Emory Bankruptcy Developments Journal

Volume 36Issue 2
The Seventeenth Annual Emory Bankruptcy Developments Journal Symposium
Articles

Special Purpose Municipal Entities and Bankruptcy: The Case of Public Colleges

Matthew A. Bruckner | 36 Emory Bankr. Dev. J. 341 (2020)

Professor Bruckner’s Article builds on the municipal bankruptcy literature by showing why the common analogy between corporate shareholders and city residents does not hold in the case of certain special purpose municipal entities. These boundary-spanning entities include certain hospitals and institutions of higher education. Instead of residents, this Article concludes that either creditors or the state is better situated to avoid the financial distress of boundary-spanning special purpose municipal entities, such as public institutions of higher education. This Article also reviews every decision where eligibility for relief under chapter 9 of the Bankruptcy Code was contested and distills a set of definitions for “municipality” that can be used to determine whether an entity must seek relief under chapter 9 (or if chapter 11 is available).Then, this Article applies those definitions to public institutions of higher education and determines that they, unlike private institutions, are eligible for relief only under chapter 9 of the Bankruptcy Code.

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The Pros and Cons of the Small Business Reorganization Act of 2019

William L. Norton III & James B. Bailey | 36 Emory Bankr. Dev. J. 383 (2020)

Effective February 19, 2020, Congress enacted new bankruptcy legislation granting debtors the option to elect a new subchapter V of chapter 11 of the bankruptcy code (Subchapter V). This was made possible by the bipartisan legislation known as the Small Business Reorganization Act of 2019 (SBRA). The SBRA was enacted to provide small business debtors the opportunity to reorganize in a cost-effective manner. This Article addresses certain pros and cons of these amendments to the Bankruptcy Code, specifically addressing how the amendments advantage debtors, the limits that debtors should consider before pursuing reorganization under the new Subchapter V, and the uncertainty of the new Subchapter

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Comments

Harvesting Highs but no Relief for the Lows: The Inconsistent Treatment of Marijuana Businesses by Bankruptcy and Tax Law

Lauren Timlin | 36 Emory Bankr. Dev. J. 395 (2020)

Despite marijuana’s varying levels of legalization in thirty-three states, the U.S. federal government still regards marijuana cultivation and distribution as federal crimes, leading bankruptcy courts to deny marijuana businesses the benefits of bankruptcy for fear of aiding the illegal activities. Court interpretations of the Controlled Substances Act and what constitutes illegal activity continue derailing marijuana businesses’ attempts at repaying creditors through bankruptcy. This Comment argues that courts should change their approaches to bankruptcy for marijuana businesses and ultimately proposes a hybrid solution involving bankruptcy and tax laws as avenues for relief for the debtor, creditor, and trustee in marijuana bankruptcy cases.

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Thawing the Freeze: Cutting Costs and Increasing Efficiency by Granting Administrative Expense Priority to Nonquantifiable Benefits

Alan M. Hinderleider | 36 Emory Bankr. Dev. J. 435 (2020)

Courts overwhelmingly deny requests for administrative expenses under § 503 of the Bankruptcy Code because the applicant did not make a quantifiable benefit to the estate. This Comment proposes a solution that requires only a small adjustment in the language or interpretation of § 503(b)(3)(D) that will result in increased judicial efficiency, shortened cases, and the more efficient use of resources. This Comment calls upon the Federal Judiciary and Congress to allow administrative expense priority for reasonable expenses to applicants who benefit the estate without being duplicative, self-interested, or meritless, but are unable to directly quantify how they did so.

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Jay Alix, McKinsey, and a Lack of Clarity

Ryan McMullan | 36 Emory Bankr. Dev. J. 471 (2020)

Previous bankruptcy courts have not applied a clear, consistent standard regarding which entities are subject to the Bankruptcy Code requirements by virtue of being a professional person under 11 U.S.C. § 327(a), what constitutes a disinterested person under 11 U.S.C. § 327(a), or what exactly an entity must disclose under Bankruptcy Rules of Civil Procedure Rule 2014(a) prior to bankruptcy employment. However, the court has just such an opportunity in Alix v. McKinsey & Co. This Comment explores who is considered to be a professional under the U.S. Bankruptcy Code, what is required to be disinterested according to the Code, and finally, the level of disclosures required under Rule 2014. This Comment concludes that the various courts involved in the ongoing bankruptcy and civil suits between Alix and McKinsey, particularly in Alix v. McKinsey & Co., should adopt clear, easy-to-follow tests that provide a consistent standard to these questions across circuits.

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Where’s My Refund? How to Address Overpaid Domestic Support Obligations under the Bankruptcy Code

Amanda Nowak | 36 Emory Bankr. Dev. J. 511 (2020)

The overpayment of domestic support obligations is a source of much debate among bankruptcy courts throughout the United States. Courts that deem overpaid support debts as domestic support obligations focus on the debt’s function at the time of the original agreement whereas other courts reject this approach and view the overpayment as a simple money judgment. This discrepancy has led to an inequity for families across the nation as jurisdictions throughout the United States produce distinctive interpretations of overpaid support debts. This Comment analyzes the jurisdictional split, Congress’s intent in drafting the Code, the substance of the obligation, and the intent and current condition of the parties. After this analysis, the author proposes a new set of standards to remedy this inequity.

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Symposium

Introduction

Connor J. Edwards | 36 Emory Bankr. Dev. J. 551 (2020)

Each year the Emory Bankruptcy Developments Journal hosts a Symposium on important and prescient issues in bankruptcy law. This year, on February 20, 2020, the Journal hosted its Seventeenth Annual Symposium. The Symposium featured two panels, one consumer-focused and the other corporate-focused. The Symposium also included Articles written by Professors Nathalie Martin and Douglas Baird and the responses.

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Consumer Bankruptcy Panel: Bringing Relevance Back to Consumer Bankruptcy

Pamela Foohey, Daniel Keating, David Lander, Nathalie Martin, The Honorable Sage M. Sigler | 36 Emory Bankr. Dev. J. 553 (2020)

Conversations on the consumer panel centered around the relevance of bankruptcy for the average consumer and how the system could be improved. The bulk of this panel discussed the notion that the Bankruptcy Code, when drafted, did not effectively cover many of issues faced by the average consumer today. The astronomical increases in student loan debt, credit card debt, mortgages, and car payments are some of the key issues discussed.

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Bringing Relevance Back to Consumer Bankruptcy

Nathalie Martin | 36 Emory Bankr. Dev. J. 581 (2020)

In this wonderful Article, Professor Nathalie Martin makes an important observation about America’s current economic and social stratification. Martin argues that in many ways and for many reasons, consumer bankruptcy has become virtually irrelevant. Martin discusses the increase in debt over the last two decades, the growing wage and income gap, growing debt inequality and race, and the fall of the Consumer Financial Protection Bureau, all justifications for using the bankruptcy system to help ameliorate these problems. Martin then notes a few ways the Code could be amended to become more relevant, including allowing all secured debt to be stripped down and allowing more student loans to be discharged. Martin concludes by discussing the main policy justifications for our consumer bankruptcy system and suggests a third system modification that would make bankruptcy more relevant for consumers, namely a hearing or other forum in which consumers could be publicly forgiven of their debts and perhaps even be heard about their financial woes through the bankruptcy court system.

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The Relative Relevance of Bankruptcy: A Response to Professor Martin

Daniel Keating | 36 Emory Bankr. Dev. J. 625 (2020)

Professor Daniel Keating comments on and adds to Professor Martin’s arguments by surveying some bankruptcy players to gain some [opensmartdoublequotes]real world[closedsmartdoublequotes] perspective, including: two federal bankruptcy judges, one chapter 7 and chapter 13 standing trustee, one career law clerk to a federal bankruptcy judge, one former attorney advisor for the Bankruptcy Court for the Eastern District of Missouri, one bankruptcy lawyer who does mostly business but some consumer bankruptcy, and four lawyers who do primarily or exclusively consumer bankruptcy work. Based on this perspective, Keating concludes that whether Martin’s prescriptions for bankruptcy reform will make bankruptcy more relevant depends a lot on the accuracy of empirical assumptions and predictions that underlie her Article—assumptions about the characteristics of the current consumer debtor population as well as predictions about how her reforms would affect the future behavior of both debtors and creditors.

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Stingy Bankruptcy Relief is Sinking the U.S. Economy

David Lander | 36 Emory Bankr. Dev. J. 647 (2020)

Professor Lander responds to Professor Martin’s article by pointing out that the issue may not be so black and white. This Article lays out the factors that policymakers should consider when they make consumer bankruptcy policy and discussed the forces on the various sides of the debate on that issue. Lander argues that our current stingy bankruptcy relief system is killing the economy and supports Professor Martin’s proposal to see bankruptcy as a key for reducing inequality.

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Consumer Bankruptcy Should be Increasingly Relevant—Why Isn’t It?

Pamela Foohey | 36 Emory Bankr. Dev. J. 653 (2020)

Professor Pamela Foohey responds to Professor Martin’s argument by pointing out a number of important reasons why consumer bankruptcy remains relevant. Moreover, the author argues that some of these reasons suggest that it is more relevant than ever. This Article overviews the place consumer bankruptcy presently occupies in the United States. In doing so, Foohey details why consumer bankruptcy remains relevant in the face of a socio-economic structure and of laws that suggest that bankruptcy may not be a particularly useful place for struggling Americans to turn to for help. Foohey argues it is the time for bigger changes to the system that have a greater chance of making consumer bankruptcy relevant to Americans’ needs. The Article concludes with suggestions to streamline the consumer bankruptcy system to provide people with a place to turn to deal with their financial struggles that more fully accounts for why they have come to bankruptcy for help.

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Keynote Address

The Honorable Wendy L. Hagenau | 36 Emory Bankr. Dev. J. 665 (2020)

In between the two panels, we were honored to have the Honorable Wendy L. Hagenau, Chief Bankruptcy Judge of the U.S. Bankruptcy Court for the Northern District of Georgia, serve as our keynote speaker. This tradition of having a keynote speaker started in 2019, and we are happy to keep it alive. Judge Hagenau provided a great perspective on the importance of bankruptcy law, and her experience in the field and passion for helping people. It was a truly special opportunity to host her and learn from her experience.

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Corporate Bankruptcy Panel--The Fraudulent Conveyance Origins of Chapter 11: An Essay on the Unwritten Law of Corporate Reorganizations

Douglas Baird, Sarah R. Borders, Richard Levin, Bruce Markell, David Skeel | 36 Emory Bankr. Dev. J. 671 (2020)

The second panel was the Corporate Panel, led by Professor Douglas Baird from the University of Chicago Law School. We were fortunate enough to have the impressive Sarah R. Borders act as the moderator of this panel. The discussion, however, did not require much moderating; the panelists were familiar with one another and the discussion was entertaining. The panel was divided into two schools of thought: those who felt like the Code solely governed the practice of corporate bankruptcy, and those who felt like there was a set of unwritten rules created over the last 150 years that pulled the strings.

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The Fraudulent Conveyance Origins of Chapter 11: An Essay on the Unwritten Law of Corporate Reorganizations

Douglas G. Baird | 36 Emory Bankr. Dev. J. 699 (2020)

In the first few decades of the Bankruptcy Code, experienced reorganization professionals followed a set of norms that ensured that parties, notwithstanding their conflicting positions, would continue bargaining with each other. Such norms helped keep the parties bargaining with each other, and these norms followed a few familiar patterns. In this Essay, Professor Baird contends that time and tradition have produced unwritten rules with respect to the conduct of a reorganization. These unwritten rules are now an essential feature of corporate reorganization practice. Baird reconceptualizes the role of the judges, who he argues no longer are neutral arbiters of disputes, and are more like vigilant referees, intervening if one of the players violates these unwritten rules.

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Lawyers, Judges and Unwritten Rules

Bruce A. Markell | 36 Emory Bankr. Dev. J. 719 (2020)

Professor Bruce Markell adds to the discussion on Professor Baird’s piece by offering a different perspective on the origin and enforcement of the unwritten rules. The author agrees with Professor Baird’s conclusions but differs on what has shaped both the current set of unwritten rules and the role of the judge in their application. He first explains his understanding of the role of fraud in avoiding transactions. He then assesses Professor Bairdapostrophe]s perception of the role of the bankruptcy judge in corporate reorganizations. He concludes with a counternarrative, based on the Marquess of Queensburyapostrophe]s rules for boxing, for the role of the judge.

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A Response to Professor Baird’s Essay on Unwritten Law: Writing Some Unwritten Law

Richard Levin | 36 Emory Bankr. Dev. J. 729 (2020)

Rich Levin comments that Professor Baird makes a useful point about the bankruptcy judge’s policing role and the importance of the boundaries of the field in which the players joust. Levin argues, however, that Baird’s unwritten rules are, in fact, available in writing to all who would search. Levin does not consider case law to be unwritten rules and concludes that we appoint judges to provide the elasticity in the rules so that they are applied sensibly and constructively to achieve fair and equitable results in reorganization cases that are consistent with Congress’s design.

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Unwritten Rules and the New Contract Paradigm

David Skeel | 36 Emory Bankr. Dev. J. 739 (2020)

Professor David Skeel opines that Professor Baird’s story is highly persuasive and captures a key dimension of bankruptcy practice that has not been fully appreciated but argues that the story covers a great deal of ground very quickly, and as a result oversimplifies the concepts. Skeel comments on Professor Baird’s piece and puts his insights into a larger context by making two simple points. First, he argues that what’s good for bankruptcy insiders is not always good for everyone, pointing out the dangers of unwritten rules. Second, he argues that bankruptcy’s written rules—both statutory provisions and the parties’ contracts—still matter, and they matter a lot.

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