Grassroots Shareholder Activism in Large Commercial Bankruptcies

Abstract

In early 2013, a group of similarly situated individuals gathered to discuss how they could defend themselves against a grave potential injustice. Time was of the essence, so they would need to act quickly to preserve their rights. Fortunately, their path to justice was already paved: the matter was pending in federal court, and each had standing to appear and be heard. But frustratingly, this seemingly well-paved path was barred to them. These individuals, who were technically parties to the proceeding, were virtually invisible to the court and largely disenfranchised in settlement negotiations. Striving to overcome these obstacles, they persisted in their efforts to unite and gain a collective voice in the proceedings. Throughout the summer, the group organized meetings, events and actions; they penned heartfelt letters to the judge and entered dozens of documents on the case docket. But despite these efforts, the court denied their requests for formal representation in the case and, shortly thereafter, approved a settlement that terminated their interests. Meanwhile, evidence surfaced to confirm their worst fears: others stood to profit handsomely from the settlement. Needless to say, these events have left a profoundly negative impression on these individuals. They believe that the legal system not only failed to protect their most basic procedural and substantive rights, but in fact served as an instrument of economic inequality and social injustice. These individuals were common shareholders of the iconic, publicly traded Eastman Kodak Company during its Chapter 11 bankruptcy reorganization. Many lost their life savings; all lost their trust in the U.S. financial markets and courts of law. This Article takes up their cause, providing the first empirical investigation and academic theorization of grassroots shareholder activism in large commercial bankruptcies.

Keywords: Chapter 11, Commercial bankruptcy, Shareholder activism