The bankruptcy process takes as a given the pre-bankruptcy allocation of economic risk. Yet, the ... more The bankruptcy process takes as a given the pre-bankruptcy allocation of economic risk. Yet, the Bankruptcy Code permits this risk to be reallocated through the adjustment process so long as that reallocation is "fair and equitable," does not "discriminate unfairly," and is in the "best interests" of creditors. The first two look to bankruptcy law for their definitions; the third derives from state law. Chapter 9 of the Bankruptcy Code does not resolve any conflicts among these requirements. This uncertain state of affairs generates a powerful incentive among most parties to settle. So long as the court retains the power to dismiss the case and remit the conflicts to the vagaries of state adjudication, Chapter 9 functions to create an institutional game of Chicken driving stakeholders to consensus.
Autonomy-based theories of contract theory have moved beyond the narrowly dutiful. Welfare-center... more Autonomy-based theories of contract theory have moved beyond the narrowly dutiful. Welfare-centered theorists have increasingly responded to criticisms by drawing moral concerns into their analysis. Refinements to virtue-based accounts of contract law bring the values of autonomy and welfare together but even the best hovers above the person whose virtues are considered. These developments collectively demonstrate a movement toward pluralism in contact theory. In short, the inadequacy of any single approach to contract theory is apparent. Scholars working from within each approach now seek to refine their theories in light of other perspectives. Yet this increasing openness to multiple perspectives has omitted sustained consideration of the center of contracts: the human person. This article draws on the work of sociologist Christian Smith and others as resources by which the movement toward pluralism can be enhanced and grounded in a deep consideration of the capacities of the human person—thus, a person-centered approach. Because Smith is a sociologist, I also draw on the work of Andrew Gold to help bridge the gap between the capacities of person and state-sanctioned legal remedies. Finally, in an extended conclusion, I demonstrate how a person-centered pluralism can ground an approach to what Margaret Radin calls the “normative degradation” of aspects of boilerplate in a principled way.
This paper represents the results of an examination of the implementation of India\u27s Insolvenc... more This paper represents the results of an examination of the implementation of India\u27s Insolvency and Bankruptcy Code, 2016 (IBC). This project included purposive sampling as well as interviews with resolution professionals, representatives of India\u27s Insolvency Professional Agencies, and officials of the Insolvency and Bankruptcy Board of India. Analysis of this data identified three problems: 1. Vesting near-plenary control of the Corporate Resolution Insolvency Process (CIRP) with a Committee of Creditors made up of financial creditors has led to a perception of inequitable distributions between the classes of creditors. 2. The CIRP provisions of the IBC are inconsistent with public policy to the extent that they were construed to fail to protect vested charges of secured creditors. 3. The CIRP provisions and the accompanying Insolvency Resolution Regulations fall short of the standards of procedural fairness. To resolve these problems this paper suggests that the Insolvency Resolution Regulations be revised to: (i) define net liquidation value as the value ofthe assets of the corporate debtor less the value of those assets subject to secured claims of holders of registered charges; (ii) require any resolution plan to account for the value of the secured claims of holders of registered charges in assets of the corporate debtor; (iii) require any resolution plan to disclose information substantiating the allocation of value within the class of financial creditors and between the classes of financial and operational creditors; and (iv) require the Committee of Creditors to provide reasons for any deviation from the norm of equitable distribution of any residual enterprise value between the classes of financial and operational creditors. In Part I of what follows there is a brief introduction to salient features of the corporate insolvency resolution process under the IBC. Part II describes the research underlying this project while Part III elaborates on certain aspects of that research. Part IV situates the conclusions of that research in the larger framework of Indian law and international practices. Finally, Part V lays out proposed changes to the CIRP Regulations and a defense of their efficacy in this context
This is a working chapter for the "Christianity and the Law" series published by Cambri... more This is a working chapter for the "Christianity and the Law" series published by Cambridge University Press. Written at an introductory level, it aims to demonstrate that the contract law doctrine of unconscionability finds its warrant in the virtues of reciprocity and justice. These virtues came to be part of the Western tradition of law in the eleventh century as scholastic theologians and jurists wove together strands of biblical revelation, Roman law, and Aristotelian commutative justice. The culmination of this project — the civil law doctrine of laesio enormis (rough equality in exchange) — remained unaffected by the Protestant Reformation. Because justice in exchange was a matter of conscience as well as law, it played a role even in the common law tradition. The gradual subjectivization of conscience and the displacement of justice in contract law by notions of utility and autonomy through the course of the nineteenth century lead to the disappearance of unconscionability in the common law. Unconscionability was resuscitated in Article 2 of the Uniform Commercial Code but its application is has proved uncertain and unpredictable. A return to a virtue-centered understanding of unconscionably — rough equality in exchange — would make unconscionability more certain and predictable.
The term "financial contracts" is often used but frequently with little understanding. ... more The term "financial contracts" is often used but frequently with little understanding. Some have asserted that the use or at least the misuse of complex financial contracts such as derivatives and swaps contributed to the financial crisis that began in 2008. Others have observed that financial contracts have contributed greatly to the efficiency of the financial markets by increasing the availability of credit and reducing its cost.Financial contracts have received special treatment under the Bankruptcy Code since its enactment in 1978. Since then Congress has expanded the scope of what amounts to exemption from the strictures of the automatic stay, the power to assume executory contracts, and scope of fraudulent conveyance attack. Freedom from the effects of bankruptcy increases the utility of financial contracts to the contract counterparties but at the cost of undermining a debtor's ability to reorganize.This piece is a short article that was published in a professional journal. Its goal was to present the basic vocabulary of financial contracts and some of their fundamental uses in the context of a story. The article goes on to address how the basic building blocks of financial contracts fare in bankruptcy. It should prove useful to students who approach financial contracts and bankruptcy without prior knowledge of either subject.
Until very recently the political story line of municipal Chapter 9 bankruptcy has seen it deploy... more Until very recently the political story line of municipal Chapter 9 bankruptcy has seen it deployed as a means to address unfunded public employee pension obligations. The reality has always been more complex but with the filings of Stockton and now Detroit the question of pensions vs. bonds has come to center stage. If the creditors cannot agree on a plan of adjustment, it can be crammed down but cramdown under Chapter 9 requires that the plan be "fair and equitable." If a municipality pursues this route to confirmation, courts will need to resolve three questions.Do preferences created by state law control bankruptcy distributions?Can a plan of adjustment that prefers retirees (or bondholders) be crammed down over the objection of the impaired class?If the answer to the second question might be no, could a municipality move assume its collective bargaining agreements subject to only the business judgment rule to avoid battling over fairness at confirmation?This working paper suggests that each question should be answered in the negative. Notwithstanding the Tenth Amendment, when a state permits its cities to file, it loses control. "In for a penny, in for a pound." If my conclusions are correct -- and even if they only may be correct -- all parties have an incentive to negotiate to a consensual plan.Dismissal is the appropriate remedy for an nonconsensual, unfair plan and the threat of sending everyone back to state court and state law remedies should be a sufficient penalty to encourage settlement.Comments, suggestions, and criticisms are actively solicited.
... He earned a JD in 1980 from the University of Wisconsin Law School. Jeremy L. Pryor is an ass... more ... He earned a JD in 1980 from the University of Wisconsin Law School. Jeremy L. Pryor is an associate at Carrell Blanton Garrett & Van Horn, PLC, in Richmond, Virginia. ... 23. Fournier Furniture, Inc. v. Waltz-Holst Blow Pipe Co., 980 F.Supp 187, 190 (WDVa. 1997). 24. ...
Part of the Bankruptcy Law Commons This Article is brought to you for free and open access by Sch... more Part of the Bankruptcy Law Commons This Article is brought to you for free and open access by Scholarly Repository @ Campbell University School of Law. It has been accepted for inclusion in Campbell Law Review by an authorized administrator of Scholarly Repository @ Campbell University School of Law.
The recent narrative of municipal bankruptcies focuses on the power of insolvent cities to reduce... more The recent narrative of municipal bankruptcies focuses on the power of insolvent cities to reduce burdensome retiree benefit obligations.' From Orange County to the cities of San Bernardino and Vallejo as well as Detroit, a principal focus has been the power of cities to cut retirement benefits free of the procedural and substantive roadblocks faced by non-municipal debtors. But the story arc has changed with the filing by the City of Stockton. Stockton did not move to reject any of its labor contracts and continued to pay the California Public Employees' Retirement System all amounts due for pensions present and future. Rather than its unions, Stockton's principal bankruptcy antagonists were the holders of its municipal bond debt. Could it be that Stockton, rather than adjusting its finances at the expense of its workers and retirees, plans to do so to the detriment of its more distant creditors? Would such a plan of adjustment be fair? Risk is inherent in all economic transactions and all creditors should understand that they are exposed to a risk of nonpayment. As the identity of creditors changes from bondholders to employees to retirees, however, actual awareness of that risk decreases. More significantly, the power to protect against that risk through use of the financial market diminishes. It is thus not surprising that state law occasionally intervenes to reallocate risk through the political process for the benefit of those less able to use the market. Whatever the reason-economic or political-the interests of some creditors are better protected from risk than others. On the one hand, the bankruptcy process takes as a given this initial allocation of risk. On the other hand, the
Ever more Americans live in a common interest community such as a homeowners’ association or cond... more Ever more Americans live in a common interest community such as a homeowners’ association or condominium. Common interest communities restrict the uses owners may make of their property but provide benefits to the owners. The community association pays for these benefits by levying assessments on the owners’ property. Common interest communities offer a wide variety of benefits that can be divided into two sorts: public and private. Local municipalities typically provide public benefits at taxpayer expense; private entities usually afford private benefits at the consumer’s expense. Like both public and private entities, common interest communities can experience the problem of financial distress. The ultimate solution to financial distress is relief under the Bankruptcy Code. Private entities are eligible for relief under chapter 11; public entities — municipalities — are eligible for relief under chapter 9. Chapter 9 affords municipalities significant protections compared to privat...
The bankruptcy process takes as a given the pre-bankruptcy allocation of economic risk. Yet, the ... more The bankruptcy process takes as a given the pre-bankruptcy allocation of economic risk. Yet, the Bankruptcy Code permits this risk to be reallocated through the adjustment process so long as that reallocation is "fair and equitable," does not "discriminate unfairly," and is in the "best interests" of creditors. The first two look to bankruptcy law for their definitions; the third derives from state law. Chapter 9 of the Bankruptcy Code does not resolve any conflicts among these requirements. This uncertain state of affairs generates a powerful incentive among most parties to settle. So long as the court retains the power to dismiss the case and remit the conflicts to the vagaries of state adjudication, Chapter 9 functions to create an institutional game of Chicken driving stakeholders to consensus.
Autonomy-based theories of contract theory have moved beyond the narrowly dutiful. Welfare-center... more Autonomy-based theories of contract theory have moved beyond the narrowly dutiful. Welfare-centered theorists have increasingly responded to criticisms by drawing moral concerns into their analysis. Refinements to virtue-based accounts of contract law bring the values of autonomy and welfare together but even the best hovers above the person whose virtues are considered. These developments collectively demonstrate a movement toward pluralism in contact theory. In short, the inadequacy of any single approach to contract theory is apparent. Scholars working from within each approach now seek to refine their theories in light of other perspectives. Yet this increasing openness to multiple perspectives has omitted sustained consideration of the center of contracts: the human person. This article draws on the work of sociologist Christian Smith and others as resources by which the movement toward pluralism can be enhanced and grounded in a deep consideration of the capacities of the human person—thus, a person-centered approach. Because Smith is a sociologist, I also draw on the work of Andrew Gold to help bridge the gap between the capacities of person and state-sanctioned legal remedies. Finally, in an extended conclusion, I demonstrate how a person-centered pluralism can ground an approach to what Margaret Radin calls the “normative degradation” of aspects of boilerplate in a principled way.
This paper represents the results of an examination of the implementation of India\u27s Insolvenc... more This paper represents the results of an examination of the implementation of India\u27s Insolvency and Bankruptcy Code, 2016 (IBC). This project included purposive sampling as well as interviews with resolution professionals, representatives of India\u27s Insolvency Professional Agencies, and officials of the Insolvency and Bankruptcy Board of India. Analysis of this data identified three problems: 1. Vesting near-plenary control of the Corporate Resolution Insolvency Process (CIRP) with a Committee of Creditors made up of financial creditors has led to a perception of inequitable distributions between the classes of creditors. 2. The CIRP provisions of the IBC are inconsistent with public policy to the extent that they were construed to fail to protect vested charges of secured creditors. 3. The CIRP provisions and the accompanying Insolvency Resolution Regulations fall short of the standards of procedural fairness. To resolve these problems this paper suggests that the Insolvency Resolution Regulations be revised to: (i) define net liquidation value as the value ofthe assets of the corporate debtor less the value of those assets subject to secured claims of holders of registered charges; (ii) require any resolution plan to account for the value of the secured claims of holders of registered charges in assets of the corporate debtor; (iii) require any resolution plan to disclose information substantiating the allocation of value within the class of financial creditors and between the classes of financial and operational creditors; and (iv) require the Committee of Creditors to provide reasons for any deviation from the norm of equitable distribution of any residual enterprise value between the classes of financial and operational creditors. In Part I of what follows there is a brief introduction to salient features of the corporate insolvency resolution process under the IBC. Part II describes the research underlying this project while Part III elaborates on certain aspects of that research. Part IV situates the conclusions of that research in the larger framework of Indian law and international practices. Finally, Part V lays out proposed changes to the CIRP Regulations and a defense of their efficacy in this context
This is a working chapter for the "Christianity and the Law" series published by Cambri... more This is a working chapter for the "Christianity and the Law" series published by Cambridge University Press. Written at an introductory level, it aims to demonstrate that the contract law doctrine of unconscionability finds its warrant in the virtues of reciprocity and justice. These virtues came to be part of the Western tradition of law in the eleventh century as scholastic theologians and jurists wove together strands of biblical revelation, Roman law, and Aristotelian commutative justice. The culmination of this project — the civil law doctrine of laesio enormis (rough equality in exchange) — remained unaffected by the Protestant Reformation. Because justice in exchange was a matter of conscience as well as law, it played a role even in the common law tradition. The gradual subjectivization of conscience and the displacement of justice in contract law by notions of utility and autonomy through the course of the nineteenth century lead to the disappearance of unconscionability in the common law. Unconscionability was resuscitated in Article 2 of the Uniform Commercial Code but its application is has proved uncertain and unpredictable. A return to a virtue-centered understanding of unconscionably — rough equality in exchange — would make unconscionability more certain and predictable.
The term "financial contracts" is often used but frequently with little understanding. ... more The term "financial contracts" is often used but frequently with little understanding. Some have asserted that the use or at least the misuse of complex financial contracts such as derivatives and swaps contributed to the financial crisis that began in 2008. Others have observed that financial contracts have contributed greatly to the efficiency of the financial markets by increasing the availability of credit and reducing its cost.Financial contracts have received special treatment under the Bankruptcy Code since its enactment in 1978. Since then Congress has expanded the scope of what amounts to exemption from the strictures of the automatic stay, the power to assume executory contracts, and scope of fraudulent conveyance attack. Freedom from the effects of bankruptcy increases the utility of financial contracts to the contract counterparties but at the cost of undermining a debtor's ability to reorganize.This piece is a short article that was published in a professional journal. Its goal was to present the basic vocabulary of financial contracts and some of their fundamental uses in the context of a story. The article goes on to address how the basic building blocks of financial contracts fare in bankruptcy. It should prove useful to students who approach financial contracts and bankruptcy without prior knowledge of either subject.
Until very recently the political story line of municipal Chapter 9 bankruptcy has seen it deploy... more Until very recently the political story line of municipal Chapter 9 bankruptcy has seen it deployed as a means to address unfunded public employee pension obligations. The reality has always been more complex but with the filings of Stockton and now Detroit the question of pensions vs. bonds has come to center stage. If the creditors cannot agree on a plan of adjustment, it can be crammed down but cramdown under Chapter 9 requires that the plan be "fair and equitable." If a municipality pursues this route to confirmation, courts will need to resolve three questions.Do preferences created by state law control bankruptcy distributions?Can a plan of adjustment that prefers retirees (or bondholders) be crammed down over the objection of the impaired class?If the answer to the second question might be no, could a municipality move assume its collective bargaining agreements subject to only the business judgment rule to avoid battling over fairness at confirmation?This working paper suggests that each question should be answered in the negative. Notwithstanding the Tenth Amendment, when a state permits its cities to file, it loses control. "In for a penny, in for a pound." If my conclusions are correct -- and even if they only may be correct -- all parties have an incentive to negotiate to a consensual plan.Dismissal is the appropriate remedy for an nonconsensual, unfair plan and the threat of sending everyone back to state court and state law remedies should be a sufficient penalty to encourage settlement.Comments, suggestions, and criticisms are actively solicited.
... He earned a JD in 1980 from the University of Wisconsin Law School. Jeremy L. Pryor is an ass... more ... He earned a JD in 1980 from the University of Wisconsin Law School. Jeremy L. Pryor is an associate at Carrell Blanton Garrett & Van Horn, PLC, in Richmond, Virginia. ... 23. Fournier Furniture, Inc. v. Waltz-Holst Blow Pipe Co., 980 F.Supp 187, 190 (WDVa. 1997). 24. ...
Part of the Bankruptcy Law Commons This Article is brought to you for free and open access by Sch... more Part of the Bankruptcy Law Commons This Article is brought to you for free and open access by Scholarly Repository @ Campbell University School of Law. It has been accepted for inclusion in Campbell Law Review by an authorized administrator of Scholarly Repository @ Campbell University School of Law.
The recent narrative of municipal bankruptcies focuses on the power of insolvent cities to reduce... more The recent narrative of municipal bankruptcies focuses on the power of insolvent cities to reduce burdensome retiree benefit obligations.' From Orange County to the cities of San Bernardino and Vallejo as well as Detroit, a principal focus has been the power of cities to cut retirement benefits free of the procedural and substantive roadblocks faced by non-municipal debtors. But the story arc has changed with the filing by the City of Stockton. Stockton did not move to reject any of its labor contracts and continued to pay the California Public Employees' Retirement System all amounts due for pensions present and future. Rather than its unions, Stockton's principal bankruptcy antagonists were the holders of its municipal bond debt. Could it be that Stockton, rather than adjusting its finances at the expense of its workers and retirees, plans to do so to the detriment of its more distant creditors? Would such a plan of adjustment be fair? Risk is inherent in all economic transactions and all creditors should understand that they are exposed to a risk of nonpayment. As the identity of creditors changes from bondholders to employees to retirees, however, actual awareness of that risk decreases. More significantly, the power to protect against that risk through use of the financial market diminishes. It is thus not surprising that state law occasionally intervenes to reallocate risk through the political process for the benefit of those less able to use the market. Whatever the reason-economic or political-the interests of some creditors are better protected from risk than others. On the one hand, the bankruptcy process takes as a given this initial allocation of risk. On the other hand, the
Ever more Americans live in a common interest community such as a homeowners’ association or cond... more Ever more Americans live in a common interest community such as a homeowners’ association or condominium. Common interest communities restrict the uses owners may make of their property but provide benefits to the owners. The community association pays for these benefits by levying assessments on the owners’ property. Common interest communities offer a wide variety of benefits that can be divided into two sorts: public and private. Local municipalities typically provide public benefits at taxpayer expense; private entities usually afford private benefits at the consumer’s expense. Like both public and private entities, common interest communities can experience the problem of financial distress. The ultimate solution to financial distress is relief under the Bankruptcy Code. Private entities are eligible for relief under chapter 11; public entities — municipalities — are eligible for relief under chapter 9. Chapter 9 affords municipalities significant protections compared to privat...
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