The following nine bankruptcy-related working papers can be downloaded from the Social Science Research Network:
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Columbia Business School’s Kenneth Ayotte and Stav Gaon, Asset-Backed Securities: Costs and Benefits of Bankruptcy Remoteness
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Yale School of Management’s Arturo Bris, Ivo Welch and Ning Zhu: The Costs of Bankruptcy
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Purdue University Business School’s Diane K. Denis and NYU’s Business School’s Kimberly J. Rodgers, Chapter 11: Duration, Outcome, and Post-Reorganization Performance
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Quinnipiac University Law School’s Stephen G. Gilles, The Judgment-Proof Society
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Independent Consultant Michael Nwogugu, Decision-making, Risk and Corprate Governance: A Critique of Bankruptcy/Recovery Prediction Models
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Duke University’s Steven L. Schwarcz, The Easy Case for the Priority of Secured Claims in Bankruptcy
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Lawyer Michael St. James, Why Bad Things Happen in Large Chapter 11 Cases: Some Thoughts about Courting Failure
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Wisconsin Law School’s Bernard Trujillo, Patterns in a Complex System: An Empirical Study of Valuation in Business Bankruptcy Cases
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Boston College Law School’s Catharine P. Wells, Who Owns the Local Church? A Pressing Issue for Dioceses in Bankruptcy
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Abstracts for each of these working papers follow:

Continue Reading Nine Bankruptcy-Related Working Papers Available for Downloading from SSRN

The case of Penthouse Media Group v. Guccione (In re General Media, Inc.), 2005 WL 3529148 (Bankr. S.D.N.Y., 12/27/05), involves an adversary proceeding filed by the reorganized debtor against Bob Guccione, the debtor’s former Chairman and CEO. Mr. Guccione is best known for having founded Penthouse Magazine, as well as such quality, trend-setting publications as Spin Magazine and Omni Magazine. Unquestionably, however, his absolutely worst legacy shall always be the movie Caligula, which cost a whopping $20 million in 1979 and is often cited, to this day, as possibly the worst film ever made.
For me, the case has special sentimental value because 25 years ago, while cooling my heels in New York City between college and law school, I spent two hours a week as private tutor to Mr. Guccione’s youngest son at Mr. Guccione’s very posh E. 67th Street townhouse (reportedly NY’s largest residence), which was at the heart of the dispute in this case.
Anyway, in this case, the reorganized debtor filed a five count complaint against Mr. Guccione. The first three counts sought turnover of certain intellectual property, as well as 10 unnamed items of property still in the townhouse, which he was now renting from a third-party owner. The final two counts alleged conversion and breach of fiduciary duty for a certain transaction involving possible self-dealing. [NB: In fact, the 10 items likely were imported statutes and other antiques or antiquities of immense weight and value, as to which there were pre-confirmation disputes over whether the items were fixtures of personal property under applicable non-bankruptcy law. Imagine, though, what fun David Letterman would have with this “top ten” list!]
Guccione moved to dismiss for lack of subject matter jurisdiction and for failure to state a claim on which relief can be granted. The Court summarized the positions of the parties on these issues as follows:

Guccione argues, in the main, that the Court lacks subject matter jurisdiction. In addition, he contends that a turnover action will not lie post-confirmation because there is no trustee and no estate. Next, he maintains that the Plan released him from liability based on pre-petition conduct other than conduct that was fraudulent, willful or grossly negligent. Finally, he asserts that the plaintiff should be estopped from asserting the claims because they were not raised during the bankruptcy case or disclosed to the creditors, and the plaintiff procured Guccione’s support for confirmation without disclosing its intention to bring this action.
The plaintiff counters that (1) the Court retained jurisdiction over these claims in the Plan, (2) the plaintiff acquired the right to pursue these claims as consideration for PET’s funding of the Plan, and (3) the turnover claims were preserved under the Plan. Furthermore, the Townhouse Property was the subject of a prior Court order, which the First Cause of Action seeks to enforce. Lastly, some of the damage claims are clearly within the statute of limitations, and the release defense, which excludes intentional wrongs, cannot be decided on a motion to dismiss.

In dismissing the action based on lack of subject matter jurisdiction, the Court noted that “a party invoking the bankruptcy court’s post-confirmation jurisdiction must satisfy two requirements”:

Continue Reading New York Bankruptcy Court Finds No Post-Confirmation Jurisdiction Exists to Support Reorganized Debtor’s Case Against Penthouse Magazine Founder

In Amedisys, Inc., v. JP Morgan Chase Manhattan Bank as Trustee, 2005 WL 3497805 (Bankr. S.D. Ohio, 12/22/05), the plaintiff appealed the bankruptcy court’s order granting the defendants’ partial summary judgment motion. The plaintiff designated items to be included in the record on appeal, and the defendants moved to strike some of these items.
The bankruptcy court looked at the split among the circuits on whether a bankruptcy court has the power to rule on disputes regarding the contents of the appellate record. In this well-researched opinion, the Court found that that a majority of courts hold that bankruptcy courts do have the power to rule on such disputes, stating:

Continue Reading Who Decides Disputes Over the Content of the Appellate Record? Ohio Bankruptcy Court Sides with Majority in Holding that Bankruptcy Court Decides Those Disputes

As large cases go, the relationship between UAL and the Creditors’ Committee has been pretty good, with most disputed matters having been resolved consensually between the parties without wasteful litigation fanfare and posturing. When it comes to post-confirmation corporate governance issues, however, the parties appear ready to duke it out over the proposed management equity incentive plan (which offers up to 15% of the equity of Reorganized UAL to about 400 management employees), creditor representation on Reorganized UAL’s board of directors, and UAL’s proposed inclusion of a “blank check” preferred stock “poison pill” defense in its post-confirmation corporate charter.
The dispute officially surfaced in the Committee’s objection to confirmation of UAL’s proposed reorganization plan (objection available here; UAL’s plan and other related filings available here) over the “size and terms of the Management Equity Incentive Program [and] the composition of the post-emergence Board of Directors and other corporate governance issues.” Still, the Committee assured the Court (and the markets), “the Committee fully supports the Debtors’ intention to emerge from Chapter 11 in February 2006.”
In gearing up for a fight over these issues, the Committee recently filed an emergency motion to retain Yale Law School’s Professor Jonathan R. Macey (at $800/hour, for those curious about the going rate) to serve as the Committee’s “Corporate Goverance Expert.” (Motion here; Macey Affidavit here). The Committee explains the basis for bringing this emergency motion as follows:

On December 13, 2005, the Committee filed Creditors Committee’s Objection to Plan Confirmation and Approval of Related Plan Supplement Documents. Among the Committee’s specific objections were objections to the Debtors’ proposed board composition and their proposal for implementation of poison pill provisions. The Committee has engaged in in-depth discussions and negotiations with the Debtors regarding the appropriateness of their proposed corporate structure, including, but not limited to, corporate governance, board composition and the availability of a poison pill. However, at this time no resolution of these issues has been achieved and the Committee requires an expert in preparation for the confirmation hearing to provide expert testimony and provide an expert report. The Committee is currently engaged in extensive preparation for the confirmation hearing scheduled to commence January 18, 2006. Expert reports are due January 2, 2006 and depositions must be completed by January 9, 2006. Therefore, the Committee seeks the relief requested herein on an emergency basis.

UAL today filed an objection (available here) to the Committee’s application to retain Professor Macey, arguing that his services “are at worst completely irrelevant and unnecessary and at best wholly duplicative of the services already provided by Heidrick & Struggles, the Committee’s previously-retained consultant on the composition and structure of United’s board.”
UAL’s objection to the Committee’s emergency motion provides an introduction to UAL’s arguments in support of the management equity incentive plan and UAL’s proposed post-confirmation corporate governance provisions. UAL describes the Committee’s core confirmation objections regarding corporate governance issues as follows:

Continue Reading Litigation Drums Beat Over UAL’s Proposed Post-Confirmation Corporate Governance and Management Equity Incentive Plan