Dysfunctional bankruptcy courts

It is a truth universally acknowledged that a failed business must be in want of a lawsuit.

My own bias in such cases is that investors --especially the institutional sort -- have to be prepared to take their knocks. When they invest in a risky posititon, either they were aware of the risk or they were likely lacking in their due diligence. Either way, I can work up more sympathy for the failed managers than for their vengeful former investors.

The failed managers aren't the only targets of the lawsuits that follow from a typical early 21st century business debacle.

We have these darned "fraudulent conveyance" and "avoidance" lawsuits that help spread trouble. Even the possibility that X now teeters near bankruptcy makes it very risky for anyone to accept money from X, which has a variety of perverse consequences and may have helped lead Bear Stearns to slaughter earlier this year.

Bridgeport Holdings will likely worsen the problems that arise from such situations. All it seems likely to accomplish in the first round of consequence is to drive up D&O liability insurance rates. The second round? the impact of those higher rates? an arbitrary re-allocation of resources toward fields thought to be inherent lewss transparent, and thus less likely to draw lawsuits.