Post #23 - The Setup

First off, apologies to everyone for not getting an article out last week.  Work has been very busy.  We’ve got a few interesting and fast-paced cases that we’re involved with, which is fun, but it doesn’t leave much time to write.  I’ve had high hopes, but when the day job wraps up after 1, 2, or sometimes 3 a.m., those hopes get sleepy.

Second, this is a big week!  Tomorrow is the first debate between Vice President Harris and former President Trump.  It’s anyone’s guess how consequential the debate will end up being (almost certainly less consequential than the last), but it’s the candidates’ first face-to-face meeting and the best opportunity yet to make their case in front of a massive television audience.  The Harris-Walz interview on CNN drew 6.3 million viewers; the Biden-Trump debate was watched live by 51.3 million, not including those who streamed the debate online, and the potential for Tuesday may be even greater: the first Biden-Trump debate in 2020 was watched live by more than 73 million people, and the first Clinton-Trump debate was watched by 84 million people.  I’m not saying the race will be won on Tuesday night—even events that seem wildly important in the moment, like the Trump assassination attempt, can fade as quickly as the next big thing comes along—but the debate certainly could change a ticket’s trajectory in a very tight race.

Here’s the plan: today, the setup; tomorrow, Congress (part 2 of the What Parts of These Platforms Could Actually Come to Fruition series) and a brief debate preview; and at some point from Wednesday-Sunday, a debate response.*

*All plans remain vulnerable to work-related torpedoes, but I’ll do my best.

Part I - The Setup (Yes, It’s a Repeat of the Article Title)

Given the reason this is my first article since August 26th, I thought it might be appropriate to talk a bit about work.  I work as a corporate restructuring lawyer at a large firm in New York City.  Much of my practice group’s work involves shepherding large companies through bankruptcy.  When a company files for “chapter 11” bankruptcy protection, the goal is typically to stay in business rather than liquidate, on the premise that the company will be able to provide a better return to its creditors by staying in business rather than by selling off its assets piecemeal.  Chapter 11 gives debtor companies powerful tools to right-size their financial situation and reach arrangements with creditors to settle outstanding debts.  Former President Trump has filed companies for chapter 11 six times, most recently in 2009.

Bankruptcy comes with serious tradeoffs: on the one hand, you gain powerful protections against your creditors—litigation is paused, and any efforts to collect on what is owed are blocked—but on the other, you can’t do much of anything without the approval of the bankruptcy judge.  It’s not just that you can’t do the major things—confirm a plan of reorganization (essentially a giant settlement among a debtor and its creditors) or sell the company to an outside buyer: you can’t so much as pay your utility bills, pay your employees, or use your bank accounts at all unless and until the judge says you can.  Everything you do has to be approved by an audience of one, and you might have to argue for that approval over vociferous objections from other parties.  

My firm recently represented a large company in its chapter 11 bankruptcy in the Southern District of New York.  Getting through the case successfully involved 20 months of near constant negotiation with a number of key parties with varied, often opposing interests and perspectives, including the federal government, our client’s secured financial creditors, an official committee of unsecured creditors, an official committee of litigation claimants, and a representative of possible future claimants, among others.  All of these parties were represented by highly sophisticated lawyers, bankers, and financial consultants.  

Here’s another quirk about bankruptcy, one that might seem a bit counter-intuitive at first: it’s very, very expensive.  A debtor needs to pay not only for its own lawyers, bankers, and financial consultants, but also for the advisors of any official committee and maybe certain other parties as well.  Our client was paying its own fees, its financial creditors’ fees, the two official committees’ fees, the future claimants’ representative’s fees, and the fees of a group of state attorneys general, among others.  To give an idea of what kind of numbers we’re talking about, my firm alone—this is all public, so no getting me in trouble for saying it—received over $115 million for our work just during the case (there was an extensive, expensive prelude as well).  Over 300 lawyers, paralegals, research assistants, and trial consultants across over a dozen different practice groups spent time on the case—again, that’s from one firm.  

The massive cost is a powerful incentive to be fast—to get in and out of bankruptcy as quickly as you can.

But you can’t just be fast.  It’s also important to be sure—to reach broad consensus with key parties before you ask the judge to render a final decision.  That isn’t always going to be possible, but proceeding without that consensus comes with real risks.  Even if the judge agrees with you and approves a plan of reorganization or sale over an objection, the objecting party might appeal, and the appellate process can take years—years during which the debtor company will remain in bankruptcy, keeping warm by burning giant piles of money.  Keep in mind that it’s to creditors’ benefit to be fast and sure as well—with few exceptions, they won’t get any return on their claims until the case is done.

Point is, bankruptcy incentivizes debtors and creditors alike to resolve disagreements and reach as much consensus as possible as quickly as possible.

But how does that consensus come about?  In this particular case, through extended negotiations, including a months-long mediation process among, at one point, ten different parties, again, all represented by brigades of smart, expensive professionals.  We couldn’t improve our client’s position by relying on half-truths, distortions, vagueness, or vibes any more than the other parties could.  We couldn’t go find a friendly audience, take a poll, and come back thinking that would change something.  The long negotiations worked because of serious, good faith efforts on all sides to clearly, painstakingly define issues and work from that base of common understanding to reach deals with which everyone could get comfortable.

Einstein apparently said, “If I had an hour to save the world, I would spend 55 minutes defining the problem and 5 minutes thinking about solutions.”  It makes sense: it’s awfully hard to solve a problem when you don’t really understand what it is or what caused it.

Let me close today with a couple of questions:

Is Congress incentivized to seek consensus quickly (or at all)?

How much of Tuesday’s debate will focus on problems, and how much will focus on solutions?  

Random Fact

I’ve spoken in support of clearly defining problems, but it also helps to fully think through solutions.  

Kaylee and I went to Maui for our honeymoon.  On a hike somewhere on the road to Hana, we came across a surprising sight: a mongoose (I don’t know how much this tells you about me as a person, but yes, I did recognize the mongoose immediately and wonder what the heck it was doing in Hawaii).

As it turns out, from the 19th until the middle of the 20th century, Hawaii’s most valuable commodity was sugar cane.  Rats, like humans, are big fans of sugar, and they were doing some serious damage to the delicious sugar cane stalks.  Problem = rats.

In 1872, sugar cane planters on the Big Island came across an article about Caribbean sugar growers successfully curbing their own rat infestations by importing mongooses from India.  So, these planters got 72 mongooses from Jamaica.  Their offspring were shipped to Molokai, Maui, and Oahu (Kauai remains mongoose-free).  So far, so good.

But, there was a bit of an issue—a mismatch between problem and solution.  As it turns out, rats are nocturnal.  Mongooses are diurnal.  They never met.

The rats kept running around at night chewing on sugar cane, and hungry mongooses wandered about during the day smashing native birds and turtle eggs.

The best-laid plans of mice and men, as they say.

Random Recommendation

Staying on the animal theme, watch where you step if you’re in the Everglades.  Burmese pythons are native to Southeast Asia.  During the 1990s and into the 2000s, 90,000 were imported into the U.S., which presumably means that tens of thousands of Americans thought it would be a good idea to own a snake that typically grows to about 16 feet long.

The long and short of it is that some of these pythons ended up in the Everglades, and they breed rapidly and live long lives.  The damage to local fauna has been catastrophic.  In 2012, a report found that in areas where the snakes were well-established, foxes and rabbits had been wiped out, and raccoon sightings were down 99.3%, opossum sightings 98.9%, and deer sightings 94.1%.  

I guess the point I want to make is that while there are times it makes sense to introduce non-native animals to a new place, try to avoid the animals that are going to eat everything that already lives there.