A Fable from the Seventh Circuit: Frank Easterbrook on Good Faith
33 Pages Posted: 3 Nov 2014
Date Written: November 3, 2014
Abstract
Selling shoes in Chicago just got tougher. Struck by an unexpected blow from a source not unfriendly to economic pursuits, the prognosis forrecovery can only be bleak. To make matters worse, the shoe business is not the only victim in this tale of woe: the law took a beating as well.
The occasion for this economic and jurisprudential bruising is Kham & Nate's Shoes No. 2, Inc. v. First Bank of Whiting. In this decision, the Seventh Circuit, under the pen of Judge Frank Easterbrook, vacated a district court's subordination of a lender's claims pursuant to a plan of reorganization. The district court's justification for subordinating the debt was a finding by the bankruptcy judge that the lender had behaved "inequitably" in refusing to grant further cash advances pursuant to a line-of-credit agreement between the parties.
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