At the end of a forthcoming Columbia Law Review article, Lucian Bebchuk and Assaf Hamdani propose that Congress establish a National Corporate Law Commission to comprehensively review corporate law and — not surprisingly given their prior work — determine which aspects should be federalized.  Bebchuk and Hamdani mention in a footnote (fn 184 to be exact) that their preferred model for the corporate commission is . . . the National Bankruptcy Review Commission. 

Putting aside whether corporate law should be federalized, I’m wondering whether the bankruptcy commission is the right model.  For one thing, the bankruptcy commission had a limited existence (I remain hopeful that the provision in a recent Senate bill proposing to forcibly reconvene the bankruptcy commission will never become law).  But Bebchuk and Hamdani suggest in the article that they think a standing commission is preferable.  I’ll leave to the public choice scholars to discern the implications of the distinction here for purposes of turning commission recommendations into law.    In addition, the bankruptcy commission’s members were selected not only by Congress, as the authors indicate they desire for the corporate commission, but by the President and by the Chief Justice.  I suspect it was well understood that the late Chief Justice Rehnquist would choose federal judges for the bankruptcy commission (he chose one circuit judge and one bankruptcy judge). Given the underlying federalization mission that Bebchuk and Hamdani advocate for this commission, identifying the right judicial members of such a commission could be delicate. 

In any event, Bebchuk and Hamdani would like the corporate commission to consider the creation of a specialized federal corporate law court (they don’t advocate for the specialized court but note its possibility as a response to those who like the idea of the Delaware Chancery Court).  Here’s another place where the bankruptcy experience might be useful.  Bankruptcy cases are part litigation, part transactional, part administrative.  Assuming a specialized federal forum is justified at all, it seems that this is a better reason than in-depth knowledge of a substantive legal field.   Notably, the recently-created "business courts" in states like Nevada are far broader in jurisdictional scope than the Delaware Chancery Court (admittedly, the new courts would probably go out of business quickly if their jurisdiction was limited to corporate disputes as traditionally defined).  Even the Delaware Chancery Court is getting a bit more generalist; the state of Delaware has given the court jurisdiction over money damage technology disputes and mediation-only business disputes.   All this being said, one federalization possibility — certainly controversial — would be to expand the bankruptcy court to include corporate and related matters.  Greater legal integration of shareholders and creditors would be a good development, and perhaps more exposure to the governance of financially healthy corporations would aid courts in presiding over the bankruptcy cases of insolvent corporations.      

All my professional life, I have heard that there are three rules of bankruptcy:  "disclose, disclose, disclose."  Worried about a conflict?  Disclose it. Want to make a payment? Disclose it.  Starting a new business initiative? Disclose it.  In fact, I thought disclosure was the quo for the quid of the automatic stay and other bankruptcy-induced protection.  Evidently I was misinformed.

Gretchen Morgensen reported in the New York Times yesterday that Delaware bankruptcy judge Kevin Carey ruled that the Werner Company, a ladder maker, wouldn’t have to disclose the bonsues it was handing out to the executives as part of the reorganization plan.  The reason?  Such disclosure ""may create low morale and an unhealthy work environment." Just to drive home the point, the hearing itself was closed to the public.

What can this mean except that the employees are asked to take a hit while the executives are taking home sacks of money?  And if keeping it a secret is supposed to help morale, then is it fair to assume that the amount of money the executives are keeping is more even than the rank-and-file employees could possibly imagine?

So the new rule is "discose, disclose, and keep it a secret if the big boys want it that way"?  I just want to be sure that I have it right before I try to teach it to a new generation of students.

Involuntary bankruptcy petitions are a fascinating and a fundamental part of our bankruptcy system.  They are quite rare overall, although somewhat less so in the biggest chapter 11 cases, according to LoPucki and Whitford’s early research.   But the disappearance of a Chapel Hill lawyer has prompted the filing of an involuntary petition – – a media report here.   Pursuing a bankruptcy case against a missing person will be a challenge worth watching.

Regardless of the class I’m teaching, I always find some way to incorporate the subjects of credit, debt and bankruptcy into my lectures. In Introduction to Sociology, I tie the subjects to discussions of social institutions; in Research Methods, I talk about the methods we use to collect data on the Consumer Bankruptcy Project (and share many of our findings); and in Social Inequality, well, the connection is pretty obvious.

One consequence of these lectures on credit/debt/bankruptcy is that students feel free to come talk with me in the privacy of my office about their parents’ bankruptcies. Some cry because they are frightened that their parents will no longer be able to afford to pay for college, which translates into either more student loans or postponing their education. Some are afraid that their friends will find out the truth about why the family sold the house and moved out of the neighborhood. Others are angry at their parents’ (assumed) financial stupidity. And still others are relieved to know that their parents are not to blame–their mom’s medical bills or the loss of their dad’s job better explains what happened to the family.

Granted, these observations are nothing more than anecdotal evidence, but they do suggest that when parents file for bankruptcy, the experience extends to their children. The kids are frightened, embarrassed and angry–all of the emotions that their folks probably felt. Unfortunately, these kids don’t feel that they can talk with their parents about the bankruptcy (we all know that people will talk about their sex lives long before they will chat about their finances). Instead, they turn to their professor for reassurance.