Education Quarterly Reviews

ISSN 2621-5799

Published: 18 May 2020

To Declare or Not to Declare [Bankruptcy]: That May Be the Question,
A Tale of Bankruptcy in Higher Education

Richard J. Hunter, Jr, John H. Shannon, Henry J. Amoroso, Hector R. Lozada

Seton Hall University, USA

pdf download

Download Full-Text Pdf

10.31014/aior.1993.03.02.130

Pages: 170-193

Keywords: Bankruptcy, Reorganization, Examiner, Labor, Automatic Stay, Employment, Title IX

Abstract

This case study provides the background for a discussion of the bankruptcy of a composite non-profit corporation under Chapter 11 of the Bankruptcy Code, and the possible alternatives available to bankruptcy. Topics considered include: reorganizations, the selection of a bankruptcy trustee or an examiner, duties of a non-profit board, the automatic stay, aspects of the creation and confirmation of the bankruptcy plan, priority of creditors, termination of employment contracts for tenured and non-tenured faculty and those faculty represented by a union, at-will employment, and Title IX implications for any bankruptcy filing. The case study then turns to a discussion of options and perspectives available in the case that bankruptcy under Chapter 11 is not seen as a viable or practical alternative. Could the real target of restructuring and cost cutting be academic tenure?

References

  1. Adams, S. (2020). Boston university is first to announce it may postpone opening its campus until January 2021. Forbes (April 14, 2020). Retrieved: https://www.forbes.com/sites/susanadams/2020/04/13/boston-university-is-first-to-announce-it-may-postpone-its-fall-term-until-january-2021/

  2. Amsler, J.B., & Boruvka, E. (2019). Teaching democracy through practice: collaborative governance on campus. Journal of Dispute Resolution, 2019: 73-109.

  3. Applebaum, A.S. (2019). The new hidden cost of chapter 11. American Bankruptcy Institute Journal, 38(3): 32-33.

  4. Armstrong, C. (2019). What happens when a company files chapter 11 bankruptcy? The Balance Careers.com (August 9, 2019). Retrieved: https://www.thebalancecareers.com/what-to-do-when-your-company-files-chapter-11-bankruptcy-316247

  5. Association of Flight Attendants (AFA). 2004). What is section 1113 anyway? Jump Seat News.com (November 5, 2004). Retrieved: https://jumpseatnews.com/2004/11/what-is-section-1113-anyway (last visited April 15, 2020).

  6. Bank, J.W. (2019). Representing a business in a workout or bankruptcy. Michigan Bar Journal, 98: 52-54.

  7. Bragg, S. (2018). Debtor in possession. Accounting Tools (June 4, 2018). Retrieved:

  8. https://www.accountingtools.com/articles/2018/6/4/debtor-in-possession

  9. Brake, D. (2001). The struggle for sex equality in sport and the theory behind Title IX. University of Michigan Journal of Law Reform, 34: 13-149.

  10. Broude, R.F. (2020). Reorganizations under chapter 11 of the bankruptcy code. Eagan, Minn.: Law Journal Press.

  11. Bruckner, M. (2017). Why can’t colleges declare bankruptcy? HBCU’s would benefit greatly from chapter 11 reorganization. New York Daily News (March 30, 2017). Retrieved: https://www.nydailynews.com/opinion/colleges-declare-bankruptcy-article-1.3013855

  12. Buzuvis, E.E. (2006). Survey says… A critical analysis of the new Title IX policy and a proposal for reform. Iowa Law Review, 91: 821-886.

  13. Cameron, C.D. (1994). How “necessary” became the mother of rejection: an empirical look at the fate of collective bargaining agreements on the tenth anniversary of bankruptcy code section 1113(c). Santa Clara Law Review, 34: 841-943.

  14. Cedrone, M.J. (2019). Supreme silence and precedential pragmatism: King v. Burwelland statutory interpretation in the federal courts of appeals. Marquette Law Review, 103: 43-109.

  15. Chingos, M.M. (2017). Don’t forget private, non-profit colleges. Economic Studies(Evidence Speaks Reports), 2(9): 1-9.

  16. Coco, D. (2019). Third-party bankruptcy releases: an analysis of consent through the lenses of

  17. due process and contract law. Fordham Law Review, 88: 231-265.

  18. Cordry, K. (2020). Affairs of state, textualism, originalism and the code: arguments for a heretical view of section 363. American Bankruptcy Institute Journal, 39(2): 20-29.

  19. Elliott, D.Y., & Hollander, E.C. (2014). Navigating a nonprofit corporation through bankruptcy. Non-Profit Quarterly (April 29, 2014). Retrieved: https://nonprofitquarterly.org/nonprofit-corporation-navigating-through-bankruptcy/

  20. Fisher, R., Berman, J., Harper, S., & Ayers-Mann, J. (2019). D.C. Circuit denies enforcement of NLRB’s decision applying Pacific Lutheran standard. Employer Labor Relations.com (March 18, 2019). Retrieved: https://www.employerlaborrelations.com/2019/03/18/d-c-circuit-denies-enforcement-of-nlrbs-decision-applying-pacific-lutheran-standard/

  21. Fuller, K. (2005). Chapter 11 examiner when why what and how (Part 1). American Bankruptcy Institute Journal (March 2005). Retrieved: https://www.abi.org/abi-journal/chapter-11-examiner-when-why-what-and-how-part-i

  22. George, B.G. (1999). Sports law in the 21stcentury: Title IX and the scholarship dilemma. Marquette Sports Law Journal, 9: 273-285.

  23. Goldschmid, H.J. (1998). The fiduciary duties of nonprofit directors & officers: paradoxes, problems, and proposed reforms. Journal of Corporate Law, 234: 631-653.

  24. Harper, Faith. (20120. Lon Morris to liquidate all of its assets through auctions. Jacksonville Daily Progress (October 5, 2012). Retrieved: https://www.jacksonvilleprogress.com/news/lon...

  25. Harrison, Y., & Murray, V. (2014). Guidelines for improving the effectiveness of boards of directors of nonprofit organizations. Albany, N.Y.: Open SUNY.

  26. Hefferan, J.J. (2016). A sporting chance: Biediger v. Quinnipiac University and what constitutes a sport for purposes of Title IX. Marquette Sports Law Review, 26: 583-670.

  27. Herman, K.A., & Herman, J.A. (2019). Protecting retirement assets from creditors. Journal of the Missouri Bar, 75: 172-204.

  28. Heyman, S.B. (2019). United States Supreme Court surveys: 2017 term digest Reality Trust v. Somers: Whistleblowers and corporate retaliation. Roger Williams University Law Review, 24: 78-103.

  29. Higer, A.J. (2020). I teach at Rutgers and I don’t know if I’ll have a job this fall. N.J.com (April 24, 2020). Retrieved: https://www.nj.com/opinion/2020/04/i-teach-at-rutgers

  30. Hueske, W. (2013). School’s out forever: Lon Morris College, section 525(a), and revocation of Title IV eligibility for institutions of higher education in bankruptcy. Weil Bankruptcy Blog (April 9, 2013). Retrieved: https://business-finance-restructuring.weil.com/government/schools-out-forever-lon-morris-college-section-525a-and-revocation-of-title-iv-eligibility-for-institutions-of-higher-education-in-bankruptcy/

  31. Huffman, A.E. (2020). Forgive and forget? An analysis of student loan forgiveness plans. North Carolina Banking Institute, 24: 449-478.

  32. Hunter, R. J., & Shannon, J.H. (2015). Is it time to revisit the Yeshiva decision: the myth of “shared university governance.” International Review of Sciences and Humanities, 9(1): 193-207.

  33. Hunter, R.J., & Shannon, J.H. (2020). A primer on the role of the university’s attorney. Education Quarterly Reviews, 2(4): 86-100.

  34. Liebert Cassidy Whitmore. (2020). D.C. Circuit rejects NLRB’s Pacific Lutheran test, reasserts Great Fall’s exemption for determining NLRA exemption for religiously affiliated schools. Lcwlegal.com (March 4, 2020). Retrieved: https://www.lcwlegal.com/news/dc-circuit-rejects-NLRB’s-Pacific-Lutheran-test

  35. Lindblad, M. (2017). Advantages & disadvantages of at-will employment. BIZFLUENT (September 26, 2017). Retrieved: https://bizfluent.com/info-8533105-advantages-disadvantages-atwill-employmenthtml

  36. Lippman, E., & Grimmer, T. (2017). Protecting donor restrictions on bequests. The CPA Journal, 87(4): 9-12.

  37. Lipson, J.C. (2010). Understanding failure: examiners and the bankruptcy reorganization of large public companies. American Bankruptcy Law Journal, 84: 1-77.

  38. Lipson, J.C. (2018). The secret life of priority: corporate reorganization after Jevic. Washington Law Review, 93: 631-783.

  39. Lubben S. (2019). American business bankruptcy: a primer (Chapters 17 & 20). Northhampton, Mass.: Edward Elgar Publishing.

  40. Marshall-Freeman, D., (2017). Title IX’s three-prong test in athletics. National School Boards Association. Retrieved: https://cdn-files.nsba.org/s3fs-public/09. MarshallFreeman Title IX 3 Prong Test.pdf

  41. Martin, P. (2005). Court approves termination of United Airlines pension plans. World Socialist Web.org (May 13, 2005). Retrieved: https://www.wsws.org/en/articles/2005/05/unit-m13.html

  42. Methner, S.E. (2019). A Catholic university approach to campus speech: using constitutional academic freedom to hold the tension of free speech, inclusive diversity, and university identity. University of St. Thomas Law Journal, 15: 358-418.

  43. Meyer, R.C. (2020). Legislative update, Small Business Reorganization Act arrives this month. American Bankruptcy Institute Journal, 39(2): 8-49.

  44. National Conference of State Legislators (NCSL). (2019). The at-will presumption and exceptions to the rule. NCSL.org (September 21, 2019). Retrieved: http://www.ncsl.org/research/labor-and-employment/at-will-employment-overview.aspx

  45. Nave, G.A. (1985). Collective bargaining agreements in bankruptcy proceedings: Congressional response to Bildisco. University of Illinois Law Review, 1985: 997-315.

  46. NCAA. (2020). Title IX frequently asked questions. NCAA.org. Retrieved: http://www.ncaa.org/about/resources/inclusion/title-ix-frequently-asked-questions (last visited April 14, 2020).

  47. Norton, W.L. (2004). Norton bankruptcy law and practice, 4: Section 79.23. Eagan, Minn.: Thompson Reuters (Westlaw).

  48. Olson, G.A. (2009). Exactly what is ‘shared governance’? Chronicle of Higher Education (July 23, 2009). Retrieved: https://www.chronicle.com/article/Exactly-What-Is-Shared/47065

  49. O’Neill, C. (2020). The meeting of creditors (341 hearing) is an important part of every chapter 7 and chapter 13 bankruptcy case. All law.com (updated). Retrieved: https://www.alllaw.com/articles/bankruptcy/what-expect-meeting-creditors-341-hearing.html (last visited April 19, 2020).

  50. Parker, M. & Park, S. (2015). The impact of Pacific Lutheran on collective bargaining at catholic colleges and universities. Journal of Collective Bargaining in the Academy (The Keep), 7(1): Article 3. Retrieved: http://thekeep.eiu/jcba/vol7/iss1/3

  51. Pasquale, K., Siegel, J., & Lee, O. (2015). The rejection and modification of collective bargaining agreements pursuant to bankruptcy code section 1113. Norton Annual Survey of Bankruptcy Law: 113-159.

  52. Payne, A.M. (2019). What the hack? Reexamining the duty of oversight in an age of data breaches. Georgia Law Review, 53: 727-769.

  53. Price, N. (2018). The fiduciary responsibilities of a nonprofit board of directors. Board Effect.com (March 12, 2018). Retrieved: https://www.boardeffect.com/blog/fiduciary-responsibilities-nonprofit-board-directors/

  54. Rimbach, J. (2020). NJ colleges will partially refund students sent home due to coronavirus.

  55. Here’s how it will work (March 27, 2020). Retrieved: https://www.msn.com/en-us/news/us/nj-colleges-will-partially-refund-students-sent-home-due-to-coronavirus-here-s-how-it-will-work/ar-BB11FRrL

  56. Rosenthal, L. (2017). Yes, nonprofits sometimes do file bankruptcy. For Purpose Law Group (March 29, 2017). Retrieved: https://www.forpurposelaw.com.nonprofits-file-bankruptcy/

  57. Schlagel, C., & Averch, C. (2020). Beauty is in the eye of the beholder: a bundle of rights theory of enforceability of chapter 11 voting assignments. American Bankruptcy Institute Law Review, 28: 1-38.

  58. Schmidt, A. (2019). Litigator’s perspective, is under oath enough? American Bankruptcy Institute Journal, 36(9): 18-58.

  59. Seltzer, R.M., & Ciantra, T.N. (2007). The future of labor through the prism of bankruptcy: the return of government by the injunction in airline bankruptcies.American Bankruptcy Institute Law Review, 15: 499-535.

  60. Seton Hall University. (2018). Faculty Guide. Seton Hall University. Retrieved: https://www.shu.edu/provost/upload/Faculty-Guide.pdf 12)

  61. Shachmurove, A. (2019). Escape from pandemonium: Reconciling section 363(f) and section 365(h) in Qualitech’s shadow and Spanish Peak’s wake. American Bankruptcy Institute Law Review, 27: 181-263.

  62. Shanes, A. (2020). Seton Hall’s endowment drops 9% as outbreak takes financial toll on markets. (April 3, 2020). North Jersey.com. Retrieved: https://www.northjersey.com/story/news/coronavirus/2020/04/03/seton-halls-endowment-drops-9-coronavirus-outbreak-takes-toll/2945215001/

  63. Spizman, L., & Kane, J. (1990). Chapter 11 bankruptcy and the termination of collective bargaining contracts. Employee Responsibilities and Rights Journal, 3(4): 277-284.

  64. Strub, M.H., & Reisner, J.M. (2020). Section 507: a re-examination of the rules of property rights and post-petition gifting in bankruptcy. Bankruptcy Institute Law Review, 28: 93-134.

  65. Temin, M.L., & Chovanes, M.B. (2020). Venue in small-value preference cases after SBRA: Congress should have amended 28 U.S.C. Section 1409(b). American Bankruptcy Institute Journal, 39(4): 38-84.

  66. Trautman, L.J., & Ford, J. (2019). Nonprofit governance: the basics. Akron Law Review, 52(4): 971-1042.

  67. United States Courts. (2020). Chapter 11. Bankruptcy Basics.Retrieved: https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics (last visited April 18, 2020).

  68. U.S. Department of Education. (1996). Clarification of intercollegiate athletics policy guidance: the three-part test (January 16, 1996). Retrieved: https://www2.ed.gov/about/offices/list/ocr/docs/title9-qa-20100420.html (last visited April 15, 2020).

  69. U.S. Department of Justice (2020). Change in chapter 11 quarterly fee payment processing time (April 1, 2020). Retrieved: https://www.justice.gov/ust/chapter-11-quarterly-fees (last visited April 15, 2020).

  70. U.S. Legal (2020). The role of an examiner. U.S. Legal.com. Retrieved: https://bankruptcy.uslegal.com/chapter-11-bankruptcy/the-role-of-an-examiner/ (last visited April 16, 2020).

  71. Vedder, R. (2020). Tenure is dying. Forbes (April 13, 20120. Retrieved: https://www.forbes.com/sites/richardvedder/2020/04/13/academic-tenure-rip1

  72. Vron, V. (2010). Rejection of an executor contract does not relieve a debtor of assumed liabilities. Weil Bankruptcy Blog (December 22, 2010). Retrieved: https://business-finance-restructuring.weil.com/executory-contracts/update-to-rejection-of-an-executory-contract-does-not-relieve-a-debtor-of-assumed-liabilities/

  73. West, M.S. (1986). Life after Bildisco: Section 1113 and the duty to bargain in good faith. Ohio State Law Journal, 47: 65-161.

  74. Willborn, S., et al. (2012). Employment law: Cases and Materials (5thed.). New York: Lexis-Nexis.

  75. Wong, D. (2010). Chapter 11 bankruptcy cramdown and the contract rate approach. Northwestern University Law Review, 106(4): 1927-1958.

  76. Zaretsky, B. (1993). Symposium on bankruptcy: Chapter 11 issues: trustees and examiners in chapter 11. South Carolina Law Review, 4: 907-962.

CASES

Biediger v. Quinnipiac University (2009). 616 F. Supp 2d 277 (United States District Court,

District of Connecticut)

Cathcart v. Micale (2019). 402 F. Supp. 3d 110 (United States District Court, Eastern District of

Pennsylvania)

Cejka v. Vectrus Sys. Corp. (2018). 2018 U.S. Dist. LEXIS 173599 (United States District

Court, District of Colorado)

Cohen v. Brown University (1993). 991 F.2d 888 (United States Court of Appeals, 1st Circuit)

Grove City College v. Bell (1984). 465 U.S. 555 (United States Supreme Court)

In re Baldwin United Corp. (1984). 47 B.R. 898 (United States District Court, Southern District

of Ohio)

In re Baldwin-United Corporation (1985). 57 B.R. 759 (United States District Court, Southern

District of Ohio)

In re Betty Owen School, Inc. (1996). 195 B.R. 23 (United States Bankruptcy Court, Southern

istrict of New York)

In re Big Rivers Elec. Corp. (2004). 355 F.3d 415 (United States Court of Appeals, 6th Circuit)

In re Bricksin (2006). 346 B.R. 497 (United States Bankruptcy Court, Northern District of

California)

In re Lon Morris College (2012). Case No. 12-60557 (United States Bankruptcy Court, Eastern

District of Texas)

In re Roth American Industries (1992). 975 F.2d 949 (United States Court of Appeals, 3rd

Circuit)

In re Tighe Merchantile (1986). 62 B.R. 995 (United States Bankruptcy Court, Southern District

of California)

In re Wabash Valley Power Ass’n. (1996). 72 F.3d 1305 (United States Court of Appeals, 7th

Circuit)

Kapp v. Naturelle, Inc. (1979). 611 F.2d 703 (United States Court of Appeals, 8th Circuit)

Lucio v. Fern at Tenth LLC (2019). 2019 U.S. Dist. LEXIS 174330 (United States District

Court, Southern District of Texas, Mcallen Division)

NLRB v. Bildisco (1984). 465 U.S. 513 (United States Supreme Court)

NLRB v. Pacific Lutheran University (2014). 19-RC-102521, 361 NLRB 1404. (National Labor

Relations Board)

NLRB v. Yeshiva University (1980). 444 U.S. 672 (United States Supreme Court)

Smith v. Safety-Kleen Sys. (2019). 2019 U.S. Dist. LEXIS 23806 (United States District Court,

Western District of Pennsylvania)

Smith v. Shaw’s Supermarkets, Inc. (2020). 2020 U.S. App. LEXIS 12479 (United States Court

of Appeals, 2ndCircuit)

USC v. NLRB (2019). No. 17-1149 (United States Court of Appeals, D.C. Circuit)


SELECT STATUTORY MATERIALS

Cal. Corp. Code Section 5239(a): No personal liability for certain volunteers

Civil Rights Restoration Act of 1987 (2012). 20 U.S.C. Section 1681.

Higher Education Act (1965). Pub. L. 89–329.

H.R. Rep. No. 109-31, pt. 1, at 145 (2005): Bankruptcy Abuse Prevention and Consumer

Protection Act of 2005

National Labor Relations Act (1935, as amended). 29 U.S.C. Sections 151- 169.

N.Y. Not-for-Profit Corp. Law Section 720-a: No personal liability for certain volunteers

Title IX of the Educational Amendments (1972). 20 U.S.C. §1681 et seq.

Tower Amendment (1974). 120 Congressional Record 15: 322-323.

U.S. Code Title 11— BANKRUPTCY (The Bankruptcy Act, 2019)

1. CHAPTER 1—GENERAL PROVISIONS (§§ 101 – 112)

2. CHAPTER 3—CASE ADMINISTRATION (§§ 301 – 366)

3. CHAPTER 5—CREDITORS, THE DEBTOR, AND THE ESTATE (§§ 501 – 562)

4. CHAPTER 7—LIQUIDATION (§§ 701 – 784)

5. CHAPTER 9—ADJUSTMENT OF DEBTS OF A MUNICIPALITY (§§ 901 – 946)

6. CHAPTER 11—REORGANIZATION (§§ 1101 – 1195)

7. CHAPTER 12—ADJUSTMENT OF DEBTS OF A FAMILY FARMER OR FISHERMAN WITH REGULAR ANNUAL INCOME (§§ 1201 – 1232)

8. CHAPTER 13—ADJUSTMENT OF DEBTS OF AN INDIVIDUAL WITH REGULAR INCOME (§§ 1301 – 1330)

9. CHAPTER 15—ANCILLARY AND OTHER CROSS-BORDER CASES (§§ 1501 – 1532)

20 U.S.C. Section 1002(a)(4)(A): Title IV eligibility

28 U.S.C. Section 1930(a)(6): Bankruptcy fees.

42 U.S.C. Section 14503(a): Limitation on Liability for (Non-Profit) Volunteers

About Us

The Asian Institute of Research is an online and open-access platform to publish recent research and articles of scholars worldwide. Founded in 2018 and based in Indonesia, the Institute serves as a platform for academics, educators, scholars, and students from Asia and around the world, to connect with one another. The Institute disseminates research that is proven or predicted to be of significant influence for the general public.

Stay Connected

  • Instagram - Black Circle
  • Facebook - Black Circle
  • LinkedIn - Black Circle

Contact Us

Please send all inquiries to the email:

editorial@asianinstituteofresearch.org

Business Address:

5th Floor, Kavling 507, Fajar Graha Pena Tower, Jl. Urip Sumohardjo No.20, Makassar, Indonesia 90234

Copyright © 2018 The Asian Institute of Research. All rights reserved