September 23, 2021

Warren, Cornyn Introduce Bill to Prevent Large Corporations From 'Forum-Shopping' in Bankruptcy Cases

Senators Call Out Corporations’ Attempts To Dodge Accountability by Filing Bankruptcy Cases with Favorable Judges

Text of Bill (PDF)

Washington, D.C. — United States Senators Elizabeth Warren (D-Mass.) and John Cornyn (R-Texas) today introduced the Bankruptcy Venue Reform Act of 2021 which would require large corporations and wealthy individuals to file for bankruptcy in their home states or where significant assets are located. In the last 20 years, more than 70% of public companies with at least $100 million in assets filed for bankruptcy in a district outside of the one closest to their headquarters. The legislation would prevent corporations from “shopping” for favorable bankruptcy judges and ensure that small businesses, employees, retirees, creditors, and other stakeholders can fully participate in cases that will have tremendous impacts on their lives.

"Wealthy corporations should not be able to run across the country to find a favorable court to file bankruptcy. While they manipulate the system to file for bankruptcy wherever they please, affected communities — like workers, creditors, and consumers — lose," said Senator Warren. “This bipartisan bill will prevent big companies from cherry-picking courts that they think will rule in their favor and to crack down on this corporate abuse of our nation's bankruptcy laws."

"Corporations seeking courts sympathetic to their interests often ‘forum shop,’ tilting the playing field away from small businesses," said Senator Cornyn. "I urge my colleagues to support this bipartisan, common-sense solution to close this loophole and help restore public trust in our bankruptcy system."

“The Commercial Law League of America (“CLLA”), the nation's oldest organization of attorneys and experts in the field of commercial law and bankruptcy, welcomes and strongly endorses the introduction of a companion bankruptcy venue reform bill in the Senate (to HR 4193), to address the runaway forum and judge shopping of commercial Chapter 11 cases to bankruptcy courts located far away from where the corporation was headquartered and operated.  Such a reform would ensure that important bankruptcy cases would remain in their home states so that the distinct needs of each community are addressed and not overlooked or, worse, ignored by a remote court,” said Peter C Califano, Esq., Past President of the CLLA (2017) and current Chair of its Government Affairs Committee.

The Bankruptcy Venue Reform Act of 2021 would prevent the practice of forum shopping in Chapter 11 bankruptcy cases and ensure fairness in the bankruptcy system by:

  • Requiring individual debtors to file for bankruptcy in the district where their domicile, residence, or principal assets in the United States is located;
  • Requiring corporate debtors to file for bankruptcy in the district where their principal assets or principal place of business in the United States is located;
  • Corporate debtors would no longer be permitted to file simply on the basis of their state of incorporation.
  • Stopping debtors from filing for bankruptcy in another district simply because an affiliate of the debtor has filed there; and
  • Requiring that courts transfer or dismiss cases filed in the wrong district.

The senators first introduced the legislation in 2018. 

The legislation is supported by Commercial Law League of America (CLLA) and the Boston Bar Association. The senators first introduced the legislation in 2018.