The Examiners on Bankruptcy Venue Reform: What Did You Think?

Our Examiners, a panel of some of the leading bankruptcy experts, weighed in this week on the topic of venue reform. And in more than a dozen responses, they agreed—the venue provisions of the bankruptcy code, as is, work well for businesses and creditors.

Their opinions stand in opposition to those published in an op-ed by the now-retired Judge Steven Rhodes, who argued vehemently that this is an area of the law that needs changing.

The debate also sparked comments and tweets from readers, many of whom agreed with the Examiners that this part of the code shouldn’t be changed.

In the comments section of one of the posts, Christopher A. Ward called the venue fight “misguided.”

The reality is that the statistics do not lie. A majority of cases that could file in Delaware actually file in the jurisdiction where the company is based. The problem is that the Wall Street Journal and other major publications do not cover those cases, only the mega-cases receive publicity. Therefore, the general population only hears about Caesars (which was transferred to Chicago) and other high publicity cases.

(We agree that a great deal of our coverage is focused on these mega-cases. But readers interested in reading about smaller cases, many of which are filed outside of New York and Delaware, can check out our coverage of these smaller companies in DBR Small Cap.)

On Twitter, Ted Gavin—who says he is a friend of and in a band with Judge Rhodes—disputed the judge’s premise in a series of tweets.

@WSJBankruptcy (1) Judge Rhodes is my friend, my colleague and my bandmate. But on venue, he is an out of tune band member….

— Ted Gavin (@tedgavin) February 26, 2015

@WSJBankruptcy (2) @ch11commission DID consider venue. He was the star witness, in fact. His argument, in the end, did not persuade them …

— Ted Gavin (@tedgavin) February 26, 2015

@WSJBankruptcy (3) to consider a change in venue rules. If that is a shortcoming of the Commission, then every litigant who blames a judge

— Ted Gavin (@tedgavin) February 26, 2015

@WSJBankruptcy (4) for their loss in litigation is correct – and we know that can’t be. Venue rules work as is. The majority of change …

— Ted Gavin (@tedgavin) February 26, 2015

@WSJBankruptcy (5) requests are granted; circuit laws do differ in their impact on ch11 cases; venue is an important tool in the …

— Ted Gavin (@tedgavin) February 26, 2015

@WSJBankruptcy (6) restructuring toolkit and the point is to preserve jobs and value. I respect Judge Rhodes, but disagree with his opinion.

— Ted Gavin (@tedgavin) February 26, 2015

Mark Desgrosseilliers, a bankruptcy attorney in Wilmington, Del., also chimed in, saying the current rules work fine.

“@WSJBankruptcy: Do bankruptcy venue rules need reformation?” No. Transfer venue motions work fine. Numerous examples in DE and elsewhere.

— MarkDesgrosseilliers (@MarkDesgross) February 27, 2015

But some readers disagree, advocating like Judge Rhodes for improved rules.

Eric Rasmusen called Mark Roe’s idea for a bankruptcy supreme court “excellent for several reasons.”

1. We’d get uniform bankruptcy law across the country….2. The appellate decisions would be made by experts in bankruptcy. 3. Bankruptcy judges would have an added carrot for them to do their very best….

Consulting firm R2 Advisors said Examiner Sharon Levine made good points, but “reform is more beneficial than harmful.”

Bankruptcy venue reform is good for all – @LevineSharon makes good points, but reform is more beneficial than harmful http://t.co/Bvp1zs9UNG

— r2 advisors (@r2advisors) March 3, 2015   

Finally, commenter BKYATTY said that venue rules must be changed.

Filings in Delaware are significantly more expensive than in other venues, as the rates of Delaware practitioners (who must, by local rule, be engaged and in attendance at hearings) approach those of New York City attorneys. If the goal is a fairer and more economically efficient process, then the rules should be changed.

We hope you found this debate as interesting as we did, and feel free to keep the comments coming. Examiners will be back again the first week of April.