Vanderbilt Law Review

First Page



Bankruptcy is back. The use of Chapter 11 by large, publicly held firms was a subject of much debate in the academic and popular press in the late 1980s and the early 1990s. Firms such as Texaco, Revco, LTV, Federated Department Stores, Maxwell Communications, TWA, and Eastern Airlines all filed for bankruptcy during that time. The economic boom of the mid- and late 1990s, however, resulted in a relative dearth of high-profile bankruptcy cases. The recent economic downturn has moved corporate reorganizations back into the spotlight. The Chapter 11 filings by firms such as Enron, Global Crossing, the Loewen Group, US Airways, United Airlines, and WorldCom have focused attention once again on Chapter 11. Yet today's bankruptcy practice has changed notably since our last wave of major bankruptcies. The most visible change in the reorganization of large, publicly held companies in the past fifteen years has been the rise of the Delaware bankruptcy court. As of 1990, a firm looking to reorganize under Chapter 11 would most likely file its bankruptcy petition in the Southern District of New York. Today, such firms look first and foremost to Delaware, Indeed, other courts are changing their practices to mirror those of Delaware. This switch in the lead venue of reorganization practice raises two sets of questions. The first set of questions focuses directly on this trend. Delaware's prominence in corporate law has spawned a decades-old debate over why firms choose Delaware and whether the forces that drive firms to Delaware create a body of corporate law that advances or impedes societal interests. The rise of the Delaware bankruptcy court raises similar inquiries. In short, we need to explore why firms now choose to file for reorganization in Delaware, and whether the switch to Delaware is one that should be applauded or condemned.