The Corporation as Trinity

In Adolf Berle’s famous 1954 essay, “Corporate Capitalism and The City of God,” certain passages that once seemed musty and redolent of a bygone era are now eerily timely. Like current critics, Berle chides corporate leaders who think they can simply mind their own business, oblivious to larger social concerns. “For the fact seems to be that the really great corporat[e] managements have reached a position for the first time in their history in which they must consciously take account of philosophical considerations,” Berle wrote. “They must consider the kind of community in which they have faith, and which … Read more

The Empty Idea of “Equality of Creditors”

For 200 years, the equality of creditors norm—the idea that similarly situated creditors should be treated similarly—has been widely viewed as the most important principle in American bankruptcy law, rivaled only by our commitment to a fresh start for honest but unfortunate debtors.   Back in her law professor days, Senator Elizabeth Warren once said that she knew her students could recite the equality of creditors principle in their sleep, because she’d heard them do it in her 8:30 a.m. classes.

Yet if we look at current bankruptcy practice, creditor equality seems to be rapidly disappearing.  The departures from equality in … Read more

Bankruptcy on the Side

Side agreements between creditors of a corporate debtor can dictate how those creditors act when the debtor files for bankruptcy. For example, intercreditor agreements commonly include a promise by one party to remain silent – to waive some procedural right that the party would otherwise have under the Bankruptcy Code – at potentially crucial points in the reorganization process. Because these agreements can alter bankruptcy outcomes even for those outside of the agreement, they are controversial. In a forthcoming article, “Bankruptcy on the Side,” we provide a framework for analyzing these agreements.

Using simplified examples, we show that side agreements … Read more