On November 22, 2021, the United States Bankruptcy Court for the Southern District of New York announced a modification to its judge-assignment scheme for “mega chapter 11 cases.” Under the new Local Bankruptcy Rule 1073-1(f), which took effect on December 1, 2021, mega chapter 11 cases will be randomly assigned among each of the district’s nine Bankruptcy judges irrespective of the courthouse in which the case is filed. A case will be considered a “mega” case if either the assets or liabilities of the debtor are at least $100 million (or in a multi-debtor case if the cumulative assets or liabilities meet the $100 million threshold). Under the old assignment rule, the case was randomly assigned among the judges sitting in a particular courthouse. The Southern District of New York has courthouses in New York City, White Plains, and Poughkeepsie.
The announcement explains that the rule change “will result in a more balanced utilization of resources,” but it may also solve a perception problem. Under the old rule, large debtors could effectively hand-pick their judge by bringing the case in Poughkeepsie or White Plains, each of which has only one judge assigned: Robert D. Drain in White Plains and Chief Judge Cecelia G. Morris in Poughkeepsie.1 There is no doubt forum shopping in bankruptcy cases is a hot topic. We recently wrote about the Bankruptcy Venue Reform Act of 2021 introduced by Senators Elizabeth Warren (D-MA) and John Cornyn (R-TX) that would curb perceived venue shopping nationwide. This rule also brings SDNY in line with two other districts handling large volumes of corporate chapter 11’s, the District of Delaware (which only has one courthouse in Wilmington DE) and the Southern District of Texas (where pursuant to General Order 2018-1, complex chapter 11 cases are assigned randomly between two judges).
The announcement by the United States Bankruptcy Court for the Southern District of New York can be found here: Modification in Assignment of Mega Chapter 11 Cases.