Bill Summary
The Bankruptcy Venue Reform Act of 2021 is a bill that seeks to amend title 28 of the United States Code in order to make changes to the requirements for where bankruptcy cases can be filed. This bill aims to address the issue of "forum shopping," where companies file for bankruptcy in districts that may not be their home district, in order to potentially gain an advantage in the bankruptcy process. The bill includes findings that show how forum shopping can negatively impact important stakeholders such as small businesses, employees, and creditors, and aims to prevent this practice in cases filed under chapter 11 of title 11, United States Code. The bill also outlines specific requirements for where cases can be filed, taking into account the location of an individual's assets or the principal place of business for entities. It also addresses the issue of out-of-state admission for government attorneys and allows for the transfer of cases to other districts in the interest of justice or for the convenience of the parties involved. Ultimately, the purpose of this bill is to promote fairness, integrity, and public confidence in the bankruptcy system by reducing forum shopping.
Possible Impacts
1. Limiting the ability of companies to file for bankruptcy in districts outside of their home district could result in more local stakeholders, such as small businesses, employees, retirees, and creditors, being able to participate in the bankruptcy proceedings. This could have a significant impact on their lives, communities, and local economies.
2. The burden of establishing proper venue for a bankruptcy case would be placed on the entity filing for bankruptcy, which could make it more difficult for them to choose a district that is most beneficial for them.
3. The change in definition for "principal place of business" for an entity could make it more difficult for them to establish proper venue in a desired district, as they would need to provide clear and convincing evidence to support their choice.
[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 2827 Introduced in Senate (IS)]
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117th CONGRESS
1st Session
S. 2827
To amend title 28, United States Code, to modify venue requirements
relating to bankruptcy proceedings.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 23, 2021
Mr. Cornyn (for himself and Ms. Warren) introduced the following bill;
which was read twice and referred to the Committee on the Judiciary
_______________________________________________________________________
A BILL
To amend title 28, United States Code, to modify venue requirements
relating to bankruptcy proceedings.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Bankruptcy Venue Reform Act of
2021''.
SEC. 2. FINDINGS AND PURPOSE.
(a) Findings.--Congress finds that--
(1) bankruptcy law provides a number of venue options for
filing bankruptcy under chapter 11 of title 11, United States
Code, including, with respect to the entity filing bankruptcy--
(A) any district in which the place of
incorporation of the entity is located;
(B) any district in which the principal place of
business or principal assets of the entity are located;
and
(C) any district in which an affiliate of the
entity has filed a pending case under title 11, United
States Code;
(2) the wide range of permissible bankruptcy venue options
has led to an increase in companies filing for bankruptcy
outside of their home district--the district in which the
principal place of business or principal assets of the company
is located;
(3) the practice described in paragraph (2) is known as
``forum shopping'';
(4) forum shopping has resulted in a concentration of
bankruptcy cases in a limited number of districts;
(5) forum shopping--
(A) 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; and
(B) deprives district courts of the United States
and courts of appeals of the United States of the
opportunity to contribute to the development of
bankruptcy law in the jurisdictions of those district
courts; and
(6) reducing forum shopping in the bankruptcy system will
strengthen the integrity of, and build public confidence and
ensure fairness in, the bankruptcy system.
(b) Purpose.--The purpose of this Act is to prevent the practice of
forum shopping in cases filed under chapter 11 of title 11, United
States Code.
SEC. 3. VENUE OF CASES UNDER TITLE 11.
Title 28, United States Code, is amended--
(1) by striking section 1408 and inserting the following:
``Sec. 1408. Venue of cases under title 11
``(a) Principal Place of Business With Respect to Certain
Entities.--
``(1) In general.--Except as provided in paragraph (2), for
the purposes of this section, if an entity is subject to the
reporting requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)), the term
`principal place of business', with respect to the entity,
means the address of the principal executive office of the
entity as stated in the last annual report filed under that Act
before the commencement of a case under title 11 of which the
entity is the subject.
``(2) Exception.--With respect to an entity described in
paragraph (1), the definition of the `principal place of
business' under that paragraph shall apply for purposes of this
section unless another address is shown to be the principal
place of business of the entity by clear and convincing
evidence.
``(b) Venue.--Except as provided in section 1410, a case under
title 11 may be commenced only in the district court for the district--
``(1) in which the domicile, residence, or principal assets
in the United States of an individual who is the subject of the
case have been located--
``(A) for the 180 days immediately preceding such
commencement; or
``(B) for a longer portion of the 180-day period
immediately preceding such commencement than the
domicile, residence, or principal assets in the United
States of the individual were located in any other
district;
``(2) in which the principal place of business or principal
assets in the United States of an entity, other than an
individual, that is the subject of the case have been located--
``(A) for the 180 days immediately preceding such
commencement; or
``(B) for a longer portion of the 180-day period
immediately preceding such commencement than the
principal place of business or principal assets in the
United States of the entity were located in any other
district; or
``(3) in which there is pending a case under title 11
concerning an affiliate that directly or indirectly owns,
controls, or holds 50 percent or more of the outstanding voting
securities of, or is the general partner of, the entity that is
the subject of the later filed case, but only if the pending
case was properly filed in that district in accordance with
this section.
``(c) Limitations.--
``(1) In general.--For the purposes of paragraphs (2) and
(3) of subsection (b), no effect shall be given to a change in
the ownership or control of an entity that is the subject of
the case, or of an affiliate of the entity, or to a transfer of
the principal place of business or principal assets in the
United States, or to the merger, dissolution, spinoff, or
divisive merger of an entity that is the subject of the case,
or of an affiliate of the entity, to another district, that
takes place--
``(A) within 1 year before the date on which the
case is commenced; or
``(B) for the purpose, in whole or in part, of
establishing venue.
``(2) Principal assets.--
``(A) Principal assets of an entity other than an
individual.--For the purposes of subsection (b)(2) and
paragraph (1) of this subsection--
``(i) the term `principal assets' does not
include cash or cash equivalents; and
``(ii) any equity interest in an affiliate
is located in the district in which the holder
of the equity interest has its principal place
of business in the United States, as determined
in accordance with subsection (b)(2).
``(B) Equity interests of individuals.--For the
purposes of subsection (b)(1), if the holder of any
equity interest in an affiliate is an individual, the
equity interest is located in the district in which the
domicile or residence in the United States of the
holder of the equity interest is located, as determined
in accordance with subsection (b)(1).
``(d) Burden.--On any objection to, or request to change, venue
under paragraph (2) or (3) of subsection (b) of a case under title 11,
the entity that commences the case shall bear the burden of
establishing by clear and convincing evidence that venue is proper
under this section.
``(e) Out-of-State Admission for Government Attorneys.--The Supreme
Court shall prescribe rules, in accordance with section 2075, for cases
or proceedings arising under title 11, or arising in or related to
cases under title 11, to allow any attorney representing a governmental
unit to be permitted to appear on behalf of the governmental unit and
intervene without charge, and without meeting any requirement under any
local court rule relating to attorney appearances or the use of local
counsel, before any bankruptcy court, district court, or bankruptcy
appellate panel.''; and
(2) by striking section 1412 and inserting the following:
``Sec. 1412. Change of venue
``(a) In General.--Notwithstanding that a case or proceeding under
title 11, or arising in or related to a case under title 11, is filed
in the correct division or district, a district court may transfer the
case or proceeding to a district court for another district or
division--
``(1) in the interest of justice; or
``(2) for the convenience of the parties.
``(b) Incorrectly Filed Cases or Proceedings.--If a case or
proceeding under title 11, or arising in or related to a case under
title 11, is filed in a division or district that is improper under
section 1408(b), the district court shall--
``(1) immediately dismiss the case or proceeding; or
``(2) if it is in the interest of justice, immediately
transfer the case or proceeding to any district court for any
district or division in which the case or proceeding could have
been brought.
``(c) Objections and Requests Relating to Changes in Venue.--Not
later than 14 days after the filing of an objection to, or a request to
change, venue of a case or proceeding under title 11, or arising in or
related to a case under title 11, the court shall enter an order
granting or denying the objection or request.''.
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