What Should Judges Do in Chapter 11
This piece contends that doctrinal corporate bankruptcy reforms, however wise, will be incomplete without deeper consideration of the role of various institutional actors, particularly judges and courts. The bankruptcy system sends mixed messages to judges. Drafters of the 1978 Bankruptcy Code exhorted judges to be no more or less than umpires of discrete disputes raised by the parties. Today's bankruptcy system, however, imposes greater, and conflicting, expectations: to promote quick resolution of disputes through encouraging party settlement, but also to exercise independent oversight even if no party in interest objects - sometimes without a clear sense of how the court should gather the information to make such a judgment. These tensions are not unique to bankruptcy; they also arise in civil actions, both simple and complex, in federal district courts. Managing them, however, is essential to changing the dynamics of modern corporate bankruptcy and, therefore, to the project of reform.
The Law of Failure
If a broker-dealer liquidates in federal bankruptcy court, why does an insurance company liquidate in state court, and a bank outside of court altogether? Why do some businesses re-organize under state law 'assignments', rather than the more well-known Chapter 11 of the Bankruptcy Code? Why do some laws use the language of bankruptcy but without advancing policy goals of the Bankruptcy Code? In this illuminating work, Stephen J. Lubben tackles these questions and many others related to the collective law of business insolvency in the United States. In the first book of its kind, Lubben notes the broad similarities between the many insolvency systems in the United States while describing the fundamental differences lurking therein. By considering the whole sweep of these laws - running the gamut from Chapter 11 to obscure receivership provisions of the National Bank Act - readers will acquire a fundamental understanding of the 'law of failure'.
Lawyers on the Auction Block: Evaluating the Selection of Class Counsel by Auction
The lead counsel auction has recently achieved increased visibility as a possible way of improving the selection and compensation of plaintiffs' counsel in class action litigation. Supporters of the auction approach, including judges who have used lead counsel auctions, claim that the lead counsel auction introduces competitive market forces into the selection process, and that these forces can address many existing problems with class action procedures and the jurisprudence of fee awards. The benefits of the auction, they claim, include lower legal fees and better representation of the plaintiff class. These claims have not been subject to careful scrutiny. Indeed, auction advocates have overlooked substantial methodological problems with the design and implementation of the lead counsel auction. Even if these problems were overcome, limitations of the auction procedure hamper its ability to function as an effective method of selecting class counsel. In particular, auctions are poor tools for selecting firms based on multiple criteria, such as price and quality, auctions potentially compromise the judicial role, and lead counsel auctions are unlikely to produce reasonable fee awards. Although the existing record in auction cases is insufficient to permit a rigorous empirical evaluation, early results raise concerns. This article therefore considers an alternative method for selecting and retaining lead counsel: negotiation by an empowered lead plaintiff. The article describes recent developments in institutional activism under the Private Securities Litigation Reform Act of 1995, and argues that these developments demonstrate that client empowerment is a more effective way of incorporating market forces into the selection and compensation of class counsel. The article concludes with interpretive guidance for the courts to facilitate further development of the PSLRA model and with an analysis of how the empowered lead plaintiff model can be extended beyond securities litigation.