A major commercial bankruptcy has ripple effects that extend far beyond the company’s shareholders and creditors. “People lose their jobs, landlords lose tenants and vendors lose a customer,” said Professor Andrew Dawson, a Miami Law faculty member since 2011. “Bankruptcy courts oversee a process that on its face is about financial restructuring, but that also touches on deep and challenging political questions.”
“The bankruptcy courts today are being tasked with handling politically untouchable subjects,” he said. “Along with mass tort cases, we are seeing the courts used for restructuring public entities like the City of Detroit or the Commonwealth of Puerto Rico,” he said. “No politician wants to take up questions like who should bear the brunt of these bankruptcies or how governments should resolve their problems. The bankruptcy code gives judges the ability to force deals that no one will like, but these cases can be very contentious every step of the way.”
In studying the case of Detroit, Dawson said the code doesn’t provide answers regarding the payment of claims. “Do you force financial cuts on employees and retirees, making it harder for the city to hire and retain good workers, and causing a negative impact on the tax base? Or do you cut payments to the bondholders, with ramifications for tapping into the capital markets in the future? Because the code doesn’t spell things out—deliberately—cities and states can use bankruptcy as they see fit.”
A NATURAL TEACHER
Teaching and the law come naturally to Dawson. A native of Dallas, Texas, Dawson earned his bachelor’s degree from Williams College in 1999, majoring in Spanish. He spent four years teaching at a Dallas high school and coached freshman and junior varsity football.
“By my fourth year of high school teaching, I knew I wanted to do something else,” Dawson said. “I started talking with the parents of my students and felt a sense of connection to the lawyers. My former English teacher had also been a lawyer, and I could see similarities between the two professions. For instance, if you have a general litigation practice, you have to do research, learn things, and then have to educate your client, colleague, jury, or judge.”
Exploring a career in law, Dawson worked for a year as a paralegal in a Dallas law firm and then enrolled at the University of Texas School of Law intending to be a litigator. But he was still drawn to teaching and transferred to Harvard Law School after his first year.
It was at Harvard that Dawson discovered his passion for bankruptcy law. “I took a course from Elizabeth Warren [now U.S. Senator from Massachusetts],” he said. “Her problem-solving approach to bankruptcy cases really grabbed me, and I felt this would be the right field for me.”
In 2008, Dawson earned his J.D. from Harvard Law, where he was a Kauffman Legal Fellow, senior editor of the Harvard Negotiation Law Review, and recipient of the American Bankruptcy Institute Medal of Excellence and the Irving Oberman Memorial Award. Afterward, Dawson clerked for the Hon. Jane R. Roth, U.S. Court of Appeals for the Third Circuit, and for the Hon. Peter J. Walsh, U.S. Bankruptcy Court for the District of Delaware.
He and his wife Lauren came to Miami in 2011 with their three young children. At Miami Law, Dawson teaches contracts, commercial law, business association, and bankruptcy. “Understanding the law is essential, but being a business lawyer is all about problem-solving,” he said. “Most of my students come in with little business background, but they all have experience solving complex problems. My aim is to direct them to apply that experience to address clients’ needs.”
A RESIDENT SCHOLAR
This problem-solving approach informs Dawson’s scholarship as well as his teaching. “Bankruptcy law,” he said, “is ultimately about solving complex problems that may cut across various legal fields as well as political boundaries.” Part of Dawson’s research focuses on such cross-border insolvency matters. “If a multinational files for bankruptcy, what is the appropriate venue?” he said. “What happens if you also have arbitration agreements? These are issues that need to be considered in the business world.”
After the U.S. adopted the United Nations Commission on International Trade Law’s Model Law on Cross-Border Insolvency in 2005, Dawson conducted the first empirical study of this new chapter 15 of the Bankruptcy Code. In addition to his international research, Dawson has served on the advisory board of the Caribbean Insolvency Symposium and is a graduate of the International Insolvency Institute’s NextGen Leadership Program.
In the Spring 2017 semester, Dawson was invited to serve as the Robert M. Zinman American Bankruptcy Institute Resident Scholar. “ABI is a nonprofit that focuses on education for lawyers, judges, paralegals, and others involved in bankruptcy matters,” Dawson said.
As resident scholar, Dawson prepared articles, podcasts, and webinars on developing issues in bankruptcy, including legal analyses. “This was like being a journalist, interviewing the lawyers and judges handling big issues,” he said.
Dawson has also served as the reporter for the Labor and Benefits Subcommittee of ABI’s Commission to Study the Reform of Chapter 11. The commission spent three years studying ways the code should be modernized to take into account the significant changes in corporate finance and corporate governance since the code was last revised in 1978. For example, the federal code doesn’t work very well for small businesses, so many companies in financial distress are turning to state laws for remedies, Dawson said. “Bankruptcy is just too expensive for small businesses, so they find new and creative ways to deal with financial distress,” he added.
After studying State of Florida court records on business insolvencies from Miami-Dade, Broward, and Palm Beach Counties for the past three years, Dawson has come up with some surprising findings.
“Conventional wisdom has been that the owners would use the state courts as a way to liquidate their businesses since the federal courts have a monopoly over reorganization,” Dawson said. "But in practice, you do see owners using some reorganization features, such as an assignment for the benefit of creditors.”
Instead of being liquidated, which occurs about half the time, many businesses are sold as a going concern to another entity, Dawson said. “My research suggests that the new entity could also be operated by the prior ownership, basically achieving a reorganization without the public necessarily being aware of the difference.”
For instance, a small Florida business like a yoga studio, restaurant, or clothing boutique would stay open with the same employees without any interruption in service. The ownership structure has changed, but not the people. “The owners may have shed some of their liabilities, such as a bad supplier deal, but continue to have the same lender and landlord,” Dawson said. “This is a way to make the problems go away, and the decisions are rarely challenged. It’s a creative solution without the time and costs of a formal bankruptcy.”