Bankruptcy

Private Law and Asset Shielding — Yonathan Arbel

by

Post by Yonathan Arbel,  postdoctoral fellow in private law, Harvard Law School (job market candidate)

One of the central questions in the New Private Law is how ‘down-to-earth’ should legal analysis be? Regardless of one’s substantive view on this debate, there is one area in which we have been insufficiently realistic: private law enforcement. There is a real gap in our understanding of how legal norms are executed by sheriffs, bailiffs, and private ordering. Understanding the limits of doctrine and law could be informative for both economic and justice-based views of the law, as well as to views that look at the law from the internal point of view.

My scholarship focuses on questions concerning the enforcement of private legal norms. In Shielding of Assets and Lending Contracts (Forthcoming, Int’l Rev. L. Econ.) I consider the problem of asset shielding. Most judgments, if not voluntarily implemented, depend on enforcement through the seizure of the judgment-debtor’s assets. The problem is that ownership is too malleable and enforcement is too constrained, so there are many ways in which people can hide, shield, or protect their assets (transfer of money to an exotic offshore trust, bankruptcy planning, sham transfer to one’s relatives, hiding money under the mattress, etc.). Some of these techniques are more complicated than others, and some people will have moral reservations about deploying certain kinds of shielding techniques, or self-interested concerns about the effects of shielding on their credit scores, but overall, there is a real temptation here – especially since criminal enforcement against those who shield is quite rare. Given this temptation, it is puzzling why people do not shield assets more often. More generally, because avoiding judgments through asset shielding undermines many private legal obligations, it is important to have an account of when people would choose to meet their obligations and, if they decide to shield, the magnitude of assets that would be shielded.

Read more

Impairing State Contractual Commitments – How Sacred Should Contracts Be? — Aditi Bagchi

by

Post by Aditi Bagchi

In early May, the Illinois Supreme Court unanimously struck down a 2013 state pension reform law.  That statute reduced various public pension benefits in an effort to reduce overwhelming debt in the public pension system.  The Court affirmed a lower court ruling that the bill violated the pension protection clause in the Illinois state constitution, which provides that “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”  The Court read the clause to prevent the legislature from any downward revision of a public employee’s pension benefits after the first day of her employment.

Illinois argued that the clause should be read to subject its public pensions to the same limitations as other contractual relationships, including modification or elimination by the state’s police power.  The Court rejected that argument, holding that, especially where the state is itself a party to the contract in question, the hurdle for a substantial impairment of contract is very high and had not been met in this case.

Read more

Naked Came the Assignment — Anthony J. Sebok

by

Post by Anthony J. Sebok

Here is a simple question: why should it matter who brings a valid claim in private law?  Standing, of course, is an important mechanism that insures that courts spend their time only on cases that matter to someone, especially in public law.  But what if the party who was the victim of a genuine harm chooses to assign that claim to a stranger, in order (let’s assume) to let them bring it to the courts.  Why not let that happen?

It is commonly assumed that almost all legal rights are freely assignable:  contract rights, property rights, and even certain causes in action for damages.  But the law in both the United States and England is grappling with how far to take the principle of fee assignability when it comes to “naked” assignments – that is, the assignment of causes of action for the redress of a wrong, not the collection of a debt or the performance of a contract.

Read more