HAS YOUR TENANT NO CONSCIENCE? AN ANALYSIS OF CHAPTER 11’s LANDLORD CAP, GOOD FAITH, AND SOLVENT DEBTORS
INTRODUCTION
Recently, the Third Circuit, in In re Integrated Telecom Express, Inc., (“Integrated II”) reversed both a district court and bankruptcy court in deciding that a solvent debtor who filed for Chapter 11 bankruptcy, partially to take advantage of the “landlord cap” in Chapter 11, did not meet the good faith filing requirement because the debtor was not in “financial distress.” In so holding, the court took a very limited view of the appropriate scope of Chapter 11, and by so doing, set a precedent that may seriously jeopardize the balancing of interests in which Congress engaged in drafting the provisions of the Bankruptcy Code. It is not inconceivable that the Third Circuit’s narrow conception of the scope of Chapter 11 is preferable in today’s economic context. However, Congress and not the courts should be making this determination. Additionally, even if it is the proper province of the courts to be formulating broad shifts in bankruptcy policy, there is no question that the courts should be forced to explicitly acknowledge the choices they are making, and should justify them with sound reasoning.
The first part of this note will investigate the adoption of the good faith filing requirement in the Third Circuit. The good faith filing requirement for Chapter 11 is not contained in any statute. Instead, the courts affirmatively created it.
The second part of this note will explore the purposes of the good faith filing requirement, which in turn will require an analysis of the purposes of Chapter 11 generally. Professor Lawrence Ponoroff and Professor F. Stephen Knippenberg provided academia with an excellent overview of the t ...