Courting Failure: How Competition for Big Cases Is Corrupting the Bankruptcy Courts by Lynn LoPucki

by Lynn M. LoPucki

LoPucki's provocative critique of Chapter 11 is required reading for everyone who cares about bankruptcy reform. This empirical account of large Chapter 11 cases will trigger intense debate both inside the academy and on the floor of Congress. Confronting LoPucki's controversial thesis-that competition between bankruptcy judges is corrupting them-is the most pressing challenge now facing any defender of the status quo."-Douglas Baird, University of Chicago Law School"This book is smart, shocking and funny. This story has everything-professional greed, wrecked companies, and embarrassed judges. Insiders are already buzzing."-Elizabeth Warren, Leo Gottlieb Professor of Law, Harvard Law School"LoPucki provides a scathing attack on reorganization practice. Courting Failure recounts how lawyers, managers and judges have transformed Chapter 11. It uses empirical data to explore how the interests of the various participants have combined to create a system markedly different from the one envisioned by Congress. LoPucki not only questions the wisdom of these changes but also the free market ideology that supports much of the general regulation of the corporate sector."-Robert Rasmussen, University of Chicago Law SchoolA sobering chronicle of our broken bankruptcy-court system, Courting Failure exposes yet another American institution corrupted by greed, avarice, and the thirst for power.Lynn LoPucki's eye-opening account of the widespread and systematic decay of America's bankruptcy courts is a blockbuster story that has yet to be reported in the media. LoPucki reveals the profound corruption in the U.S. bankruptcy system and how this breakdown has directly led to the major corporate failures of the last decade, including Enron, MCI, WorldCom, and Global Crossing.LoPucki, one of the nation's leading experts on bankruptcy law, offers a clear and compelling picture of the destructive power of "forum shopping," in which corporations choose courts that offer the most favorable outcome for bankruptcy litigation. The courts, lured by big money and prestige, streamline their requirements and lower their standards to compete for these lucrative cases. The result has been a series of increasingly shoddy reorganizations of major American corporations, proposed by greedy corporate executives and authorized by case-hungry judges.

Genres: Law

Paperback

First published January 14, 2005

Reviews

[Stephen · Rating 4 out of 5]

Fascinating and very helpful book, carefully backed by a great deal of empirical research. Only four stars because he has a very active stance in the book and moralizes a great deal, sometimes in ways that strike me as incompletely supported by the data. For instance, he condemns the release of fee caps, but doesn't examine whether the free access to the secured creditor's security without supervision has raised bankruptcy lawyers' fees above the fees of other kinds of lawyers.

Also, I would have liked him to consider the risk that in the face of harsh bankruptcy laws, companies might simply try harder to avoid bankruptcy, possibly at the cost of growth, as is my perception from the New Deal through 1979.

Finally, to some extent, despite his continuing efforts to monitor, the situation really has changed. The DIP has much less control now in many cases, replaced by the DIP lender or the secured creditor. Yet, these are not traditional case placers, and they have an interest in reining in fees. How does that trend affect this argument?

Overall, very intriguing and helpful portrait of the almost contemporary bankruptcy system, which might have influenced me more if there was a little less outrage.

[R. · Rating 4 out of 5]

While nearly a decade has passed since this book rocked the bankruptcy world, Courting Failure remains as relevant today as it was when first published. Courting Failure details the efforts of corporate America to locate and groom bankruptcy venues that would, in some instances, turn a blind eye to the law and err on the side of the management teams that drive large corporations into bankruptcy rather than looking out for the best interests of employees, retirees, creditors, and vendors. One need look no further than the American Airlines and the Energy Future Holdings bankruptcies to see how Delaware has cemented itself as the venue of choice for large companies. Political stalwarts including Joe Biden and the Texas Attorney General have all but conceded government oversight to the courts. LoPucki has been loudly attacked for the findings in his book, and it may be because he seems so enamored with the term corruption. LoPucki missed the mark, because this is not corruption in the classic sense and a label unfairly attached to the judges involved. But LoPucki is right in too many of his findings to be dismissed as an academic quack.

[Annette · Rating 4 out of 5]

If the U.S. Bankruptcy Courts were Pintos, Lynn Lopuki would be Ralph Nader (before he delivered the White House to the biggest toolbox in the world..you know, when people LIKED him...). This book is surprisingly accessible and a definite muck-raking piece. I liked it!