Virtual Judgment Proofing: A Rejoinder

Abstract

This is a rejoinder by the author of The Death of Liability, 106 Yale L.J. 1 (1996). The rejoinder is to a reply by Professor James J. White to the original article. Corporate Judgment Proofing: A Response to Lynn LoPucki's The Death of Liability, 107 Yale L.J. 1363 (1998). In response to specific points made by White, LoPucki argues that the judgment proofing of large companies would not be visible in Compustat data because it is not accomplished through secured debt or leasing and because Compustat data is aggregated by corporate group. Contracting parties will permit debtors to judgment proof themselves because by doing so the contracting parties and debtors can externalize liability and split the profits between them. LoPucki also responds to arguments that corporate veil piercing, fraudulent conveyance law, government and consumer reaction, and mandatory insurance will prevent judgment proofing by large companies. The rejoinder concludes that computerization will lead to the proliferation of virtual companies that are born judgment proof.