Hauerwasian Christian Legal Theory

This Essay, which was written for a Law and Contemporary Problems symposium on Stanley Hauerwas, tries to develop an account of public engagement in Hauerwas’ theology. The Essay distinguishes between two kinds of public engagement, “prophetic” and “participatory.” Christian engagement is prophetic when it criticizes or condemns the state, often by urging the state to honor or alter its true principles. In participatory engagement, by contrast, the church intervenes more directly in the political process, as when it works with lawmakers or mobilizes grass roots action. Prophetic engagement is often one-off; participatory engagement is more sustained. Because they worry intensely about the integrity of the church, Hauerwasians are more comfortable with prophetic engagement than the participatory alternative, a tendency the Essay calls the “prophetic temptation.” Hauerwasians also struggle to explain what can or should participatory engagement look like. After first comparing Hauerwas’s understanding of Jesus’s Sermon on the Mount with that of his two twentieth century predecessors, Walter Rauschenbusch and Reinhold Neibuhr, the Essay turns to Hauerwasian public engagement and the prophetic temptation. The Essay then considers the implications of Hauerwas’s theology for three very different social issues, the Civil Rights Movement, abortion, and debt and bankruptcy

When Should Bankruptcy Be an Option (for People, Places, or Things)?

When many people think about bankruptcy, they have a simple left-to-right spectrum of possibilities in mind. The spectrum starts with personal bankruptcy, moves next to corporations and other businesses, and then to municipalities, states, and finally countries. We assume that bankruptcy makes the most sense for individuals; that it makes a great deal of sense for corporations; that it is plausible but a little more suspect for cities; that it would be quite odd for states; and that bankruptcy is unimaginable for a country. In this Article, I argue that the left-to-right spectrum is sensible but mistaken. After defining “bankruptcy,” I outline a series of puzzles for the standard intuitions, such as the absence of personal bankruptcy in many countries and the fact that state bankruptcy is in some respects more defensible than municipal bankruptcy. I then develop and apply a five-factor framework that considers: (1) whether unsustainable debt is a potential problem; (2) the benefits of reshaping decision-making incentives; (3) the risk of premature liquidation; (4) the dignity of the debtor; and (5) spillover effects

The Empty Idea of “Equality of Creditors”

For two hundred 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. I argue in this Article that the accolades are misplaced. Although the equality norm once was a rough proxy for legitimate concerns, such as curbing self-dealing, it no longer plays this role. Nor does it serve any other beneficial purpose. Part I of this Article traces the historical emergence and evolution of the equality norm, first in the federal bankruptcy laws that applied to individuals and small businesses, and then as it diffused (much later) into large scale corporate reorganization practice. Part II describes how easy it has become to circumvent the norm, focusing on five strategies for giving a favored group of creditors a higher payout than other unsecured creditors. Although these evasions could and in some cases should be halted (as shown in Part III), it turns out that equality of creditors is a distraction (Part IV). It contributes nothing to an assessment of the relevant doctrines, and in several contexts seems to have had a pernicious effect. Elsewhere in the law, equality language can provide valuable benefits, such as “telling us that different treatment of people does matter.” Because none of these benefits is present in bankruptcy (Part V), the equality principle should be discarded

A Way Forward for Puerto Rico\u27s Debt Crisis (with transcript)

David Skeel explains the scope of Puerto Rico’s crisis, what’s at stake, and offers a plan to bring the Commonwealth back from the brink. Click link below for transcript

The Corporation as Trinity

In “Corporate Capitalism and ‘The City of God,’” Adolf Berle references Augustine’s theological classic The City of God in service of his contention that corporate managers have a social responsibility. In this Article, I turn to another work by Augustine, The Trinity, for insights into another feature the corporation, corporate personhood. The Trinity explicates the Christian belief that God is both three and one. I argue that corporations have analogously Trinitarian qualities. Much as theologically orthodox Christians understand God to be both one and three, I argue that corporations are best seen as both a single entity and through the lens of their individual managers and shareholders. Part I explores the debate over corporate personhood that was prompted by the Citizen United and Hobby Lobby cases. Part II develops the Trinitarian account of the corporation. After outlining the Trinitarian perspective on corporate personhood, Part III explores its implications for a variety of issues, including the personhood of “closely held” corporations, whether noncorporate entities have personhood, and whether a corporation can have a religious identity. The final section returns to Berle to discuss the current debate over corporate political involvement

State Bankruptcy from the Ground Up

After a brief, high profile debate, proposals to create a new bankruptcy framework for states dropped from sight in Washington in early 2011. With the debate’s initial passions having cooled, at least for a time, we can now consider state bankruptcy, as well as other responses to states’ fiscal crisis, a bit more quietly and carefully. In this Article, I begin by briefly outlining a theoretical and practical case for state bankruptcy. Because I have developed these arguments in much more detail in companion work, I will keep the discussion comparatively brief. My particular concern here is, as the title suggests, on developing a bankruptcy framework from the ground up. After briefly discussing what bankruptcy is, and some of the confusion befogging this term, I will argue that state bankruptcy should emphasize five key objectives, an approach I will compare to two possible alternatives. I then will consider six facets of the bankruptcy case: initiation; proposing a reorganization plan; the role of a stay, reachback provisions and confirmation rules; the possibility of “guillotines” or “checks” tailored to the state bankruptcy context; financing; and the structure of the bankruptcy court

Corporate Governance and Social Welfare in the Common Law World

The newest addition to the spate of recent theories of comparative corporate governance is Corporate Governance in the Common-Law World: The Political Foundations of Shareholder Power, an important new book by Christopher Bruner. Focusing on the U.S., the U.K., Canada and Australia, Bruner argues that the robustness of the country’s social welfare system is the key determinant of the extent to which its corporate governance is shareholder-centered. This explains why corporate governance is so shareholder-oriented in the United Kingdom, which has universal healthcare and generous unemployment benefits, while shareholders’ powers are more attenuated in the United States, with its much weaker social welfare protections. Canada and Australia fall in between but closer to the U.K. After describing Bruner’s theory and evidence in the first part of this Essay, I poke at it from several angles in the three parts that follow. In Part II, I consider whether there is a mechanism that adequately explains the connection between social welfare and shareholder orientation; interestingly, despite the book’s title, Bruner does not suggest that the common law plays any particular role. In Part III, I consider whether shareholders in the United States may have more power than their limited formal rights suggest, and in Part IV I ask whether the United States (rather than the United Kingdom, as is conventionally assumed) may simply be an outlier, due to federalism and other factors and as reflected in the U.S.’s weak social welfare system. I then conclude

Bankruptcy for Banks: A Tribute (and Little Plea) to Jay Westbrook

In this brief essay, to be included in a book celebrating the work of Jay Westbrook, I begin by surveying Jay’s wide-ranging contributions to bankruptcy scholarship. Jay’s functional analysis has had a profound effect on scholars’ understanding of key issues in domestic bankruptcy law, and Jay has been the leading scholarly figure on cross-border insolvency. After surveying Jay’s influence, I turn to the topic at hand: a proposed reform that would facilitate the use of bankruptcy to resolve the financial distress of large financial institutions. Jay has been a strong critic of this legislation, arguing that financial institutions need to be resolved by regulators and an administrative process, not bankruptcy. As an advocate of bankruptcy-for-banks, I ask Jay if he might reconsider his opposition if the legislation were amended to respond to several of his primary concerns

Distorted Choice in Corporate Bankruptcy

We ordinarily assume that a central objective of every voting process is ensuring an undistorted vote. Recent developments in corporate bankruptcy, which culminates with an elaborate vote, are quite puzzling from this perspective. Two strategies now routinely used in big cases are intended to distort, and clearly do distort, the voting process. Restructuring support agreements (RSAs) and “deathtrap” provisions remove creditors’ ability to vote for or against a proposed reorganization simply on the merits. This Article offers the first comprehensive analysis of these new distortive techniques. One possible solution is simply to ban distortive techniques, as several scholars advocate with RSAs that offer joinder bonuses. Although an antidistortion rule would be straightforward to implement, I argue this would be a mistake. The distortive techniques respond to developments that have made reorganization difficult, such as claims trading and a greater need for speed. 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. How can legitimate use of the new distortive techniques be distinguished from more pernicious practices? To answer this question, I outline four rules of thumb to assist the scrutiny. 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. I then apply the rules of thumb to a few prominent recent cases. I conclude by considering two obvious extensions of the analysis, so-called “gifting” transactions in Chapter 11 and bond-exchange offers outside of bankruptcy