Bankruptcy Court competition for big business reorganization cases

This Atlanta Jounal Constitution article discusses an issue that UCLA law professor Lynn LoPucki characterizes as a “race to the bottom” — i.e., bankruptcy courts in certain jurisdictions bending federal bankruptcy law to market themselves to debtors’ lawyers who often are instrumental in choosing the venue of big business reorganization cases. The cost attributable to this “race to the bottom” is considerable because the two main bankruptcy venues — Delaware and the New York City — commonly approve professional fees in big reorganization cases that are at the highest level of the profession. In comparison, the high hourly rates being charged and routinely approved in the Enron reorganization case in New York would likely not have been approved if the case had been filed in Houston where Enron is based and which is a far more convenient venue for the vast majority of Enron creditors.

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