- Bill calls on corporations and the wealthy to file for bankruptcy in their home state
- Warren aims to prevent favorable judges from ‘picking things’
- Cornyn says bill will close ‘loophole’ in bankruptcy law
(Reuters) – Senators Elizabeth Warren, a Democrat from Massachusetts, and John Cornyn, a Republican from Texas, on Thursday introduced a bill to tackle large corporations that file for bankruptcy before judges they say will be favorable to their interests.
Under the Bankruptcy Sites Reform Act, 2021, large corporations and high net worth individuals would be required to file bankruptcy in their home state or where their most important assets are located. A version of the bill was introduced in the United States House of Representatives in June by Representative Zoe Lofgren, a Democrat from California, and Representative Ken Buck, a Republican from Colorado, and garnered bipartisan support, with four Democrats and three Republicans. sign as co-sponsors.
The location issue has gained attention in recent months in the Chapter 11 case of OxyContin maker Purdue Pharma, which filed for bankruptcy in White Plains, New York, despite being headquartered in Stamford, Connecticut. .
“Rich corporations should not be able to travel the country to find a favorable court to file for bankruptcy. As they manipulate the system to file for bankruptcy wherever they see fit, affected communities – like workers, creditors and consumers – lose, ”Warren said. in a report.
The bill “would prevent big business from sorting out the courts they say will rule in their favor and crack down on this corporate abuse of our country’s bankruptcy laws,” she added.
Bankruptcy law currently allows businesses to file in districts where they are incorporated or where affiliates are located. This leads many large Chapter 11 companies to be filed in Delaware, New York or Texas, where judges are used to overseeing complex business bankruptcies.
Cornyn called the proposal a “two-party, common-sense solution to closing this loophole.”
The Commercial Law League of America said in a statement Thursday that the bill “would tackle the forum on the run and judge purchases.”
The legislation follows another bill introduced by Warren this year that seeks to block litigation protections for owners or insiders of bankrupt businesses.
Critics of Purdue and members of the Sackler family who owned the maker of OxyContin accused them of filing the case in White Plains to ensure it would be overseen by a judge who they said would approve the lawsuits. legal protections against future opioid litigation for the Sacklers, even if they are not bankrupt themselves.
US bankruptcy judge Robert Drain, who recently said he didn’t feel “manipulated” in the Purdue case, ultimately approved these protections for the Sacklers. His decision is under appeal by the bankruptcy watchdog of the US Department of Justice and the states of Connecticut, Washington and Maryland, as well as Washington, DC.
The Sacklers have long denied wrongdoing over allegations they helped fuel the national opioid crisis by pushing sales of OxyContin.
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