2008, it was the largest such filing in U.S. history and a huge shock to the world’s financial markets, which were already stressed from the deflated housing bubble and questions about subprime mortgages. Lehman was the fourth-largest U.S. investment bank with assets of $639 billion and its operations spread across the globe. Lehman’s clients and counterparties began to disclose millions of dollars of potential losses as they accounted for their exposures. But the impact of Lehman’s demise was felt well beyond its counterparties. Concern regarding its ...


The Lehman Brothers Bankruptcy G: The Special Case Of Derivatives, Rosalind Z. Wiggins, Andrew Metrick Mar 2019

The Lehman Brothers Bankruptcy G: The Special Case Of Derivatives, Rosalind Z. Wiggins, Andrew Metrick

The Journal of Financial Crises

When it filed for bankruptcy protection in September 2008, Lehman Brothers was an active participant in the derivatives market and was party to 906,000 derivative transactions of all types under 6,120 ISDA Master Agreements with an estimated notional value of $35 trillion. The majority of Lehman’s derivatives were bilateral agreements not traded on an exchange but in the over-the-counter (OTC) market. Because derivatives enjoyed an exemption from the automatic stay provisions of the U.S. Bankruptcy Code, parties to Lehman’s derivatives could seek resolution and self-protection without the guidance and restraint of the bankruptcy court. The ...


The Lehman Brothers Bankruptcy F: Introduction To The Isda Master Agreement, Christian M. Mcnamara, Andrew Metrick Mar 2019

The Lehman Brothers Bankruptcy F: Introduction To The Isda Master Agreement, Christian M. Mcnamara, Andrew Metrick

The Journal of Financial Crises

When Lehman Brothers Holdings, Inc. (LBHI) sought Chapter 11 protection, the more than 6,000 counterparties with which its subsidiaries had entered into over 900,000 over-the-counter (OTC) derivatives transactions faced the question of how best to respond to protect their interests. The existence of standardized documentation developed by the International Swaps and Derivatives Association (ISDA) for entering into such transactions meant that the counterparties likely thought that they were dealing with a well-defined and robust set of options in answering this question. Yet, in practice, the resolution of Lehman’s OTC derivatives portfolio ended up being less orderly than ...


The Lehman Brothers Bankruptcy E: The Effects On Lehman’S U.S. Broker-Dealer, Rosalind Z. Wiggins, Andrew Metrick Mar 2019

The Lehman Brothers Bankruptcy E: The Effects On Lehman’S U.S. Broker-Dealer, Rosalind Z. Wiggins, Andrew Metrick

The Journal of Financial Crises

Lehman’s U.S. broker-dealer, Lehman Brothers Inc. (LBI), was excluded from the parent company’s bankruptcy filing on September 15, 2008, because it was thought that the solvent subsidiary might be able to wind down its affairs in a normal fashion. However, the force of the parent’s demise proved too strong, and within days, LBI and dozens of Lehman subsidiaries around the world were also in liquidation. As a regulated broker-dealer, LBI was required to comply with the Securities and Exchange Commission financial-responsibility rules for broker-dealers, including maintaining customer assets separately. However, the corporate complexity and enterprise integration ...


The Lehman Brothers Bankruptcy B: Risk Limits And Stress Tests, Rosalind Z. Wiggins, Andrew Metrick Mar 2019

The Lehman Brothers Bankruptcy B: Risk Limits And Stress Tests, Rosalind Z. Wiggins, Andrew Metrick

The Journal of Financial Crises

Investment banks are in the business of taking calculated risks. Risk management infrastructure facilitates the safe pursuit of profits and the balancing of associated risks. By 2006, Lehman Brothers was thought to have a very respectable risk management system, and even its regulator, the Securities and Exchange Commission, viewed its risk framework as being fully compliant with regulatory requirements. In its public disclosures, Lehman characterized its risk controls as “meaningful constraints on its risk taking” and evidence of its continued financial stability. Beginning in late 2006, however, Lehman began dismantling its carefully crafted risk management framework as it pursued a ...


The Lehman Brothers Bankruptcy A: Overview, Rosalind Z. Wiggins, Thomas Piontek, Andrew Metrick Mar 2019

The Lehman Brothers Bankruptcy A: Overview, Rosalind Z. Wiggins, Thomas Piontek, Andrew Metrick

The Journal of Financial Crises

On September 15, 2008, Lehman Brothers Holdings, Inc., the fourth-largest U.S. investment bank, sought Chapter 11 protection, initiating the largest bankruptcy proceeding in U.S. history. The demise of the 164-year old firm was a seminal event in the global financial crisis. Under the direction of its long-time Chief Executive Officer Richard Fuld, Lehman had been very successful pursuing a high-leverage, high-risk business model that required it to daily raise billions of dollars to fund its operations. Beginning in 2006, Lehman began to invest aggressively in real-estate-related assets and soon had significant exposures to housing and subprime mortgages, just ...


Catholic Dioceses In Bankruptcy, Marie T. Reilly Jan 2019

Catholic Dioceses In Bankruptcy, Marie T. Reilly

Catholic Dioceses in Bankruptcy

The Catholic Church is coping with mass tort liability for sexual abuse of children by priests. Since 2004, eighteen Catholic organizations have filed for relief in bankruptcy. Fifteen debtors emerged from bankruptcy after settling with sexual abuse claimants and insurers. During settlement negotiations, sexual abuse claimants and debtors clashed over the extent of the debtors’ property and ability to pay claims. Although such disputes are common in chapter 11 plan negotiations, the Catholic cases required the parties and bankruptcy courts to account for unique religious attributes of Catholic debtors. This article reviews the arguments and outcomes on property issues based ...


The Suitability Of South Africa's Business Rescue Procedure In The Reorganization Of Small-To-Medium-Sized Enterprises: Lessons From Chapter 11 Of The United States Bankruptcy Code., Mikovhe Maphiri Oct 2018

The Suitability Of South Africa's Business Rescue Procedure In The Reorganization Of Small-To-Medium-Sized Enterprises: Lessons From Chapter 11 Of The United States Bankruptcy Code., Mikovhe Maphiri

Michigan Business & Entrepreneurial Law Review

South African small- to medium-sized enterprises (“SMEs”) are the bread and butter of our economy. Providing much-needed employment and developing the skills of historically disadvantaged persons formally and informally are some of the most significant benefits of SMEs in a developing country such as South Africa. However, despite these significant contributions to the socioeconomic development of the country, SMEs generally have the lowest survival rates in the world as compared to large enterprises globally, resulting in high rates of business failure and the loss of jobs which these entities create. The Companies Act of 2008 replaces the previous judicial management ...


Between Dialogue And Decree: International Review Of National Courts, Robert B. Ahdieh Jun 2018

Between Dialogue And Decree: International Review Of National Courts, Robert B. Ahdieh

Robert B. Ahdieh

Recent years have seen dramatic growth in the number of international tribunals at work across the globe, from the Appellate Body of the World Trade Organization and the International Tribunal for the Law of the Sea, to the Claims Resolution Tribunal for Dormant Claims in Switzerland and the International Criminal Court. With this development has come both increased opportunity for interaction between national and international courts and increased occasion for conflict. Such friction was evident in the recent decision in Loewen Group, Inc. v. United States, in which an arbitral panel constituted under the North American Free Trade Agreement found ...


Optimal Deterrence And The Preference Gap, Brook E. Gotberg Jan 2018

Optimal Deterrence And The Preference Gap, Brook E. Gotberg

Faculty Publications

This Article is the first of its kind to argue that preference law is ineffective as a deterrent of collection behavior based on empirical evidence, drawn from interviews of actors within the field-debtors, creditors, and the attorneys who represented them in bankruptcy proceedings. This Article reports on interviews of sampled individuals who participated in successful 7 Chapter 11 reorganization cases involving preference actions. The overwhelming and indisputable conclusion from these interviews is that creditors may adjust their behavior in response to preference law, but not in ways that further the purported goal of preference deterrence. Accordingly, if preference law is ...


Foreword: Bankruptcy’S New And Old Frontiers, William W. Bratton, David A. Skeel Jr. Jan 2018

Foreword: Bankruptcy’S New And Old Frontiers, William W. Bratton, David A. Skeel Jr.

Faculty Scholarship at Penn Law

This Symposium marks the fortieth anniversary of the enactment of the 1978 Bankruptcy Code (the “1978 Code” or the “Code”) with an extended look at seismic changes that currently are reshaping Chapter 11 reorganization. Today’s typical Chapter 11 case looks radically different than did the typical case in the Code’s early years. In those days, Chapter 11 afforded debtors a cozy haven. Most everything that mattered occurred within the context of the formal proceeding, where the debtor enjoyed agenda control, a leisurely timetable, and judicial solicitude. The safe haven steadily disappeared over time, displaced by a range of ...


Jevic's Promise: Procedural Justice In Chapter 11, Pamela Foohey Jan 2018

Jevic's Promise: Procedural Justice In Chapter 11, Pamela Foohey

Articles by Maurer Faculty

In this Response to Jonathan Lipson's article, The Secret Life of Priority: Corporate Reorganization After Jevic, 93 Wash. L. Rev. 631 (2018)), I focus on Czyzewski v. Jevic Holding Corp.'s implications for procedural justice and corporate reorganization. In his article, Lipson explicitly links the chapter 11 process with the Bankruptcy Code’s substantive rules about priority, crafting a forceful argument about what procedural values the U.S. Supreme Court sought to uphold when it penned Jevic. In doing so, Lipson expounds on a broader truth about the co-option of corporate reorganization’s process in the name of value ...


Bankruptcy On The Side, Kenneth Ayotte, Anthony J. Casey, David A. Skeel Jr. Nov 2017

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

Northwestern University Law Review

This Article provides a framework for analyzing side agreements among stakeholders in corporate bankruptcy, such as intercreditor and “bad boy” agreements. These agreements are controversial because they commonly include a promise by a stakeholder 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, in other cases, parties to a side agreement may attempt to extract value from nonparties to the agreement by contracting for specific performance or excessive stipulated damages that ...


Turning The Page: The Demise Of The “Queenan Doctrine” Requiring The Adoption Of A Foreclosure Valuation Methodology In Chapter 11 Cases, Harrison Denman May 2017

Turning The Page: The Demise Of The “Queenan Doctrine” Requiring The Adoption Of A Foreclosure Valuation Methodology In Chapter 11 Cases, Harrison Denman

University of Miami Business Law Review

This Article traces the evolution of the default standard applied by bankruptcy courts to valuing a secured lender’s collateral under section 506(a) for purposes of determining whether a “diminution in value” has occurred sufficient to trigger the need for adequate protection. Historically, bankruptcy courts applied a standard premised on the scholarship of Judge Queenan of the Bankruptcy Court for the District of Massachusetts. That standard called for, absent contractual language to the contrary, application of a foreclosure valuation methodology regardless of the actual or anticipated use of such collateral during the chapter 11 cases. In recent years, there ...


Technically Bankrupt, Brook E. Gotberg Jan 2017

Technically Bankrupt, Brook E. Gotberg

Faculty Publications

What is the difference between a robot and a lawyer? The answer is not a joke, and may soon be a matter of great urgency for attorneys, as the legal field attempts to adjust to disruptive technologies that are likely to permanently alter the way that law is practiced throughout the United States. The consequences for failing to adjust to technological disruption for any industry, as demonstrated in recent years by big-name, bankrupt companies, can be disastrous. Legal tools found in chapter 11 of the Bankruptcy Code are largely intended to assist debtors in reorganizing their business affairs, preserving value ...


Lender Discrimination, Black Churches And Bankruptcy, Pamela Foohey Jan 2017

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 Churches filing ...


Business Insolvency And The Irish Debt Crisis, Paul B. Lewis Sep 2016

Business Insolvency And The Irish Debt Crisis, Paul B. Lewis

Paul Lewis

No abstract provided.


Finding Common Ground: Resolving Assumption And Assignment Of Intellectual Property Licenses In Chapter 11 Bankruptcy Through Adoption Of The Actual Test, Courtney Marie Davis Apr 2016

Finding Common Ground: Resolving Assumption And Assignment Of Intellectual Property Licenses In Chapter 11 Bankruptcy Through Adoption Of The Actual Test, Courtney Marie Davis

Journal of Intellectual Property Law

No abstract provided.


Promise Utility Doctrine And Compatibility Doctrine Under Nafta: Expropriation And Chapter 11 Considerations, Freedom-Kai Phillips Jan 2016

Promise Utility Doctrine And Compatibility Doctrine Under Nafta: Expropriation And Chapter 11 Considerations, Freedom-Kai Phillips

Canada-United States Law Journal

No abstract provided.