postings by Melissa Jacoby

In Memory of Leonard M. Rosen

posted by Melissa Jacoby

Rosen

As family, friends, and colleagues mourn the passing of the Leonard Rosen, the fitting tribute by Wachtell, Lipton, Rosen & Katz allows a glimpse into his exceptional contributions:

But above all, Leonard was a good man. A generous man. A kind man. A man you could trust with your most difficult problems and deepest concerns, a superb partner who represented, and will always represent, all we strive to be as lawyers, citizens, and human beings. He was much sought after for his judgment, as well as for his marvelous ability to resolve disputes and reconcile disparate views. He shaped the culture of our Firm. He was the glue that cemented a group of hard-working and talented attorneys into a leading law firm that has served as a model for other firms. He was not only admired and respected by his colleagues; he was beloved.

When the American College of Bankruptcy named Leonard Rosen as its Distinguished Service Award recipient in 2003, Harvey Miller's remarks included these words: 

Throughout his professional career and his personal life, Len has exhibited enormous talent, intellectual honesty, intelligence, objectivity, personal dignity and an infectious good will – qualities that have enabled him to calm stormy waters and allow competing parties to reconcile their differences and resolve their disputes. His ability to diffuse conflict is legendary. . . .  During the 43 years that I have known Len, I have never heard anyone utter a bad word about him. . . . Len truly is a man for all seasons.   

Leonard Rosen's speech that weekend in 2003 concluded with a call to duty:

Justice Earl Warren has been quoted as saying, “Law floats in a sea of ethics.” We all have social and ethical responsibilities as professionals to help protect important economic and social interests in our society, including the public trust that is essential to the functioning of our capital markets. We need to be a part of the debate that shapes the necessary solutions — leaving our clients and our own self-interest at the door — so that we can play a most persuasive and important role in the battle to restore confidence in our economic system.

Deepest condolences to the Rosen family. And may we all strive harder to live up to Leonard Rosen's example.  

Terrific New Paper on Arkison & Authority of Bankruptcy Court

posted by Melissa Jacoby

BlankPaperThe paper was just posted here. Its authors are Elizabeth Gibson and Jonathan Landers, and it was written for the National Bankruptcy Conference. A key sentence from the abstract: "The paper contends that the Court’s analysis in [Commodity Futures Trading Commission v.] Schor supports the constitutionality of bankruptcy court adjudication of private rights with the parties’ consent, notwithstanding the decision of three federal circuits to the contrary." The paper also discusses consequences for the bankruptcy system, magistrate system, and the workload of district courts in the event that the Supreme Court rejects the consent route. All in an efficient seventeen-page package.

Paper image courtesy of Shutterstock.

New Empirical Paper on Home Mortgage Foreclosure and Bankruptcy

posted by Melissa Jacoby

RibbonHouse Cross-campus colleagues and I have posted a paper that studies intersections between mortgage foreclosure, chapters of bankruptcy, and other variables, using the Center for Community Capital's unique panel dataset of lower-income homeowners. An excerpt from the abstract:

We analyze 4,280 lower-income homeowners in the United States who were more than 90 days late paying their 30-year fixed-rate mortgages. Two dozen organizations serviced these mortgages and initiated foreclosure between 2003 and 2012. We identify wide variation between mortgage servicers in their likelihood of bringing the property to auction. We also show that when homeowners in foreclosure filed for bankruptcy, foreclosure auctions were 70% less likely. Chapters 7 and 13 both reduce the hazard of auction, but the effect is five times greater for Chapter 13, which contains enhanced tools to preserve homeownership. Bankruptcy’s effects are strongest in states that permit power-of-sale foreclosure or withdraw homeowners’ right-of-redemption at the time of auction.

Bear in mind that most homeowners in foreclosure in this sample did not file for bankruptcy. Among the 8% or so who did, the majority filed chapter 13. For even more context, please read the paper - brevity is among its virtues, and exhibits take credit for page length. A later version will ultimately appear in Housing Policy Debate.

Ribbon house image courtesy of Shutterstock.

Detroit's Managerial Milestones

posted by Melissa Jacoby

PathA city in bankruptcy operates with considerably more freedom from judicial oversight than its private chapter 11 counterparts. People often say judges have just two principal points of involvement in a chapter 9: presiding over trials on eligibility and confirmation of the plan of adjustment. My earlier posts about Detroit have told a story that puts judges in a more active ongoing role, emblematic of the evolution of the federal judiciary over the second half of the Twentieth Century. Serious managerial judging (plus a team) empowers them to shape the speed and direction of municipal restructuring notwithstanding doctrinal and constitutional limits on their formal legal authority. Yesterday's evidentiary hearing in Detroit's bankruptcy is illustrative.

Continue reading "Detroit's Managerial Milestones" »

One Hundred Forty Characters (Of Detroit)

posted by Melissa Jacoby

MessageShort bursts on Detroit's Chapter 9 bankruptcy will be offered at @bankrprof. While I'm here, though, a report that the retiree committee has filed a motion to withdraw the reference from the bankruptcy court of its objections to Detroit's chapter 9 eligibility. 

Note paper image courtesy of Shutterstock

Detroit: More People, Moving Faster (and, in an instance, Slower)

posted by Melissa Jacoby

PuzzleExclamationMy Detroit posts so far (here and here) focus on the role of the judge and court. The first considered managerial judging, and there's significant news on that front this week. Having read one hundred and nine timely objections to eligibility, Judge Rhodes interpreted many objections to raise only legal issues and expedited the hearing on those issues to September 18, from October 23 (see p.3 of order). On September 19, the court will hear from individuals who filed eligibility objections, three minutes each. October 23 remains the date for objections that require the resolution of material fact. But the court is deferring objections based on treatment of pension rights in a plan because they are not eligibility issues (see section VI of the order, p. 6). This is the technically "slower" instance, per this post's title. Parties troubled by this new order have until September 6 to file objections or comments (see section XI. p.7).

Continue reading "Detroit: More People, Moving Faster (and, in an instance, Slower) " »

Doesn't Anyone Want to Talk About Jurisdiction This Week?

posted by Melissa Jacoby

PurpleElephantWith the Second Circuit's ruling in the Argentina/NML case and the now-urgent need to get secured transactions and bankruptcy into the 1L curriculum, Credit Slips has yet to give attention to Wellness International Network, Limited,  issued on Aug 21 by the Seventh Circuit. Luckily, on this issue, I don't mind getting the ball rolling, and then stepping out of the way. 

Continue reading "Doesn't Anyone Want to Talk About Jurisdiction This Week? " »

It Takes A Village: Detroit, Chapter 9, and Litigotiation

posted by Melissa Jacoby

HumanspokesFirst, the most recent news: the fee examiner job in Detroit's chapter 9 has just been awarded. And the Detroit Free Press has just awarded itself a not-so-subtly snarky news headline

Similar to the bankruptcy court's order appointing a mediator, the fee examiner order authorizes the examiner to call in reinforcements - other lawyers at his law firm, as well as an accountant and the accountant's firm. Judicial Team Chapter 9 Detroit grows. 

A cadre of federal judges once fought hard - repeatedly and successfully - to exclude bankruptcy judges from the Article III judiciary. In so doing, they conceptualized bankruptcy judges as the helpers, not the ones building teams. When a district judge was asked at a Congressional hearing in the 1970s whether bankruptcy judges would need law clerks, the district judge's NO could be heard from miles around. That issue has long been resolved - of course, they need law clerks. The Federal Rules of Bankruptcy Procedure prohibit special masters in bankruptcy cases. But bankruptcy courts commonly appoint fee examiners or fee committees in bigger cases, which seem little different from a special master. And the judges fighting against Article III status never imagined a bankruptcy judge appointing his own chief district judge as the omnibus mediator, with the potential for a raft of additional judicial and non-judicial mediators in tow. But now it has happened. And that delegation of responsibility from bankruptcy judge to district judge is already underway, per the first mediation order dated August 16.  

And yet, the building of this team should feel familiar to those Article III judges from the 1970s and 1980s. When they needed to bring order to complex cases involving unconstitutional conditions in prisons and schools, and bargaining over the remedial scheme, district judges brought in more people. Masters. Special masters. Hearing officers. Monitors. Various kinds of committees. Ombudsmen. Barring the appointment of lions, tigers, or bears, the City of Detroit case yet again illustrates commonalities between the non-adversarial aspects of bankruptcy cases and non-bankruptcy litigotiation.

Human spokes image courtesy of Shutterstock

Detroit's Chapter 9 and the Vanishing Umpires

posted by Melissa Jacoby


SpiralCrowd
When the Chief Judge of the Sixth Circuit selected Judge Rhodes to preside over the City of Detroit's chapter 9 case, she attached a letter from the Chief Judge of the Eastern District of Michigan. Among other things, it lauded Judge Rhodes' case management skills, and asserted the need for those skills in a case of this nature. To many, the phrase “case management” may evoke procedural judicial tasks of little normative content. But the sandwich of the two words should invite deeper questions about the role of courts, judges, judicial adjuncts, and trials, and the impact of the presence or absence of disputes playing out in public view.

Continue reading "Detroit's Chapter 9 and the Vanishing Umpires" »

Buying Hope

posted by Melissa Jacoby

NumbersThose interested in The Stakes of Design back in April may appreciate Why We Keep Playing The Lottery. Thanks to The Morning News for alerting readers to the article, and thanks to author Rosecrans Baldwin for co-founding The Morning News, and . . . that's enough.

Numbers image courtesy of Shutterstock

Don't Fancy Games (For Your Kids' Financial Education)? How About The Theatre?

posted by Melissa Jacoby

MoneyTree"Make it fun and they will come," Lauren Willis discussed in the instructive post that evaluated the pros and cons of "The Gamification of Financial Education." Meanwhile, in London, a live show has been designed for children as young as five to teach them about the financial system. Interesting story on the show in The Guardian here. Tickets to "Bank On It" (running through the 14th of July) and other information here.   

Money tree image courtesy of Shutterstock 

Ice Cube Bonds: New Paper on 363 Sales and Chapter 11

posted by Melissa Jacoby

MatchesFAC UT ARDEAT, begins The Flamethrowers by Rachel Kushner. It means "made to burn," the narrator learns (from that "gasbag . . . Chesil Jones"). Whether your preferred hurry-up 363 sale metaphor involves flames, ice, or a wagon full of rotting salmon, Ted Janger and I have just posted a draft of an article reframing the problems with pre-plan going-concern sales, and reallocating the risk associated with such sales. The abstract:

Financially-distressed companies can melt like ice cubes. In Chrysler’s Chapter 11 bankruptcy, the finding that the debtor was losing $100,000,000 per day justified the hurry-up sale of the company to Fiat.  This assertion -- that the firm is a rapidly wasting asset -- is frequently offered, and accepted, in support of quick sales under section 363(b) of the Bankruptcy Code. This raises a policy question:  is this speed and streamlined process a “bug” or “feature?” Do these hurry-up going-concern sales create a speed premium and maximize value for the bankruptcy estate, or do they facilitate collusive deals between incumbent managers, senior creditors and potential purchasers? The answer is, “a little bit of both.” It is, therefore, crucial to distinguish between sales where the court and parties have good information about the value of the company and the costs of delay, from those in which melting ice cube leverage is used to exploit information asymmetries and to lock-in a favored deal. To accomplish this sorting and reduce transactional leverage, we seek to allocate the increased risks of foregone process to the beneficiaries of the sale. We propose that a reserve – the Ice Cube Bond – be set aside at the time of sale to preserve any potential disputes about valuation and priority for resolution after the sale has closed. This approach retains expedited section 363 sales as a useful way to quiet title in complex assets and preserve value, while preserving the opportunities for negotiation and adjudication contemplated by the Bankruptcy Code.

Perhaps Ice Cube Bonds is the long weekend reading material you were hoping would come your way? We'd value your feedback.

Match image courtesy of Shutterstock.

The Stakes Of Design

posted by Melissa Jacoby

SlotThat 99% invisible is a vibrant architecture and design podcast might have been beside the point in Credit Slips land -- but for the fact that its current show (Episode 78) focuses on the design and technology of casino slot machines, and the particular profitability of penny slot machines. The short piece is built on the work of M.I.T. professor and anthropologist Natasha Dow Schüll. Lots on the consumer finance and cognitive behavioral side of things; don't expect any mention of bankrupt casinos.

Slot photo courtesy of Shutterstock.

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, visit http://listserv.uiuc.edu/archives/bankr-l.html and click on the link for "Join or leave the list." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

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