Legal Research – Statutory, Regulatory, Case law and Derivative Research – The Interplay between Bankruptcy and Financial Regulations in the Derivatives Markets
Dana Neacsu and William Shirley
Workshop purpose:
The purpose of this workshop is to enable you to research any legal topic previously unfamiliar to you by using all the skills learned in this workshop. You should come away from the course with a solid understanding of the principles of legal research, and of preferred methodologies according to various factual situations, and with a solid frame of reference that enables you to function independently and competently in the constantly evolving world of legal information.
As discussed below, we have designed a workshop that is based directly on the kinds of research tasks and research skills that arise in the context of law firm practice.
Background information:
Bankruptcy is a triggering event that changes legal relationships between creditors and debtors. Financial regulation moderates the establishment of those relationships in the first place. Both bankruptcy law and financial regulation are “public rules” that apply to all market participants. They both contain a multitude of mandatory norms establishing hierarchies of rights and obligations. Bankruptcy allows non-defaulting parties to resolve competing outstanding claims against the party in bankruptcy proceedings. Financial regulation is intended, in part, to limit the need for bankruptcy proceedings and also to ensure favorable outcomes when proceedings in bankruptcy nonetheless arise.
In contrast, derivative transactions give rise to “private rules,” represented by derivative contracts that apply only to transacting parties. Derivatives transactions that are traded “over the counter” typically derive from a market-standard Master Agreement establishing the rights and obligations of those engaging in the derivative transactions, including dispute resolution rules that apply in the case of default and termination.
Traditionally, bankruptcy rules applied to all creditors without discrimination. A specific exception was created for derivatives of government securities (to protect the market for sovereign debt from disruption caused by the default of financial intermediaries). Then, bankruptcy rules and norms evolved even further: first to incorporate additional limits on their applicability to derivatives (and certain other kinds of contracts); more recently, to reverse course and expand applicability in response to the experience of the financial crisis.
Until the financial crisis, the regulation of derivatives was “light touch.” Since the financial crisis, derivatives markets and their participants have been regulated much more vigorously.
In this workshop, we are going to investigate this evolution in both bankruptcy and financial regulations by identifying the mandatory (public) law established by bankruptcy rules and derivatives regulations. We will also see what a swap looks like, and we will investigate court decisions and regulations that moderate the (private) law established by a swap’s contract terms. Each time we do not understand what we need to do, we will identify a treatise or other secondary resource to help us.
The teaching philosophy:
While most librarians believe that the best way to teach legal research is to teach it bibliographically, emphasizing the resources available and the methods required to access those resources, that method has not been wholly effective. In the end, most law school graduates learn how to research on the dime of the first law firm that they join after graduation. They learn it within a specific area of practice of the firm.
In this workshop we will not give students research problems at random in an effort to assist them in finding their way through the appropriate sources; that method bears little fruit in the long run. A more interesting approach is to mimic how lawyers learn to research in their first years as young associates: focusing on a specific area of law, and integrating doctrinal and research issues with practical issues that arise in the practice of law.
In the current environment, the interplay between bankruptcy, financial regulation and derivative transactions seems especially relevant to our students.
How will the workshop “work”?
- a) Flipping the classroom. Prior to our meetings, the students will either read about or watch a video describing a substantive issue that we will research during the weekly workshop; they will learn the name of the leading treatise or other bibliographic resource, as well as the various primary sources which constitute the law in that area.
- b) In-class exercises: During each class session, we will identify the primary sources. We will locate their repositories. We will learn how to find them. We will learn how to evaluate them. We will learn their legal hierarchy: public law (statutes, cases, rules) vs. private law (contracts). Then, we will discuss the students’ findings and methods of being more efficient and exact with their work.
Non-graded Workshop Outline
| Week | Research Source | Research Topic | Comments/Class notes |
| 1 – ThursdaySept. 12, at noon, JG 646Preliminary readings:Faber, Dennis & Niels Vermunt (eds) Bank Failure. Lessons from the Lehman Brothers (2017), pp 3-30 Neacsu, Bower, Introduction to U.S. Law, Policy, and Research-An Environmental Perspective: Principles of Legal ResearchSecondary Sources Collier on Bankruptcy (Lexis)Library looseleaf servicesBloomberg Law: Bankruptcy TreatiseNorton Bankruptcy Law & PracticeIn-class presentation | Federal and state statutes.o publication – USC – and its commercial counterparts (USCA, USCS). o https://www.govinfo.gov/ o Westlaw Edge/ Lexis Advance / Bloomberg Lawo publication – state statutes (NY)o Westlaw Edge/ Lexis Advance / Bloomberg Law | Bankruptcy Code (Chapter 11);FDIA (bank resolution);Dodd-Frank Title II (OLA);ABA-sourceOLA-primer for the PresidentNY State Insurance company receivership law (Chapter 28, Art. 74)NY state agencies | Make sure you understand the terminologyHighlight the myriad sources for dealing with the problem of insolvency;note the relationship between Ch. 11, FDIA and OLAdiscuss the applicability of state law in the absence of controlling federal lawIn-class exercise: Look for the definitions of “qualified financial contract” and “swap agreement” in the Bankruptcy Code, the FDIA, OLA and at least one state insurance law statute.Answers to in-class questions:Section 907 of PL 109, 119 STAT 23 (2005) added a definition of “swap agreement,” and all the other components of the definition of “qualified financial contract”, to the Bankruptcy Code, but did not add “qualified financial contract” itself.FDIA included the definition of “swap agreements” under the broader definition of “qualified financial contract.” OLA borrowed it. |
| 2 – ThursdaySept. 19, at noon, JG 646Preliminary ReadingPeter Marchetti. Amending the Flaws in the Safe Harbors of the Bankruptcy Code…. 31 Emory Bankruptcy Development Journal 305, 340-374 (2015) In-class presentationClass-recording | Judicial decisions• In what court are bankruptcy claims filed? o Why? o Where are such trial court cases appealed? • Is there an official repository of all federal cases? o What about partial repositories? o What is their major shortcoming?Can you find the SDNY web site? • What about the US Bankruptcy Court for the SDNY? | Lehman (Bros) Brothers bankruptcy cases Is there a way to find all court decisions regarding the LB bankruptcy organized by topic and jurisdiction? o Secondary sources o Legal databases.Finding cases: o By name/citation o By topic o Using keywords and terms and connections within a specific jurisdiction | The interplay between Chapter 11 and swap claims. In-class exercise: Can you find if there are any bankruptcy cases related to LB’s insolvency where the creditors attempted to raise safe harbor status for their swaps and bypass the automatic stay imposed by bankruptcy rules?Class remarks:N.B Remember that if you use terms and connectors the databases will only return results with those exact terms. A search for “Lehman Brothers” would not produce results with “Lehman Bros.” |
| 3 – ThursdaySept. 26, at noon, JG 646Preliminary readings: Strauss, Peter. Administrative justice in the United States (2nd ed, 2016) Administrative rulemaking. pp 219-258Neacsu, Bower, Introduction to U.S. Law, Policy, and Research-An Environmental Perspective In-class presentation | How do federal agencies work?What is an enabling statute?• Where are the relevant regulatory provisions published? * Discuss the official federal codification – CFR – and its lack of commercial counterparts/ * Can you locate their official repository? https://www.govinfo.gov/ * How would you locate federal regulations? * Why are you choosing that path? * Commercial databases v. free-of-charge databases | The QFC rule and its enabling statute.Finding all QFCs rules.Plan and execute | Interplay between regulatory powers and statutory norms—focus on the statutory source of Fed’s authority and the rule’s interplay with Chapter 11 safe harbor from the automatic stay.In-class exercise: The Federal Reserve adopted a rule requiring important banking institutions (GSIBs) to amend qualified financial contracts (QFCs) to prevent their immediate cancellation or termination in certain circumstances.Can you find the rule? Once you find the rule, can you identify the statutory provision that enabled the Federal Reserve to adopt the rule? |
| 4 – ThursdayOct. 3, at noon, JG 646Preliminary readings:Pistor, Katharina, The Code of Capital,Ch. 3 and Ch. 4Constantinides, George. Financial Derivatives: Futures, Forwards, Swaps, Options, Corporate Securities, And Credit Default Swaps (2015), ch 1: 10-15 In-class presentation | The importance of interdisciplinary research to understand your clients.1. Using Columbia’s catalogs to find business treatises, and economic papers;2. Using Columbia’s resources to find company profiles (privately and publicly traded companies)2. Using the three databases to find other secondary sources describing the scope of commercial transactions | The swap market in basic economic terms; business and financial informationBloomberglaw :Company data (Edgar) & analysis (BNA)10-K filings2. Business Source Complete (from CLIO)Company data (publicly traded; e.g., information on Citibank and gold swaps with Venezuela) – (for private companies, including institutions of higher education (e.g. MIT) and their investments ORBIS – CLIO)3. S& P Net Advantage is best forIndustry overviewsCompany data (for public companies only)4. ThomsonOne (works with IE) and is best forCompany dataMergers and AcquisitionsMSCI GMI analyst (for ESG data)Using databases to find the ‘health” of a bank, e.g.MSCI GMI Analysis for BBB’s industry report | Real world problem for practicing lawyers: understanding the economics of what their clients do.In-class exercise: Find non-legal authoritative resources about the meaning of a “swap transaction.” Give examples, and explain the steps taken. |
| 5 – ThursdayOct. 10, at noon, JG 646 In-class presentationClass-recording | Researching private law: Industry standard documentationthe role of interdisciplinary secondary sourcesThe importance of dictionaries: what is ISDAFinding authoritative sources of private law (law firm KM) | ISDA Master AgreementISDA 2018 U.S. Resolution Stay Protocol;The Stay Protocol 2019 Updates (FAQ) | Where to find, how to read (e.g., ISDA users’ guides)In-class exercise:Find the ISDA Master Agreement; Find the ISDA 2018 US Stay Protocol; Find the FAQ about the Protocol. Discuss their research value |
| 6 – ThursdayOct. 17, at noon, JG 646 In-class presentation | Legislative historyDatabase coverage;Columbia databases (Proquest Congressional) | Dodd-Frank Tittle II definition of QFC, including “swap agreement” sub-definition | First bankruptcy code history; then Dodd-Frank Title II historyIn-class exercise: Find the legislative history behind the Bankruptcy Code definition of”swap agreements” and the history behind the Dodd-Frank’s definition |
| 7 – ThursdayOct. 24, at noon, JG 646 In-class presentationClass-recording | Regulatory history1. The role of secondary sources2. Using the Federal Register3. Regulatory Insight | QFC rule adopting release | Federal agency statements about their own rules (e.g., adopting releases publishing in the Federal Register when agencies adopt new rules)In-class exercise: Find at least four QFC rules issued by different agencies, and their regulatory history |
| 8 – ThursdayOct. 31, at noon, JG 646 In-class presentation | Supreme Court decisions:The federal judiciary;The Role of the US Supreme Court decisionsWhen does a S. Ct decision cease to be “good law.”The role of citatorsKeyCite Shepards B-Cite Google Scholar’s How cited: https://bit.ly/2PxJAAw https://bit.ly/2PxJAAwFastcase’s Bad Law BotCase Text’s Warning system: https://ly/2C2jugJ https://bit.ly/2C2jugJ) | Kisor v. Wilkie, 588 U. S. ____ (2019) (W/ L/ B) (official) (and its forbearers:Auer v. Robbins, 519 U. S. 452 (1997)Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984));Sec. Sources: Supreme Court Limits Rule That Requires Judges to Defer to Agencies | Judicial deference to federal agency interpretations of their own statutes and rulesIn-class exercise: Find and discuss whether Chevron, and Auer are still good law (to what extent they have been impacted by the Court’s decision in Kisor). |
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