The Municipal Bond Cases Revisited

94 American Bankruptcy Law Journal 591 (2020)

38 Pages Posted: 18 Nov 2020 Last revised: 2 Apr 2021

See all articles by Allison Buccola

Allison Buccola

affiliation not provided to SSRN

Vincent S.J. Buccola

University of Pennsylvania - The Wharton School - Legal Studies & Business Ethics Department

Date Written: September 25, 2020

Abstract

Recent high-profile attempts to repudiate municipal bonds break from what had become a stable American norm of honoring public debt. In the nineteenth century, though, hundreds of cities, towns, and counties walked away from their bonds. The Supreme Court’s handling of repudiation in the so-called municipal bond cases conjured intense animus at the time. But the years as well as the archaic prose and sheer volume of the opinions have obscured the cases’ significance.

This article reconstructs the bond cases with an eye to modern disputes. It reports the results of our reading all 203 cases, decided 1859–1899, in which the Justices opined on bond validity. At a high level, our findings correct a stock narrative in the literature. The standard account paints the Court as a reliable champion of northeastern capitalists in what resembled regional or class politics more than law. That story does not withstand scrutiny, however. We find, for example, that the Court ruled for the repudiating municipality about a third of the time. Moreover, the decisions had a readily articulable logic at the heart of which lay a familiar law/fact distinction. Estoppel barred issuers in most instances from denying factual predicates of bond validity, but it did not prevent scrutiny of legal predicates. The Justices were willing to hold bonds void on even highly technical legal grounds.

Keywords: municipal debt, municipal bonds, repudiation, bond repudiation, ultra vires, estoppel, bond recitals, debt limit, municipal bond cases, gelpcke, railroad-aid bonds, Puerto Rico, FOMB

Suggested Citation

Buccola, Allison and Buccola, Vincent S.J., The Municipal Bond Cases Revisited (September 25, 2020). 94 American Bankruptcy Law Journal 591 (2020), Available at SSRN: https://ssrn.com/abstract=3699633

Allison Buccola

affiliation not provided to SSRN

Vincent S.J. Buccola (Contact Author)

University of Pennsylvania - The Wharton School - Legal Studies & Business Ethics Department ( email )

3730 Walnut Street
Suite 600
Philadelphia, PA 19104-6365
United States

HOME PAGE: http://lgst.wharton.upenn.edu/profile/buccola/

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