Anthony Casey and Joshua Macey Write About Bankruptcy

Bankruptcy by Another Name

In the past few years, bankruptcy has emerged as a popular tool for resolving mass-tort litigation. Academics have largely greeted this development with skepticism and alarm, arguing that large corporations turn to bankruptcy to reduce expected payouts at the expense of plaintiffs who have been harmed by corporate misconduct.  In an earlier article, we defended mass-tort bankruptcies as providing a process that can offer significant economic benefits to both plaintiffs and corporate defendants. Bankruptcy, we pointed out, is designed to prevent a race to the courthouse that can destroy enterprise value. By consolidating proceedings in a single forum and binding holdouts and future claimants, bankruptcy provides a vehicle for quickly and efficiently resolving complex mass-tort litigation. This can leave all parties better off, increasing plaintiff recoveries and helping a corporation resolve lawsuits that would otherwise drain resources.

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