Emory Bankruptcy Developments Journal

Volume 33Issue 1

Non-Article III Adjudication: Bankruptcy and Nonbankruptcy, With and Without Litigant Consent

Ralph Brubaker | 33 Emory Bankr. Dev. J. 11 (2016)

This Article analyzes the Supreme Court’s 2015 decision in Wellness International Network, Ltd. v. Sharif. In upholding the constitutionality of non-Article III bankruptcy adjudications with litigant consent, Wellness resolved an important issue raised by the Court’s momentous 2011 Stern v. Marshall decision. The Wellness opinion, though, has more profound implications for the constitutionality of non-Article III adjudications, both bankruptcy and nonbankruptcy, whether those non-Article III adjudications are conducted with or without litigant consent. Beyond the bankruptcy context, Wellness reveals a general Supreme Court jurisprudence with a bifurcated analytical methodology that facilitates a complex interaction between the waivable personal and non-waivable structural interests protected by Article III, § 1. In the bankruptcy context, Wellness provides further evidence that the Court is, over a long run of decisions, simply confirming the constitutional significance of its extensive summary-plenary jurisprudence as the operative constitutional constraint on the adjudicatory powers of non-Article III bankruptcy judges.

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Fair Equivalents and Market Prices: Bankruptcy Cramdown Interest Rates

Bruce A. Markell | 33 Emory Bankr. Dev. J. 91 (2016)

Cramdown is the confirmation of a plan of reorganization over the dissent of an entire class of creditors. Bankruptcy’s absolute priority rule permits such confirmation only if the dissenting class is paid in full, or if no junior class receives anything. “Paid in full,” however, does not require payment in cash. It can consist of intangible promises to pay money that banks, investors, and markets regularly value. Whether this market value can precisely be transferred to cramdown has vexed many. Recently, the debate has flared when a bankruptcy court applied a chapter 13 case, Till v. SCS Credit Corp., to cramdown confirmation in Momentive, a large chapter 11 case. Given the legislative history and precedents in the cramdown area, this Article takes the position that Momentive was correct, and that courts should resist using pure market-based valuations in cramdown calculations.

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Bankruptcy’s Endowment Effect

Anthony J. Casey | 33 Emory Bankr. Dev. J. 141 (2016)

This Article responds to Professor Markell’s analysis of the recent controversy over cramdown interest rates in corporate bankruptcies. The Article argues that the controversy stems from courts and scholars assigning undue importance to preserving creditors’ nonbankruptcy endowments in a manner that is inconsistent with foundational bankruptcy policy. The Article makes the case that the guiding principle for optimal bankruptcy design should instead be the minimization of opportunistic behavior that reduces the net value of a firm. Applying this principle to the question of the cramdown interest rate, this piece shows that an optimal rule supports a cramdown interest rate based on the prevailing market rates for similar loans. The Article demonstrates that this approach is consistent with the Bankruptcy Code and the theoretical principles (although not the ultimate conclusion) that Professor Markell has advocated.

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