Accept an unpalatable offer, or reject it and risk getting much less (or even nothing)? This is the choice stakeholders in chapter 11 bankruptcies increasingly face as a result of the proliferation of “deathtrap” provisions in plans of reorganization. For example, a class of bondholders may be forced to decide between accepting 60 cents on the dollar if they vote to accept a plan, or 40 cents if they reject. A class of equityholders may have to decide between accepting equity warrants, or rejecting and getting nothing. Adding to the paralysis of being confronted with a deathtrap is the reality that there is surprisingly little authority on whether, and under what conditions, such provisions are enforceable under the Bankruptcy Code. The authorities that do exist are split on this question—emboldening debtors seeking to precipitate chapter 11 settlements while leaving impaired classes of stakeholders to decry deathtraps as “draconian” and “coercive” mechanisms.
Daniel Desatnik is an associate in the Business Solutions, Governance, Restructuring & Bankruptcy Group. He earned his J.D. from Columbia Law School, where he graduated as a James Kent Scholar and Harlan Fiske Stone Scholar. His practice focuses on the representation of debtors, creditors’ committees, equity committees, and creditors in chapter 11 cases and out-of-court restructurings.
Daniel is one of the core members of the Proskauer team representing the Financial Oversight and Management Board of Puerto Rico (FOMB) in its successful restructuring of Puerto Rico’s $74 billion debt load, lowering its liabilities by $33 billion and saving it over $50 billion in debt service payments. He played a key role in the $6 billion Title VI restructuring of the Governmental Development Bank’s debt. He currently plays a key role in the restructuring of the operations and over $9 billion of debt of Puerto Rico’s electric utility, PREPA.
Recognized by Best Lawyers in America in its "Ones to Watch" list in 2021, 2022, 2023, and 2024, he has successfully argued precedent-setting cases before the First Circuit Court of Appeals, Eighth Circuit Court of Appeals, and in federal bankruptcy court. He has been featured on panels and podcasts on bankruptcy law topics, and his articles have been published in industry-leading outlets such as Debtwire and Reorg Research.
Prior to law school, Daniel earned a B.A. and M.A. in political science at Emory University. Daniel uses his political science background to understand how the legal and policy environment impact corporate restructuring efforts.
Daniel is a top-ranked competitive tennis player. As a junior, Daniel won several high profile and national-level tennis tournaments. Daniel played varsity tennis for Emory University and represented the United States in the 2017 Maccabiah Games held in Israel, earning wins over professionally ranked competition en route to placing 5th in a draw of 64 players from around the world. In addition, he is the founder and CEO of an award-winning app that teaches teenagers about financial literacy.
The jury renders its verdict. No party objects. The judge thanks the jury for its service, discharges them, and tells them they are free to go. The jury exits, but there’s one problem: the jury’s verdict is internally inconsistent. Is it too late to call the jury back to rectify the inconsistencies in its verdict?
This was the question facing the Supreme Court in the case of Dietz v. Bouldin, decided earlier this month. After the jury delivered a verdict of $0 in damages, the judge discharged the jury and the jurors left the courtroom. However, the judge quickly realized that the jury’s verdict was legally impermissible: the parties had stipulated that medical expenses of $10,136 were owed, and the only question for the jury to decide was whether the award should be even higher.