Back in June I posted about the American Bankruptcy Institute’s current efforts to reform Chapter 11 of the Bankruptcy Code. The University of Illinois Law Review has kindly agreed to post my very modest contribution to the ABI’s deliberations in which I try to articulate why I am sceptical about legislative attempts to dilute secured creditors’ rights in bankruptcy. The paper, accessible here, is entitled, “Statutory Erosion of Secured Creditors’ Rights: Some Lessons from the United Kingdom” and the abstract goes like this:

“Concerns about secured creditor capture of Chapter 11 are now part of the corporate bankruptcy reform conversation in the United States. So, for example, the American Bankruptcy Institute’s Commission on Chapter 11, scheduled to report and make recommendations for the reform of United States business reorganization law by the end of 2014, has the issue of secured creditors’ rights in bankruptcy squarely on its radar. The narrative is now well established and oft repeated. Whereas in the past, firms filing for Chapter 11 would come into the bankruptcy process with at least some unencumbered assets, modern firms tend to have capital structures that are entirely consumed by multiple layers of secured debt. And so, according to the prevailing conventional wisdom, Chapter 11 in the general run of cases has become little more than a glorified nationwide foreclosure process through which secured creditors can exit via a quick section 363 sale or an outright liquidation that is far from guaranteed to maximize the welfare of all creditors. But can concerns about the possible downside of secured creditor control of corporate reorganization be converted into effective reforms?

This paper (based on the author’s presentation at a symposium jointly sponsored by the American Bankruptcy Institute and the University of Illinois), offers insights from experience in England and Wales that, it is hoped, will assist reformers in the US to think through the possible consequences of certain types of reform proposal. The paper starts from the premise that lenders that are powerful enough to bargain for superior control and priority rights inside or outside of bankruptcy will be equally capable of adjusting to legal changes that affect, or are perceived as affecting, their interests.

Four ways in which lenders will adjust to “adverse” bankruptcy reform are identified: (i) meta bargaining; (ii) adjustments to pre-bankruptcy behaviour; (iii) transactional innovation; and (iv) shape shifting. The paper then illustrates how lenders in England and Wales have successfully adjusted to statutory attempts to undermine their bankruptcy priority and (via the abolition of administrative receivership) erode their control rights.”

I guess I may have to rethink the reference to the “United Kingdom” in the title if the Scots vote for independence on Thursday 18th September…

Visual learners

New semester.  New challenges.  A brand new 1L Contracts class has checked in and I like to think we are having fun already of a fashion (I certainly am). As usual I am doing my best to learn 60 plus names and am trying to offer something for everyone despite the diversity of individual learning styles.  Those of you who self-identify as visual learners may want to check out this post on the Law School Academic Support Blog.

Enjoy the semester.

Reed Smith attorney Vincent Martorana has just published a new edition of A Guide to Contract Interpretation on Drafting Points, his excellent blog. In less than sixty pages, the Guide provides a thorough and systematic account of the principles courts use to identify and handle drafting ambiguities.  On page 4, there is very useful Contract-Interpretation Flow Chart (students, take note!).  The only caveat I would enter is that Vincent has distilled the principles from opinions in two jurisdictions, New York (where he is based) and Delaware. For those of us who study or practice in other jurisdictions, it is essential that we cross-check the principles against local law and cite to local law in situations where local law governs.  Even so, this is a fairly mild caveat. New York and Delaware are, of course, very important and influential commercial law jurisdictions. And at the level of general principle (as opposed to the specifics of individual cases), my impression is that the basic approach to contract interpretation in most, if not all the states, is similar to that in NY and DE. As ever, there will be differences in how the principles are applied judge by judge and state by state.
Our congratulations to Vincent on a really nice and very helpful piece of work!

I just read this article – Supercharging Lawyer Development Through Feedbackauthored by Prof. Bill Henderson, which I picked up on the TaxProfBlog.  Music to my ears. The problem is how to institutionalize “legal education as professional development” – and, in particular, how to go about implementing a pedagogy which prides itself on “quality and speed of feedback, as well as on sufficient opportunity to practice” (to quote Daniel Kahneman to whom Prof. Henderson cites).  The closest approximation we currently have is Legal Writing.  But there’s no doubt we should make it happen as, I for one, do not find Prof. Henderson’s predictions either “fanciful or utopian”. It’s a design problem that law schools can and should try to solve.

My bankruptcy law students are aware that, as a general rule, federal bankruptcy law treats ipso facto clauses in contracts and leases with considerable disfavour. Ipso facto clauses are clauses that provide for a contract or lease to terminate in the event that a party files for bankruptcy. The Latin phrase means “by the fact itself” or “by that very fact” and its usage reflects the notion that a contract or lease including such a clause is designed to terminate “by the very fact” that one of the parties files for bankruptcy. Bankruptcy law doesn’t like ipso facto clauses because they deprive the bankruptcy estate of valuable assets that could otherwise be monetized for the benefit of creditors.


As my bankruptcy law students also know, there are exceptional circumstances in which these clauses do hold up. Ken Adams, Bob Eisenbach, and I just had an article published in the ABA’s Business Law Today that discusses these clauses and proposes model language that practitioners can use when drafting them. We also suggest – well it was Ken’s idea really – that we should cut out the Latin and start referring to ipso facto clauses in plain old English as “termination-on-bankruptcy” provisions. I welcome any thoughts and comments on the article.

A few weeks ago I got an invitation from Brian Rogers, aka The Contracts Guy to participate in a ‘blog hop’.  Regular readers will know that I am a great fan of Brian’s blog as it helps me to connect my students to the real world of transactional law and practice.  Such is my respect for Brian that I readily accepted the invitation… without having the first iota of a clue what a ‘blog hop’ is…

As Brian has kindly encouraged followers of his blog to check me out, I’ll be encouraging you all at the end of this post to ‘hop’ to the blogs & sites of some other great people whose work I follow regularly.  So keep reading.

Before I get to the introductions, the topic of the ‘blog hop’ is ‘why I write’.  I suppose a slightly edgier way to frame the topic is to ask the question: ‘why bother?’  Well here goes.


What am I working on?

I am not the most disciplined of bloggers.  There’s a lot of self-help stuff out there from social media savvy types who can help you build your blog traffic.  And most of it says that you should blog little and often. I tend to go in fits and starts depending on my other commitments. But as an educator, I find that blogging is a good way to offer a resource to a student audience that in some ways supplements what I do in the class room and in other ways seeks to go beyond the confines of the subjects I teach (contracts, bankruptcy, business organizations) to touch on topics of general relevance to the law students of today and tomorrow.   So I post about contracts and contracts teaching: see here, here, and here.  But I also post about careers, soft skills, and try to engage 1L law students in particular to start thinking about career development from Day One of law school.  I haven’t ever really sat down and systematically articulated my views on the state of legal education in the US or in my home country (the UK).  But I think my views can easily be discerned: see here and here.  Suffice to say, we live in interesting times.


How does my writing differ from others of its genre?

First and foremost, I want to connect with students (current and prospective). But at the same time, I want to reach practitioners, like Brian, who enable me to expand my practitioner networks and ensure my knowledge of the law as practiced and of the realities of the legal services market is fully up to speed.  So I aim to be informal while hoping that folks don’t think I’m glib or trying to be ‘hip’. It’s nice to get away from the formal constraints of the other kinds of writing in which I engage (e.g. law review articles).


Why do I write what I write?

I am trying to be a ‘bridge’ from the world of higher education to the real world of work – and, in particular, from the law school class room to the practice of law.  See further here  – one of my early posts.  The ‘way’ in ‘Walters Way’ is used in the same sense (a route that links two points) rather than in the Frank Sinatra sense!


How does my writing process work?

I have to confess that my writing process is fairly random.  A problem not helped by my tendency to make notes of my best ideas on pieces of scrap paper that I subsequently lose.  I follow other blogs in my areas of particular interest and accumulate links and contacts.  Several of my posts have been shout-outs to great blogs, sites or other resources that I’ve found helpful and think will be helpful to students.


And while we are on the subject of shout-outs here are some other people you should check out…

Kevin O’Keefe is the CEO and founder of LexBlog, Inc.  Kevin helps lawyers and law firms build relationships and develop their practices using social media and blogging. He posts consistently excellent content on his “Real Lawyers Have Blogs” site. You can also find him on twitter: @kevinokeefe.

Angela Kopolovich is the Managing Director of Alegna International, an international legal recruitment boutique.  She maintains a blog, “It’s All About Who You Know”. In my job, it is absolutely imperative that I have a good understanding of the rapidly changing legal services market and trends in hiring in order to best advise current and prospective students. Angela is a source of valuable insights.  Her twitter is @Recruiter_Law.

Alison Monahan is the San Francisco based founder of The Girl’s Guide to Law School and Trebuchet.  Readers of this blog will know that I am big fan of The Girl’s Guide and of Alison’s various other related enterprises.  She is my main ‘go to’ source for ideas on how best to support my students with their studies, decision making, and professional development.  Alison keeps it real! Follow her on twitter: @GirlsGuidetoLS.

Students and practitioners with an interest in bankruptcy law may be interested in the work of the American Bankruptcy Institute’s Commission to Study the Reform of Chapter 11 of the Bankruptcy Code.  The Commission’s study is premised on the concern that Chapter 11, originally enacted in 1978, is now significantly out of date.  One particular concern is that Chapter 11 in the general run of cases has become little more than a glorified nationwide foreclosure process that functions principally for the benefit of secured creditors at the expense of debtors and other stakeholders.

In April, I was lucky to be invited to speak at a symposium jointly organized by the American Bankruptcy Institute and the University of Illinois that addressed the implications of secured creditor capture of Chapter 11.  My main message to reformers in the US, drawing on secured creditors’ responses to legislative erosion of their rights in the United Kingdom, was that lenders will invariably adjust to legislative changes that affect their interests.  Accordingly, the designers of any new bankruptcy law must not lose sight of the tendency of powerful constituencies to undermine reform efforts, whether through the political process, or by other means, such as transactional innovation.

An early draft of my written paper is available here.

And you can watch a recording of my presentation at the symposium and the follow-up commentary provided by Ted Janger of Brooklyn Law School here.


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