Book Review: To Protect Their Interests

To Protect Their Interests: The Invention and Exploitation of Corporate Bankruptcy. 2026. Stephen J. Lubben. Columbia University Press.

In March 2024, health and fitness products manufacturer BowFlex filed for bankruptcy in New Jersey, 3,000 miles away from its corporate headquarters. The company’s apparent basis for seeking that jurisdiction, which is considered particularly favorable to debtors, was a prior filing by subsidiary BowFlex New Jersey LLC, formed in February 2024. Stephen J. Lubben, Professor of Corporate Governance and Business Ethics at Seton Hall University School of Law, comments, “If that works, American corporate debtors can file pretty much wherever they want.”

“Forum-shopping” by the parties who control the bankruptcy process is not the only means by which they have learned to game the rules established under the most recent major overhaul of US bankruptcy law in 1978. For example, as detailed in To Protect Their Interests: The Invention and Exploitation of Corporate Bankruptcy, if a company’s owners expect allegations of pre-bankruptcy fraud to be lodged, they replace senior management before filing. That maneuver reduces the likelihood that the court will appoint a trustee, which would reduce the controlling interests’ advantage. In earlier times, the powerful players jockeyed to avoid filing under the 1938 bankruptcy law’s Chapter X, which was expressly designed for large enterprises, preferring the Chapter XI alternative that promised more lucrative outcomes for them.

The author documents how insiders’ domination of bankruptcy proceedings dates back to the nineteenth century. Under the receivership model dominant at the time, resolution of railroad bankruptcies was stage-managed by corporate titans such as Jay Gould and bankers such as J. Pierpont Morgan. Hardcore fans of transportation history will savor the author’s elaborate recounting of the battles over the Texas and Pacific, Missouri Pacific, and Wabash. Investment professionals whose primary aim is to enhance their understanding of the current dynamics of today’s distressed debt market will find value in more recent case studies involving familiar names such as Chrysler, General Motors, Neiman Marcus, and Toys “R” Us.

Lubben’s chronicle is immaculately up to date. He describes, for example, the contemporary escalation of battles between and within classes of creditors, which he links to the increased prominence of private-equity-owned companies in bankruptcy cases. All in all, the history of largely unsuccessful attempts to ensure fair treatment for large and small claimants alike makes for a captivating tale, featuring such prominent figures as Harry Truman (pre-presidency), Calvin Coolidge (post-presidency), and Fiorello LaGuardia. Lubben places key events in the context of social trends, illustrating how bankruptcy resolution intersected with the dismantling of racial segregation and women’s growing participation in professional life.

To Protect Their Interests recounts the evolution of bankruptcy resolution in both legislative and judicial terms, and what turns out to be most important, as it works in actual practice. Since the early days, bankruptcy rules have been adapted for purposes never intended by lawmakers, such as pushing back against the aspirations of organized labor and dealing with multibillion-dollar product liabilities. Lubben writes that, notwithstanding stated objectives such as preserving value by reorganizing rather than liquidating financially strained enterprises, “corporate restructuring has always been about buying consent from those who could stop you and imposing your will on those who could not.”

Among the specific problems the author highlights is the persistent one of companies waiting too long to seek bankruptcy protection, to the detriment of the businesses’ creditors, employees, and ongoing health. Not being one to point out problems without offering solutions, Lubben calls for another redo of the Bankruptcy Code after nearly half a century of dealing with the most recent attempt’s flaws. He proposes a return, in modified form, to a system that relies more heavily than the present one on appointment of trustees. To cut down on forum shopping, he advocates creating a group of circuit judges to handle complex cases and requiring companies to file for bankruptcy where they have long been headquartered. Lubben acknowledges, though, that the prospects for such reforms are cloudy under present political conditions that militate against bipartisan cooperation.

Practitioners who are likely to base some assumptions and actions on facts presented in To Protect Their Interests can be confident of the author’s rigor. He provides 77 pages of notes and a 31-page bibliography. Tables, graphs, maps, and photographs help the reader navigate exposition that frequently requires intense concentration. That effort will be amply rewarded, as the historical dimension unquestionably deepens one’s understanding of the competing interests and objectives with which the bankruptcy framework continues to grapple.