NewYorkUniversity
LawReview
Current Issue

Volume 72, Number 2

May 1997
Articles

A Theory of Corporate Insolvency

Barry E. Adler

Modern scholarship on corporate bankruptcy works from the premise that investors are willing to expend resources identifying and saving insolvent firms that can continue efficiently. In this Article, Professor Adler argues that this premise may be faulty, at least for multiple-creditor firms. Viewed properly, from an ex ante perspective, investors may wish to design initial capital structures that will produce few insolvent but viable firms. Consequently, in a world of unimpeded contractual choice investors might forgo any collective insolvency process directed primarily at the preservation of going concerns. Professor Adler argues, accordingly, that corporate bankruptcy law and proposals for its replacement may be ill-advised for largefirms, not because these firms could efficiently continue post insolvency without bankruptcy reorganization or some substitute, but because it may be appropriate that these firms not continue. In the process of making this argument, Professor Adler offers new interpretations of three puzzling phenomena: asset-based finance; the failure of investors to contractually avoid the seemingly expensive American bankruptcy reorganization process; and common equity’s residual interest in a firm that fails to pay dividends on preferred stock.

Commentaries

Commentary

Jeanine Pirro

As a prosecutor and former judge, I have been at both the receiving and pitching end of criticism of the judiciary. Criticism of judges is nothing new. It is something that we have engaged in throughout the course of our history, but now, because of the technological age in which we live, more and more people are aware of such criticism. My feeling is that if the judge cannot take public scrutiny and outcry, the judge should not be on the bench.

Commentary

Bob Herbert

I was a reporter at the Daily News when the term “Turn ’em Loose, Bruce” was hung on Bruce Wright. The Daily News and the New York Post had a field day with that. Two things struck me about that. One, the reporters and editors desperately wanted a “Turn ’em Loose, Bruce” story; they just wanted that story, they wanted to get that term in the lead, and they wanted it in the headline. The other thing was that not only did the editors not understand the implications of the facts in the cases that they were writing about–usually the case involved the allegedly low amounts of bail that Bruce Wright was setting–but they didn’t even understand the facts themselves. They didn’t care about the facts. The problem was that some of the stories were serious.

Essays

A Twentieth Amendment Parable

John Copeland Nagle

Once upon a time, there was a constitutional amendment that had avoided all of the disputes characteristic of constitutional law. The Supreme Court had never even mentioned it. Only four district court decisions had in any sense turned on the Amendment’s meaning. Law schools did not hold symposia exploring the subtleties of the Amendment. The definitive law review article on the Amendment had yet to be written. The most attention the Amendment received was as an example of a constitutional provision so straightforward that it generated few of the interpretive controversies that lurked elsewhere in the Constitution.

Lectures

How James Madison Interpreted the Constitution

The Honorable Richard S. Arnold

Madison Lecture

In this Madison Lecture, Chief Judge Richard S. Arnold of the United States Court of Appeals for the Eighth Circuit explores the subject of constitutional interpretation as practiced by the eponymous James Madison. Following Madison’s public arguments and private statements through crucial early American debates over federal powers, Judge Arnold finds that the “Father of the Constitution” refused to take advantage of his own formative contributions to the Constitution. On the contrary, Madison sought constitutional authority in the citizenry, as exercised through state ratifying conventions and through the precedential effect of deliberative legislative action. Arnold reminds us that Madison was a consummate politician at a time when the occupation was not yet a pejorative epithet, but public officeholders were even then subject to harsh personal criticism that rivals if not surpasses the political vitriol of our times. Madison nevertheless developed a consistent, yet flexible, view of constitutional interpretation that can still enlighten he constitutional debates of today.

Notes

The Bold and the Beautiful: Art, Public Spaces, and the First Amendment

Daniel Mach

Art has become a battleground on which American society fights its most intensely political and deeply personal wars. Because art by its very nature stimulates both intellectual and emotional responses, it is uniquely suited to generate powerful, often conflicting reactions in both artist and viewer. Increasingly, our most profound cultural tensions surface when people contest the meaning and value of artistic expression.

The Practice of Peer Review in the International Nuclear Safety Regime

Monica J. Washington

Before the first artificial fissioning of a uranium atom, it was apparent to the scientific community that harnessing the atom’s vast reservoir of energy, even for peaceful purposes, was not without its risks. Today, five decades after splitting the atom and just over one decade since the April 1986 Chernobyl accident sent radioactive fallout across Eastern and Western Europe, an increasing number of states have come to recognize the tremendous transboundary risks that are inherent in the development of nuclear power. Accompanying this trend has been the search for appropriate and effective means to improve the safety of nuclear power plants worldwide.

Speeches

Introductory Remarks

Norman L. Greene

“Politicians on Judges: Fair Criticism or Intimidation” was a program produced by the Committee on Lectures and Continuing Education of the Association of the Bar of the City of New York and held on October 7, 1996, before a large gathering at the Association.

Some Thoughts on Judicial Independence

Mario M. Cuomo

Once every four years we are asked to look closely at our unique democracy and ask ourselves how well it’s working and whether we need to make some changes. Invariably, for those who take the time to reflect, it becomes a reminder of the genius of the original design: a separation of powers to give the ship of state balance, a political system–legislative and executive–to implement the will of the majority, and a judicial system to protect the minority from being deprived of rights so basic no majority should be powerful enough to deny them. Tonight we discuss how that design is being tested by recent events.