The Spring 2010 issue of the American Bankruptcy Institute
Law Review is an exceptional edition featuring articles on a
variety of topics. The issue includes five open-issue pieces and a
Student Note, all examining probing new issues in the field of
bankruptcy law. Additionally, the issue contains three articles and
a roundtable discussion from the American Bankruptcy Institute
Legislative Symposium held in November 2009.
The issue begins with the piece Life After Debt:
Understanding the Credit Restraint of Bankruptcy Debtors by
Katherine Porter, which examines how bankruptcy transforms how
people borrow. Prior to conducting her research, the author
hypothesized that after families emerged from bankruptcy, they
would return to borrowing. The article then examines and analyzes
empirical evidence on whether families borrow after bankruptcy and
how they do so. The author’s findings refuted her initial
hypothesis, instead the result revealed that families are more
likely to abstain from borrowing when they are vulnerable to
post-bankruptcy financial problems. Finally, the author concludes
that bankruptcy transforms the debtors' demand for credit as a
family and makes them more likely to avoid unmanageable debts in
the future.
The second open piece, by Lois Lupica, is The Costs of
BAPCPA: Report of the Pilot Study of Consumer Bankruptcy
Cases. The article examines the costs of the consumer
bankruptcy system in a pilot study to determine whether these costs
have been passed on to the consumer. Entitled the “Costs of BAPCPA
Pilot Study,” the study has attempted to identify, quantify, and
analyze the costs of BAPCPA, and offers preliminary insight into
how the Bankruptcy Code's new procedural requirements have been
monetized. The author posits that this National Study will provide
evidence as to whether the 2005 amendments to the Bankruptcy Code
have improved bankruptcy law and practice or whether they have just
made the system more complicated and costly to use.
J. Maxwell Tucker provided the issue’s third article,
Substantive Consolidation: The Cacophony Continues. In the
piece, the author agrees with the common belief that current rules
for substantive consolidation suffer from interpretive ambiguities.
However, the author seeks to determine which rule of decision a
bankruptcy court should follow to modify the structural
subordination that state corporate law imposes on creditors of a
parent corporation, vis-à-vis creditors of the subsidiary. The
author ultimately determines that deciding the correct rule for
substantive consolidation ultimately requires making a policy
choice between the "entity theory" and the "enterprise theory" of
corporate group liability. Finally, the author concludes by arguing
that lower courts’ current practice of resolving cases using
substantive consolidation may be delaying the development of a
comprehensive legislative response to the problem.
In the next piece, Beyond Chimerical Possibilities: The
Meaning and Application of Adequate Assurance of Future Performance
Under the Bankruptcy Code, author Jason B. Binford examines
the meaning and interpretations of the phrase adequate assurance of
future performance as it is used in the Bankruptcy Code,
specifically related to the assumption of executory contracts. The
author examines the congressional intent of the meaning of the
phrase, how it has been interpreted by courts, and special
consideration related to legislative history and provisions
specifically related to shopping centers. The author ultimately
concludes that adequate assurance is a very fact intensive inquiry,
making accurate prediction very difficult, but that there is a
sufficient amount of information to provide guidance as to what is
necessary to meet the requirements.
The last of the open-issue pieces, Testing the Bankruptcy
Code Safe Harbors in the Current Financial Crisis, is written
by Eleanor Heard Gilbane. There, the author gives a comprehensive
review of the changes made to the Bankruptcy Code’s safe harbor
provisions in BAPCPA and FINA. The author argues that the changes
were necessary and important because the amendments clarified many
of the past ambiguities in the law and allowed for the inclusion or
newer products and collateral arrangement. The author ultimately
concludes that there will be more clarifications needed due to
unexpected ambiguities that will surface as the legislation is
implemented and that the Safe Harbor Provisions will be the source
of many debates in the future.
From November 16 to 17, 2009, the American Bankruptcy Institute
and the Georgetown University Law Center hosted the symposium
Chapter 11 at the Crossroads: Does Reorganization Need Reform?
A Symposium on the Past, Present and Future of U.S. Corporate
Restructuring. The symposium brought together prominent
scholars from the field of bankruptcy law to discuss the current
state of Chapter 11 law and changes that may be necessary in the
future.
Leading off the symposium is Professor Barry E. Adler with his
article, A Reassessment of Bankruptcy Reorganization after
Chrysler and General Motors. In the piece, the author analyzes
the Chrysler and GM chapter 11 cases and their potential effect on
bankruptcy practice. The author examines how the
debtor-inpossession lender or its designee was afforded more than
its post-petition investments in both cases, and how bankruptcy
courts may continue to extend these precedents. The author
concludes by proposing limitations on section 363 and relying on
applicable state bankruptcy laws for asset sales of large debtor
corporations.
The second symposium piece is Repeal the Safe Harbors
by Stephen J. Lubben. This piece examines the “safe harbor”
provisions that exclude classes of derivative contracts from many
different provisions of the Bankruptcy Code. The author explains
the disadvantages of exempting derivative contracts from aspects of
bankruptcy, and the risks to the financial industry with this
continued practice. The author closes by suggesting the creation of
a new, distinct structure to resolve repeal of the safe harbor
provisions, or by adapting chapter 11 to reflect these changes.
The third symposium piece is Preserving State Corporate
Governance Law in Chapter 11: Maximizing Value Through Traditional
Fiduciaries by John Wm. (“Jack”) Butler, Jr., Chris L.
Dickerson, and Stephen S. Neuman. This piece reviews the benefits
of maintaining the current state law fiduciary management of
chapter 11 cases. The author justifies preservation of this format
because of the checks and balances already in place. The author
illustrates that a debtor’s state law fiduciary has the ability to
manage the debtor’s business as a debtor-in-possession, and the
bankruptcy code and bankruptcy judge provide sufficient safeguards
for this system. The author concludes by providing examples of
other models for managing chapter 11 cases, but ultimately resolves
to maintain the current state law fiduciary system.
The final article is a student note written by Craig T.
Lutterbein, the ABI Law Review’s Associate Managing
Editor, entitled “Fraud and Deceit Abound” but do the
Bankruptcy Courts Really Believe that Everyone is Crooked: The
Bayou Decision and the Narrowing of “Good Faith.” The article
criticizes the Bayou court’s application of an objective,
notice-based standard for determining when a redeeming creditor is
entitled to the protection of the good faith defense contained in
section 548(c) of the Bankruptcy Code. Through an analysis of
previous case law and statutory interpretation, the author
concludes that good faith must be defined by a subjective honesty
in fact standard.
The Editorial Board would like to thank all of the authors for
contributing to another exciting issue of the American
Bankruptcy Institute Law Review. Further, many thanks to the
editors, the staff, and particularly our faculty advisors,
Professor G. Ray Warner and Professor Keith Sharfman. The ABI Law
Review continues to be an especially rewarding and positive
experience for the students at St. John's University School of
Law.
Elizabeth L. Anderson and the Editorial Board