The indubitable equivalent of such claims

« previous post | next post »

Discussing our local newspapers' bankruptcy case, Steve Tawa explained today ("Newspaper Bankruptcy Ruling Could Hinge on 'Or,' Or a Comma", KYW Newsradio 1060, 12/15/2009) that:

Lawyers argued over complex bankruptcy code phrases like "indubitable equivalent."  They also vetted the word "or" in the language, and a certain comma's placement in the statute.

Josh Rosenberg was puzzled — which "or", which comma, and why? The rest of the article doesn't say.

So Josh wrote and asked me. It's a linguistic question, right? But I have no clue — I'm in Landsdowne VA for a conference. Not that I would have been in court anyhow.

Luckily, there's a story about this in one of the two local papers whose fate is on the line: Christopher Hepp, "Court hears credit-bid arguments in newspaper case", The Philadelphia Inquirer, 12/15/2009.  Unluckily, the Inky's coverage doesn't give much more linguistic information than the radio story did — in fact, in an apparent step backwards, it doesn't even mention that "certain comma", though we get the following additional clue about the "or":

Lawrence G. McMichael, the lawyer who represented Philadelphia Newspapers, countered that the issue turned on three words within the code.

The first was the word or, which was used to introduce the last of three provisions in a section that spells out how to ensure that a disputed bankruptcy plan is fair to lenders.

McMichael argued that it meant the company could use any of the provisions to prove that its plan was fair. The company chose to rely on a provision that makes no mention of credit bidding but calls for creditors to receive the "indubitable equivalent" in value of their collateral.

That meant, McMichael said, that Philadelphia Newspapers must pay its lenders at least as much as the company was valued. The auction, without credit bidding, would guarantee that, he argued.

Both of the stories make it clear what the substantive issue is. As Tawa's piece puts it:

The central issue now is whether the lenders can use the debt they are owed to "credit bid" for control of the newspapers.

A bankruptcy judge said yes.  A federal judge reversed that ruling, and lenders took their appeal to the Third Circuit.

Lenders' lawyer Abid Qureshi maintains that his clients should not have to put up more cash to protect their collateral:

"That's inconsistent with the code, and with the Constitution."

A Google search for "indubitable equivalent" at site: turns up two possibly-relevant sections — Title 11, Chapter 3, Subchapter IV, § 361 Adequate protection, and Title 11, Chapter 11, Subchapter II, § 1129 Confirmation of plan.

I suspect that the argument is about segment (b)(2) of the second link, which reads:

(2) For the purpose of this subsection, the condition that a plan be fair and equitable with respect to a class includes the following requirements:

(A) With respect to a class of secured claims, the plan provides—


(I) that the holders of such claims retain the liens securing such claims, whether the property subject to such liens is retained by the debtor or transferred to another entity, to the extent of the allowed amount of such claims; and

(II) that each holder of a claim of such class receive on account of such claim deferred cash payments totaling at least the allowed amount of such claim, of a value, as of the effective date of the plan, of at least the value of such holder’s interest in the estate’s interest in such property;

(ii) for the sale, subject to section 363 (k) of this title, of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens on proceeds under clause (i) or (iii) of this subparagraph; or

(iii) for the realization by such holders of the indubitable equivalent of such claims.

And I speculate (more cautiously) that the "or" in question might be the one at the end of (2)(A)(ii), and that the issue might be whether it makes all three clauses (i), (ii), and (iii) disjunctive, or just the last two. Then again…

Well, never mind.  This section of the U.S. Code feels to me like the linguistic equivalent of the kind of complex mathematical expression that I can never get to come out the same way twice when I calculate its value by hand. Unfortunately, the linguistic equivalent of a scientific calculator doesn't (yet?) exist.

So I'm referring the question to the our readers. If you know something about the case, or if you can guess how this section of the U.S. Bankruptcy Code is at issue (working in the "or" and that certain comma, of course), or if you even can figure out what clause (ii) actually means (I can keep up, I think, until I hit the self-referential part about "the treatment of such liens on proceed under clause (i) or (iii) of this subparagraph"), please let us know.

And really, isn't it past time to set up the CLO ("Congressional Logic Office"), and to establish chairs of Logic at law schools?


  1. Richard Sabey said,

    December 16, 2009 @ 4:12 am

    Here, the numbering and indentation of the paragraphs serves to make the "complex mathematical expression" clear. The "or" comes between (ii) and (iii), and thus conjoins (i), (ii) and (iii). If the "or" had been meant to conjoin only the last two clauses, then these 4 clauses would have been
    (ii) and
    (iii) (I) or

    [(myl) I'm with you on the numbering, but does the indentation really have the force of law?]

  2. Gordon P. Hemsley said,

    December 16, 2009 @ 4:19 am

    I'm going to have to agree with the first part of what Richard says: all 3 subsections are made disjunctive by that "or".

    But I'm not going to speculate on what might make only (ii) and (iii) disjunctive.

    [(myl) I agree with the analysis of the scope of this disjunction, which is fairly clear given the numbering. But still at issue is whether this is the scope that was debated (or at least raised) in the oral argument; whether the two sides really disagree about the scope; and why such a disagreement would bear on the question of whether a credit bid is to be allowed in the bankruptcy auction.]

  3. mollymooly said,

    December 16, 2009 @ 4:44 am

    Laws should be written in XML. Then you could write your own XSLT to convert them to your favorite dialect of Plain English, with serial commas added to taste.

    [(myl) But then, as usual, XML would clarify the syntax while leaving the semantics totally unspecified.]

  4. Peter Taylor said,

    December 16, 2009 @ 5:22 am

    Section (ii) seems to me to say that if the bankrupt company B is in possession of some item X over which lender L has a claim (because X is listed as security for the loan L made to B) then the plan may allow for B to sell X provided that the money obtained then becomes security over which L has a claim, and that the plan allows L to obtain the value it is owed either through deferred cash payments (seems a bit odd to permit them to be deferred, but maybe the sale isn't for cash?) or through the receipt of assets which are agreed to be worth at least as much as the claim.

  5. td said,

    December 16, 2009 @ 9:11 am

    Thanks for shining a light on a difficult statute. Let me see if I can help at least a little.

    There is no such thing as a congressional logic office, of course, but there is a congressional legislative drafting office — two of them, in fact (one in the House, one in the Senate). I'm an alum of the House one. These offices really do try to keep the statute books orderly and easy to read, but it's a very difficult mission, more often realized as "try to keep the statute books at least somewhat more orderly and somewhat more easy to read than if there were no drafting offices whatsoever".

    Aside on terminology: each subdivision of a section has its own moniker. The "or" you are speaking of (which, from what I can tell, is indeed what the dispute is about) is at the end of clause (ii) of subparagraph (A) of paragraph (2) of subsection (b). That's subsection (b)(2)(A)(ii) for short. And as you surmise, the "or" does seem to signal that (i), (ii), and (iii) are alternatives. That certainly would be my assumption too, though the litigants seem to challenge that.

    Aside on indentation: yes, the structure of the statute is used by the courts as a guide to meaning, though it's pretty flimsy.

    I have no idea what the comma placement issue could be. The main legal issue, from what I can tell (having looked at the federal court opinion), is this: the right of the lender to "credit bid" is in section 363(k). A sale under clause (ii) is plainly subject to the lender's right to "credit bid". But is there a way to hold a sale without giving the lender a right to "credit bid"?

    For example, what if you gave the lender something else of value, something that was not the right to "credit bid", but was the "indubitable equivalent"? That would seem to satisfy clause (iii). And, having satisfied clause (iii), what if you then held a sale without the right to "credit bid"?

    Hope that helps.

    [(myl) It does! Thanks for the explanation.

    Though my remark about the CLO was, of course, a joke, I do wonder whether it might be appropriate to try to find less ambiguous ways to indicate the logical structure of laws. I realize that the current solution is the end product of centuries of cultural evolution, and that a lot of people have a lot of cultural capital invested in it (including perhaps in some of the consequences of its ambiguity or vagueness). And I also realize that within the boundaries of current practice, there can be better and worse drafting. But still, many of the uncertainties involved (of scope, of reference, and so on) are difficult or impossible to avoid in laws written entirely in English (or other natural languages), but are things that modern logicians and semanticists know how to prevent. Why not enlist their help, say in replacing or supplementing the systems of clauses, subparagraphs, paragraphs, etc. with a syntactically-unambiguous framework (e.g. mollymooly's XML proposal) that is also provided with a well-defined semantics of scope and (cross-) reference?]

  6. Nancy Jane Moore said,

    December 16, 2009 @ 11:25 am

    As someone who reads court opinions (and then reports on them) for a living, I agree that the "or" means a choice of i or ii or iii. But I wouldn't be surprised by a court that decided it differently; I see a lot of opinions where the court's interpretation of a statute is not the one I'd make.

    Here's what I find ironic in the whole process: Anyone who has ever worked for Congress or a state legislature (or probably for a small town city council) knows that the old adage about writing legislation and making sausage is true. But despite the fact that a final law is often a mishmash cobbled together by compromise and browbeating, courts always say that laws must be interpreted on the assumption that the legislature knew what it was doing and meant to say things exactly as they said them, no matter how little sense the final product makes.

    I wouldn't be surprised to find that whoever wrote the bankruptcy code section in question didn't really mean what ended up in the final version. And I really wouldn't be surprised if none of the people who voted for the code could tell you what the section was intended to mean.

  7. Bob Lieblich said,

    December 16, 2009 @ 11:39 am

    In Gowers's revision of Fowlers MEU, there's an article on "officialese," in which Gowers distinguishes between the sort of language to be used in drafting a statute or regulation and the language used to explain things to an inquiring citizen. He points out that the official language ("legalese") must work out like an equation and lead to the result intended by the drafter. "Eloquence cannot be expected of anyone so circumscribed." (from memory) "Officialese" is the same sort of hifalutin language used to "explain" something to the ordinary person asking about how the law works. Gowers is obviously agin officialese, but he sympathizes with the drafter of the legalese.

    In the recent foofaraw over health care "reform," the naysayers frequently complain that they don't have the time to read and study the various legislative proposals. In fact, they get plain-language summaries of what the legislation is supposed to do, and it's up to the staffs of the drafting offices to convert it into legalese for enactment. The average legislator is considerably less capable of working through dense legalese than the average reader of this blog is of working through the statutory excerpt above.

    A substantial portion of my professional time is spent trying to reason through complicated statutes and regulations, not to mention all sorts of contract provisions prescribed by the federal government for inclusion in public contracts. (I'm in Navy shipbuilding, and it doesn't get more complex than that.) Occasionally I encounter something whose proper application to the situation at hand simply cannot be determined. In those cases, the contractor's position almost always prevails, because the government is almost always the author of the contested language, and the court holds the author responsible if the language cannot be made to work ( or has two or more reasonable readings, which amounts to the same thing.) This principle of interpretation is known in Latin shorthand as "contra proferentem." Almost no lawyer under the age of 60 or so can spell it correctly, except by accident.

    Hey, that's why they pay us lawyers the big bucks. It finances my Langauge Log subscription, among other things. So it's not all bad.

  8. Mr Fnortner said,

    December 16, 2009 @ 11:55 am

    As linguists, you should be able to pull out of the convoluted and tortuous sentences their grammatical essences. The next step is to ascertain whether the sentences are mutually exclusive (disjunctive). With my meager skills, I can clearly see that lien holders have the choice (maybe not their choice) of (i) cash, (ii) proceeds of sale, or the mysterious indubitable equivalent. The redacted section reads:

    (i)(I) that holders retain liens securing claims and (i)(II) each holder receive cash payment [of] amount of claim; [or]
    (ii) for the sale of property subject to liens with liens to attach to proceeds; or
    (iii) realization of equivalent of such claims.

    I agree the law as written is an abomination. Perhaps a jurist cannot see that the "or" applies to all three options. That is why we have an appeals process.

  9. John Lawler said,

    December 16, 2009 @ 12:03 pm

    @Bob Lieblich
    Shipbuilding law! That's complex indeed. Far more than simple linguistic theory. This explains why I always enjoy Bob's posts. When you retire, Bob, you can become a linguistics professor and provide examples and counterexamples for the trade.

  10. J. W. Brewer said,

    December 16, 2009 @ 12:27 pm

    (Disclaimer: I am not a bankruptcy lawyer although I have some episodic and idiosyncratic experience in that field.) Part of the context here is that (ii) crossreferences 363(k) of the Code, which expressly provides (if it hasn't been amended since the two-year-old copy on my desk) for such a sale to be subject to what was referred to above as a "credit bid" but also says that that credit bid process will be available "unless the court for cause orders otherwise." So I think that the lenders here might be saying that the court having ordered otherwise, as contemplated and permitted by 363(k) read in isolation, nonetheless is improper because it creates a barrier to plan confirmation though non-compliance with (ii), with the debtor for its part arguing that the "or" means that if we fulfill (iii) we don't need to comply with (ii) so we'll still have a confirmable plan. I would think a sensible question for a judge to ask the lenders' counsel is: don't (i) and (ii) provide your clients with continuing protection that they would need as an economic/policy matter only if they're *not* realizing the indubitable equivalent of their claim? (It's obviously a bonus when the economics and policy will line up with what would seem the most straightforward syntactic parsing — that doesn't always happen.) But for all I know the lenders' lawyers may have a very good answer to that question. Or it may be that the debtor has an aggressive or questionable position as to what the proposed "indubitable equivalent" is, if it's something other than immediate payment in cash of 100% of the allowed claims.

    On my hypothesis, the comma placement issue *might* have to do with whether the subject to 363(k) language in (ii) should be read to incorporate that subsection's authorization of the court to decline to permit a credit bid in appropriate circumstances or instead contemplates/mandates that 363(k) will apply in its default setting of credit bids being permitted.

  11. J. W. Brewer said,

    December 16, 2009 @ 12:36 pm

    I see that while I was doing my prior comment a new post made my speculation about the comma-placement mystery (which correctly identified the commas at issue but not the arguments being made about their import) unnecessary. So the debtors were taking a less aggressive position than I conjured up for them, although I guess if I were representing them I might have shied away from the more aggressive argument for tactical reasons if I felt sufficiently good about the odds of prevailing on the less aggressive position.

  12. td said,

    December 16, 2009 @ 1:05 pm

    To be sure, there have been proposals to draft laws in ways that would make them less vulnerable to syntactic ambiguity. Professor Layman E. Allen at Michigan Law wrote a number of articles over the years about what he referred to as "normalized" legislative drafting. A more recent contribution by Professor Grayfred B. Gray can be found here:

    At risk of oversimplifying, the basic approach is to structure statutory commands as IF-THEN statements, with well-defined connectors such as AND, OR, and so on. And there's quite a bit more work being done on this in Europe, I think, than in the U.S. This sort of approach has strengths and weaknesses; there are tensions among the goal of syntactic clarity, other drafting goals (like readability), and legislative goals (like intentional ambiguity to facilitate compromise). But I think it's a very powerful approach, and one that a drafter should always keep in mind.

  13. td said,

    December 16, 2009 @ 1:20 pm

    Here's how the IF-THEN approach works in practice. The following sentences are in a form typically used for rules of law:

    The Secretary shall do X.
    The Secretary may do Y.
    The Secretary shall not do Z.

    The IF-THEN approach suggests they can be written as:

    If the Secretary does not do X, then [consequence 1].
    If the Secretary does Y, then [consequence 2].
    If the Secretary does Z, then [consequence 3].

    This is, of course, a very simple, barebones example. But note that it not only improves clarity, it also reveals gaps in the policy. In the example, when we translate the typical approach into the IF-THEN approach, we see that we haven't stated the consequences. Even if the drafter doesn't want to write in IF-THEN statements, he or she should always run the policy through the IF-THEN "translator" to see what gaps can be turned up.

  14. Simon Spero said,

    December 16, 2009 @ 9:02 pm

    Based on past experience, Indentation can be recovered from paragraph labels. I remember staying up all night trying to repair the plain text of Hillary Clinton's Health Security Act, after receiving a file with no indentation or word wrap. The procedure ended up triggering a flareup of my carpal tunnel, making me one the few people directly injured by un-enacted health care legislation.

RSS feed for comments on this post