Alex Huang on Bankruptcy Law's doctrinal evolution: An empirical study (ABLJ)

"Bankruptcy Law's doctrinal evolution: An empirical study"
Alex Huang
American Business Law Journal, Volume 62, Issue 4, pp. 289 - 312
Published online: October 2025

Abstract: Despite the stability of the formal Bankruptcy Code, an influential literature suggests a paradigm shift from debtor control to lender control in the actual processing of Chapter 11 cases. Yet, while existing studies highlight who now benefits more from case outcomes, how the doctrinal case content has evolved amidst this paradigm shift remains unexplored. To address this gap, I examine the doctrinal evolution of Chapter 11 cases through citation practices. In bankruptcy law, judges are required to cite sections and co-cite doctrinally related code sections to justify their decisions, similar to how precedents are co-cited. The citation practices enable a systematic examination of corporate reorganization law using information from 6439 bankruptcy opinions, revealing a shift toward a closer relationship between operational and distributional sections. These two types of sections govern critical bankruptcy decisions: operational sections oversee firm activities related to asset deployment and securing financing, while distributional sections regulate decisions concerning creditors' priority and payoffs. Both individual section co-citation analysis and the global examination based on community detection and text analysis demonstrate that these two categories of sections have transitioned from being infrequently co-cited to being frequently co-cited. This article explains the strengthened co-citation relationship between operational and distributional sections as a result of a shift in business transaction structures. In modern bankruptcy, distributional decisions are increasingly made simultaneously with operational decisions—the bundling structure, rather than the traditional unbundled structure. This bundling serves as the mechanism through which lender control is exercised as it sidesteps the priority rule in favor of certain senior lenders. As judges oversee more bundled transactions, sections of different types, implicitly or explicitly, are co-cited more frequently. This study systematically identifies the doctrinal shift from unbundling to bundling for the first time. By linking case content to outcomes, this study enhances our understanding of the bankruptcy law paradigm shift. Furthermore, this network approach to addressing the inconsistency between judicial practice and formal law holds potential in other fields.