AG Nessel joins bipartisan push to limit where corporations can file for bankruptcy

Michigan

LANSING, Mich. (WLNS) — A letter signed by Attorney General Dana Nessel and 42 other attorneys general is pushing for corporation limits on places one is able to file for bankruptcy.

The Bankruptcy Venue Reform Act of 2021 would prevent corporations from choosing to file for bankruptcy in whichever district is believed to be more favorable.

The bill would also aim to end forum shopping.

According to the International Trademark Association, “Forum shopping refers to the practice of choosing the court or jurisdiction that has the most favorable rules or laws for the position being advocated.”

The legislation says that forum shopping does the following:

  • Prevents small businesses, employees, retirees, creditors, and other important stakeholders from fully participating in bankruptcy cases that have tremendous impacts on their lives, communities, and local economies
  • Deprives district courts of the United States of the opportunity to contribute to the development of bankruptcy law in the jurisdictions of those district courts
  • Reducing forum shopping in the bankruptcy system will strengthen the integrity of, and build public confidence and ensure fairness in, the bankruptcy system

The letter additionally discusses the Michigan company General Motors, “who used a single dealership based in Harlem to allow it to file in New York in 2009,” which falls outside it’s Detroit headquarters.

“This legislation would close a loophole that allows corporations to strategize a bankruptcy filing,” Nessel said. “These proposed bills already have bipartisan support, and I join my colleagues in urging Congress to get them across the finish line.”  

If passed, the Bankruptcy Venue Reform Act of 2021 would: 

  • Limit where businesses may file bankruptcy by ensuring that they will do so in a jurisdiction in which their “principal assets” or their “principal place of business” are located.
  • Require the parent company’s status to determine where affiliates filings will be allowed.
  • Require rules to be prescribed to allow all governmental attorneys to appear without charge and without being required to associate with local counsel. 

The coalition was led by Connecticut Attorney General William Tong, Maryland Attorney General Brian Frosh, Ohio Attorney General Dave Yost, and Texas Attorney General Ken Paxton. 

Attorneys general from both sides of the aisle joined AG Nessel in the coalition, hailing from Alaska, Arizona, Arkansas, California, Colorado, District of Columbia, Florida, Georgia, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Nevada, New Hampshire, New Mexico, New York, North Dakota, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming. 

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