ANALYSIS: Chapter 11 Megacases Mount as Delaware Stays Dominant

Chapter 11 megacase filings got off to a fast start in US bankruptcy courts this year, with Delaware remaining the leading venue for megacase petitions.

Companies filed megacases—defined here as voluntary Chapter 11 filings of nonindividuals with more than $50 million in assets (not counting jointly administered affiliate cases)—four times more often in first-quarter 2023 (48 cases) than in the first quarter of 2022 (12 cases), and almost twice as frequently than in the first quarter of 2021 (28 cases).

The lower total in 2022 reflected a time when companies may still have been benefiting from pandemic-related stimulus measures, corporate defaults were diminishing, and bankruptcy work was drying up. However, as 2022 progressed, inflation, rising interest rates, and supply chain issues began taking their toll—all helping drive up the megacase total for the start of 2023. And with banking crises adding to the continued economic uncertainty, it does not seem like Chapter 11 attorneys will have a hard time finding work this year.

While megacase filings are higher, the same venues are dominant.

In Q1 2023, the US Bankruptcy Court for the District of Delaware maintained its status as the leading venue, with 15 cases. The Southern District of Texas came in a relatively close second with 10 cases, followed by the Southern District of New York with six cases. No other bankruptcy court received more than two megacase filings in the first quarter of 2023.

As these jurisdictions continue to dominate large Chapter 11 bankruptcy cases, once again there are renewed bipartisan congressional efforts at bankruptcy venue reform.

A House bill reintroduced Feb. 14 would require corporate debtors to file where their principal place of business or principal assets are located, rather than in their state of incorporation. As this legislation clearly targets Delaware, it is hard to imagine that it will find support from a president who calls that state home. For now, it is unlikely that anything will dislodge Delaware from its dominant place for filing Chapter 11 megacases.

Bloomberg Law subscribers can find related content on our Bankruptcy Practice Center and Chapter 11 resources.

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