Rescuing Business: The Making of Corporate Bankruptcy Law in England and the United States

By Bruce G. Carruthers; Terence C. Halliday | Go to book overview

7
Employing The Weak: The "Forgottten Class"

Shield International Corporation sold books, records, and horoscopes. It advertised widely in national magazines, and sold its wares through the mail. In the final year of its descent towards insolvency, complaints about Shield International began to appear frequently in the in-boxes of consumer protection agencies, for it had perfected the doubtful art of accepting and cashing customers' checks without sending the merchandise they had paid for. When Shield International filed for protection from creditors in the southern district of the federal district court in New York, on 8 May 1970, it listed 4,616 customers who had paid in full for goods they had not received. The size of the claims ranged from $1 to $50, with the average about $7. The referee appointed by the district court judge to manage the case advised all the short-changed customers that court proceedings would look into the affairs of Shield International, and they were invited to file claims of proof, a form to be completed and filed with the court that laid out the nature of the customer's claim to recapture his moneys or his goods. Only 87 of the 4,616 filed. In the final analysis, however, it was those that did not file who seemed wise to the ways of bankruptcy proceedings. Neither those who filed nor those who did not--none of the 4,616 who had prepaid for their goods--received anything at all.1

Corporate bankruptcy presents an arena where the most powerful financial actors--the state, the financial industry, large corporations-- are pitted against all other creditors, including the comparatively weak. The fate of Shield International's customers represents in microcosm the typical fortunes of many weak creditors in bankruptcy proceedings. They get little or nothing from the corporate bankruptcy estate. "Weakness" is, however, a deceptively simple concept, for creditors may be weak in their everyday bargaining within the market or work place, weak in the capacity to mobilize politically, or weak in their legal standing when corporations fail. These different types of weakness are frequently related, but not simply or predictably.

____________________
1
Reported in Schrag and Ratner ( 1970: 1147); for the case file see In re Shield Intl Corp., No. 70 B 323 (S.D.N.Y., filed petition 8 May 1970).

-303-

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