Wednesday, April 11, 2018

Higher Education, Bankruptcy, and Teacher Tenure

Matthew Bruckner has put together an interesting three part series on the intersection of bankruptcy and higher education.  His first paper, Bankrupting Higher Education, was published in the American Bankruptcy Law Journal.  He argued:

Many institutions of higher education are struggling financially and would benefit from the use of bankruptcy reorganization tools designed to enable struggling enterprises to restore themselves to a state of financial viability. This essential set of tools for responding to financial distress is available only in bankruptcy reorganizations and Congress has effectively precluded colleges and universities from having access to them. This Article argues that this is a mistake and is premised upon an outdated and unsupported premise. It contributes to the nascent literature on higher education bankruptcy proceedings by examining how differences among the three primary organizational structures of institutions of higher education affect whether and under what circumstances institutions of higher education should be allowed to reorganize through bankruptcy. This Article argues that the profound differences in how colleges are organized greatly affect whether bankruptcy reorganization is appropriate for each type of institution. It concludes that for-profit colleges are most likely to benefit from access to bankruptcy reorganization, public colleges would likely benefit least from having bankruptcy reorganization available, and the myriad far-reaching benefits of granting all institutions of higher education the right to reorganize under the bankruptcy law far outweighs any potential risks.

In his second article, Higher Ed ‘Do Not Resuscitate’ Orders, he explored how concerns over for-profit colleges' questionable practices clouds the issue of whether colleges on the whole should be able to use bankruptcy to reorganize.  In his abstract, he writes

Congress has effectively precluded all institutions of higher education from reorganizing in the bankruptcy courts because it was concerned about exploitative profiteers opening fly-by-night colleges, defrauding students, and then finding refuge there. This choice harms students, employees, creditors and communities. As such, this Article advocates that Congress should reverse its decision and allow colleges to reorganize in bankruptcy. To support this argument, this Article contrasts the bankruptcy treatment of healthcare enterprises to that of higher education enterprises. In doing so, this Article builds on my own prior work and contributes to the literature on higher education bankruptcies.

His newest article goes to an even deeper level of nuance, analyzing how professors' tenure rights would intersect with bankruptcy proceedings.  He offers this summary:

Many institutions of higher education are in dire financial straits and will close, merge, or file for bankruptcy in the near future. This Article considers the effect of bankruptcy laws on the ability of higher education institutions to restructure their workforces and, in particular, the impact that a bankruptcy filing may have on tenured professors. It also addresses how some tenured professors may be able to complicate their employer’s reorganization to their own strategic advantage.

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