Chapter 11 Reorganization Cases and the Delaware Myth

Since the mid-1990s, there has been a spirited debate concerning the emergence of the United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court") as the virtual Chapter 11 capital for distressed debtor corporations. The "Delawarization" of corporate reorganizations under title 11 of the United States Code (the "Bankruptcy Code"), which occurred during the 1990s as a result of the migration of Chapter 11 cases of large enterprises from other venues to Delaware, has provoked a stream of academic articles debating the consequences of Delaware's emergence. Armed with statistics purporting to demonstrate a high rate of recidivism among debtors reorganized under Chapter 11 in Delaware, critics have alleged that the Delaware Bankruptcy Court hurriedly confirms nonfeasible plans of reorganization in an attempt to attract more attorneys to bring their Chapter 11 cases to that court. These critics have propagated a myth that there is something fundamentally wrong, perhaps even reckless, with the reorganization process as it is practiced by the Delaware Bankruptcy Court.