Multiple Claims, Ivanhoe and Substantive Consolidation

16 Pages Posted: 8 Dec 2009 Last revised: 11 Nov 2014

Daniel J. Bussel

University of California, Los Angeles (UCLA) - School of Law

Date Written: December 4, 2009

Abstract

The Supreme Court's 1935 Ivanhoe decision created the specter of undue multiplication of claims, particularly in bankruptcies that involve large business enterprises conducted through many separate legal entities. Ivanhoe should be overruled on its own facts, but even if it is not, its extension to other situations is indefensible. Until overruled, Ivanhoe is properly limited to creditors secured by nondebtor collateral, foreclosure of which does not give rise to reimbursement or subrogation claims against the bankruptcy estate. While even in that case Ivanhoe overcompensates the creditor, such cases are rare and do not entail large-scale multiplication of claims against bankruptcy estates. If Ivanhoe is so limited, co-debtor liability among insolvent estates can be dealt with through a form of marshaling described in this Article. Otherwise, the practical second-best solution to the multiple claims problem is likely to remain liberal reliance on the substantive consolidation doctrine.

Keywords: Bankruptcy

Suggested Citation

Bussel, Daniel J., Multiple Claims, Ivanhoe and Substantive Consolidation (December 4, 2009). 17 American Bankruptcy Institute Law Review 217 (2009); UCLA School of Law, Law-Econ Research Paper No. 09-23. Available at SSRN: https://ssrn.com/abstract=1518613

Daniel J. Bussel (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

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