By: Eric A. Rosen | July/August/September 2021
As published in Commercial Law World Magazine
The Dallas Stars, Boston Herald, Chicago Tribune, Los Angeles Dodgers, Nebraska Book Company, Tropicana Las Vegas Casino and Washington Mutual all bear the name of the city or state where they are based. All filed for relief under Chapter 11 of Title 11 of the United States Code ("Code" or "Bankruptcy Code") in Delaware, taking advantage of a loophole in the Code that allows businesses to have their cases heard in jurisdictions to which they have no meaningful connection.
This practice is the basis for continued efforts to implement bankruptcy reform, including the most recent bipartisan bill: The Bankruptcy Venue Reform Act of 2021, H.R. 4193, 117th Cong. (2021). The bill would require corporate debtors to file where their principal place of business is or where the principal assets are located—meaning a location with a real world connection to the debtor's business.
This article contends that while bankruptcy venue reform should be accomplished for the reasons articulated by the bill’s sponsors and in the arguments discussed below, there is a more pressing reason why venue reform needs to be implemented now. Specifically, reform is necessary to eliminate the negative perception of the bankruptcy court system as a whole.