It is Time to Change Bankruptcy Forum Laws

Chris Hughes co-authored the article “It is Time to Change Bankruptcy Forum Laws” for the California Lawyer’s Association. The article provides an overview of the impact of forum shopping and how it could be reformed.

The article begins:

“Forum shopping, the act of seeking the most favorable jurisdiction or court in which a claim might be heard, has a long history in the United States dating back to at least 1842 in the case of Swift v. Tyson, 41 U.S. 1 (1842). For more than 250 years, courts and legislatures have taken steps to rein in rampant forum shopping. Nevertheless, forum shopping continues to be prevalent in two sectors of the law.

The first is patent litigation where in 2021, approximately 23% of all patent cases were filed in Waco, Texas. This issue was apparently noted by Chief Justice John Roberts in his 2021 year-end report on the Federal Judiciary, highlighting ‘an arcane, but important matter of judicial administration: judicial assignment and venue for patent cases in federal trial court.’

The second sector of the law involves corporations using the current venue statute to file bankruptcy petitions in only a small handful of districts such as the Southern District of New York or Delaware rather than where the corporation is headquartered. In testimony provided at a House Judiciary Committee hearing, Georgetown Law professor Adam Levitin testified that in 2020 ‘57% of all large, public company bankruptcy cases ended up before just three of the country’s 375 bankruptcy judges.’ Currently, bills have been proposed in both the House and the Senate intended to curtail bankruptcy forum shopping.”