The Spring 2009 issue of the American Bankruptcy Institute
Law Review is an incredible edition featuring articles on a
variety of topics. The issue includes a symposium on non-bankruptcy
alternatives to bankruptcy, three roundtable discussions on the
future of the retail, automotive, and real estate sectors, two
openissue pieces, and on LL.M. thesis, all of which address cutting
edge bankruptcy matters.
The issue begins with a symposium, Relief Without a
Petition: Non-Bankruptcy Alternatives. The symposium brought
together several leading practitioners to discuss viable
alternatives that may be used as an alternative to filing for
bankruptcy.
The first symposium piece, Practical Issues in Assignments
for the Benefit of Creditors, is by Robert Richards and Nancy
Ross. The piece addresses common issues arising from and
considerations in creating an assignment for the benefit of
creditors, such as pre-assignment planning, notification of
creditors, the marketing and sale of assets, claims adjudication,
and bankruptcy, among others. The piece also provides guidance for
the creation and operation of an assignment for the benefit of
creditors.
Geoffrey L. Berman and Catherine E. Vance provide the issue’s
second symposium piece, Model Statute for General Assignments
for the Benefit of Creditors: The Genesis of Change. The piece
provides a model statute so as to attempt to create a modern and
uniform piece of law among the various states. Commentary provided
by the authors examines the underpinnings of the model statute and
offers suggestions for ways in which states can modernize such
applicable law.
The final symposium piece, Trust Mortgages: An
Under-Appreciated Tool, is by Daniel C. Cohn and Nathan R.
Soucy. The piece discusses the applicability of trust mortgages in
out-of-court restructurings, and notes that a trust mortgage can
essentially be described as an out-of-court chapter 11
reorganization or liquidation. Also discussed are the possible uses
for this device, as well as legal issues that may arise. The
authors also address important considerations for drafting a trust
mortgage, such as assents, fiduciary duties of the trustee relating
to late assents, and the allowance of claims, among other
considerations.
The three roundtable discussions address the future of several
different sectors and industries in light of the current economic
climate. These teleconferences discussed the future of the retail
industry, the automotive sector, and the real estate industry and
the various problems plaguing each of these sectors and where these
sectors are headed in the future. The roundtable discussions were
moderated Jack F. Williams, ABI Resident Scholar, and Professor,
Georgia State University. The panel of experts for the discussion
on the retail sector distress consisted of Laura Davis Jones, Scott
Avila, and Howard Brod Brownstein. The panel of experts for the
discussion on automotive sector distress included Deborah L.
Thorne, Ronald J. Silverman, and Ben Pickering. Finally, the panel
of experts for the discussion on real estate industry distress
consisted of Rebecca Roof and Greg Apter.
The first of the open-issue pieces is authored by Professor
Robert M. Zinman and Novica Petrovski. The Home
Mortgage and Chapter 13: An Essay on Unintended Consequences
discusses the amendments before Congress dealing with home
mortgages and the potential effects on a mortgage loan in chapter
13. Most notably, the authors observe that new changes embodied in
the proposed law would eliminate the chapter 13 "safe harbor."
While the Amendments would go to the benefit of homeowners, the
authors assert that there may be unintended consequences of
enacting the Amendments which would negatively affect borrowers and
lenders and additionally cause problems for the approval of
confirmation plans in chapter 13. The authors review the unintended
consequences of both the enactment of the safe harbor in 1978 and
the pending Amendments, and discuss the proposed Amendments and
their potential consequences. The authors propose alternative
amendments that may produce a better result, and one that allows
chapter 13 to operate as it is intended to, both constitutionally
and statutorily.
The second open-issue piece, Fraudulent
Conveyance Law: Destroying Free Exercise Rights at a Church Near
You, by Nicholas C. Rigano, discusses the interaction between a
debtor’s right to donate to a religious entity, consistent with
their Free Exercise right, the Uniform Fraudulent Transfer Act, the
Religious Freedom Restoration Act, and the Bankruptcy Code and the
ability of a creditor to avoid such a donation as a fraudulence
conveyance. The author argues that section 548(a)(2) of the
Bankruptcy Code violates the Religious Freedom Restoration Act, and
that the Uniform Fraudulent Transfer Act violates present Free
Exercise clause analysis. The author reviews the history of the
Free Exercise clause, as well as the applicable fraudulent transfer
laws, and argues that these provisions are unconstitutional because
they fail to meet the strict scrutiny requirements of the Religious
Freedom Restoration Act.
The final piece, Credit Derivatives Can Create a Financial
Incentive for Creditors to Destroy a Chapter 11 Debtor: Section
1126(e) and Section 105(a) Provide a Solution, is an LL.M.
thesis by Patrick D. Fleming. The author addresses the very real
conflict that plagues some creditors when they undermine the
chapter 11 process because they have a financial incentive to
minimize the distribution they would receiving in such a
proceeding. The author discusses this problem in light of the use
of credit derivatives, which create this specific conflict for
creditors, as the creditor is placed in a situation where they will
make a financial gain so long as the amount of distribution that
they receive because of their claim is minimized. Turning to
section 1126(e) of the Bankruptcy Code, the author argues that
courts should find an absence of good faith in a situation where
the creditor seeks to advance their interests by profiting from a
credit derivative position and therefore thwarting the debtor’s
attempt to reorganize. A related issue that must be dealt with, as
the author discusses, is whether courts should additionally require
creditors to disclose any creditor derivative positions that they
may have. The author observes that section 105 of the Code sheds
light on this issue and may provide a proper disclosure scheme, but
that an additional consideration is just how much information needs
to be revealed so that the creditor is still able to continue to
conduct their trading activities and maintain necessary
confidentiality. Thus, the author addresses several important
considerations in crafting a disclosure scheme so that net adverse
creditors may be exposed.
The Editorial Board would like to thank all of the authors for
contributing to another extraordinary issue of the American
Bankruptcy Institute Law Review. Also, many thanks to the
editors, the staff, and particularly our faculty advisor, Professor
G. Ray Warner. The ABI Law Review continues to be an exceptionally
rewarding and unique experience for the students at St. John's
University School of Law.
Katherine C. Jewell and the Editorial Board