[Congressional Record Volume 151, Number 12 (Tuesday, February 8, 2005)]
[Senate]
[Pages S1125-S1129]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. CORNYN:
S. 314. A bill to protect consumers, creditors, workers, pensioners,
shareholders, and small businesses, by reforming the rules governing
venue in bankruptcy cases to combat forum shopping by corporate
debtors; to the Committee on the Judiciary.
Mr. CORNYN. Mr. President, I rise today to introduce the Fairness in
Bankruptcy Litigation Act of 2005.
This legislation will provide much-needed protection--for consumers,
creditors, workers, pensioners, shareholders, and small businesses--by
reforming the rules governing venue in bankruptcy cases to combat forum
shopping.
Quite simply, my bill will prevent corporate debtors from moving
their
[[Page S1126]]
bankruptcy cases thousands of miles away from the communities and their
workers who have the most at stake. And it will prevent bankrupt
corporations from effectively selecting the judge in their own cases--
because picking the judge isn't far off from picking the verdict.
This Act is a positive step for fairness, responsibility, and
justice. It implements a major recommendation from the October 1997
National Bankruptcy Review Commission report, and earned the support of
prominent bankruptcy law professors and practitioners nationwide. The
bill is also supported by Texas Attorney General Greg Abbott (R) and
former Massachusetts Attorney General Scott Harshbarger (D); Brady C.
Williamson, who served as chairman of the National Bankruptcy Review
Commission; and major national bankruptcy organizations like the
National Association of Credit Management and the Commercial Law League
of America.
With the introduction of this Act, this body will now have an
opportunity to consider this growing crisis, which effects so many
consumers and workers, just as we are about to examine the issue of
comprehensive bankruptcy reform.
Sadly, our current bankruptcy venue law has become a target for
enormous abuse. It's a problem that is well documented by academics,
most recently in a comprehensive book published just last week by UCLA
Law Professor Lynn M. LoPucki, as well as by Harvard Law Professor
Elizabeth Warren, who served as the reporter for the National
Bankruptcy Review Commission, and Professor Jay L. Westbrook of the
University of Texas Law School.
I have personal experience with the worst kind of forum shopping.
During my service to the State of Texas as Attorney General, I argued
that the Enron Federal bankruptcy court proceedings should be litigated
in Houston. That seemed like the common sense argument, of course--
after all, Houston was where the majority of employees and others who
were victimized by that corporate scandal called home.
Yet that's not where the case ended up. Instead, Enron was able to
exploit a key loophole in bankruptcy law to maneuver their proceedings
as far away from Houston as possible. They ended up in their desired
forum in New York. See In re Enron Corp., 274 B.R. 327 (S.D.N.Y. Bankr.
2002).
Enron used the place of incorporation of one of its small
subsidiaries in order to file a bankruptcy claim in New York, and then
used that smaller claim as the basis for shifting all of its much
larger bankruptcy proceedings into that same court. The company had
7,500 employees in the Houston headquarters, but they filed for
bankruptcy in New York, where Enron had only 57 employees.
This kind of blatant forum shopping makes a mockery of our laws. The
common-sense legislation that I've introduced today will combat such
egregious forum shopping by requiring that corporate debtors file where
their principal place of business or principal assets are located,
rather than their state of incorporation, and forbidding parent
companies from manipulating the venue by filing first through a
subsidiary.
Bankruptcy venue abuse is not just bad for our legal system; it hurts
America's consumers, creditors, workers, pensioners, shareholders, and
small businesses. Under current law, corporate debtors effectively get
to pick the court in which they will file for bankruptcy. As a result,
creditors can be forced to litigate far away from the real-world
location, where costs and inconveniences associated with travel are
prohibitive.
This troubling loophole also serves to unfairly enable corporate
debtors to evade their financial commitments. It badly disables
consumers, creditors, workers, pensioners, shareholders, and small
businesses from pursuing and receiving reasonable compensation from
bankruptcy proceedings.
Current law allows debtors to forum shop and thereby to pick
jurisdictions likely to rule in their favor. If debtors get to pick the
jurisdiction, then bankruptcy judges have a disturbing incentive to
compete with other bankruptcy courts for major bankruptcy cases, by
tilting their rulings in favor of corporate debtors and their
attorneys.
The examples are numerous. Here are three of the most prominent
incidents: Polaroid. In October 2001, Boston-based Polaroid filed for
bankruptcy in Delaware, listing assets at $1.9 billion. Polaroid's top
executives claimed that the company was a ``melting ice cube,'' and
arranged a hasty sale for $465 million to a single bidder. The court
refused to hear testimony as to the true value of the company and
closed the sale in only 70 days. The top executives went to work for
the new buyer and received millions of dollars in stock. Meanwhile,
disabled employees had their health-care coverage canceled. The so-
called ``melting ice cube'' became profitable the day after the sale
became final.
K-Mart. In January 2002, failed top executives delivered Michigan-
based K-Mart to the bankruptcy court in Chicago, which reportedly had
been actively soliciting large corporate debtors to file there. With a
workforce of 225,000, K-Mart had more employees than any company that
had ever filed bankrupt nationwide. The Chicago judge let the failed
executives take tens of millions of dollars in bonuses, perks, and loan
forgiveness. Bankruptcy lawyers also profited, pocketing nearly $140
million in legal fees. But some 43,000 creditors received only about
ten cents on the dollar.
Worldcom. Worldcom perpetrated one of the biggest accounting frauds
in history, inflating its income by $9 billion. Although based in
Mississippi, Worldcom followed Enron into the New York bankruptcy
court, where its managers received the same lenient treatment. No
trustee was appointed; indeed, five months after the case was filed,
the directors in office when the fraud occurred still constituted a
majority of the board. They chose their own successors. A Top Worldcom
executive used money taken from the company to build an exempt Texas
homestead, and Worldcom took no action. That executive then used the
homestead to buy his way out of his problems with the SEC. Meanwhile,
creditors--mostly bondholders--lost $20 billion.
This is not the first time we have addressed this important issue.
The House Judiciary Subcommittee on Commercial and Administrative Law
held a hearing on July 21, 2004, entitled ``Administration of Large
Business Bankruptcy Reorganizations: Has Competition for Big Cases
Corrupted the Bankruptcy System?,'' and Congressman Brad Sherman (D-CA)
has previously led efforts to champion bankruptcy venue reform in the
House. During the 107th Congress, Senator Durbin introduced S. 2798,
the Employee Abuse Prevention Act of 2002, joined by Senators Kennedy,
Kerry, Leahy, and Rockefeller, while Congressman William D. Delahunt
(D-MA) introduced the same bill in the House; section 205 of that
legislation would have reformed bankruptcy venue law.
I believe we must take steps to respond to this important problem.
The American people deserve better from our legal system. All
bankruptcy cases deserve to be handled fairly and justly, and no
corporate debtor should be allowed to escape responsibility by fleeing
to another venue. It is high time that we take up this much-needed
reform.
I ask unanimous consent that letters of support be printed in the
Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
Attorney General of Texas,
Austin, TX, February 2, 2005.
Re Fairness in Bankruptcy Litigation Act of 2005.
Hon. John Cornyn,
U.S. Senate,
Washington, DC.
Dear Senator Cornyn: I support your important initiative to
prohibit opportunistic forum shopping by corporate debtors.
As you know firsthand from your tenure as Attorney General
of Texas during the State's involvement in the Enron
bankruptcy proceedings, such unsavory court-shopping truly
harms innumerable parties--large and small alike. Far too
often, corporate debtors file for bankruptcy in a far-flung
district solely because of their incorporation in the state
where that district is located.
Your proposal to amend 28 U.S.C. Sec. 1408--the aptly named
Fairness in Bankruptcy Litigation Act--would prevent this
unseemly practice. As you know, bankruptcy forum shopping can
adversely impact not just states and state agencies, but
countless consumers, creditors, employees, pensioners,
stockholders, and small businesses that are regularly
thwarted from protecting their interests simply because the
debtor filed in a distant forum.
[[Page S1127]]
The venue stratagems used by large law firms to maximize
their professional fees, render far-away courts inaccessible
to scores of unsecured creditors, and select compliant,
debtor-friendly judges undermine the credibility of our
nation's bankruptcy system. Indeed, after two years of public
hearings, the National Bankruptcy Review Commission
recommended that Congress overhaul the law to prevent forum
shopping by large Chapter 11 debtors and their affiliates. I
strongly support their recommendation and applaud you for
bringing this urgent matter to the attention of the United
State Senate.
Abusive forum shopping by corporate debtors harms Americans
from all walks of life. It is time for this gamesmanship to
stop. I commend your efforts to strengthen our bankruptcy
system and safeguard the interests of ordinary Americans.
Sincerely,
Greg Abbott.
____
Murphy, Hesse, Toomey
& Lehane, LLP, Attorneys at Law,
Boston, MA, February 8, 2005.
Re Bankruptcy Venue Reform.
Senator John Cornyn,
Hart Senate Office Building,
Washington, DC.
Dear Senator: I commend efforts, either through an
amendment to the bankruptcy bill before Congress or through
the separate vehicle being introduced by Senator Cornyn, to
close a major jurisdictional loophole in the bankruptcy
statutes which directly affects every investor, business
competitor, creditor, consumer, union, and state Attorney
General in this country. While forum shopping and court
competition are having a direct, adverse effect on the
governance and reorganization of large, public companies,
investors are feeling that effect in their returns; employees
and unions in the abrogation of collectively bargained
contracts and economic security; competitors in the loss of a
level playing field; consumers and creditors in the loss of
basic rights; and Attorneys General in the loss of power to
be heard and to protect the rights of constituents and state
public policy.
For the past decade, most bankrupt large public companies
have ``forum shopped'' their cases to the bankauptcy courts
in Wilmington, Delaware and New York City. For a time, that
was generally thought to be advantageous. But events in Enron
and other cases have shown otherwise. The shopping benefited
bankruptcy professionals who worked in those cases by
enabling them to charge higher fees and by freeing them from
some restrictions on conflicts of interest. The shopping also
benefited executives of some of those companies by allowing
them to hang onto their jobs longer and in some cases even be
paid large ``retention bonuses.''
But the effect of forum shopping on the companies--and
hence on the shareholders and bondholders who invested in
them--has been decidedly negative. According to major studies
and the empirical research of experts like Professor Lynn
LoPucki of UCLA law school, companies reorganized in the
Delaware and New York courts in the early and mid-1990s
failed at a rate more than double the rate for companies
reorganized in other courts. As other courts copied Delaware
in an effort to staunch their outflow of cases, the failure
rates for those courts' reorganizations skyrocketed to match
Delaware's rates. To confirm a plan, the Bankruptcy Code
requires that the court find that ``confirmation . . . is not
likely to be followed by the liquidation, or the need for
further financial reorganization of the debtor.'' But of the
43 largest public companies reorganized in U.S. Bankruptcy
Courts from 1997 through 2000--the most recent period for
which failure rates can be calculated--21 (49%) were back in
bankruptcy within five years. Historically, the failure rates
for big reorganization in non-competing courts have been
below 10%.
Legislative action can address this problem in a common
sense, fair, simple and direct way, by requiring bankrupt
companies file in their local bankruptcy courts. By local
courts, I mean the courts in the cities where the companies
have their headquarters or their principal operations. This
will free judges from the pressures to compete with other
courts for cases, and enable them to return to the crucial
function for which they were appointed: to protect
shareholders, creditors, employees, suppliers, customers and
the companies themselves during the brief but often frantic
period between the failure of one corporate regime and its
replacement with another. It will also ensure that these
judges and courts hear from everyone affected and entitled to
be heard--not only those who can afford to travel or appear
in ``foreign'' courts, especially the public's lawyers, the
Attorneys General. It is not a panacea for economic
insecurity, and it changes no legal rights or duties or law.
But it will cure a major inequity and a loophole utilized
primarily to ``game'' the system. Enactment of this bill, or
a similar legislative amendment, will enable us to say: ``We
had a problem, and now we have fixed it.''
Scott Harshbarger.
____
Commercial Law League
of America ',
Chicago, IL, February 7, 2005.
Hon. John Cornyn,
U.S. Senate,
Washington, DC.
Dear Senator Cornyn: The Commercial Law League of America
(``CLLA''), founded in 1895, is the Nation's oldest
organization of attorneys and other experts in credit and
finance actively engaged in the field of commercial law,
bankruptcy and reorganization. Its membership exceeds 3,500
individuals. The CLLA has long been associated with the
representation of creditor interests, while at the same time
seeking fair, equitable and efficient administration of
bankruptcy cases for all parties in interest.
The Bankruptcy Section of the CLLA is made up of
approximately 1,100 bankruptcy lawyers and bankruptcy judges
from virtually every State in the United States. Its members
include practitioners with both small and large practices,
who represent divergent interests in bankruptcy cases. The
CLLA has testified on numerous occasions before Congress as
experts in the bankruptcy and reorganization fields.
A principal concern of the CLLA is the need for an
amendment requiring that the domicile and residence for venue
of corporate debtors be conclusively presumed to be the
location of the debtor's principal place of business without
regard to the debtor's state of incorporation. Such a change
would benefit creditors and prevent an unacceptable degree of
forum shopping by debtors who are in search of a venue that
will be friendly to their needs. More important, however,
requiring that a corporate bankruptcy take place locally
ensures that the distinct needs of the community are not
overlooked.
Allowing the practice of forum shopping by debtors
undermines the bankruptcy process and creates unwarranted
competition among the courts. Before filing, the debtor is
able to determine which courts have taken friendly views of
the debtor's particular needs and select such a court with
the intent of creating a disadvantage for creditors. Indeed,
some corporate debtors have even commenced bankruptcy cases
in preferred venues by strategically creating or using
otherwise healthy subsidiaries to create a basis for filing
in the intended court. Current law as written fosters these
abuses.
The CLLA strongly supports passage of the Fairness in
Bankruptcy Litigation Act of 2005 (the ``Act'') since the
proposed legislation addresses these abuses. The Act will
help to eliminate the forum shopping that skews the
bankruptcy process and will foster greater local control over
important business and community decisions. Although the Act
may require some technical modifications to achieve and
address the legislation's purported goals, its overall
provisions and goals are well grounded and supported by the
abuses taking place within the bankruptcy system.
Much has been said among members of Congress that
bankruptcy reform is necessary to prevent what it perceives
as abuse of the bankruptcy process. A venue provision that
requires corporate bankruptcies to be filed at the principal
place of business furthers that goal and for all these
reasons we encourage the passage of the Act at the earliest
opportunity.
Respectfully submitted,
Mary K. Whitmer,
President.
Jay L. Welford,
Co-Chair, National Governmental Affairs Committee.
Peter C. Califano,
Chair, Legislative Committee, Bankruptcy Section.
Alan I. Nahmias,
Chair, Bankruptcy Section.
Judith Greenstone Miller,
Co-Chair, National Governmental Affairs Committee.
____
Harvard Law School,
January 31, 2005.
Senator John Cornyn,
617 Senate Hart Office Building,
Washington, DC.
Dear Senator Cornyn: Since its inception, the central
promise of the Federal bankruptcy system is that all
creditors--large and small--have equal access to participate
in the judicially-supervised liquidation or reorganization of
the debtor. No bankruptcy will be run to benefit one group of
creditors over another, or to permit the debtor to escape
from close scrutiny after its financial collapse.
Unfortunately, that promise has been significantly eroded.
Mega-companies and their counsel shop for courts that will
render decisions that may favor the debtor, the attorneys or
a small group of powerful creditors. These parties often file
the bankruptcy petitions in locations far distant from most
of the company's business and from most of its creditors,
including its workers, retirees and local trade creditors who
have made their own investments in the company.
Forum shopping creates an advantage for the insiders, while
making it virtually impossible for small creditors to
participate in the bankruptcy process. Employees, pensioners,
trade creditors and others have claims that are important to
them, but that are not large enough to justify millions of
dollars in lawyers' fees or trips to distant locations. As a
result, many of these smaller parties are shut out of the
system. They literally cannot get to the courthouse.
Bankruptcy courts around the country are capable of
handling the cases that come their way--large or small. The
judges are smart and thoughtful, and the court personnel are
dedicated and hard-working. No
[[Page S1128]]
single court in this country, regardless of its experience,
should have an exclusive lock on dealing with big cases. No
court has special powers or unique skills to deal with the
questions of claims, property of the estate, financing,
fraud, attorneys' fees and so on--issues that can arise in
any case, regardless of size.
The current system of court shopping harms too many
parties. Closing a loophole in the bankruptcy laws that
permits this unseemly practice and forcing companies in
trouble to subject themselves to the scrutiny of their local
courts and local creditors is an important step toward
strengthening the credibility of the bankruptcy system. The
reform embodied in your proposal is real reform. If a company
prospers in part because it draws on the strength of the
community where it operates, that same community should be
able to participate fully in its financial reorganization.
Very truly yours,
Elizabeth Warren,
Leo Gottlieb Professor of Law.
____
School of Law,
The University of Texas at Austin,
Austin, Texas, February 6, 2005.
Senator John Cornyn,
Senate Hart Office Building,
Washington, DC.
Dear Senator Cornyn: There is no single reform of our
Chapter 11 system that is as important as ensuring an end to
the forum shopping that has so distorted that system in
recent years. The present venue rules are so loosely
constructed that they permit any large public' company to
file a Chapter 11 pretty much wherever it likes. Naturally,
the management of companies in financial trouble and the
professionals that advise them take advantage of those rules
to choose the forum that will best serve their interests.
Often that means a Chapter 11 filing in a courthouse far away
from the company's home.
These rules permit the company's management to escape the
close scrutiny of intensely interested local media and to
avoid attendance at court hearings by employees, local
suppliers, and others vitally interested in the case and
knowledgeable about the company. They force smaller creditors
to file claims from afar, claims that are often the subject
of an arbitrary objection by the debtor that the distant
creditor cannot afford to litigate. Conversely, creditors who
received some payment before bankruptcy may be the subject of
long-distance preference attacks that they cannot properly
defend in a remote courthouse, especially if the amounts
involved, although substantial, are not enough to justify the
expense of a defense. Compounding the problem of expense is
the creditor's lack of knowledge of lawyers in the distant
forum and the risk, especially in Delaware, that in a big
case most experienced local lawyers will already be committed
to other clients. On top of these direct injuries to
creditors, in cases where a trustee in bankruptcy is
appointed, the administration of assets hundreds or thousands
of miles removed from the trustee's home cannot be done
efficiently and rarely can be done well.
These and other effects of forum shopping are inefficient
and prejudicial. In addition, the present system imposes
subtle pressures on bankruptcy judges and district judges,
who cannot be unaware that their decisions as to venue will
determine whether the community and the local bar will be
greatly enriched by the administration of large bankruptcy
cases. Despite the high degree of professionalism on our
federal bench, it is not reasonable to expect that these
pressures will have no effect.
Although I am expressing my own opinions and not speaking
for the University or the Law School, I write as someone who
has practiced, studied, taught, and written about bankruptcy
law for over thirty years. Please let me know if I can
provide further information that would be helpful to your
work.
Respectfully,
Jay L. Westbrook,
Benno C. Schmidt,
Chair of Business Law
____
University of California,
Los Angeles, School of Law,
Los Angeles, CA, January 31, 2005.
Senator John Cornyn,
Hart Senate Office Bldg.,
Washington, DC.
Dear Senator Cornyn: I write to thank you for your courage
in proposing the Fairness in Bankruptcy Litigation Act of
2005. This legislation will not only provide protection for
all parties to large, public company bankruptcies, it will
also protect honest bankruptcy judges from the pressures
arising from the necessity to compete for cases. My research
suggests that by ending the necessity for the courts to
compete for cases, this legislation will result in better
reorganizations, the preservation of jobs, and higher returns
to creditors and shareholders.
This is a difficult issue to present to the public, because
it is both obscure and complex. Please be assured that I and
many others appalled by the competition will do whatever we
can to assist you.
Yours truly,
Lyan M. LoPucki
____
Dear Senator Cornyn: I am writing to you to support your
effort to pass a bill that would prevent corporations from
shopping for the most favorable venue. The current practice
has resulted in a ``race to the bottom'' as bankruptcy courts
work hard to lure corporate bankruptcies to their courts.
I was a professor at the University of Missouri-Kansas City
School of Law for almost 20 years. My own worst example is
the case of Birch Telecom, a Kansas City-based company that
filed in Delaware in 2002. After laying off a quarter of
their employees--citizens of Missouri, Kansas, and Texas--
Birch went into bankruptcy with a prepared plan (known as a
``pre-pack'') that included significant compensation for the
very officers who had led the company into bankruptcy.
A bankruptcy judge from Texas, sitting by designation
(because of the volume of cases being filed in Delaware) had
the audacity to suggest that he might not approve the plan
because of the compensation package. Before his words were
out of his mouth, Birch Telecom's attorneys had appealed the
reference of the case to that judge. The case was withdrawn,
and a Delaware judge, who understood that the game is
appeasing the corporate debtors, approved the plan 13 days
later.
What possible chance do employees and local creditors have
when a distant bankruptcy judge will rubber-stamp the
company's every request, in a court too far away for them
even to appear?
Congress says that it is trying to stop bankruptcy abuse.
Venue shopping is the very worst example of bankruptcy abuse,
and it affects the lives of thousands of ordinary Americans--
employees and small businesses--every single day.
I wish you good luck in the passage of this important piece
of legislation.
Sincerely,
Corinne Cooper,
Professor Emerita of Law.
____
Creel & Moore, L.L.P.,
Attorneys and Counselors,
Dallas, TX, February 4, 2005.
Re proposed bankruptcy legislation/venue.
Senator John Cornyn,
Hart Senate Building, Washington, DC.
Dear Senator Cornyn: One of the issues being discussed in
connection with proposed bankruptcy legislation is in what
venue or venues is it most appropriate for business debtors
to initiate voluntary bankruptcy cases, where they conduct
their daily business or where they were incorporated.
Because a corporation (or any other type of business
organization) seeking bankruptcy relief should do so in a
forum that is convenient for itself, its management, its
employees and its creditors, Section 1408 of Title 28 of the
U.S. Code should be amended to prohibit the right of a debtor
corporation to file in the state of its incorporation unless
it either has its principal place of business or its
principal assets in that state.
The reason for requiring a debtor to seek relief in a
bankruptcy court nearest to its actual place of operation is
that, otherwise, the rights of the other parties are
significantly and adversely affected because of the distance,
delay and costs of dealing with a faraway court.
The practice that has developed over the years is that
corporations, for example those created under the laws of
Delaware, file in Delaware, far from their actual places of
business, Texas for example, thus causing their management,
employees and creditors to have the burden and expense of
travel, to hire distant counsel with whom they have had no
prior experience, or both, in order to protect their
interests. Many times, at least from a creditor/employee
perspective, the inconvenience and expense, when balanced
against the probability of an insignificant recovery on a
claim, is such that creditors/employees simply abandon their
claims, a result which is contrary to the spirit and intent
of the Bankruptcy Code.
As a bankruptcy practitioner for over 40 years and one who
is active in various bankruptcy organizations, I urge you and
your staff to consider the thoughts expressed in their
letter.
As the grandfather of Richie Anderson who served as an
intern on your staff last summer, I know, from his
experience, that you will listen to the opinions of your
constituents.
Yours very truly,
L. E. Creel, III.
____
Winstead,
February 4, 2005.
Re Bankruptcy Venue Reform
Hon. John Cornyn,
U.S. Senate, Hart Senate Office Bldg.,
Washington, DC.
Dear Senator Cornyn: I write in support of reform of the
Bankruptcy Code's current venue provisions.
I am twenty-three year bankruptcy practitioner and head of
the bankruptcy practice for our law firm, I additionally
serve as Vice President (Business Bankruptcy) of the
Bankruptcy Section of the State Bar of Texas and am national
co-chair of the Unsecured Trade Creditors' Committee of the
American Bankruptcy Institute. My practice, while focused in
Texas, brings me before courts throughout the country--
particularly those in Delaware and New York.
Practicing in Texas, I have personal experience with the
unfortunate practice of companies and their counsel shopping
for forums. Whether to escape the watchful eye of employees,
creditors or the press, numerous companies from around the
country have filed bankruptcy cases in the District of
[[Page S1129]]
Delaware or the Southern District of New York to obtain what
they believed would be either favorable treatment or a venue
for their bankruptcy cases which would in large measure
frustrate the rights and interests of their creditors and
employees. It is for these reasons, among others, that I
strongly support a modification of the Bankruptcy Venue
Statute and urge prompt action.
If I can be of any assistance to you, please do not
hesitate to call upon me. Best regards.
Very truly yours,
Berry D. Spears.
____
Munsch Hardt Kopf & Harr PC,
Attorneys & Counselors,
February 7, 2005.
Re Amendment to Section 1408 of Title 28, United States Code
Hon. John Cornyn,
U.S. Senate, Hart Senate Office Bldg.,
Washington, DC.
Dear Senator Cornyn: As a bankruptcy practitioner for some
25 years, I am writing to voice my support for an amendment
to the venue provisions of Section 1408 of Title 28, United
States Code. As has been well documented, the concept of
``forum shopping'' by significant Chapter 11 Debtors
throughout the country has become an art form over the last
few years. Certain jurisdictions now actively campaign to
attract large, high-profile bankruptcy cases to their venue.
It goes without saying that bankruptcy judges must become
``Debtor friendly'' in order to maintain the attractiveness
of these venue options. Accordingly, decisions relating to
the allowance of professional fees, conflicts and other
critical bankruptcy issues have become disparate throughout
the country.
An amendment to Section 1408, which limits the use of the
state of incorporation to those instances where the Debtors'
principal place of business or principal assets reside, will
promote uniformity as well as removing some of the perceived
inequities in the system. The public's perception of a fair
and uniform bankruptcy system is paramount.
Thank you for your interest in this legislation.
Very truly yours,
Russell L. Munsch.
____
Fulbright & Jaworski, L.L.P.,
Houston, Texas, February 7, 2005.
Re bankruptcy venue reform.
Senator John Cornyn,
Senate Hart Office Building, Washington, DC.
Dear Senator Cornyn: I write you to express my strong
support for bankruptcy venue reform. By way of introduction,
I have been a partner in the bankruptcy section of Fulbright
& Jaworski since June 1, 2004. Prior to that, I served as a
United States Bankruptcy Judge in Houston for almost 17
years, resigning as Chief Judge a day before I joined
Fulbright.
Over the many years of my judicial career, I watched as
many cases which should have been filed in Texas instead
found their way to the dockets of courts in Delaware, New
York, or some other distant jurisdiction. This migration of
large cases is not unique to Texas and it represents a
fundamental flaw in the perceived and actual fairness of the
bankruptcy system. The ``little people'' (small creditors,
former employees, etc.) in a large bankruptcy case are at
once the most vulnerable economically and the parties least
capable of participating in a distant forum.
I firmly feel the integrity of today's bankruptcy system
requires that the rights of all involved be protected and
that fair access to court be ensured. Bankruptcy venue reform
would be a tremendous step toward rectifying these problems.
The opinions expressed in this letter are my own and not
those of Fulbright & Jaworski or its clients. I appreciate
your consideration of my concerns. If you should have any
questions or need additional information or assistance from
me, please do not hesitate to contact me.
Sincerely,
William Greendyke.
____
January 31, 2005.
Senator John Cornyn,
Senate Hart Office Building,
Washington, DC.
Dear Senator Cornyn: On behalf of the National Association
of Credit Management (NACM), I am writing to express the
support of NACM National Board of Directors and the NACM
membership for the Venue in Bankruptcy Cases bill scheduled
to be introduced by Senator Cornyn. This important
legislation would provide enormous relief to the thousands of
business creditors, and most importantly to small business
creditors whose interests are routinely impaired by a
bankruptcy process that is long-overdue for change.
NACM is a 22,000-member trade association, representing the
interests of corporate (commercial) credit executives. NACM
was founded in 1896 and represents both American business
credit professionals in all 50 states as well as business
credit executives in more than 30 countries worldwide. NACM's
mission is to ensure the constant improvement and enhancement
of the business trade credit profession and process.
NACM's membership comprises all types of businesses:
manufacturers, wholesalers, service industries, and financial
institutions. NACM's members range in size from small
businesses to a majority of the Fortune 500. NACM members
make the daily decisions to extend unsecured, business and
trade credit from one company to another. NACM members--the
business credit executive--approve and provide billions of
dollars each day in business and trade credit, which fuels
this country's business economy.
This bill would provide much needed relief to businesses
and--perhaps even more importantly--to small businesses. This
bill would provide relief to the current practice of
requesting a transfer of venue, which is both expensive and
time consuming to both the debtor's estate and to creditors.
Additionally, this bill would address any abuse that
currently exists in the Code that encourages ``shopping''
cases into a ``friendly forum''.
Our membership stands ready to provide whatever level of
support is needed to advance this important legislation. As
the national organization representing the decision makers
within the American economic model who drive commerce, we
hope you will ensure that Congressional leadership will take
action on this bill as expeditiously as possible.
We must provide immediate relief to the small business that
simply cannot afford to wait any longer for bankruptcy reform
from Congress.
Thank you for your consideration of our comments and please
let us know what we can do to assist you in advancing this
legislation.
Sincerely yours,
Robin Schausell, CAE,
President.
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