Courts As Institutional Reformers: Bankruptcy and Public Law Litigation

47 Pages Posted: 8 Dec 2017 Last revised: 26 Apr 2019

See all articles by Kathleen G. Noonan

Kathleen G. Noonan

University of Pennsylvania, Perelman School of Medicine, Children's Hospital of Philadelphia ; University of Pennsylvania - Perelman School of Medicine

Jonathan C. Lipson

Temple University - James E. Beasley School of Law

William H. Simon

Columbia University - Law School; Stanford University - Stanford Law School

Date Written: January 26, 2018

Abstract

This article compares two spheres in which courts induce and oversee the restructuring of organizations that fail systematically to comply with their legal obligations: bankruptcy reorganization and public law litigation (civil rights or regulatory suits seeking structural remedies). The analogies between bankruptcy and public law litigation (PLL) have grown stronger in recent years as structural decrees have evolved away from highly specific directives to “framework” decrees designed to induce engagement with stakeholders and make performance transparent. We use the comparison with bankruptcy, where the value and legitimacy of judicial intervention are better understood and more accepted, to address prominent criticisms of PLL. Our comparison shows that judicial intervention in both spheres responds to coordination problems that make individual stakeholder action ineffective, and it explains how courts in both spheres can require and channel major organizational change without administering the organizations themselves or inefficiently constricting the discretion of managers. The comparison takes on greater urgency in light of the Trump Administration’s vow to “deconstruct the administrative state,” a promise which, if kept, will likely increase demand for PLL.

Keywords: institutional reform litigation, structural reform, public law litigation, chapter 11 bankruptcy, equity receiverships, corporate restructuring

JEL Classification: K22, K41

Suggested Citation

Noonan, Kathleen G. and Lipson, Jonathan C. and Simon, William H., Courts As Institutional Reformers: Bankruptcy and Public Law Litigation (January 26, 2018). Columbia Public Law Research Paper No. 14-572; Temple University Legal Studies Research Paper No. 2018-05. Available at SSRN: https://ssrn.com/abstract=3082672 or http://dx.doi.org/10.2139/ssrn.3082672

Kathleen G. Noonan

University of Pennsylvania, Perelman School of Medicine, Children's Hospital of Philadelphia ( email )

34th Street and Civic Center Boulevard
Philadelphia, PA 19104-4399
United States

University of Pennsylvania - Perelman School of Medicine ( email )

423 Guardian Drive
Philadelphia, PA 19104
United States

Jonathan C. Lipson (Contact Author)

Temple University - James E. Beasley School of Law ( email )

1719 N. Broad Street
Philadelphia, PA 19122
United States

William H. Simon

Columbia University - Law School ( email )

435 West 116th Street
Jerome Greene Hall, Mailbox A-18
New York, NY 10027
United States
212-854-9215 (Phone)
212-854-7946 (Fax)

Stanford University - Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
(650) 723-4605 (Phone)

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