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Abstract: Bankruptcy forum shopping is a controversial topic prompting hotly debated questions: is it a race to the bottom or to the top? Should the venue rules be changed to prohibit forum shopping, or does the status quo give debtors the flexibility they need to succeed in a bankruptcy case? How did forum shopping become so ubiquitous in the first place?
Many scholars and commentators have wrestled with these questions. This article contributes to the ongoing debates by shedding light on the last of these questions. Its central claim is that, at bottom, the history of bankruptcy forum shopping is really a story of the rise and fall of various magnet courts, where a “magnet court” is one of a handful of United States bankruptcy courts that attracts an inordinate number of large chapter 11 cases.
Our study of magnet courts reveals that the sustained popularity of any one magnet court is not guaranteed. Indeed, recent months provide a prime example of the shift in popularity among the magnet courts. A comparison of data from the final quarter of 2022 to the final quarter of 2023 reveals that a new magnet court, the Bankruptcy Court for the District of New Jersey, is on the rise. Further, a once-popular magnet court, the Bankruptcy Court for the Southern District of Texas, may be on the decline as a result of a well-publicized scandal involving one of its judges.
Although our views on forum shopping in bankruptcy are known, we do not seek to weigh in on the forum shopping debate directly in this article. Rather, our goal is to document how the statutory venue provisions in bankruptcy, as used by debtors' attorneys, have contributed to the development and evolution of magnet courts. As we describe below, in addition to the trend of consolidation of large reorganization cases in a handful of districts, recent years have seen a shift in preferred venues for large chapter 11 cases. Although the District of Delaware and the Southern District of New York are still preferred venues, other districts have become popular for large cases. These new magnet courts have infringed on New York's and Delaware's command of magnet court status. As filing trends fluctuate, the status of certain courts as magnet courts is subject to change.
A discussion of bankruptcy's magnet courts is relevant to bankruptcy practitioners throughout the country. Yet it may have special salience in California, where the Bankruptcy Court for the Central District of California recently adopted a general order establishing filing procedures in complex chapter 11 cases. This move seems designed to appeal to debtors with complex cases, although it is arguably too early to tell whether it will attract more complex cases to the district.
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