Business bankruptcy has a long history, and the process has been used to make the best of the dire situation when a firm’s liabilities overwhelm its assets and operations. While the system isn’t perfect, it works reasonably well to compensate those with claims. But according to an expert analysis in Law 360, some in Congress are contemplating legislative changes that would threaten this mechanism.
The analysis by Josiah M. Daniel III, a retired partner in residence at Vinson & Elkins LLP, looks at proposed changes to how mass tort bankruptcies are handled that would upend the balanced system at the expense of deserving, injured individuals.
“Improvements in a variety of areas, including much greater transparency in the proceedings, should be made. But the medicine presently being prescribed will not cure those ills. Fundamentally, Chapter 11 functions well to resolve disputed, unliquidated claims fairly and to allocate the proceeds of assets and causes of action to those entitled to payment,” Daniel wrote. “Over the past four decades under the Bankruptcy Code, mass tort bankruptcy cases have resolved millions of civil tort claims and paid literally billions of dollars to injured claimants. Businesses will continue to face mass tort litigation. Chapter 11 and the tools to implement it should remain available for mass tort situations.”