Unwritten Law and the Odd Ones Out
In a new book, Douglas Baird argues that the values of reorganization professionals, more than statute or case law, define the norms of corporate bankruptcy. This Book Review shows how rule-by-reorganizers can explain Chapter 11's troubling tendency to disregard the interests of legacy creditors.
Bankruptcy grifters infiltrate the Chapter 11 process, seeking bankruptcy’s benefits for mass-tort defendants without incurring many of its costs. This Article concludes that bankruptcy should not be a procedural panacea for companies facing litigation exposure, and offers a number of potential solu…
Mandatory Aggregation of Mass Tort Litigation in Bankruptcy
Nondebtor releases are the rotten core of the “bankruptcy grifter” phenomenon that Lindsey Simon’s article critiques. Such releases are an unconstitutional exercise of substantive common lawmaking by the federal courts, and they are not necessary for the bankruptcy process to facilitate efficient an…
One Size Fits None: An Overdue Reform for Chapter 7 Trustees
Despite their differences, consumer and business Chapter 7 cases are administered by the same trustees under the same rules. We advance normative arguments against this one-size-fits-all approach, buttressed by novel empirical research. Two policy changes are appropriate: (1) trustee compensation sh…
COVID-19 Debt and Bankruptcy Infrastructure
The COVID induced debt spike on corporate balance sheets portends a wave of future bankruptcy cases. Congress should act now to build up a bankruptcy infrastructure by requiring that every circuit create a “business bankruptcy panel” designed to administer the Chapter 11 filing of large companies. R…
J. Crew, Nine West, and the Complexities of Financial Distress
The law-and-economics literature assumes that omnisciently rational “sophisticated parties” write optimal contracts, making bankruptcy law unnecessary. Two case studies, J. Crew and Nine West, illustrate the limitations of this idealized model. We argue for a theory of debt contracting based in boun…
Small Business Disaster Relief and Restructuring
To assist small businesses in the wake of an exogenous shock, Congress should consider implementing a system of lending that models the financing provided to small business debtors in a bankruptcy proceeding. Such a system would be more targeted, effective, and fair than traditional government loans…
Shocking Business Bankruptcy Law
The intersection of major crises and financial distress generates no shortage of stock stories. This Essay offers one more: how shocks can be used opportunistically in big Chapter 11 cases to unravel bankruptcy law, and to shift the system further away from the objective of responding to overindebte…
Pandemic Hope for Chapter 11 Financing
The pandemic revealed that the increasing complexity of debtors’ capital structure could supply much-needed competition in the Chapter 11 financing market, as other inside lenders increasingly challenge a debtor’s favored inside lenders. After discussing the benefits of this surprising development, …
Reconstructing the Bankruptcy Power: An Originalist Approach
The Bankruptcy Clause delimits Congress’s bankruptcy power, but its limits changed after ratification of the Thirteenth Amendment. Before, it enabled collective creditor remedies against merchant debtors; after, it provided relief to insolvent debtors threatened by economic oppression. Recognizing t…
Distorted Choice in Corporate Bankruptcy
Two new strategies—restructuring support agreements and deathtrap provisions—distort the voting process in nearly every big Chapter 11 case. Although they could be banned, this Article, the first comprehensive assessment, calls for a more nuanced approach, outlining four rules of thumb for determin…
The Proceduralist Inversion – A Response to Skeel
This essay assesses Distorted Choice in Corporate Bankruptcy, by David Skeel. While Skeel usefully identifies how Restructuring Support Agreements (RSAs) help debtors secure support for Chapter 11 reorganizations, this essay argues that Skeel fails to appreciate that RSAs can also short-circuit the …
Governance Reform and the Judicial Role in Municipal Bankruptcy
Recent proceedings involving large municipalities such as Detroit, Stockton, and Vallejo illustrate both the utility and limitations of using the Bankruptcy Code to adjust municipal debt. In this Article, we contend that, to resolve fully the distress of a substantial city, mun…
Debtor’s Dilemma: The Economic Case for Ride-Through in the Bankruptcy Code
122 Yale L.J. 1594 (2013).
Following the 2005 amendments to the Bankruptcy Code, a Chapter 7 debtor hoping to retain an encumbered asset such as a motor vehicle after bankruptcy faces at least five options. The Bankruptcy Code allows a debtor to redeem the asset, reaffirm the debt, or convert to a Ch…
Bankruptcy-Proof Finance and the Supply of Liquidity
122 Yale L.J. 460 (2012).
The 2008 financial crisis has prompted widespread criticism of the bankruptcy safe harbors for repurchase agreements (repos) and derivatives, which allow a failed firm’s counterparties to enforce these contracts outside of the bankruptcy process. The emerging consensus holds…
Bankruptcy, Backwards: The Problem of Quasi-Sovereign Debt
121 Yale L.J. 888 (2012).
This Feature considers the debts of quasi-sovereign states in light of proposals to let them file for bankruptcy protection. States that have ceded some but not all sovereign prerogatives to a central government face distinct challenges as debtors. It is unhelpful to analy…
The Economic Logic of the Lease/Loan Distinction in Bankruptcy
120 Yale L.J. 1492 (2011).
The Bankruptcy Code accords much more favorable treatment to lessors than to secured lenders, but legal scholars have yet to identify a normative justification for the disparate treatment of the two transaction types. Law-and-economics scholars have written off the lease…
Bankruptcy as Constitutional Property: Using Statutory Entitlement Theory To Abrogate State Sovereign Immunity
119 Yale L.J. 1568 (2010).
In the decade following Seminole Tribe’s ruling that Article I is not a grant of authority to abrogate state sovereign immunity, scholars and courts overwhelmingly agreed that the Eleventh Amendment barred Congress from subjecting states to suit in bankruptcy proceedings…
119 Yale L.J. 648 (2010).
In large Chapter 11 cases, the prototypical creditor is no longer a small player holding a claim much like everyone else’s, but rather a distressed debt professional advancing her own agenda. Secured creditors are more pervasive and enjoy much more control than they had e…
Applying the Absolute Priority Rule to Nonprofit Enterprises in Bankruptcy
118 Yale L.J. 1231 (2009).
The Case for Symmetry in Creditors' Rights
118 Yale L.J. 806 (2009).
Using an original framework for evaluating bankruptcy rules, this Article casts doubt on the efficiency of legal arrangements that give some creditors an absolute advantage over others in the division of a debtor’s assets. Such arrangements, which I classify as asymmetr…
Absolute Priority, Valuation Uncertainty, and the Reorganization Bargain
115 Yale L.J. 1930 (2006)
In a Chapter 11 reorganization, senior creditors can insist on being paid in full before anyone junior to them receives anything. In practice, however, departures from "absolute priority" treatment are commonplace. Explaining these deviations has been a central preoccupation…
Bailing Out Congress: An Assessment and Defense of the Air Transportation Safety and System Stabilization Act of 2001
115 Yale L.J. 438 (2005)
This Note provides the first detailed account of the conception, impact, and success of the Air Transportation Safety and System Stabilization Act (ATSSSA) of 2001, an $18 billion federal bailout of the airline industry passed eleven days after the terrorist attacks of Septem…
The Unfinished Business of Bankruptcy Reform: A Proposal To Improve the Treatment of Support Creditors
115 Yale L.J. 247 (2005)
Amid the controversy surrounding the recently enacted Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (2005 Act), few commentators have focused on the Act's provisions designed to enhance the protection of "support creditors"--a class of creditors consisting …
More Equal than Others: Defending Property-Contract Parity in Bankruptcy
114 Yale L.J. 1099 (2005)
Contracts create property; contractual rights and obligations are property. In bankruptcy, however, this aspect of nonbankruptcy law is often not recognized. This Note argues that bankruptcy law and policy should recognize the property in contract. This Note examines instanc…
A Dilution Mechanism for Valuing Corporations in Bankruptcy
111 Yale L.J. 83 (2001)
This Article proposes a new mechanism for valuing firms in bankruptcy. Under the "senior dilution" mechanism, a court would dilute the reorganized stock issued to senior claimants by issuing additional shares to junior claimants until there was no excess demand for the stock a…
Currency Policies and Legal Development in Colonial New England
110 Yale L.J. 1303 (2001)
This Article presents a new interpretation of the relation of law to economic development in colonial New England. Prior legal historical scholarship has focused almost exclusively on judicial decisionmaking, emphasizing judges' role in adapting the law in some optimal way …