How Competition for Big Cases Is Corrupting the Bankruptcy Courts
Publication Year: 2005
Published by: University of Michigan Press
A Note on the Statistics in This Book
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Most of the statistics that appear in this book are based on data contained in the author’s Bankruptcy Research Database (BRD). The BRD includes data on all bankruptcy cases ‹led by or against large public companies in the U.S. bankruptcy courts since October...
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In 1884, James B. Dill was a young lawyer with a small New York City practice and a big idea. He had already pitched the idea to the New York political bosses, and they had turned him down. Now he had a second chance—with Leon Abbett, the Democratic governor of New Jersey. The muckraking journalist Lincoln Steffens...
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In late 2001, the Enron Corporation was preparing to ‹le what remains to this day the biggest bankruptcy case in history.1 At the time, a half dozen or more U.S. bankruptcy courts were competing to attract big cases. For those courts, Enron was the ultimate prize. The court that got Enron would be the focus of the bankruptcy...
1. New York’s Game: 1980–86
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For decades before 1980, big company bankruptcies had been rare. Some said it was because modern firms were “too big to fail.” The bankruptcy lawyers saw it differently. Bankruptcy was not a financial condition. Bankruptcy was a legal proceeding. Firms fled...
2. The Rise of Delaware: 1990–96
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Throughout the entire decade of the 1980s the U.S. bankruptcy court in Wilmington, Delaware, presided over only a single large public company bankruptcy. The company, Phoenix Steel, had all of its operations in Delaware. In November and December 1990, the...
3. The Federal Government Strikes Back
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To get its 87 percent market share in 1996, the Delaware bankruptcy court sucked the lifeblood out of bankruptcy practice in the rest of the nation. The number of big cases ‹led in any given city had never been large, but each one was a bonanza for lawyers in...
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In the spring of 2000, UCLA law student Sara Kalin and I made a shocking discovery. The companies that had reorganized in Delaware from 1990 through 1996 were failing at an alarming rate....
5. The Competition Goes National
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To understand how competition is corrupting the U.S. bankruptcy courts, begin by distinguishing court competition from mere forum shopping. Courts inevitably differ in ways that advantage one litigant over another. A court may interpret a law differently or...
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To understand how competition is corrupting the U.S. bankruptcy courts, begin by distinguishing court competition from mere forum shopping. Courts inevitably differ in ways that advantage one litigant over another. A court may interpret a law differently or favor a particular kind of litigant or case. One court may process...
7. The Competition Goes Global
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Forum shopping within the United States is tame in comparison with what goes on internationally. The law governing forum shopping domestically is highly permissive and often ignored, but it exists. If a court does not follow that law, the injured party may be...
8. Global and Out of Control?
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The potential for economic harm from international forum shopping is greater than the potential for harm from domestic shopping. By choosing a different city’s court within the United States the domestic shopper can gain only a different interpretation or application...
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In recent decades, Americans have become strong believers in markets. Professor Lynn Stout recently wrote:..
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As of this writing, the bankruptcy court competition continues to hang in the balance. The cases ‹led in 2003 and early 2004 were distributed about one-quarter in Delaware, about one-quarter in New York, and about half through the rest of the country. After its...
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Page Count: 336
Illustrations: 4 charts, 13 tables
Publication Year: 2005