The project was based on LoPucki and Whitford’s empirical study of the forty-three largest publicly held companies to file for bankruptcy and complete a reorganization plan between 1979 and 1988. In addition to examining the pleadings and reported decisions in the cases, as well as newspaper accounts, LoPucki and Whitford interviewed more than 120 of the bankruptcy professionals involved in the cases. In its scope and ambition, the project recalls the voluminous Securities Exchange Commission (SEC) study overseen by William Douglas in the 1930s, a study LoPucki and Whitford frequently refer to as they examine their own findings.
In this Essay on the corporate reorganization project, I begin by very briefly describing its historical antecedents. The project draws on the insights and perspectives of two closely intertwined traditions: the legal realism of 1930s, whose exemplars included Douglas and other participants in the SEC study; and the law in action movement at the University of Wisconsin. In Section II, I briefly survey the key contributions of the corporate governance project, which punctured the then-conventional wisdom about the treatment of shareholders in bankruptcy, managers’ principal allegiance, and many other issues. In Section III, I consider two major shifts that have taken place in Chapter 11 practice in the twenty-five years since the study: the rise of creditor influence in Chapter 11, and shifts in the principal participants in (and scope of) large corporate reorganization cases. In Section IV, I explore one of LoPucki and Whitford’s key proposals—compensation for unsecured creditors when they are made to bear business risk in bankruptcy—and consider its potential relevance for the hotly debated, current question of the scope of a secured creditor’s lien in bankruptcy.