Google+ Followers

Wednesday, July 22, 2015

"Lost in Translation" Article Published on Till and Momentive

My posts from 2014 on Till v SCS Credit Corp and Momentive Performance Materials have been consolidated and prettied up into appropriate form for a law journal by virtue of the yeomanlike diligence and assistance of Katie M. McDonough, an associate at my old firm. The Fordham Journal of Corporate and Financial Law has just published the resulting piece, which is entitled "Lost in Translation: Till v SCS Credit Corp and the Mistaken Transfer of a Consumer Bankruptcy Formula to Chapter 11 Reorganizations." It can be found at 20 Fordham J. Corp. & Fin. Law 893 (2015) on Westlaw and Lexis and eventually in other online databases like Heinonline and SSRD.  There is no ungated link, afaik.

In brief, the article criticizes bankruptcy judges and creditors' lawyers for failing to notice the significant statutory distinction between chapter 11 cramdown and chapter 13 cramdown, i.e., the presence of the judicially defined "fair and equitable" standard in chapter 11 vs. the absence of that standard in chapter 13. The article shows how the "fair and equitable" standard has been consistently interpreted by the Supreme Court to require creditors protected thereby to receive 100% recoveries in real economic terms, and how the Court has repeatedly recognized that market forces are the best measure of the "fair and equitable" standard.

The article also goes behind the opinions in Till to recount how, in the briefs and oral argument, the prevailing parties, the Solicitor General and every Justice all disavowed any comparison between chapter 11 jurisprudence and the consumer debt repayment context, and focused instead entirely on practical factors that were unique to the consumer bankruptcy context.  What kind of model of Supreme Court decision-making does one have that results in the Court overruling a century of its own precedent, not only without saying so, or mentioning the precedent in the opinion, but without taking any briefing or argument on the question and consistently saying it wasn't even pertinent to the case before them?  That is the question judges should be asking debtors' lawyers who try to import Till to chapter 11.  Until a debtor's lawyer comes up with something more persuasive than "ipse dixit", the proposition that Till created a new rule for chapter 11 cramdown is ridiculous on its face.

The article argues that recognition of these two inexplicably overlooked yet highly relevant facts will enable future courts to fulfill the intention of Congress in both chapters of the Bankruptcy Code, respecting the Till decision as a pragmatic solution to issues presented uniquely in cases brought under chapter 13, which has no "fair and equitable" constraint, while restoring the "fair and equitable" scrutiny of nonconsensual reorganizations required by the plain language of chapter 11. 

Many thanks to Katie for not only wielding the laboring oar in transforming the posts into an article, for doing ALL the footnoting, for handling the law review submission process with which I was completely unfamiliar, but especially for suggesting the article be written in the first place.