Friday
Sep262008
Businesses right to reorganize is questioned
The House Judiciary Subcomittee on Commercial and Administrative Law held a hearing on Chapter 11 of the Bankruptcy Code, and whether the 2005 amendments have pertinence in the face of today's impending business distress. Chairwoman Linda Sanchez (D-Calif.) opened the hearing with a comparison between the retail industry's recent increase in 'reorganizational' bankruptcy claims and the debate over the $700 billion bailout for Wall Street that President Bush has proposed.
The question Sanchez wanted answered is whether Chapter 11 works the way Congress intended it to, or if the Bankruptcy Abuse Prevention and Consumer Privacy Act is making it harder for businesses to reorganize, thus reverting to the straight liquidation in Chapter 7 of the Bankruptcy Code. Witness Lawrence Gottlieb of Cooley Godward Kronish LLP said that Chapter 11 has become, "nothing more than a vehicle through which secured lenders, whether they be banks, hedge funds, or private equity, sell the assets of a company through a quick sale process that provides very little, if any, opportunity for retailers to restructure their debt and rehabilitate their business".
Professor Barry Adler of the New York University School of Law said that "it is better to have failed firms be liquidated, because if they're dead economically, they're going to liquidate anyway. The assets can be redeployed to better uses, if the liquidation is quick, and creditors can receive a higher return than they would originally receive". The question remains of whether a failing business will better serve the economy if bailed out at the expense of taxpayers, or left to the hands of Adam Smith.
The question Sanchez wanted answered is whether Chapter 11 works the way Congress intended it to, or if the Bankruptcy Abuse Prevention and Consumer Privacy Act is making it harder for businesses to reorganize, thus reverting to the straight liquidation in Chapter 7 of the Bankruptcy Code. Witness Lawrence Gottlieb of Cooley Godward Kronish LLP said that Chapter 11 has become, "nothing more than a vehicle through which secured lenders, whether they be banks, hedge funds, or private equity, sell the assets of a company through a quick sale process that provides very little, if any, opportunity for retailers to restructure their debt and rehabilitate their business".
Professor Barry Adler of the New York University School of Law said that "it is better to have failed firms be liquidated, because if they're dead economically, they're going to liquidate anyway. The assets can be redeployed to better uses, if the liquidation is quick, and creditors can receive a higher return than they would originally receive". The question remains of whether a failing business will better serve the economy if bailed out at the expense of taxpayers, or left to the hands of Adam Smith.
Legal Analyst Says Cyber-Bullying Legislation Needs Focus
In a phone interview with Talk Radio News Service Thursday, Heritage Foundation Senior Legal Research Fellow Brian W. Walsh said that language used in the federal cyber-bullying bill, introduced earlier this year by Rep. Linda Sanchez (D-Calif.), is overly broad.
"The terms [in the bill]...don’t have a precise, clear, accepted, generally agreed upon definition in federal law,” said Walsh.
Sanchez drafted the “The Megan Meier Cyberbullying Prevention Act” in response to the death of Megan Meier, a 13-year-old girl from Missouri who committed suicide in 2006 after being cyber-bullied on the social networking site MySpace by a woman named Lori Drew, the mother of one of Meier's classmates. Drew was indicted and convicted on charges stemming from the incident in 2008, but was later acquitted in 2009.
The bill has received mixed reviews from a handful of members of Congress who have argued that it uses vague terms and would cause potential violations of free speech rights.
“We need to be extremely careful before heading down this path,” said Rep. Bobby Scott (D-Va.) during a House subcommittee hearing on the legislation back in September.
The bill would amend the federal criminal code to allow criminal penalties to be levied upon anyone that “transmits in interstate or foreign commerce a communication intended to coerce, intimidate, harass, or cause substantial emotional distress to another person, by using electronic means.”
“We are going to end up criminalizing conduct that shouldn’t be criminal in the first place...it’s easy to draft an overbroad criminal law,” said Walsh.