Delaware Democrat Takes Over Senate Bankruptcy Panel

A U.S. Senator from Delaware, home to courts that specialize in business cases, took over the panel overseeing the bankruptcy system, making it harder for critics to weaken the state’s influence on corporate reorganizations.

Chris Coons today became chairman of the Senate Judiciary Subcommittee on Bankruptcy and the Courts after a vote by the Judiciary Committee, replacing fellow Democrat Amy Klobuchar of Minnesota. The subcommittee also oversees new judgeships, court administration and legal reform.

“For those who like Delaware as a bankruptcy venue, this is a good development,” said Samuel J. Gerdano, executive director of the American Bankruptcy Institute, a professional organization representing lawyers and others in the restructuring field.

Delaware and New York dominate large corporate bankruptcies, according to a database compiled by University of California, Los Angeles, Professor Lynn M. LoPucki. The latest effort to loosen their influence came in 2011, when lawmakers from Texas and Michigan tried to change the rules about where companies can file bankruptcy.

Coons defended Delaware’s position, saying the judges and attorneys in his state have expertise that can speed corporations through bankruptcy and “preserve jobs where possible.”

“In jurisdictions that don’t have the same capacity, in terms of experience on the bench and the strength of bankruptcy bar, it can, at times, be difficult,” Coons said in an interview today.

Fifth Judge

A subcommittee of the Judicial Conference of the U.S. this month recommended adding a fifth judge to Delaware’s federal district court to handle an increase in the number of patent cases filed in the state. The U.S. Bankruptcy Court in Delaware has six judges.

Coons said it will be difficult to get the additional judge approved by Congress.

“There are strong opponents to adding any new judges anywhere in the country,” he said.

The Senate should concentrate on approving nominations for vacant federal judgeships that are funded, Coons said. Senate confirmation is required to fill a post, and there are 85 judicial vacancies and 33 nominees awaiting approval.

Any company incorporated in Delaware can file for bankruptcy there, or wherever it has its headquarters or operations. Representative Lamar Smith, the Texas Republican who chairs the House judiciary panel, and Michigan’s John Conyers, its ranking Democrat, have proposed forcing companies to file in their home states.

Many lawyers outside of Delaware and New York support efforts to curb filings in the states, Gerdano said.