Restructuring

Contributed by Doron P. Kenter.
On January 19, 2016, the Fifth Circuit Court of Appeals flatly rejected an appeal of a bankruptcy court’s dismissal of a chapter 7 case “for cause” as a result of the debtor’s flagrant and repeated abuse of the bankruptcy and court processes to “retain assets for himself and defeat the legitimate claims of his business partners.”  The Fifth Circuit noted that the debtor’s appeal of the bankruptcy court’s order could “only be described as an exercise in chutzpah.” 
So what is chutzpah?
As we began this inquiry, we were pleased to see that the rise of the term has been examined (and reexamined) by lawyers and judges alike.  In their article “Lawsuit, Shmawsuit,” Judge Alex Kozinski and Professor Eugene Volokh chronicled the rise of the Yiddish (and, specifically, the term “chutzpah”) in the 1980s and early 1990s.  Alan Dershowitz’s early book, Chutzpah, was very likely a common law school graduation gift in 1991 (hardcover) and 1992 (paperback).  And in 1999, in “The Evolution of Chutzpah as a Legal Term: The Chutzpah Championship, Chutzpah Award, Chutzpah Doctrine, and Now, the Supreme Court,” Jack Achiezer Guggenheim wrote an excellent article describing the rise of the term and its implication in the legal discourse.  Years later, perhaps the term is ripe for a hard second look.
But first, a word about the word.
“Chutzpah” is a Yiddish and Hebrew term that cannot quite be defined.  Others have tried (and some of those efforts have been chronicled in published court decisions), but its charm lies in the word’s certain “je ne sais quoi” (to be polyglottish about it).  The best definitions include audacity, temerity, gall, impudence, cheek, guts, or brazen nerve.
Interestingly, the first documented use of the term in the U.S. court system arose in Georgia state court.  In Williams v. State, the court cited Leo Rosten’s famous “The Joys of Yiddish” in noting that “[t]he classic definition of ‘chutzpah’ is that quality enshrined in a man, who having killed his mother and father, throws himself upon the mercy of the court because he is an orphan.”
It is this definition that has, apparently, caught on.  This was obviously the Fifth Circuit’s intent this week.  As recently as last week, Judge Kwan of the United States Bankruptcy Court for the Central District of California observed that “it takes a certain amount of chutzpah to add language to a form order as Counsel has exhibited to request that the court adopt in its order that ‘This form erroneously states it is for an ‘Individual’ Chapter 11, when in fact it is a Corporate Chapter 11,’ and thus having the court admit that its court-approved form order makes erroneous statements.”  And just last month, a Virginia court similarly observed the “certain amount of chutzpah” that it took “to argue on appeal that the claimant offered no evidence after objecting below to such evidence on the grounds that the issue was uncontested because of a stipulation to which one had agreed.”
As time has gone on, the term has been defined less and less, and often used simply on its own – as would be the case with a commonly known Latin phrase that lawyers pretend to truly understand.  Indeed, in 2006, Judge Sidney Stein wrote:

The word chutzpah, despite not debuting in a reported judicial opinion until 1972, is now vastly overused in the legal literature. Yet in a case such as this—in which an individual, after being mauled by the 450-pound Siberian tiger he had been raising inside his fifth-floor apartment along with an alligator, sues the city and the police who entered the apartment in an effort to rescue the animals for doing so without a search warrant—it is a most appropriate term to use.

Given this overuse, we will spare you, dear reader, the detailed analysis that is adequately recounted elsewhere.
And yet.
We want to take the opportunity to ask whether the most commonly invoked definition and use of the term chutzpah is somewhat misguided.  It seems that is has been used in many courts to comedic effect, or to “add spice,” as Kozinski and Volokh have argued.  Does the charming/funny/quaint term make it more acceptable to invoke than any of the other terms that could stand in for it? (see also alte kaker, nebbish, etc.)  Indeed, it is quite possible that courts are inclined to use the term to drive home a point that cannot be adequately stated with humility.  (Would a court deny a motion because counsel was “cheeky” with the court, or because a litigant had been “brazen”?  Chutzpah, on the other hand…)
One must ask, then, is chutzpah legally cognizable?  Bad faith, fraud, and perjury are all cognizable legal doctrines.  Chutzpah’s charm is in its lack of a true definition – but can the presence of some nebulously defined attitude form the basis of a court’s decision, or of a legal argument?  Can a bankruptcy case or an appeal be dismissed as a “chutzpadic” filing, or must courts also look to the merits?  If the decision is rendered on the merits, why include the character judgment?   Is chutzpah itself a term of art, or merely an attention-grabbing catchphrase or a stand-in for a comprehensive analysis?
On the other hand, is chutzpah such a terrible thing?  And just because you show some chutzpah in making an argument, that doesn’t necessarily mean you’re wrong (or that you won’t someday be vindicated for taking an unpopular position).  As Judge Walls observed in Chaffee v. Kraft General Foods, Inc.:
Legal chutzpah is not always undesireable [sic], and without it our system of jurisprudence would suffer.  Indeed, consider the chutzpah exhibited by Chief Justice John Marshall in Marbury v. Madison, [which] established, among other things, the Supreme Court as the Constitution’s authoritative interpreter with the power to judicially review actions of its co-equals, the executive and legislative branches of government, and declare their actions and statutes invalid, despite the absence in the Constitution of an explicit grant of such authority.
Should we reclaim chutzpah?  It took some degree of chutzpah to elevate the practice of bankruptcy law to the “white shoe” practice that it is today.  It is that kind of chutzpah that Professor Dershowitz argues for in his book of the same name.  It is that kind of chutzpah that it takes to create and recreate a separate regime of bankruptcy courts, even after Marathon, Stern, and the like.  In fact, one could take a cue to reclaim chutzpah from our current President’s 2006 bestselling book, which has a title remarkably similar to one of the leading translations of that Yiddish term.
Capiche?