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Dana Redux: Bank Power!

posted by John Pottow

When Sen. Edward Kennedy (D-MA) got 503(c) into the new bankruptcy bill, I am sure he thought he was protecting rank-and-file employees from the perceived ravages of excessive corporate executive compensation.  And maybe he was.  But as someone who doesn't think KERPs are inherently evil, I was struck by Floyd Norris' insightful reporting in today's New York Times -- which I just saw Co-Blogger Lawless has posted a link to -- regarding the denial of the Dana executive compensation package under 503(c).  I will not repeat Professor Lawless's thoughtful comments, but I will add another, which may buttress his, that troubled me with the ruling.  I don't mind purposive statutory interpretation, but one must acknowledge that it can sometimes open a can of worms.  And one of the worms that has crawled out in this case is the well placed criticism that Dana's exec comp package doesn't look all that different from Calpine's, which recently got the judicial OK.  At pains to distinguish Calpine, Judge Lifland noted that the creditors there logrolled with the plan, whereas with Dana, they did not.  (For that matter, neither did Dana's shareholders, employees, nor even the US Trustee.)  But was that the basis of distinction that Congress truly wanted, if we are searching for legislative purpose -- whether the creditors said it quacked too much like a KERP?  Was according creditors another veto right in the debtor's magement affairs what Sen. Kennedy had in mind when pushing 503(c)?  I am doubtful.


As a Calpine shareholder when our ad hoc and pro se representatives (before an offical shareholder's committee was approved) pleaded the illegality of the debtor's "KERP" plan, I am outrged. I have re-read the transcript from that April 26th 2006 hearing, and believe that he has created a double standard. In the case of Dana he got it right. In the case of Calpine, he needs to now recuse himself from the case. He's obviously trying to "split the baby" by using a faulty logic in one case, and pretending that it was well reasoned, so that he can cite it in the Dana as a "here's what not to do" type of example. Maybe he's trying to get thrown off the case?

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