Business Organizations Law Commons^™

From Production Resources To Peoples Department Stores: A Similar Response By Delaware And Canadian Courts On The Fiduciary Duties Of Directors To Creditors Of Insolvent Companies, Pamela L.J. Huff, Russell C. Silberglied

Journal of Business & Technology Law

No abstract provided.

Twilight In The Zone Of Insolvency: Fiduciary Duty And Creditors Of Troubled Companies - History & Background, Royce De R. Barondes, Lisa Fairfax, Lawrence A. Hamermesh, Robert Lawless

Journal of Business & Technology Law

No abstract provided.

Twilight In The Zone Of Insolvency: Fiduciary Duty And Creditors Of Troubled Companies - Theory And Policy, Kelli A. Alces, Larry E. Ribstein, Alan Schwartz, Simone M. Sepe

Journal of Business & Technology Law

No abstract provided.

Bankruptcy Decision Making: An Empirical Study Of Continuation, Edward R. Morrison

Faculty Scholarship

Many small businesses attempt to reorganize under Chapter 11 of the U.S. Bankruptcy Code, but most are ultimately liquidated instead. Little is known about this shutdown decision. It is widely suspected that the bankruptcy process exhibits a continuation bias, allowing failing businesses to linger under the protection of the court, which resists liquidation even when it is optimal. This paper examines the shutdown decision in a sample of Chapter 11 bankruptcy cases filed in a typical bankruptcy court over the course of a year. The presence of continuation bias is tested along several dimensions – the extent of managerial control …

Direct Creditor Claims For Breach Of Fiduciary Duty: Is They Is, Or Is They Ain't? A Practitioner's Notes From The Field, Roger A. Lane

Journal of Business & Technology Law

No abstract provided.

Directors' Duties In Failing Firms, Larry E. Ribstein, Kelli A. Alces

Journal of Business & Technology Law

No abstract provided.

Twilight In The Zone Of Insolvency: Fiduciary Duty And Creditors Of Troubled Companies - The Duty To Creditors In Practice, J. William Callison, Mark A. Grovic, James J. Hanks Jr., Roger A. Lane

Journal of Business & Technology Law

No abstract provided.

Fiduciary Duties In Distressed Corporations: Second Generation Issues, Royce De R. Barondes

Journal of Business & Technology Law

No abstract provided.

Why A Fiduciary Duty Shift To Creditors Of Insolvent Business Entities Is Incorrect As A Matter Of Theory And Practice, J. William Callison

Journal of Business & Technology Law

No abstract provided.

Managers' Fiduciary Duties In Financially Distressed Corporations: Chaos In Delaware (And Elsewhere), Christopher W. Frost, Rutheford B. Campbell

ExpressO

In this article, the authors consider the nature of corporate managers’ fiduciary duties in periods when the company is in financial distress. This matter is important not only to corporate managers, who need clear rules regarding their duties, but also to equity and debt investors, who must understand the nature of corporate fiduciary duties in order to price the capital that they contribute to the enterprise and allocate the financial risks of loss to the most efficient risk bearer from among the investors.

Unfortunately, courts – especially the important Delaware courts – have made a mess of all of this. …

Corporate Form And Substantive Consolidation, William H. Widen

ExpressO

This Article reformulates substantive consolidation doctrine in light of modern financing techniques. Building upon the author's research showing the prevalence of substantive consolidation in large public bankruptcies, it offers an economic account (based on Coase's theory of firm size) to explain why we should expect that the circumstances giving rise to substantive consolidation should be common (rather than rare as suggested by the rhetoric of case law). Extending the asset partitioning theory developed by Professors Hannsmann and Kraakman, it offers a model for looking at the corporate form within corporate groups, particularly in the insolvency context. The recent Third Circuit …

Corporate Complicity Claims: Why There Is No Innocent Decison-Maker Exception To Imputing An Officer's Wrongdoing To A Bankrupt Corporation, Jonathan Witmer-Rich

Law Faculty Articles and Essays

This Article evaluates the innocent decision-maker exception in light of the doctrinal foundations of the in pari delicto defense and the Wagoner rule, general principles of agency law, and the lower court decisions that address these issues. It concludes that the innocent decision-maker exception is a doctrinal error, traceable to the logical misstep of a single lower court whose decision continues to be mistakenly followed. The innocent decision-maker exception is inconsistent with the basic principles of agency law that underlie imputation in the context of in pari delicto and the Wagoner rule. No court of appeals has explicitly addressed the …

What Makes Asset Securitization "Inefficient"?, Kenji Yamazaki

ExpressO

Despite the damage caused by the recent Enron scandal , the asset securitization market has been vibrant and has become a popular financing alternative . A number of academics emphasize its merits and suggest that it is a more favorable way of financing, and Congress’s proposal to make sales of asset in securitization immune from characterization as secured transactions under the Bankruptcy Reform Act of 2001 (the “Reform Act”) almost materialized when the Enron scandal hit the scene. Conversely, there have been accusations that securitization is not a legitimate way of financing because, for example, it fosters fraudulent transactions.

Why …

When Bankruptcy Meets Antitrust: The Case For Non-Cash Auctions In Concentrated Banking Markets, David Hahn

ExpressO

One of the most heated debates in bankruptcy law scholarship has been the optimal design of corporate bankruptcy law. While traditionalist scholars defended the actual practice of Chapter 11 of the Bakruptcy Code, the law-and-economics movement has by and large heavily crticized Chapter 11 and called for its replacement. Several models of corporate bankruptcy have been offered in the literature as imporved alternatives thereto. In this article, I examine the various models offered in the literature, as well as the basic model of Chapter 11, against a certain realistic background: that of an economy characterized by the concentrated dominance of …

Patterns In A Complex System: An Empirical Study Of Valuation In Business Bankruptcy Cases, Bernard Trujillo

ExpressO

This Article applies complex systems research methods to explore the characteristics of the bankruptcy legal system, presenting the results of an empirical study of twenty years of bankruptcy court valuation doctrine in business cramdown cases. These data provide solid descriptions of how courts exercise their discretion in valuing firms and assets.

This Article accomplishes two objectives: First, using scientific methodology, this Article explains the content of bankruptcy valuation doctrine. Second, this Article uses doctrine as a variable to explore system dynamics that govern the processes of change over time.

Significant findings include (i) courts tend to “split the difference” in …

Law And The Rise Of The Firm , Henry Hansmann, Reiner Kraakman, Richard Squire

Faculty Scholarship

Organizational law empowers firms to hold assets and enter contracts as entities that are legally distinct from their owners and managers. Legal scholars and economists have commented extensively on one form of this partitioning between firms and owners: namely, the rule of limited liability that insulates firm owners from business debts. But a less-noticed form of legal partitioning, which we call "entity shielding," is both economically and historically more significant than limited liability. While limited liability shields owners' personal assets from a firm's creditors, entity shielding protects firm assets from the owners' personal creditors (and from creditors of other business …

Bankruptcy Law And Inefficient Entitlements, Irit Haviv-Segal

ExpressO

The question as to the justification of bankruptcy law remains unanswered. The literature tends to emphasize the conflict and inability to compromise between the different normative outlooks of the insolvency law system. A deeper reflection on the existing theories of bankruptcy law reveals, however, that all theories share the same starting point: All theories share the understanding that efficiency considerations justify the enforcement of contractual bankruptcy arrangements. When the social theories call for increased levels of coercion and redistribution, these theories rely on normative considerations of distributive justice and rehabilitation values. They by no means rely on efficiency grounds. This …

Derivative Suits In Bankruptcy, Keith Sharfman

Faculty Publications

(Excerpt)

It is a fundamental tenet of corporate law that creditors, unlike shareholders, may not bring derivative suits on a firm's behalf—even if the firm is, or is nearly, insolvent. Corporate law affords creditors who are unhappy with a corporate debtor's management various remedies, such as the right (in limited circumstances) to put the firm into receivership or to sue the directors and officers directly for breaches of fiduciary duty. But the derivative suit is not among them.

The formal rationale for denying derivative standing to creditors is that a derivative suit is an assertion of ownership rights, and (in …

Editor's Observations: The Sarbanes-Oxley Act And What Came After, Frank O. Bowman Iii

Faculty Publications

On December 2, 2001, the Enron Corporation filed the largest bankruptcy petition in U.S. history. Losses to investors, creditors, employees, and pensioners were in the billions. Criminal investigations are ongoing. On May 1, 2003, the U.S. Sentencing Commission passed a set of amendments to the U.S. Sentencing Guidelines that will, among other things, prevent a federal district judge from awarding a sentence of straight probation to a defendant convicted at trial of an $11,000 mail fraud. This Issue of FSR tells the story of how the first of these apparently unrelated events led to the second. Put another way, this …

Information Privacy And Internet Company Insolvencies: When A Business Fails, Does Divesture Or Bankruptcy Better Protect The Consumer?, Farah Z. Usmani

Fordham Journal of Corporate & Financial Law

No abstract provided.

Multidisciplinary Practice After In Re Enron: Should The Debate On Mdp Change At All?, Nancy B. Rapoport

Scholarly Works

No abstract provided.

Is International Bankruptcy Possible?, Frederick Tung

Michigan Journal of International Law

Although international business firms proliferate, there is no international bankruptcy system. Instead, bankruptcy law remains a matter for individual states. The failure of a multinational firm therefore raises difficult questions of conflict and cooperation among national bankruptcy laws. In the discourse over the appropriate design for an international bankruptcy system, universalism has long held sway as the dominant idea, embraced nearly universally by bankruptcy scholars. Universalism offers a simple and elegant blueprint for international bankruptcy. Under universalism, the bankruptcy regime of the debtor firm's home country would govern worldwide, enjoying global reach to treat all of the debtor's assets and …

Small Business Reorganization And The Sabre Proposals, Karen M. Gebbia-Pinett

Fordham Journal of Corporate & Financial Law

No abstract provided.

Revised Article 9, The Proposed Bankruptcy Code Amendments And Securitizing Debtors And Their Creditors, Lois R. Lupica

Fordham Journal of Corporate & Financial Law

No abstract provided.

The Problem Of Corporate Groups, A Comment On Professor Ziegel, Robert K. Rasmussen

Fordham Journal of Corporate & Financial Law

No abstract provided.

The Soft-Landing Fallacy And Consumer Debtors, Barry E. Adler

Fordham Journal of Corporate & Financial Law

No abstract provided.

Comment On Means Testing Consumer Bankruptcy By Jean Braucher, Eric Posner

Fordham Journal of Corporate & Financial Law

No abstract provided.

Lesson From The Trenches: Debtor Educator In Theory And Practice, Susan Block-Lieb, Karen Gross, Richard L. White

Fordham Journal of Corporate & Financial Law

No abstract provided.

Mandatory Bankruptcy Counseling: The Canadian Experience, Lain Ramsay

Fordham Journal of Corporate & Financial Law

No abstract provided.

Response: Small Business Reorganization And The Sabre Proposals, Joseph A. Guzinsky

Fordham Journal of Corporate & Financial Law

No abstract provided.