The New York Times ran a piece Monday
postulating on efforts by the Detroit courts to compel troubled automakers General Motors Corp. (NYSE:GM) and Chrysler LLC to file Chapter 11 in Detroit, if they should need to take such action.
The city's bankruptcy judges have adopted a rule allowing the chief bankruptcy judge to pick who will oversee a giant corporate filing, rather than leaving the selection to chance. Removing the randomness of judge assignment may appease carmaker attorneys. The NYT did a good job breaking down, among other things, the challenges facing Detroit's infrastructure should it play host to a GM or Chrysler filing.
"The federal bankruptcy court is housed in a 27-story office building
at 211 West Fort Street, across from the federal courthouse that also
is home to a branch of the federal Sixth Circuit Court of Appeals," the NYT reported. "The courtrooms have adjacent work rooms for
use by lawyers -- but probably not enough to handle the hordes that
would want them for the nation's largest bankruptcy filing."
Last December, The Deal speculated on what a
GM bankruptcy might look like. We predicted then that a Detroit filing was the best way to go:
"GM isn't
going to pull an Enron Corp. and make its petition hundreds of miles
away in New York (too expensive) or Delaware (the appellate court isn't
kind to the idea of abrogating collective bargaining agreements).
Michigan's sitting jurists may not have the sophistication of their
Wilmington or Manhattan counterparts regarding big bankruptcies, but
they're hardly slouches. Parts makers Collins & Aikman Corp., Cadence Innovation LLC and Intermet Corp. all filed in Detroit, and silicone implant maker Dow Corning Corp. chose Bay City, about 115 miles away on Saginaw Bay.
"The sheer size of a GM proceeding mandates that other high-profile
cases not overwhelm a court. Many of GM's suppliers are nearby, as is
the United Auto Workers' headquarters. These are the kinds of reasons
why United Air Lines Inc. parent UAL Corp. chose to file in Chicago, says Deborah L. Thorne of Barnes & Thornburg LLP.
"Another factor: Delaware isn't a particularly friendly place to
break union contracts. "The standard for doing that in the 3rd Circuit
[Delaware, New Jersey and Pennsylvania] is hard to accomplish," says
David Stratton of Pepper Hamilton LLP."
For more details, check out
GM in bankruptcy.
- Tom Groppe
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As I explain in this post ( http://www.ohiopracticalbusinesslaw.com/2009/04/articles/bankruptcy/why-gm-will-or-at-least-should-file-bankruptcy-in-michigan/) on my Ohio Practical Business Law blog entitled "Why GM Will -- or at Least Should -- File Bankruptcy in Michigan" of the three available choice, i.e. New York, Delaware, and Michigan, Michigan makes the most sense if GM really does want a shorter bankruptcy. The connection to New York is tenuous at best,narrowing the real choice to Delaware or Michigan. While Delaware may well have judges with more experience in mega-cases, filing anywhere but Michigan will undoubtedly result in efforts to move the case back to Michigan. That would bring everything to a screeching halt while that is decided.