58 Pages Posted: 14 Feb 2015 Last revised: 16 Jan 2016
Date Written: September 25, 2015
Corporate bankruptcy cases are expensive. Perhaps even too expensive. Empirical evidence suggests that cases may be so expensive because some bankruptcy professionals overcharge their clients. Although chapter 11 has an elaborate fee control system designed to prevent this professional overcharging, the system appears to be inadequate. Chapter 11’s fee control system appears to be failing for at least two reasons: insufficient information (those tasked with controlling professional overcharging lack sufficient information to do so) and the challenging (and perhaps overwhelming) nature of the task itself.
Crowdsourcing — broadly conceived as solving problems by drawing on the contributions of many people — can help bankruptcy courts to both obtain better information and to better utilize the information they receive. First, Crowdsourcing can help produce better information, both about general market conditions and about specific instances of potential overcharging by incentivizing the bankruptcy professionals already involved in the case and other parties, even non-experts, to supply information about their relevant experiences to improve chapter 11’s fee control system.
Second, a crowdsourced fee control system could also help improve the usefulness of information received by enlisting the general public in reviewing fee applications and related disclosures by professionals, as well as any additional information produced by other members of the crowd. Crowdsourcing allows large and/or tedious projects to be broken into small, discrete problems that can then be outsourced to potential problem-solvers. Because bankruptcy fee applications already report time in increments as small as six minutes, the task of reviewing fee applications seems well-suited to being crowdsourced.
Third, crowdsourcing may be able to introduce greater innovation into the fee control process. And finally, because a crowdsourced system can overlay (and need not displace) the existing fee control infrastructure, there appears to be little downside risk to crowdsourcing fee control.
Keywords: bankruptcy, chapter 11, crowdsourcing, crowdsource, fee applications, professionals, ethics, professional ethics, corporate, business
Suggested Citation: Suggested Citation
Bruckner, Matthew A., Crowdsourcing (Bankruptcy) Fee Control (September 25, 2015). 46 Seton Hall L. Rev. 361 (2016 Forthcoming). Available at SSRN: https://ssrn.com/abstract=2564227 or http://dx.doi.org/10.2139/ssrn.2564227