UCLA law professor Lynn LoPucki‘s book last year — Courting Failure : How Competition for Big Cases Is Corrupting the Bankruptcy Courts (UM Press 2005) — is still reverberating through corporate reorganization and bankruptcy legal circles. As noted in this earlier post, Professor LoPucki has been studying for many years the issue that he characterizes as the “race to the bottom” — i.e., bankruptcy courts in certain jurisdictions (primarily Delaware and New York City) bending federal bankruptcy law to market themselves to debtors’ lawyers who often are instrumental in choosing the venue of big business reorganization cases. Professor LoPucki argues that court competition caused high reorganization failure rates in Delaware and New York during the period from 1991-96 and then high reorganization failure rates nationally when the competition spread to the rest of the country in 1997.
In September 2005, the University of Wisconsin Law School convened a conference of leading bankruptcy scholars to provide a critique of Professor LoPucki’s book, and an upcoming symposium issue of the Buffalo Law Review will include the papers presented at that conference along with this response from Professor LoPucki, the abstract of which provides in part as follows:
By historical accident, the bankruptcy venue statute gives large public companies their choice of bankruptcy courts. Over three decades a competition for those cases has developed among some United States Bankruptcy Courts. The most successful courts – Delaware and New York – today attract more than two thirds of the billion-dollar-and-over cases. The courts compete principally because the cases represent a multi-billion dollar a year industry in professional fees alone, because local lawyers pressure judges to compete, and because judges who lose the competition are stigmatized and may not be reappointed. […]
