The Bankruptcy Roundtable
Promoting the dissemination of academic and practitioner views of current bankruptcy issues
Latest News from the Bankruptcy Roundtable
Potential Resurrection of Creditor Derivative Suits on Behalf of Debtor LLCs
By Kate Scherling (Quinn Emanuel Urquhart & Sullivan, LLP) Kate Scherling Until recently, the judges of the Delaware bankruptcy court were in apparent agreement that Delaware state law acted to prohibit creditors from obtaining derivative standing to prosecute breach of fiduciary duty claims on behalf of the bankruptcy estate of a Delaware limited liability company. But in February 2024, Judge Craig T. Goldblatt broke ranks with his fellow judges in In re Pack Liquidating, LLC, No. 22-10797 (CTG), 2024 WL 409830 (Bankr. D. Del. Feb. 2, 2024), holding that the Delaware Limited Liability Company Act did not preclude the bankruptcy court from granting the official creditors’ committee standing to pursue estate causes of action (assuming it otherwise…
Fourth Circuit Holds that Bankruptcy Courts are not Limited by “Case and Controversy” Requirement of Article III
The U.S. Supreme Court has on occasion distinguished the bankruptcy courts’ power derived from Article I of the U.S. Constitution from the judicial power under Article III of the Constitution.
Delaware Bankruptcy Judge Declines to Order Arbitration of Key Pension Claims
In an opinion issued on March 27, 2024, in the In re Yellow Corporation, et. al. case, Judge Craig T. Goldblatt denied motions filed by multiemployer pension funds to arbitrate debtors’ objections to pension withdrawal liability claims in the United States Bankruptcy Court for the District of Delaware.
[Purdue Pharma Bankruptcy Series] Mass Torts, The Bankruptcy Power, and Constitutional Limits on Mandatory No-Opt-Outs Settlements
This essay explores the constitutional tensions produced by aggressive efforts to resolve mass-tort liability through federal bankruptcy proceedings, as illustrated by nonconsensual nondebtor (or third-party) releases and the so-called Texas Two-Step maneuver.
[Purdue Pharma Bankruptcy Series] What Happens After the Supreme Court’s Debacle in Purdue Pharma?
In its Purdue Pharma decision, the United States Supreme Court weakened the ability of mass tort victims to recover from injurers. The beneficiaries of this decision are fee-collecting attorneys and large institutions (such as state attorneys general) that can now divert money from victims to themselves during settlement negotiations.
[Purdue Pharma Bankruptcy Series] The End(s) of Bankruptcy Exceptionalism: The Future of Mass Tort Reorganization After Purdue Pharma
The Supreme Court’s recent opinion in Purdue Pharma ends the use of controversial nonconsensual third-party releases. It also ends a form of “bankruptcy exceptionalism” that has troubled observers for many years.
[Purdue Pharma Bankruptcy Series] Now Liquidate Purdue
It is disappointing that Purdue paid bankruptcy professionals nearly a billion dollars for a plan that violated the law. The Committee on Accountability warned this would happen.
Pledged Equity Proxy Rights and the Rise of the Board Flip
Distress happens, even at portfolio companies that once appeared financially solid. When it does, the portfolio company, its sponsor, and its lenders often enter into restructuring discussions in search of a consensual path forward, typically under the terms of a forbearance agreement.
The Rise of The Sponsor-in-Possession and Implications for Sponsor (Mis)Behavior
This Essay argues that changes in the capital markets and developments in the law and judicial practice have shifted the balance of power in many distress situations from creditors to financial sponsors.
Getting Public Information in Chapter 11
By Thomas Moers Mayer and Nancy M. Bello (Kramer Levin) Thomas Moers Mayer and Nancy M. Bello Companies in Chapter 11 must publicly report substantial financial information — indeed, more information should be reported or available publicly in Chapter 11 than outside of Chapter 11. Although public Chapter 11 debtors must continue to file Securities Exchange Commission (“SEC”) reporting, there are some exceptions. First, if the issuer meets certain criteria, the SEC will generally accept the debtor’s filing Form 8-Ks containing the monthly operating reports (“MORs”) required under Section 704 of the Bankruptcy Code and Bankruptcy Rule 2015 in lieu of annual and quarterly reports on Forms 10-K and 10-Q. Second, a debtor can generally opt to…
Bankruptcy Law in the Wake of the MeToo Movement
By Adi Marcovich Gross (Postdoctoral Fellow, Wharton Initiative on Financial Policy and Regulation; JSD Candidate, Columbia Law School) Adi Marcovich Gross The MeToo Movement has sparked a deluge of sexual misconduct-related lawsuits against corporations, prompting a number of entities, including The Weinstein Company, Boy Scouts of America, and USA Gymnastics, to seek bankruptcy protection. In my article, “Morally Bankrupt: Bankruptcy Law, Corporate Responsibility, and Sexual Misconduct,” I examine how corporations embroiled in such litigation use bankruptcy mechanisms strategically, as well as the social repercussions of such maneuvers. I argue that the way sexual misconduct claims are treated in bankruptcy directly harms existing victims and may undermine efforts to prevent future misconduct. Specifically, although bankruptcy offers a collective…
New York Bankruptcy Court: Setoff and Unjust Enrichment Cannot Be Asserted as Affirmative Defenses in Bankruptcy Avoidance Litigation
In a 2021 ruling, the U.S. Court of Appeals for the Second Circuit revived nearly 100 lawsuits seeking to recover fraudulent transfers made as part of the Madoff Ponzi scheme.
Academic Roundup 2023-2024 with Reorg
The Harvard Law School Bankruptcy Roundtable’s collaboration with Reorg continues with the first Reorg/BRT Academic Roundup.
Do Hedge Funds Exploit Material Nonpublic Information? Evidence from Corporate Bankruptcies
Hedge funds holding a large amount of unsecured debt of a financially distressed firm must decide whether to serve on the official unsecured creditors’ committee (UCC) that the U.S. Trustee appoints shortly after the firm files for Chapter 11 bankruptcy.
Can Reasonable Minds Disagree? Wesco Sends Uptier Claims to Fact-Finding
Judge Isgur’s recent summary judgment opinion inthe chapter 11 case of Wesco Aircraft Holdings, Inc. addressing the effects of a Wesco’s 2022 “uptier” liability management transaction on certain non-participating noteholders has been viewed with nearly undisguised glee…
FTX’d: Conflicting Public and Private Interests in Chapter 11
We often hear (and sometimes say) that the “public interest” plays a role in chapter 11 reorganization. But what does that really mean?
Mass Tort Bankruptcy Goes Public
Large companies like 3M, Johnson & Johnson, Purdue Pharma, and others have increasingly, and controversially, turned from multidistrict litigation to bankruptcy to resolve their mass tort liability.
The Legal Anomaly of Non-Recourse Financing
In The Legal Anomaly of Non-Recourse Financing (forthcoming in the American Bankruptcy Law Journal (2024)), we examine § 1111(b), one of the Bankruptcy Code’s most complex and challenging provisions.
Against Bankruptcy; Bankruptcy by Another Name
This week’s post features two articles, each with different views on the propriety of using bankruptcy to resolve mass tort claims.
One Step Ahead: Restructuring Considerations in an Uncertain Economic Climate
At the end of 2023, economic indicators remained mixed on whether there would be a recession or a soft landing in 2024.
Bankruptcy’s Turn to Market Value
Many lawyers viewed Chapter 11, which came into effect in 1979, as unsuccessful in the 1980s.
Early Stage Capital Raising Trends in Chapter 11 Reorganizations
Rights offerings have become a key, yet sometimes controversial, tool for companies in chapter 11.
A Commitment Rule for Insolvency Forum
The Model Law on Cross-Border Insolvency promulgated by the United Nations Commission on International Trade Law (“UNCITRAL”) looks to a debtor’s center of main interest (“COMI”) to determine the proper forum for a foreign main insolvency proceeding.
SPAC Bankruptcies
The past several years have seen a significant rise in de-SPAC transactions, through which a company goes public through a merger with a special purpose acquisition company (“SPAC”) rather than through the traditional IPO process.
Predicting Bankruptcy: Ask the Employees
The purpose of our paper is to test the predictive performance of established bankruptcy prediction models in the finance literature against a new model inclusive of employee information.