Skeel lays the foundation for the discussion by recognizing two strategies that are intended to distort – and do distort – the voting process in corporate bankruptcy: restructuring support agreements (RSAs) and “deathtrap” provisions, which both “remove creditors’ ability to vote for or against a proposed reorganization simply on the merits.”
Skeel considers the suggestion of several scholars who advocate the banning of distortive techniques and argues against this broad brush.
“The distortive techniques respond to developments that have made reorganization difficult, such as claims trading and a greater need for speed,” writes Skeel. “Further, Chapter 11’s baseline was never intended to be neutral: it nudges the parties toward confirming a reorganization plan. There also are independent justifications for some distortive techniques, and the alternative to using them might be even worse — possibly leading to more fire sales of debtors’ assets.”
Skeel proposes four guidelines to assist scrutiny of new distortive techniques in order to determine when they are being used for legitimate purposes.
“Courts should consider whether holdouts are a serious threat, the magnitude of the coercion, the significance of any independent justifications, and whether the holdout threat is an intentional feature of the parties’ contracts,” writes Skeel.
Skeel then applies his guidelines to a few prominent recent cases and concludes “by considering two obvious extensions of the analysis, so-called ‘gifting’ transactions in Chapter 11 and bond-exchange offers outside of bankruptcy.”
Skeel is the author of True Paradox: How Christianity Makes Sense of Our Complex World (InterVarsity, 2014); The New Financial Deal: Understanding the Dodd-Frank Act and Its (Unintended) Consequences (Wiley, 2011); Icarus in the Boardroom (Oxford, 2005); Debt’s Dominion: A History of Bankruptcy Law in America (Princeton, 2001); and numerous articles on bankruptcy, corporate law, financial regulation, Christianity and law, and other topics.
He has also written commentaries for the New York Times, Wall Street Journal, Books & Culture, The Weekly Standard, and other publications.
Skeel has received the Harvey Levin award three times for outstanding teaching, as selected by a vote of the graduating class, the Robert A. Gorman award for excellence in upper-level course teaching, and the University’s Lindback Award for distinguished teaching.
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