Recent Bankruptcy-Related Articles of Interest Available for Downloading from SSRN
The following bankruptcy-related scholarly papers, arranged by SSRN abstract ID number, can be downloaded from the Social Science Research Network website:
Boalt Hall School of Law's Peter S. Menell: Bankruptcy Treatment of Intellectual Property Assets: an Economic Analysis (Abstract ID: 969521)
Florida State Univ. College of Law's Kelli A. Alces: "Enforcing Corporate Fiduciary Duties in Bankruptcy." (Abstract ID: 968006)
Seton Hall Univ. School of Laws Stephen Lubben: "Delaware's Irrelevance" (Abstract ID: 967892)
George Mason Univ. School of Law's David E. Bernstein, "Expert Witnesses, Adversarial Bias, and the (Partial) Failure of the Daubert Revolution" (Abstract ID: 963461)
U.S. DOJ's Gregory J. Werden: "The Admissibility of Expert Economic Testimony in Antitrust Cases" (Abstract ID: 956397)
Michael Nwogugu: "Constitutionality of US Bankruptcy Code Preemption of Mortgage Foreclosure Statutes, and Related Economic Effects" (Abstract ID: 955914)
NYU School of Law's Barry E. Adler: "The Questionable Axiom of Butner v. United States" (Abstract ID: 954153)
Loyola Univ. of Chicago's Spencer Weber Waller and Brooklyn Law School's Neil B. Cohen: "Taking Pops Ups Seriously: The Jurisprudence of the Infield Fly Rule" (Abstract ID: 949539)
Univ. of Houston Law Center's Nancy B. Rapoport: "Avoiding Judicial Wrath: The Ten Commandments for Bankruptcy Practitioners" (Abstract ID: 940769)
Washington and Lee University School of Law's Doug Rendleman: "A Cap on the Defendant's Appeal Bond?: Punitive Damages Tort Reform" (Abstract ID: 938784)
Univ. of Houston Law Center's Nancy B. Rapoport: "The Need for New Bankruptcy Ethics Rules: How Can 'One Size Fit All' Fit Anybody?" (Abstract ID: 939448)
Abstracts for each of these papers follows:
Peter S. Menell, Bankruptcy Treatment of Intellectual Property Assets: an Economic Analysis (Abstract ID: 969521):
With the rise of intellectual property in the modern economy, bankruptcy treatment of intellectual property assets has taken on ever greater importance. The law in this area must balance different approaches to asset management. Viewing the world from an ex ante perspective, intellectual property laws seek to foster investment in research and development. Freedom of contract plays a central role in maximizing the potential value of intellectual property by encouraging a robust licensing market to exploit the value of intellectual creativity. By contrast, the bankruptcy system generally views asset management from an ex post standpoint, focusing narrowly on how to maximize the value of a failing or failed enterprise. Thus, bankruptcy law affords trustees and debtors substantial leeway to rescind contracts and reorder the affairs of the failed entity. This article examines the rather complex rules governing the treatment of intellectual property assets in bankruptcy and suggests various reforms that could better promote economic efficiency.
Kelli A. Alces "Enforcing Corporate Fiduciary Duties in Bankruptcy." (Abstract ID: 968006):
Because of a gaping hole in the law of corporate governance, rogue officers and directors can escape liability for severely disloyal, bad faith management by causing the company they operate to enter bankruptcy. The disappearance of the derivative suits that enforce state law fiduciary duties once a corporation files bankruptcy threatens to significantly undermine their deterrent effect outside of bankruptcy. Bankruptcy need not serve as a safe haven for faithless corporate managers. In fact, the Bankruptcy Code provides a solution to this problem, the appointment of a chapter 11 trustee to replace, monitor, or help troubled corporate managers, but bankruptcy courts and debtors' shareholders and creditors have been too intimidated by the traditionally extreme nature of that remedy to use it effectively. As a consequence, parties wishing to hold irresponsible managers accountable for the harm they have caused the now bankrupt corporation continue to try to use state law enforcement mechanisms that are not effective within a bankruptcy case. The common belief that a chapter 11 trustee must completely replace a debtor's management makes that remedy far too expensive to use in all but the most egregious of circumstances. The resulting loophole allows culpable officers and directors to escape the consequences of their malfeasance.
This article argues that bankruptcy courts and litigants should abandon the conventional wisdom regarding the extreme nature of the appointment of a chapter 11 trustee when faced with severe problems with a debtor's management. Instead, bankruptcy courts should embrace the discretion the Bankruptcy Code gives them to define the scope of a trustee's duties in a way that addresses mitigates the harm such managers may inflict upon the debtor without causing the reorganizing company to endure the unnecessary costs or disruptions that would accompany the complete ouster of the debtor's current management. The chapter 11 trustee is, in situations of severe mismanagement of the debtor, a mandatory remedy that has fallen into disuse. Because a trustee is the only means provided by the Bankruptcy Code to address breaches of fiduciary duty by a debtor's managers, bankruptcy courts should require interested parties to use the corporate governance rules and mechanisms enumerated in the Bankruptcy Code before trying to force causes of action against management under state or other nonbankruptcy law to fit into a bankruptcy case. More specifically, courts should require litigants to bring a motion for the appointment of a trustee before requesting leave to pursue derivative suits against the debtor's managers if there is a significant problem with the debtor in possession's operation of the firm.
Stephen Lubben, "Delaware's Irrelevance" (Abstract ID: 967892):
According to its critics, most prominently Lynn LoPucki, Delaware has become so desperate for large corporate bankruptcy cases that it has diluted its oversight of these cases, resulting in a dramatic increase in repeated chapter 11 filings. This, Professor LoPucki argues, is evidence of corruption in the corporate bankruptcy system. The defenders of Delaware acknowledge the higher refiling rate in Delaware but argue that surely Delaware must offer some advantage, given the sophisticated parties that continually decide to file there.
But all of this assumes that whether or not a case filed in Delaware is the proper criterion. Using a sample of 337 chapter 11 cases from Lynn LoPucki's Bankruptcy Research Database, I present a new regression model that predicts whether a large chapter 11 case will reenter bankruptcy within five years. Among the factors in the model are variables that capture debtor characteristics like asset size, variables that capture underlying economic conditions at the start and conclusion of the debtor's chapter 11 case, and variables that indicate whether or not the debtor was engaged in one of several key industries.
None of the variables in the equation relate to whether or not the case filed in Delaware. In fact, the model's performance substantially declines upon the inclusion of Delaware. The model also performs much better than a simple model that tries to predict refiling solely based upon whether or not a case is filed in Delaware.
My model does not conclusively prove Delaware's irrelevance to the issue of whether or not a case will enter bankruptcy again, but it challenges the faith that Delaware plays a key role in the problem of refiling and raises several additional important questions. Most notably, has the whole of bankruptcy scholarship been focused in the wrong place?
David E. Bernstein, "Expert Witnesses, Adversarial Bias, and the (Partial) Failure of the Daubert Revolution" (Abstract ID: 963461):
This manuscript raises two questions that have been surprisingly missing from the voluminous law review literature on expert evidence since the landmark Daubert decision. First, what is the underlying rationale for the replacement of the old qualifications-only, let-it-all standard for expert testimony with Daubert/Federal Rule of Evidence 702's requirement that all expert testimony be subject to a stringent reliability test? Second, once we have identified this rationale, has the "Daubert revolution" succeeded on its own terms?
I conclude that the implicit rationale for the reliability test is to preserve the perceived advantages of the adversarial system, while mitigating the harms to the courts' truth-seeking function by the inevitable strong biases that accompany adversarial expert testimony. These biases include the conscious biases of hired guns, the unconscious biases of other paid experts, and the selection biases that result from the fact that attorneys "shop" for their experts from a large pool of qualified individuals.
Rule 702 thus attempts to serve a worthy goal, but it far from fully succeeds in efficiently achieving this goal. First, in the context of forensic expertise in criminal cases, Rule 702 does nothing to address the huge gaps in resources between the prosecution and most defendants that severely inhibit defendants' ability to challenge unreliable prosecution expert testimony.
Second, Rule 702, applied correctly, does succeed in barring "junk science" causation evidence in toxic torts cases. However, it does so at the expense of excluding speculative evidence supporting causation, even when most experts in the field would conclude that the relevant evidence is a sufficient basis from which to find causation by a preponderance of the evidence. While Rule 702 is easily preferable to the prior overly permissive regime, it likely goes too far in insisting on a reliability test that makes the courtroom stricter about causation evidence than is the scientific community itself. The way around this problem is to amend Rule 702 to allow courts to admit educated guesses about causation, but only when nonpartisan experts, not subject to adversarial bias, are willing to make such guesses.
Finally, Rule 702 puts severe restrictions on the testimony of experience-based testimony by connoisseurs. Such experts may only testify if their field of expertise is a legitimate one, and they have proven to the court that they truly have the expertise they claim. Rule 702 also properly prevents attorneys from shopping for outlier and hired gun connoisseurs, given that there is no objective way for a jury to determine whether an experience-based expert's views are correct or representative of other experts in the field. Therefore, in the context of connoisseur testimony, courts should either replace adversarial experts with a panel of nonpartisan experts, or only allow an adversarial expert to testify if his conclusions are consistent with those of a nonpartisan advisory panel.
Gregory J. Werden, "The Admissibility of Expert Economic Testimony in Antitrust Cases" (Abstract ID: 956397):
The Federal Rules of Evidence and controlling Supreme Court precedents make expert economic testimony in antitrust cases inadmissible unless: (1) the witness is expert in relevant aspects of economics; (2) the testimony is well grounded in those aspects of economics; and (3) the testimony applies the tools of economics to the facts of the case. This chapter explains how these principles have been and should be applied. This chapter argues that strict application of these principles improves the quality and clarity of economic testimony in antitrust cases, increases the sophistication of the discourse in antitrust litigation, and enhances the accuracy of judge and jury decisions.
Michael Nwogugu, "Constitutionality of US Bankruptcy Code Preemption of Mortgage Foreclosure Statutes, and Related Economic Effects" (Abstract ID: 955914):
This article: 1) analyzes the constitutionality of US Bankruptcy Code preemption of State-law Mortgage Foreclosure laws; and 2) analyzes inherent conflicts between the federal bankruptcy laws and state real estate laws; 3) shows that these violations of constitutional law and conflicts-of-laws create increased information asymmetry, increased transaction costs and compliance costs, and inefficiency in real estate transactions.
Barry E. Adler, "The Questionable Axiom of Butner v. United States" (Abstract ID: 954153):
Named for the Supreme Court opinion in Butner v. United States, the Butner principle holds that bankruptcy law should be merely procedural and should honor state law entitlements rather than impose a set of substantive federal priority rules. The Butner principle has become a cherished axiom, but it is founded on the faulty premise that destructive forum shopping would be the result if bankruptcy law provided its own entitlements. The Butner principle should be discarded and courts or Congress should adopt a sensible federal priority regime, one that includes super-priority for tort victims.
Spencer Weber Waller and Neil B. Cohen, "Taking Pops Ups Seriously: The Jurisprudence of the Infield Fly Rule" (Abstract ID: 949539):
In 1975, the University of Pennsylvania published a remarkable item. Rather than being deemed an article, note, or comment, it was classified as an “Aside.” The item was of course, The Common Law Origins of the Infield Fly Rule. This piece of legal scholarship was remarkable in numerous ways. First, it was published anonymously and the author's identity was not known publicly for decades. Second, it was genuinely funny, perhaps one of the funniest pieces of true scholarship in a field dominated mostly by turgid prose and ineffective attempts at humor by way of cutesy titles or bad puns. Third, it was short and to the point in a field in which a reader new to law reviews would assume that authors are paid by the word or footnote. Fourth, the article was learned and actually about something – how baseball's infield fly rule is consistent with, and an example of, the common law processes of rule creation and legal reasoning in the Anglo-American tradition.
The article also was the launching point of the Law and Baseball movement. Legal scholars simply cannot keep their hands off the infield fly rule – either substantively or as a metaphor. An eminent antitrust scholar quickly responded to the Aside, arguing that the infield fly rule was in fact the product of law and economics concerns about efficiency (and potentially other more humanistic concerns) and that the Aside was fatally flawed in portraying the infield fly rule as inevitable or the product of a scientific legal regime. Metaphorically, the infield fly rule also has been used to analyze legal problems in tax, evidence, labor law, constitutional law, e-commerce, and the law of prostitution, as well as topics in areas as far afield as linguistics. It has been utilized to analyze problems in cases ranging from the law of sexual harassment to the law governing compromise and settlement. Indeed, the infield fly rule has even been cited as a possible topic of political protest and has been cited in religious sermons. The Common Law Origins of the Infield Fly Rule has been widely cited in articles dealing with both baseball and such diverse other subjects as legal theory, legal history, bankruptcy, criminal law, civil rights, constitutional law, and legal citation.
For all its greatness, though, Common Law Origins is a creature of its time. Written with reference only to common law reasoning, it bears a striking resemblance to the legal process school's conception of the proper development of law through a process of politically neutral reasoned elaboration. Even in 1975, the concept of the Legal Process school as the appropriate jurisprudential tool to view law was under heavy attack. Moreover, Common Law Origins appears to have deliberately chosen not to address earlier jurisprudential movements such as legal positivism, legal realism, and natural law which would have offered quite different explorations for the evolution and significance of the infield fly rule. In addition, the Aside was published in 1975 at the very beginning of the flowering of what is now often referred to as Post-Modern jurisprudence with its many different approaches to challenging legal orthodoxy. Such challenges can be found in an array of sources ranging from law and economics, critical legal studies, feminist jurisprudence, and cultural studies.
We propose to go beyond the common law origins of the infield fly rule and do what the author chose not to do: namely, explore the different spaces for an infield fly rule from the point of view of the great jurisprudential movements of the last hundred years. In so doing we conclude (i) that post-modern jurisprudence strongly suggests that the infield fly rule was far more socially constructed and historically contingent than previously acknowledged, and (ii) that it is much more difficult to be clever, funny, and insightful about Law and Baseball than it appears.
Nancy B. Rapoport, "Avoiding Judicial Wrath: The Ten Commandments for Bankruptcy Practitioners" (Abstract ID: 940769):
This article describes the top ten duties for bankruptcy lawyers. 1. Know the purpose(s) of the Bankruptcy Code. 2. Know the facts and the law. 3. Spend time crafting your arguments. 4. Don't lie (about conflicts of interest or about controlling law). 5. Be respectful (of other lawyers, of the system, and of other participants in the system). 6. Don't indulge your client's sleazy instincts. 7. Don't escalate a conflict unnecessarily. 8. Honor your calendar. 9. Keep your client informed. 10. Don't whine.
Doug Rendleman, "A Cap on the Defendant's Appeal Bond?: Punitive Damages Tort Reform" (Abstract ID: 938784):
The defendant's supersedeas or appeal bond was a servile drudge of appellate procedure until enormous punitive damages verdicts catapulted it out of local courthouses into headlines. From the verdict that exceeded $10 billion in Pennzoil v. Texaco in the 1980s to the punitive damages verdict of $145 billion in Engle v. Liggett Group that was reversed in the summer of 2006, appeal bonds have played a crucial role in huge-verdict litigation. This article's topic - tort reform statutes that cap an appeal bond - stemmed from punitive damages verdicts in smokers' trials against tobacco companies.
Beginning with appellate procedure, the article traces the appeal bond through related topics: federal abstention, bankruptcy, the arguments for and against state tort-reform statutes that cap an appeal bond, and state and federal constitutional doctrines, including the United States Constitution's Full Faith and Credit Clause.
Since constitutions neither compel nor forbid a limited appeal bond, the author resolved that the decision to cap or not to cap resides in the legislature's realm of evaluating public policy. The appeal bond cap's function of facilitating the defendant's entryway to the appellate court whose warranty is a crucial imprimatur for accurate and legitimate judicial decisionmaking convinced the author to commend a cap of $25 to $50 million for a defendant's appeal bond on a jury's verdict for punitive damages.
Nancy B. Rapoport, "The Need for New Bankruptcy Ethics Rules: How Can 'One Size Fit All' Fit Anybody?" (Abstract ID: 939448):
Short discussion why dormant, temporary, actual conflicts (DTACs) in bankruptcy cases can't be handled appropriately under state ethics rules.
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© Steve Jakubowski 2007