Five household name companies file for bankruptcy in one state in strategic move (2024)

FIVE well-known companies have filed for bankruptcy in a strategic move thanks to a little-known law.

and David's Bridal filed Chapter 11 protection in Newark and Trenton, New Jersey last month.

Just a week ago, a former chemical maker affiliated with Berkshire Hathaway did the same, as did BlockFi, a Jersey City-based company along with several other retailers during the pandemic.

However, one of the most well-known cases is legal battle over talc lawsuits in Trenton.

The company placed its LTL Management LLC unit into bankruptcy in April to settle 40,000 lawsuits.

“There’s always a lot of talk of ‘how do we get cases to New Jersey,’” Sydney Darling, a restructuring attorney with Trenk Isabel Siddiqi & Shahdanian PC, told Bloomberg.

Darling said there's been a “concerted effort by the bar to highlight our jurisdiction.”

New Jersey has become a hotspot for bankruptcy filings, coming after several judges retired from courts in Manhattan and Delaware in recent years and taking their long track records with them.

Four out of the eight bankruptcy judges in Manhattan were appointed in 2021 or sooner.

Meanwhile, in Delaware, three of the eight presiding bankruptcy judges were appointed to the bench in the last two years, including Judge Thomas Horan, who was sworn in earlier this year.

David's Bridal chose New Jersey for its second Chapter 11 filing in five years, skipping out on Delaware.

Jim Marcum, the CEO, called it a natural choice due to the proximity of the retailer's headquarters in a Philadelphia suburb.

The company also has several store locations and one of its distribution centers within the state.

“After a lot of consideration, we just like the venue,” said Marcum. “It worked out well.”

Other companies began to pop up in bankruptcy courtrooms in New Jersey during the Covid-19 pandemic.

L'Occitane, Modell's Sporting Goods, and Sur La Table all filed in the state - however, Sur La Table's headquarters is located thousands of miles away in Seattle.

“If I had my way, every New Jersey-based company would file in the state,” said Michael Sirota an attorney with Cole Schotz, a co-counsel to Bed Bath & Beyond with Kirkland & Ellis.

There is no financial incentive for the judges to get big-name bankruptcy cases in the state, however, for the lawyers, a bigger name means more business.

Kirkland & Ellis is one of the most well-known insolvency firms in the country and has teamed up with Col Schotz on several recent cases.

“When the Kirkland team evaluates venue, they’re very surgical about it,” said Sirota.

“When people experience the New Jersey bench that haven’t before, they think that it’s just as good, if not better, than any jurisdiction in the country.”

According to bankruptcy law, a company doesn't have to file in the same state where its headquarters is located.

In the past, many companies have chosen to file in Delaware and New York, two states that have experience handling large cases like this.

But in recent times, many companies have gravitated to Houston, where Chapter 11 cases are typically assigned to only two judges.

Knowing the judge who will provide over a company's bankruptcy case will give an attorney an edge.

“You’re picking a court for the judges,” said Robert Lawless, a law professor at the University of Illinois.

It’s not only knowing which way judges will lean. But also, a level of comfort with how the judge is likely to rule, and how they’re likely to conduct the proceedings.”

Lawyers want to make sure that a judge won't “strike out on a wild new way to approach” a case, Lawless said.

Big companies have been called out for supposedly gaming the system by filing for bankruptcy in order to get more favorable judges.

Senators Elizabeth Warren and John Cornyn introduced bipartisan bills in 2018 to ban corporations from "venue shipping," however the legislation hasn't gotten much support in Congress.