For the Greater Good: The Use of Public Policy Considerations in Confirming Chapter 11 Plans of Reorganization

Abstract:     
This article evaluates the bankruptcy court's ill-defined obligation to consider public policy issues during the confirmation of Chapter 11 plans of reorganization. This consideration is mandated by 11 U.S.C. 1123 and 1129(a)(5), which provide that the management of a reorganized entity must be consistent with public policy. At present, proper application of these provisions is poorly described in case law. Accordingly, this article address two primary issues: (1) what public policy concerns should be considered when confirming a plan of reorganization; and (2) what procedure should a bankruptcy court adopt when addressing such issues? After an initial discussion of potential public policy topics of interest, this article proposes the implementation of a burden shifting system to be utilized in applying 1123 and 1129(a)(5). The proposed framework benefits the bankruptcy system by: (1) creating a methodology to apply the public policy provisions of the Bankruptcy Code; and (2) reconciling apparent contradictions between the Bankruptcy Code and the current operation of bankruptcy courts.

Keywords: bankruptcy, public policy, 1123, 1129, chapter 11, confirmation, reorganization, management of a reorganized entity

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