Law Commons^™

Safe Harboring Sloppiness: The Scope Of, And Available Remedies Under, Sections 363(M) And 364(E), Vishal Patel

Emory Bankruptcy Developments Journal

No abstract provided.

Third-Party Bankruptcy Releases And The Separation Of Powers: A Stern Look, Henry Reynolds

Emory Bankruptcy Developments Journal

In the last few years, bankruptcy scholars and professionals have criticized mass tort debtors’ use of chapter 11 bankruptcy as a litigation forum. One such criticism concerns mass tort debtors’ use of third-party releases: provisions in chapter 11 reorganization plans that enjoin creditors’ claims against non-debtor third parties. If a bankruptcy court approves such releases, creditors lose claims against the released third parties, which often include the debtor’s directors, insurers, or employees.

Third-party releases have troubled many. Critics and courts have said that third-party releases violate (1) the Bankruptcy Code, (2) bankruptcy policy, (3) the constitutional right to due process, …

America’S Public Shell Trafficking Problem: Ripe For Reprocessing, Harrison Lipsky

Emory Bankruptcy Developments Journal

The scourge of public shell trafficking has led to fraudsters taking advantage of and pilfering the hard-earned dollars of the American investing public for decades. These fraudsters seek to abuse the chapter 11 bankruptcy process by discharging the debt of such public shells, so that they can increase the profitability of schemes that target innocent investors, such as reverse mergers and pump-and-dump schemes. Regulators and lawmakers alike have fought back against this phenomenon through statutory reform and targeted regulatory programs; recently, their principal method of fighting back has been to consistently object to chapter 11 plans of reorganization that could …

The Texas Two-Step: How Corporate Debtors Manipulate Chapter 11 Reorganizations To Dance Around Mass Tort Liability, Laura S. Rossi

Emory Bankruptcy Developments Journal

The purpose of the bankruptcy system is to grant a “fresh start” to the honest but unfortunate debtor, while the purpose of the tort system is to make injured parties “whole” again. As a result, these systems inevitably clash when a business debtor files for bankruptcy while there are pending tort claims against it. The tension between these systems has reached a whole new level following the emergence of a new strategy deemed the “Texas Two-Step.”

A Texas statute leaves open a loophole for otherwise solvent companies to dodge mass tort liabilities and protect their assets, leaving injured plaintiffs with …

The Long And Winding Road To The Small Business Reorganization Act: Why Our Next Stop Should Be Simplicity And Accessibility, Daniel O'Hare

West Virginia Law Review

No abstract provided.

An Innovative Framework: Evaluating The New German Business Stabilization And Restructuring Law (Starug), Andreas Rauch

Northwestern Journal of International Law & Business

This comment examines the restructuring framework, restrukturierungsgesetz (“StaRUG”), and argues that this new law represents an effective—albeit radical—departure from Germany’s previous, conservative insolvency regime. Passed in response to a 2019 EU Directive aimed at modernizing restructuring law Union-wide, and integrated into the German legal system against the backdrop of the COVID-19 pandemic, StaRUG and its ancillary reforms in other areas of German law create a restructuring proceeding that places a premium on a debtor’s continued business operations. Thus, in a striking shift from the traditional German approach to business distress, which strongly emphasized creditor rights, the new StaRUG focuses on …

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 holdout problem, …

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 a host …

Loopholes For The Affluent Bankrupt, David R. Hague

St. John's Law Review

(Excerpt)

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 …

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

Dickinson Law Review (2017-Present)

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 have …

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

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 rush of counterparties to novate …

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

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 existence of …

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

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 that characterized the Lehman …

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

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 as these …

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 …

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 impose negative …

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 has been …

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.

The Rejection Of Collective Bargaining Agreements Within Bankruptcy Reorganization: Reconciling A Legislative Dilemma, Gust Goutras

Akron Law Review

In 1981, a Dallas based conglomerate, LTV Corporation, spun-off a subsidiary known as Wilson Foods. The purpose for this action was that Wilson Foods, the nation's fifth largest meat packer was suffering from financial difficulties. Shortly after the spin-off, Wilson Foods entered into a collective bargaining agreement with its unionized employees, initiating a wage freeze through 1985. Under this arrangement, Wilson Foods' losses continued to escalate.

Betting On The Upside: Why Affirming River Road Favors Distressed Debt Speculators Over The Rehabilitation Of Businesses, Julia L. Onorato

Northwestern University Law Review

The Chapter 11 bankruptcy process demands a careful balance between protecting the creditors’ rights to be repaid and allowing a failing entity the ability to restructure. The Supreme Court in RadLAX Gateway Hotel affirmed the Seventh Circuit’s holding in River Road and interpreted the Bankruptcy Code in a way that improperly shifts this balance towards the most senior creditors at the expense of business. This Note will analyze the circuit disagreement over the cramdown provision in the Bankruptcy Code and the Supreme Court’s ultimate resolution. It will argue that in light of recent trends in the credit markets - including …

Choosing The "Per-Debtor" Approach To Plan Confirmation In Multi-Debtor Chapter 11 Proceedings, Suzanne T. Brindise

Northwestern University Law Review

No abstract provided.

How Courts Can Prevent Excess Emitters From Using Bankruptcy As A Forum To Avoid California Ab 32’S Allowance Deductions, Mohammed Tehrani

The Journal of Business, Entrepreneurship & the Law

This paper identifies bankruptcy as a forum in which entities that exceed their emissions limit might be able to avoid the accompanying allowance deduction. Specifically, an entity might be able to sell its assets free and clear of its allowance deduction liabilities through Section 363 to a new company comprised of the same actors. Part II contrasts which liabilities can be discharged through a Chapter 11 plan and which can be avoided through a free and clear sale under Section 363. Part III analyzes whether allowance deductions could be discharged through a Chapter 11 plan or avoided through a free …

Curbing The Exploitation Of Passive Creditors In Chapter 11 Reorganization By Leveraging The Oversight Role Of The United States Trustee, Addison Pierce

American University Business Law Review

No abstract provided.

The Manville Corporation Bankruptcy: An Abuse Of The Judicial Process?, Mark Kunkler

Pepperdine Law Review

Federal bankruptcy law offers a refuge to the honest debtor who is unable to pay his creditor's when his debts are due. Here, the twin aims of bankruptcy law, to give the debtor a fresh start and to provide roughly equal treatment for his! Creditors, are laudably accomplished. But what policies support the use of federal bankruptcy law when the "debtor" is in fact solvent and apparently seeks refuge only to escape liability for the products it manufactures? This comment examines the recent filing of the Manville Corporation for Chapter 11 protection under bankruptcy law with this question in mind.

The Code And The Constitution: Fifth Amendment Limits On The Debtor's Discharge In Bankruptcy, Nicholas A. Franke

Pepperdine Law Review

No abstract provided.

The New Value Exception To The Absolute Priority Rule In Chapter 11 Reorganizations: What Should The Rule Be? , Linda J. Rusch

Pepperdine Law Review

No abstract provided.

Mandatory Class Action Lawsuits As A Restructuring Technique, Bryant B. Edwards, Jeffrey A. Herbst, Selina K. Hewitt

Pepperdine Law Review

No abstract provided.

Rehabilitating Bankruptcy Reform, Kara J. Bruce

Nevada Law Journal

No abstract provided.

What We “Know” About Chapter 11 Cost Is Wrong, Stephen J. Lubben

Fordham Journal of Corporate & Financial Law

Among the collective wisdom about large corporate bankruptcy cases, the following points are almost undisputed: Longer chapter 11 cases cost more; prepackaged chapter 11 cases cost less; cases filed in New York or Delaware cost more; and fee examiners control the costs of big chapter 11 cases. But each of these points is wrong, and in most cases entirely backward. This Article provides empirical evidence to show why. Ultimately, I argue that the complexity of the bankruptcy and the compensation structure of the professionals retained (which may itself reflect further aspects of complexity) are the key determinants of cost. The …

Considerations For Private Equity Firms When Utilizing Chapter 11 New Value Deals, Alexandra Wilde

Michigan Business & Entrepreneurial Law Review

The new value exception to the Chapter 11 absolute priority rule provides a narrow avenue for equity holders to retain an equity interest in a reorganized company over the objections of senior creditors and interest holders. With the increasing number of Chapter 11 reorganization filings by private equity owned companies, private equity firms may be interested in exploring ways to retain their equity ownership in the debtor company. This Note explores the unique implications a private equity firm may encounter when attempting to utilize the new value exception as a last resort to maintain ownership in a debtor company. Part …