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Debates about the law of corporate reorganizations often seem to be debates about facts.' From this it might seem that good empirical research can resolve the large differences that exist between competing camps of bankruptcy scholarship. First-rate empirical work has, of course, been done.2 It has also changed the way some have thought about bankruptcy law.3 Nevertheless, it would be a mistake to think that empirical studies will

While reviewing "Game Theory and the Law" by Baird, Gertner and Picker, the essay provides a self-contained, nontechnical introduction to modern noncooperative game theory.

A BANKRUPTCY proceeding is a day of reckoning for all parties with ownership interests in an insolvent firm. Ownership interests are valued, the assets are sold, and the proceeds are divided among the owners. Bankruptcy proceedings take one of two forms, depending on whether ownership rights to the assets are sold on the open market to one or more third parties or whether ownership rights to the assets are transferred to the old owners in return for the cancellation of their prebankruptcy entitlements. The first kind of bankruptcy proceeding, a liquidation, is governed by Chapter 7 of the Bankruptcy Code; the second kind, a reorganization, is governed by Chapter 11. A bankruptcy proceeding always involves a sale of assets followed by a division of the proceeds among the existing owners. In a Chapter 7 proceeding the sale is real; in a Chapter 11 proceeding the sale is hypothetical.' An analysis of the law of corporate reorganizations should properly begin with a discussion of whether all those with rights to the assets of a firm (be they bondholders, stockholders, or workers) would bargain for one if they had the opportunity to negotiate at the time of their initial investment.2 Properly understood, a bankruptcy proceeding itself can be

IN 1600,' a Hampshire farmer named Pierce conveyed his sheep to his creditor Twyne to satisfy a preexisting debt. Twyne, however, allowed Pierce to remain in possession of the sheep, to shear them, and to mark them as his own. When a sheriff tried to seize the sheep under a writ of execution on behalf of another creditor, Twyne forcibly resisted, maintaining that the sheep were his. Edward Coke, then attorney general, brought a criminal action against Twyne in the Star Chamber. That court held that because the transfer to Twyne was secret it was fraudulent and therefore void.2 Few principles of Anglo-American law have been so long-lived and so widely held, as the one in Twyne's Case.3 The principle that secret inter

defaults, he will require a higher interest rate from the debtor.' In order to reduce this uncertainty, and thereby to facilitate secured credit, the Uniform Commerical Code normally requires a creditor either to take possession of the property or to make a public filing, if he wants a security interest in his debtor's property that is effective against competing property claimants.2 This requirement, coupled with a simple "first-in-time" rule, enables a creditor who wants to lend money on a secured basis to assume that, if the property in question is in the debtor's possession and if no other creditors have filed a financing statement, his claim to that property can have priority over those of other existing and future creditors. The Code assumes that this benefit outweighs the costs imposed upon secured parties by the requirement that they take possession or file.3

That information once published should be presumptively free for all to use is a commonplace of intellectual property law. As Benjamin Kaplan has observed, "if man has any 'natural' rights, not the least must be a right to imitate his fellows, and thus to reap where he has not sown. Education, after all, proceeds from a kind of mimicry, and 'progress,' if it is not entirely an illusion, depends on generous indulgence of copying."' It might thus seem to follow that judges should have only modest powers to find that individuals have common law intellectual property rights. Common law judges, however, often discover such rights under the branch of unfair competition law known as misappropriation.

During the 1970's, William Lee Kovacs operated Chem-Dyne Corporation, an industrial and hazardous waste disposal business in Hamilton, Ohio. In 1976, Ohio's Environmental Protection Agency and Department of Natural Resources charged Kovacs and ChemDyne with polluting Ohio waters with pesticides and industrial wastes. In 1979, a state court enjoined Kovacs from causing further pollution and also required him to remove all industrial wastes from the premises of Chem-Dyne within twelve months. Kovacs did not comply with the injunction and continued to dump wastes on the site.' In 1980, Kovacs filed a bankruptcy petition. The Sixth Circuit subsequently held that Kovacs' obligation to clean up the toxic wastes gave rise to a "claim" within the meaning of the Bankruptcy Code and could be discharged.2 The Supreme Court granted certiorari, and will decide the case during the October 1984 Term. A number of businesses that have violated state and federal anti