Denying Secured Creditors the Right to Credit Bid in Chapter 11 Cases and the Risk of Undervaluation
Alan N. Resnick
Volume 63, Issue 2, 323-360
The Bankruptcy Code has reached a delicate balance between protecting the rights of secured creditors and providing financially troubled companies with flexibility in reorganizing their businesses. One protection that has been available to secured creditors is the right to “credit bid” at any sale of collateral free of liens, which allows the creditor to buy the property by offsetting its claim against the purchase price instead of paying cash. This right is designed to assure that property is not sold free of security interests at a price that is below the collateral’s true value. An inadequate sales price deprives the creditor of the full benefit of its security interest. The importance of credit bidding has grown as asset sales have become more common in chapter 11 cases.
Despite the universal view during the past three decades that the right to credit bid was essentially guaranteed when property is sold under a chapter 11 plan, two recent controversial decisions—the Fifth Circuit’s decision in In re Pacific Lumber Co. and the Third Circuit’s decision in In re Philadelphia Newspapers, LLC—curtailed this protection by holding that a secured lender may be denied the right to credit bid when its collateral is sold under a chapter 11 plan if the bankruptcy court makes a judicial finding that the creditor will realize the “indubitable equivalent” of its secured claim without credit bidding.
Tax Deductions for Charitable Contributions: Domestic Activities, Foreign Activities, or None of the Above
Eric M. Zolt
Volume 63, Issue 2, 361-410
Warren Buffett, Bill Gates, and sixty-seven other billionaires have pledged to give a majority of their wealth for charitable purposes. The total dollar amount of potential funding for charitable activities is staggering. So is the potential loss of tax revenue. Because of past, current, and future tax benefits, U.S. taxpayers have funded and will fund a substantial portion of these charitable activities without any input in how the money is spent. These billionaires are not just being generous with their own money, but with the money of the American people.
Should we allow tax benefits to subsidize charitable activities and allow donors to dictate how funds are spent? This Article seeks to contribute to the debate on the desirability of charitable tax deductions by focusing on a smaller part of the charitable tax world: charitable deductions for foreign assistance. Tax benefits for foreign assistance raise several of the same issues that arise in the purely domestic context, as well as issues that may be less important or absent in the subsidizing of domestic charitable activities.
Recent scholarship has argued for continuing to allow tax benefits to foreign charitable activities, and for extending charitable tax benefits to foreign charities and to for-profit entities engaged in charitable activities. These arguments rest partly on the notion that there is no meaningful way to distinguish these activities or entities from domestic charities engaged in domestic charitable activities. These scholars may be right in arguing for consistent tax treatment for domestic and foreign charitable activity, but they may be wrong in their conclusions. The best approach may be to consider changes to the current charitable-deduction regime for both domestic and foreign charitable activities and to consider other alternatives for the government to provide financial support and other incentives for charitable activities.
Guilty by Proxy: Expanding the Boundaries of Responsibility in the Face of Corporate Crime
Amy J. Sepinwall
Volume 63, Issue 2, 411-454
The BP oil spill and financial crisis share in common more than just profound tragedy and massive clean-up costs. In both cases, governmental commissions have revealed widespread wrongdoing by individuals and the entities for which they work. The public has demanded justice, yet the law enforcement response in both cases has been underwhelming. In particular, no criminal indictments have been sought for any of the corporations responsible for the Macondo oil-rig explosion or for the Wall Street banks involved in the financial meltdown.
This governmental restraint reflects a deep-seated ambivalence about corporate criminal liability. Though scholars have been debating the justifiability of prosecuting and punishing corporations since the doctrine’s inception just over 100 years ago, virtually no progress has been made by either side. Thus, we have devastating instances of corporate crime and no good justification for prosecuting and punishing corporations.
The Article seeks to diagnose the reason for the widespread consternation about the doctrine of corporate criminal liability. It then advances a new theoretical foundation for the doctrine.
More specifically, the Article seeks to justify corporate criminal liability by arguing not that the corporation deserves to be punished for its wrongdoing but instead that its members do. Thus the Article conceives of corporate criminal liability as a way of targeting the corporation’s officials, who are blameworthy just in virtue of their role within the corporation. The Article ends by identifying a series of corporate sanctions that reflect the rationale for corporate criminal liability advanced here.
Advising Terrorism: Material Support, Safe Harbors, and Freedom of Speech
Volume 63, Issue 2, 455-520
Ever since Brandenburg v. Ohio, departures from content neutrality under the First Amendment have received strict scrutiny. However, in Holder v. Humanitarian Law Project (“HLP”), the Supreme Court decided that the perils of content regulation were less pressing than was the need to curb the human capital of groups, such as Hamas, designated as foreign terrorist organizations (“DFTOs”). As a result, the Court upheld a statute that bars “material support” of terrorist organizations, ruling that the statute bars speech coordinated with DFTOs, including training in negotiation or the use of international law. Some commentators have labeled HLP as heralding a new McCarthyism. This Article argues that critics who condemn HLPas the reincarnation of Cold War content regulation overlook the tailored quality of the decision’s hybrid scrutiny model, its roots in the Framers’ concerns about foreign influence, and its surprising parallels with constitutional justifications for professional regulation.
HLP is not the marked departure that critics claim. Just as professional regulation limits lawyers’ use of pretrial publicity, HLP reduced the impact of asymmetries in information that terrorist groups exploit. To constrain government, HLP’s framework of hybrid scrutiny also provides a safe harbor for the independent expression of ideas, and for scholars, journalists, human rights monitors, and attorneys.
Nevertheless, HLP’s critics are right that the Court’s decision is flawed. Chief Justice Roberts’s opinion invited confusion about the First Amendment status of lending “legitimacy” to violence, which could quickly drain the safe harbor that the Court created for independent advocacy. The opinion also made a studied show of deference to official sources, disdaining independent accounts of terrorist groups’ penchant for defection. Only the next case will tell if these flaws were minor missteps in a balanced decision or signs of a more severe conflict with First Amendment values.
Protected by Association? The Supreme Court’s Incomplete Approach to Defining the Scope of the Third-Party Retaliation Doctrine
Jessica K. Fink
Volume 63, Issue 2, 521-566
For decades, courts have struggled with how to treat claims of “third-party retaliation”—situations where one employee engages in some protected activity for purposes of Title VII but where the employer retaliates not against that employee, but rather against one of her coworkers—her spouse, or sibling, or mere workplace acquaintance. With its January 2011 decision in Thompson v. North American Stainless, LP, the U.S. Supreme Court finally has weighed in on this issue, deeming employees protected against third-party retaliation under Title VII.
This Article stands as one of the first in-depth examinations of Thompson and its potential impact on both employers and employees. While this Article approves of the Supreme Court’s decision to deem third-party retaliation claims viable under Title VII, this Article proposes a different framework for analyzing these claims than that applied by the Supreme Court in Thompson. Specifically, this Article argues that courts should apply jurisprudence from negligent infliction of emotional distress cases to conduct a more structured analysis of third-party retaliation claims. In addition, this Article argues that courts should define the class of plaintiffs who can assert third-party retaliation claims by requiring that only individuals who have engaged in some protected activity can sue. Other employees affected by employer retaliation—those who receive adverse treatment from their employer, but who did not themselves engage in any protected activity—should not be permitted to bring third-party retaliation claims. In articulating this framework, this Article seeks to strike a balance between deterring employers from engaging in retaliatory behavior and avoiding the negative consequences that could result from failing to place reasonable limits on the third-party retaliation doctrine.
Note – Playing Hot Potato in the Market: The Ninth Circuit’s Better Approach to Calculating Loss for Securities Fraud Sentencing
Volume 63, Issue 2, 567-594
In United States v. Berger, the Court of Appeals for the Ninth Circuit departed from the Second and Fifth Circuits regarding the standard required to determine loss for securities fraud under the Federal Sentencing Guidelines. Unlike its sister circuits, the Ninth Circuit held that the Supreme Court’s reasoning in Dura Pharmaceuticals, Inc. v. Broudo for loss causation in civil securities fraud actions did not apply to the criminal sentencing context. Instead, the Ninth Circuit endorsed price inflation, which was rejected in Dura Pharmaceuticals, as a method of determining loss under the Guidelines. This Note examines the circuits’ decisions in light of the crime and punishment of securities fraud and concludes that the Ninth Circuit’s reasoning better accords with the culpability of securities fraud offenders.
Note – Why Can’t We Be “Friends”? A Call for a Less Stringent Policy for Judges Using Online Social Networking
Volume 63, Issue 2, 595-632
Judges are increasingly using social networking websites like Facebook, Twitter, LinkedIn, MySpace, and Google+, and, naturally, the question arises: What are the ethical limits for judges doing so? A number of judicial ethics committees and others knowledgeable about judicial ethics have analyzed this question. Not all, however, were familiar with the nuances of online social networking. The California Judges Association falls into both of these categories. In November 2010, it released an advisory opinion, Opinion 66, describing its views on judges using social networking sites.
This Note details the views expressed by Opinion 66 and by opinions from Florida, Indiana, Kentucky, New York, Ohio, Oklahoma, and Wisconsin. Opinion 66 stated that a judge may not include an attorney in her online social network if the attorney is appearing before the judge—a view shared by Florida and Oklahoma but rejected by Indiana, Kentucky, New York, Ohio, and Wisconsin. This view typifies the failure of Opinion 66 to appreciate that the current ethical rules allow a judge to be online “friends” with an attorney appearing before her. This failure stemmed in part from a lack of recognition that an online connection is not indicative of a close connection. Other analytical flaws were the inexplicably higher standard for online contact and the lack of appreciation of how social networking sites work. Opinion 66—and all of the other opinions on this subject—also failed to appreciate the benefits of allowing judges to use online social networking, including transparency, outreach, and even enforcing the ethical rules.
This Note argues that the California Judges Association can, and should, release a new opinion further analyzing the use of social networking sites by judges.