Manipulating Random Assignment: Evidence From Consumer Bankruptcies in the Nation's Largest Cities

31 Pages Posted: 9 Sep 2019

See all articles by Edward R. Morrison

Edward R. Morrison

Columbia Law School

Belisa Pang

Yale University - Law School

Jonathon Zytnick

Columbia University; New York University School of Law

Date Written: August 29, 2019

Abstract

Random case assignment is thought to be an important feature of decision-making in federal courts because it helps guard against favoritism (actual or perceived) toward particular parties or types of cases. In bankruptcy courts, cases are randomly assigned to both judges and trustees. In Chapter 7 cases, for example, the trustee is a quasi-judicial actor, typically a private-sector lawyer, who has been selected to audit the debtor's finances, find and liquidate assets, and police compliance with the law. We study three major bankruptcy jurisdictions (covering Chicago, Los Angeles, and parts of New York) and find that the random-assignment process for Chapter 7 trustees is failing in two of them (Chicago and New York). We introduce several measures of non-random assignment. Across all measures, random assignment is failing: Trustees within the same court have substantially different case characteristics, despite the purportedly random assignment process. We present evidence that the imbalance in case characteristics is caused by attorney manipulation: Attorneys strategically time their case filings to avoid or attract particular trustees ("trustee shopping"). By contrast, among cases filed by debtors who have not hired attorneys ("pro se filers"), there is no case imbalance across trustees. Because they do not engage in manipulation, pro se filers – who account for the bottom decile of income and asset values among Chapter 7 debtors – are the debtors most burdened by trustee-shopping by bankruptcy attorneys. We conclude by presenting evidence that trustee-shopping is less prevalent in Los Angeles due to differences in its random-assignment protocol.

Keywords: Bankruptcy, Chapter 7, Random Assignment, Trustee Shopping

JEL Classification: D14, D12, G33, K35, R20

Suggested Citation

Morrison, Edward R. and Pang, Belisa and Zytnick, Jonathon, Manipulating Random Assignment: Evidence From Consumer Bankruptcies in the Nation's Largest Cities (August 29, 2019). Available at SSRN: https://ssrn.com/abstract=3444949 or http://dx.doi.org/10.2139/ssrn.3444949

Edward R. Morrison (Contact Author)

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States

Belisa Pang

Yale University - Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States

Jonathon Zytnick

Columbia University ( email )

420 W. 118th Street, MC 3308
New York, NY 10027
United States

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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