postings by Stephen Lubben

Does J&J Have a Patriot Coal Problem?

posted by Stephen Lubben

J&J has put its Talc subsidiary into bankruptcy in North Carolina. Trick is, the only basis for venue in North Carolina is that the talc assets were put into a Texas LLC this past Tuesday, and then that Texas LLC converted into a North Carolina LLC the same day.  

Put to one side the problematic question of how the talc assets (and liabilities) ended up in the Texas LLC – what is the reason for the conversion to a North Carolina LLC?  It seems to be a rather transparent attempt to manufacture jurisdiction in North Carolina.

Arguably venue should be transferred to Texas. Perhaps the Western District of Texas – not that other Texas district – since J&J's only clear connection with Texas is incorporation ... 

In Memoriam: Walter W. Miller, Jr. (1932–2021)

posted by Stephen Lubben

Wally Miller, my bankruptcy professor at BU Law back in the 1990s, has passed away. He is quite directly the reason why I became interested in bankruptcy.

Puerto Rico and the Professionals

posted by Stephen Lubben

It is Congress week on Slips. On Thursday I will be testifying in front of the Senate Committee on Energy and Natural Resources in support of S. 375, Puerto Rico Recovery Accuracy in Disclosures Act of 2021 or PRRADA. The bill, which has already passed the House, would supplement PROMESA's existing requirements that professionals file fee applications with various disclosure requirements that are familiar from chapter 11. My written testimony is here.  

Available now, wherever books are sold.

posted by Stephen Lubben

I'm pleased to announce the publication of the second edition of American Business Bankruptcy. Now featuring coverage of the Small Business Reorganization Act (subchapter V) and a nifty endorsement from a fellow Slipster.

Professionals Fees and Purdue Pharma LP

posted by Stephen Lubben

Featuring two Slipsters – here.

Greensill "Secured" Lending

posted by Stephen Lubben

Slips readers will be interested in Matt Levine's column today, which takes a deep dive into the recently failed Greensill's lending against “prospective receivables,” which is kind of like lending against my prospective estate in Scotland. Both look a lot like unsecured lending.

Does Delaware Get the Final Say?

posted by Stephen Lubben

I've been doing some reading on officer and director fiduciary duties to creditors, and I am surprised that how much the academic and practitioner consensus seems to have settled on the notion that, in light of the Delaware caselaw following Gheewalla, it is essentially impossible for creditors to bring a fiduciary action against a board. Namely, because Delaware caselaw has held that such claims are derivative (with all the procedural limits thereon) and have narrowed the duty to apply, if at all, to cases of actual insolvency, most claims will not be viable. Moreover, most authors implicitly assume that these claims are subject to the internal affairs doctrine (i.e., that they are subject to Delaware law no matter where the case is brought).

That analysis seems right to me only if we are sure that these sorts of claims arise out of the corporate form. But if creditor fiduciary duty claims instead arise out the debtor-creditor relationship itself, then it is not clear to me Delaware gets to decide these issues. Indeed, more often New York would seem to provide the relevant law (if the debtor-creditor relationship is subject to New York law). Of course, some might argue that the debtor-creditor relationship is purely contractual, but it strikes me that the source of these claims is a greatly under-discussed issue.

Fairness and Flexibility: Understanding Corporate Bankruptcy’s Arc

posted by Stephen Lubben

I don't post most of my law review articles here, but my latest might be of some interest to Slips readers generally. In Fairness and Flexibility: Understanding Corporate Bankruptcy’s Arc, out now in the University of Pennsylvania Journal of Business Law, I trace the long history of American business reorganization law, starting with antebellum mortgage foreclosures under state statute, up to the present Restructuring Support Agreements (RSAs). I ultimately urge more judicial oversight of current practices – which I argue evidence an extreme of "flexibility" – lest chapter 11 face an even more extreme reform backlash because of increasing unfairness.

Get your copy today!

posted by Stephen Lubben

The third edition of my Corporate Finance textbook is out and available for use in the Spring Semester. Among other new features, the new edition has a new case study (iHeart) and extensive coverage of CLOs, which are important players in finance before and after the onimage from images-na.ssl-images-amazon.comset of financial distress. Professors can contact me directly for access to a Dropbox folder that is chock full of class materials and background readings.

Puerto Rico News

posted by Stephen Lubben

The President today announced he was appointing the following people to the PROMESA oversight board. It is not immediately clear which slots these people are filling (that is, who nominated these people).  There are three open (presidential) slots at present, but one of the people below is already on the board:

  • Andrew George Biggs, of Oregon [existing board member]
  • Dr. Betty A. Rosa, Ph.D., of New York
  • John E. Nixon, of Utah

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