Priority Matters: Absolute Priority, Relative Priority, and the Costs of Bankruptcy
Chapter 11 of the Bankruptcy Code is organized around the absolute priority rule. This rule mandates the rank‐ordering of claims. If one creditor has priority over another, this creditor must be paid in full before the junior creditor receives anything. Many have suggested various modifications to the absolute priority rule. The reasons vary and range from ensuring proper incentives to protecting nonadjusting creditors. The rule itself, however, remains the common starting place.
This Article uses relative priority, an entirely different priority system that flourished until the late 1930s, to show that using absolute priority even as a point of departure is suspect. Much of the complexity and virtually all of the stress points of modern Chapter 11 arise from the uneasy fit between its starting place (absolute instead of relative priority) and its procedure (negotiation in the shadow of a judicial valuation instead of a market sale). These forces are leading to the emergence of a hybrid system of priority that may be more efficient than one centered around absolute priority.
Class Action Notice in the Digital Age
Technology is advancing dramatically each year, reshaping our society in the process. Despite these rapid changes, however, many federal courts continue to rely on traditional means of disseminating notice, including mail and newspapers, to inform class action members of their rights. As technology continues to progress in the digital age, these methods are becoming increasingly anachronistic. Inadequate notice risks a class member not learning of the action, and failing to learn of an action risks an individual losing a potentially large claim. Moreover, inadequate notice may open a judgment or settlement to direct or collateral attack.
Recognizing limitations in traditional forms of notice, some courts and parties have begun using modern technologies. They are using email notice to deliver individual notice, and banner and pop‐up advertisements on websites, as well as dedicated websites, to try to reach unknown class members. Although these efforts are a promising first step, courts and parties can do more. For example, machine learning systems—which analyze massive accumulations of data to discern unobserved patterns—could be used to identify previously unknown class members, with the ultimate goal of sending them individual notice. Social media also offers an inexpensive way for parties to reach a potentially vast, diverse class. Finally, text messaging could allow parties to deliver notice directly to class members in a matter of seconds. In the digital age, it is imperative that courts and parties harness modern technologies to provide the best notice practicable and protect the interests of class members.
Jurisdiction and Judicial Self‐Defense
Although State of Washington v. Trump has generated enormous attention, the Ninth Circuit, the parties, and legal commentators have largely overlooked a noteworthy facet of the case: appellate jurisdiction. Ordinarily, temporary restraining orders (“TROs”) are not appealable. The Ninth Circuit, however, construed the district court’s self‐styled TRO as a preliminary injunction, which permitted it to exercise jurisdiction and reach the merits.
This maneuver was curious. Despite the minimal treatment the issue received, appellate jurisdiction was a close question, doctrinally. Several factors—the abbreviated proceeding below, the minimal legal analysis in the district court’s order, and the court’s subsequent scheduling order—provided grounds to concluded that the district court’s order was, in fact, a TRO. This conclusion is strengthened by the ability to distinguish the cases cited by the Ninth Circuit on the issue.
Put differently, the panel could plausibly have dismissed the appeal on jurisdictional grounds (thus leaving in place the district court’s TRO), which would have yielded the same functional result as its actual opinion, i.e., the continued unenforceability of the President’s Immigration Order. What, then, explains the choice to reach the merits when a jurisdictional ruling would have achieved the same legal effect? We theorize that the panel’s decision represents an expression of judicial self‐defense against perceived threats to the authority and legitimacy of the courts. By affirming the district court’s substantive ruling in a unanimous, per curiam opinion, the Ninth Circuit sent a message of judicial strength and unanimity at a time when the relationship between the executive and judicial branches is tense.
How the U.S. Sentencing Commission Considers Retroactivity
In a recent Essay, Professor Litman and Mr. Beasley provide a detailed discussion of how they believe the U.S. Sentencing Commission’s data and recent actions relating to the career offender Guideline do and do not matter to the Supreme Court’s consideration of the issues set forth in Beckles v. United States. First, in support of retroactive application, the authors argue that lower court decisions invalidating the Guideline’s residual clause have “uniformly” resulted in “less severe sentences.” Second, the authors contend that the Supreme Court should give little weight to the Commission’s decision not to make retroactive its removal of the “residual clause” from the career offender Guideline. The authors support this contention with their misconception that the “Sentencing Commission opted not to investigate the possibility of making is amendment retroactive at all . . . .”
This Response does not wade into the legal issues raised in the various briefs in Beckles, or respond to the authors’ arguments regarding the import of a small number of resentencings; it instead seeks to provide greater clarity on the Commission’s process for deciding whether to make amendment guidelines retroactive.
Of Laundering and Legal Fees: The Implications of United States v. Blair for Criminal Defense Attorneys who Accept Potentially Tainted Funds
“In the common understanding, money laundering occurs when money derived from criminal activity is placed into a legitimate business in an effort to cleanse the money of criminal taint.” 18 U.S.C. § 1957, however, prohibits a much broader range of conduct. Any person who “knowingly engages” in a monetary transaction involving over $10,000 of “criminally derived property” can be charged with money laundering under § 1957.
Because § 1957 eliminates the requirement found in other money laundering statutes that the government prove an attempt to commit a crime or to conceal the proceeds of a crime, § 1957 “applies to the most open,
above‐board transaction,” such as a criminal defense attorney receiving payment for representation. In response to pressure from commentators, Congress passed an amendment two years after § 1957’s enactment defining the term “monetary transaction” so as to exclude “any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution.”
The statutory safe harbor found in § 1957(f)(1) has successfully immunized defense attorneys from money laundering prosecutions. However, United States v. Blair raised concerns among the criminal defense bar because of its holding that an attorney‐defendant was not entitled to protection under § 1957(f)(1). In Blair, an attorney‐defendant was convicted of violating § 1957 for using $20,000 in drug proceeds to purchase two $10,000 bank checks to retain attorneys for associates of his client. Noting that Sixth Amendment rights are personal to the accused and that Blair used “someone else’s money” to hire counsel for others, the Fourth Circuit held that his actions fell “far beyond the scope of the Sixth Amendment” and were not protected by the safe harbor. In his strongly‐worded dissent, Chief Judge Traxler criticized the court for “nullif[ying] the § 1957(f)(1) exemption and creat[ing] a circuit split.”
This Case Note discusses the implications of Blair for the criminal defense attorney who accepts potentially tainted funds and proposes a solution to ameliorate its unintended consequences. First, Part I provides relevant background information by discussing the money laundering statutory framework, the criticisms leveled at the framework as it was written, the Congressional response to that criticism, and § 1957(f)(1)’s application up until Blair. Next, Part II describes the Blair decision in detail and examines its implications. Part III then proposes a novel solution to the problems it created. Finally, the Case Note concludes with a brief word of practical advice for the criminal defense bar.