Business Bankruptcy Attorney Near Me: 5 Venue Rules That Matter More Than the Office Address

Where Your Bankruptcy Case Should Go

Where the attorney is located matters very little. There are far more important considerations to make when selecting a business bankruptcy attorney. Where you can file your business bankruptcy case matters, a lot. You should expect that your attorney is knowledgeable, experienced and qualified to represent you in the bankruptcy court in your district. What matters is their knowledge of the bankruptcy process and familiarity with the judges. Venue refers to the place where the bankruptcy case should be filed; in other words, where your bankruptcy case should go.

Rule one: A business can only choose a district where, for the 180 days before filing, it was domiciled (think state of incorporation), resided (think of this as the place where the business is actually located), or had its principal place of business (think of the place where the day to day decisions get made) or its principal assets. These are not the same thing, and sometimes there can be more than one district that a business could choose from.

You count backwards 180 days from the day you file the bankruptcy case. If a business moved during that 180-day period, it can file in the district where it was located for the most days.

Rule two, the affiliate rule. This one looks down the chain of corporate control. A business can also file in any district where an affiliate, general partner or partnership already has a bankruptcy case pending. Now the whole corporate family can file in that district, even if the main business has never set foot in that district.

That is how Enron, headquartered in Texas, ended up in New York. That is why General Motors and Chrysler, both of them headquartered in Michigan, filed their cases in New York as well. Critics call it forum shopping. Whether that is a good thing, or the result of legal machinations at the expense of local creditors, is the stuff of legal journals and part of the legislative debate around bankruptcy reform. Whatever the merits of the discussion, this is the way the law currently works. If a bunch of related businesses file in different districts, the court where the first petition was filed may decide where they proceed.

Different Legal Conclusions

Rule three: the Circuits of the United States Court of Appeals read the same statute and develop different legal conclusions. In the United States, each circuit court of appeals, like the 2nd Circuit or the 7th Circuit, gets to decide what the law means for the district courts in their circuit. As an example, this is why it is possible for different Circuits to decide the same question on rejecting a union contract differently.

Procedurally, judges also differ about what they expect at the very beginning of a case. Some courts are more lenient about the way a debtor is allowed to pay the vendors it needs right away, while other courts expect the debtor to provide more justification for how it picks which bills get paid. Some courts have a reputation for being more debtor-friendly.

A lot of major Chapter 11 cases are filed in Delaware or in the Southern District of New York. There are reasons why that happens. These courts see so many cases that their judges have gotten to know how the largest business bankruptcy cases work. Sometimes these are Delaware cases because the business is incorporated there. Sometimes it has a New York case because New York is the state where the main office is located or where the company does business.

Rule four: The Bankruptcy Rules say that if a case gets filed in the wrong place, the court can dismiss it or transfer it to the right district. But the court can only do this after giving the business a chance to defend itself. The court has to give the business notice of a hearing on a motion to dismiss or transfer the case. The court also has to give the U.S. Trustee notice. Even if you file in the right place, the court might move the case to somewhere else anyway. Why? To promote the convenience of the parties or to do what’s fair in a particular case.

Judges dislike blatant forum shopping. In one case, In re Patriot Coal (2012), the Southern District of New York actually sent a case to the Eastern District of Missouri because the two New York affiliates that were supposed to anchor the case in New York were formed no more than 45 days before the case was filed.

Pro Hac Vice Admission

Rule five: The lawyer you pick has to be able to practice in the district where you file. In the Southern District of Ohio, simply having admission in the district court gets you in to the bankruptcy court as well. If they are not already admitted there, lawyers who are not in the district have to ask the court for permission to appear on each case. The paperwork itself is called a pro hac vice admission. In Latin, that means a lawyer is asking for permission to appear for this one case.

There are limits to this concept. In the Southern District of Florida, more than three of these pro hac vice requests in separate cases in a year are presumed by the court to be improper general practice in that district. Also watch out on travel expenses. Often, your lawyers and witnesses will travel to where you need them to be, and the business estate will pay for their travel.

So if your business is in Cleveland, should you limit yourself to an attorney who lives and works there? Not necessarily. What you should start with is a list of every district where your business could file. There are several things to look at for each court. What are its rules and procedures, for example? What local precedents has it set in cases like yours? What are the individual judges’ track records? And travel costs to get to a hearing? Then hire counsel who knows how those courts work, and who can practice in them.