Bankruptcy Venue Reform Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 4421 To amend title 28, United States Code, to modify venue requirements relating to bankruptcy proceedings. IN THE HOUSE OF REPRESENTATIVES SEPTEMBER 19, 2019 Ms. LOFGREN (for herself, Mr. SENSENBRENNER, Mr. CRIST, and Mr. STEUBE) introduced the following bill; which was referred to the Com- mittee on the Judiciary A BILL To amend title 28, United States Code, to modify venue requirements relating to bankruptcy proceedings. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Bankruptcy Venue Re- 4 form Act of 2019’’. 5 SEC. 2. FINDINGS AND PURPOSE. 6 (a) FINDINGS.—Congress finds that— 7 (1) bankruptcy law provides a number of venue 8 options for filing bankruptcy under chapter 11 of 9 VerDate Sep 11 2014 20:32 Sep 23, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4421.IH H4421 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 4421 IH title 11, United States Code, including, with respect 1 to the entity filing bankruptcy— 2 (A) any district in which the place of in- 3 corporation of the entity is located; 4 (B) any district in which the principal 5 place of business or principal assets of the enti- 6 ty are located; and 7 (C) any district in which an affiliate of the 8 entity has filed a pending case under title 11, 9 United States Code; 10 (2) the wide range of permissible bankruptcy 11 venue options has led to an increase in companies 12 filing for bankruptcy outside of their home States— 13 the district in which the principal place of business 14 or principal assets of the company is located; 15 (3) the practice described in paragraph (2) is 16 known as ‘‘forum shopping’’; 17 (4) forum shopping has resulted in a concentra- 18 tion of bankruptcy cases in a limited number of dis- 19 tricts; 20 (5) forum shopping— 21 (A) prevents small businesses, employees, 22 retirees, creditors, and other important stake- 23 holders from fully participating in bankruptcy 24 VerDate Sep 11 2014 20:32 Sep 23, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4421.IH H4421 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 4421 IH cases that have tremendous impacts on their 1 lives, communities, and local economies; and 2 (B) deprives district courts of the United 3 States of the opportunity to contribute to the 4 development of bankruptcy law in the jurisdic- 5 tions of those district courts; and 6 (6) reducing forum shopping in the bankruptcy 7 system will strengthen the integrity of, and build 8 public confidence and ensure fairness in, the bank- 9 ruptcy system. 10 (b) PURPOSE.—The purpose of this Act is to prevent 11 the practice of forum shopping in cases filed under chapter 12 11 of title 11, United States Code. 13 SEC. 3. VENUE OF CASES UNDER TITLE 11. 14 Title 28, United States Code, is amended— 15 (1) by striking section 1408 and inserting the 16 following: 17 ‘‘§ 1408. Venue of cases under title 11 18 ‘‘(a) PRINCIPAL PLACE OF BUSINESS WITH RE- 19 SPECT TO CERTAIN ENTITIES.— 20 ‘‘(1) IN GENERAL.—Except as provided in para- 21 graph (2), for the purposes of this section, if an en- 22 tity is subject to the reporting requirements of sec- 23 tion 13 or 15(d) of the Securities Exchange Act of 24 1934 (15 U.S.C. 78m, 78o(d)), the term ‘principal 25 VerDate Sep 11 2014 20:32 Sep 23, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4421.IH H4421 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 4421 IH place of business’, with respect to the entity, means 1 the address of the principal executive office of the 2 entity as stated in the last annual report filed under 3 that Act before the commencement of a case under 4 title 11 of which the entity is the subject. 5 ‘‘(2) EXCEPTION.—With respect to an entity 6 described in paragraph (1), the definition of the 7 ‘principal place of business’ under that paragraph 8 shall apply for purposes of this section unless an- 9 other address is shown to be the principal place of 10 business of the entity by clear and convincing evi- 11 dence. 12 ‘‘(b) VENUE.—Except as provided in section 1410, 13 a case under title 11 may be commenced only in the dis- 14 trict court for the district— 15 ‘‘(1) in which the domicile, residence, or prin- 16 cipal assets in the United States of an individual 17 who is the subject of the case have been located— 18 ‘‘(A) for the 180 days immediately pre- 19 ceding such commencement; or 20 ‘‘(B) for a longer portion of the 180-day 21 period immediately preceding such commence- 22 ment than the domicile, residence, or principal 23 assets in the United States of the individual 24 were located in any other district; 25 VerDate Sep 11 2014 20:32 Sep 23, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4421.IH H4421 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 4421 IH ‘‘(2) in which the principal place of business or 1 principal assets in the United States of an entity, 2 other than an individual, that is the subject of the 3 case have been located— 4 ‘‘(A) for the 180 days immediately pre- 5 ceding such commencement; or 6 ‘‘(B) for a longer portion of the 180-day 7 period immediately preceding such commence- 8 ment than the principal place of business or 9 principal assets in the United States of the en- 10 tity were located in any other district; or 11 ‘‘(3) in which there is pending a case under 12 title 11 concerning an affiliate that directly or indi- 13 rectly owns, controls, or holds 50 percent or more of 14 the outstanding voting securities of, or is the general 15 partner of, the entity that is the subject of the later 16 filed case, but only if the pending case was properly 17 filed in that district in accordance with this section. 18 ‘‘(c) LIMITATIONS.— 19 ‘‘(1) IN GENERAL.—For the purposes of para- 20 graphs (2) and (3) of subsection (b), no effect shall 21 be given to a change in the ownership or control of 22 an entity that is the subject of the case, or of an af- 23 filiate of the entity, or to a transfer of the principal 24 place of business or principal assets in the United 25 VerDate Sep 11 2014 20:32 Sep 23, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4421.IH H4421 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 4421 IH States of an entity that is the subject of the case, 1 or of an affiliate of the person entity, to another dis- 2 trict, that takes place— 3 ‘‘(A) within 1 year before the date on 4 which the case is commenced; or 5 ‘‘(B) for the purpose of establishing venue. 6 ‘‘(2) PRINCIPAL ASSETS.— 7 ‘‘(A) PRINCIPAL ASSETS OF AN ENTITY 8 OTHER THAN AN INDIVIDUAL.—For the pur- 9 poses of subsection (b)(2) and paragraph (1) of 10 this subsection— 11 ‘‘(i) the term ‘principal assets’ does 12 not include cash or cash equivalents; and 13 ‘‘(ii) any equity interest in an affiliate 14 is located in the district in which the hold- 15 er of the equity interest has its principal 16 place of business in the United States, as 17 determined in accordance with subsection 18 (b)(2). 19 ‘‘(B) EQUITY INTERESTS OF INDIVID- 20 UALS.—For the purposes of subsection (b)(1), 21 if the holder of any equity interest in an affil- 22 iate is an individual, the equity interest is lo- 23 cated in the district in which the domicile or 24 residence in the United States of the holder of 25 VerDate Sep 11 2014 20:32 Sep 23, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4421.IH H4421 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 4421 IH the equity interest is located, as determined in 1 accordance with subsection (b)(1). 2 ‘‘(d) BURDEN.—On any objection to, or request to 3 change, venue under paragraph (2) or (3) of subsection 4 (b) of a case under title 11, the entity that commences 5 the case shall bear the burden of establishing by clear and 6 convincing evidence that venue is proper under this sec- 7 tion. 8 ‘‘(e) OUT-OF-STATE ADMISSION FOR GOVERNMENT 9 ATTORNEYS.—The Supreme Court shall prescribe rules, 10 in accordance with section 2075, for cases or proceedings 11 arising under title 11, or arising in or related to cases 12 under title 11, to allow any attorney representing a gov- 13 ernmental unit to be permitted to appear on behalf of the 14 governmental unit and intervene without charge, and with- 15 out meeting any requirement under any local court rule 16 relating to attorney appearances or the use of local coun- 17 sel, before any bankruptcy court, district court, or bank- 18 ruptcy appellate panel.’’; and 19 (2) by striking section 1412 and inserting the 20 following: 21 ‘‘§ 1412. Change of venue 22 ‘‘(a) IN GENERAL.—Notwithstanding that a case or 23 proceeding under title 11, or arising in or related to a case 24 under title 11, is filed in the correct division or district, 25 VerDate Sep 11 2014 20:32 Sep 23, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4421.IH H4421 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 4421 IH a district court may transfer the case or proceeding to a 1 district court for another district or division— 2 ‘‘(1) in the interest of justice; or 3 ‘‘(2) for the convenience of the parties. 4 ‘‘(b) INCORRECTLY FILED CASES OR PRO- 5 CEEDINGS.—If a case or proceeding under title 11, or aris- 6 ing in or related to a case under title 11, is filed in a 7 division or district that is improper under section 1408(b), 8 the district court shall— 9 ‘‘(1) immediately dismiss the case or pro- 10 ceeding; or 11 ‘‘(2) if it is in the interest of justice, imme- 12 diately transfer the case or proceeding to any dis- 13 trict court for any district or division in which the 14 case or proceeding could have been brought. 15 ‘‘(c) OBJECTIONS AND REQUESTS RELATING TO 16 CHANGES IN VENUE.—Not later than 14 days after the 17 filing of an objection to, or a request to change, venue 18 of a case or proceeding under title 11, or arising in or 19 related to a case under title 11, the court shall enter an 20 order granting or denying the objection or request.’’. 21 Æ VerDate Sep 11 2014 20:32 Sep 23, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\H4421.IH H4421 pamtmann on DSKBC07HB2PROD with BILLS