Professor Frederick Tung’s Paper Selected as One of 2014’s Top Ten Corporate and Securities Articles
Published in the Virginia Law Review, the paper questions the stability of creditor priority structure in bankruptcy proceedings.
“Breaking Bankruptcy Priority: How Rent-Seeking Upends the Creditors’ Bargain,” co-authored by Professor Fred Tungof Boston University School of Law and Professor Mark Roe of Harvard Law School, was selected as one of the ten Best Corporate and Securities Articles of 2014. It was the only bankruptcy-related article on the list.
This “10-best” list reflects the choices of academic teachers in this area of the law from more than 560 articles published last year, based on an annual poll conducted by Georgetown Law Professor Robert Thompson. Recognized papers will be published in an upcoming issue of Corporate Practice Commentator.
Tung and Roe’s paper, published in the Virginia Law Review, questions the stability of bankruptcy’s priority structure. Bankruptcy scholarship has long conceptualized bankruptcy’s reallocation of value as a hypothetical bargain among creditors: creditors agree in advance that if the firm falters, value will be reallocated according to a fixed set of statutory and agreed-to contractual priorities.
Tung and Roe propose an alternative view. “The bargain is never fixed because creditors regularly attempt to alter the priority rules and often succeed,” Tung and Roe write. “Priority is in fact up for grabs. Bankruptcy should be reconceptualized as an ongoing rent-seeking contest in which creditors continually seek to break priority—to obtain categorical changes in priority rules in order to jump themselves ahead of competing creditors.”
The paper goes on to “explain how priority jumping interacts with finance theory and how it should lead us to reconceptualize bankruptcy not as a simple, or even a complex, creditors’ bargain, but as a dynamic process with priority contests fought in a three-ring arena of transactional innovation, doctrinal change, and legislative trumps.”
Professor Tung researches, teaches, and consults in the areas of corporate and securities law, bankruptcy, and the governance of financial institutions. Prior to joining the BU faculty, he was the Robert T. Thompson Professor of Law and Business at Emory University School of Law. He has also been a visiting professor at Harvard Law School, a Roger T. Traynor Professor in Corporate Law at Hastings College of the Law, and a fellow at the Searle-Kauffman Institute on Law, Innovation and Growth. He testified in Congress before the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP); served as a consultant on law reform for the Ministry of Justice in Ethiopia, the Center for Commercial Law and Economics in Indonesia, and the California Law Revision Commission; and has been a lecturer in the law department at Peking University. He also has served on the Consumer Law Task Force of the Atlanta Legal Aid Society.