Why Every Mega Bankruptcy Happens in Delaware or Texas: The Data Behind Forum Shopping
A company headquartered in Los Angeles, with factories in Ohio, customers across the country, and 50,000 employees, can file for bankruptcy in Wilmington, Delaware — a city of 70,000 people — simply because it incorporated there. This is not a legal anomaly or an oversight. It is the deliberate result of a quirk in U.S. bankruptcy venue rules that has created an extraordinary concentration of corporate power in a handful of courtrooms, where a small number of judges, law firms, and restructuring advisors handle the vast majority of billion-dollar cases.
The data is striking. According to Cornerstone Research, the District of Delaware accounts for approximately 40% of all large corporate bankruptcies, and the Southern District of Texas (Houston) accounts for approximately 24%. [^1] Together, these two venues handle nearly two-thirds of all large corporate Chapter 11 cases in the United States — a concentration that has profound implications for the fairness, efficiency, and geographic equity of the bankruptcy system.
This article uses data from Cornerstone Research, the CLLA Bankruptcy Venue Reform Primer, the Harvard Bankruptcy Roundtable, and the SEC's Public Company Bankruptcy Cases Opened and Monitored dataset to explain how forum shopping works, why it matters, and what the data reveals about the concentration of bankruptcy power in America.
The Wilmington Paradox
Wilmington, Delaware is a city of approximately 70,000 people. It has no particular connection to most of the companies that file for bankruptcy in its federal courthouse. Red Lobster, headquartered in Orlando, Florida, did not file in Wilmington — it filed in Tampa, one of the rare cases where a company filed "at home." But Toys "R" Us, headquartered in Wayne, New Jersey, filed in the Eastern District of Virginia. Sears Holdings, headquartered in Hoffman Estates, Illinois, filed in the Southern District of New York. Nortel Networks, headquartered in Ontario, Canada, filed in the District of Delaware.
The pattern is not random. It reflects a deliberate strategy by debtors and their legal advisors to select the venue that they believe will be most favorable to their reorganization objectives. This practice — known as "forum shopping" or "venue shopping" — is legal, widespread, and deeply controversial.
The legal mechanism that enables forum shopping is straightforward. Under the U.S. Bankruptcy Code, a company may file for bankruptcy in any district where it is incorporated, has its principal place of business, has its principal assets, or has an affiliate that has already filed. The "affiliate" provision is particularly significant: it allows a company to establish a legal presence in its preferred venue by creating a subsidiary or affiliate that is incorporated there, then using that affiliate's filing to anchor the parent company's case in the same court.
How Forum Shopping Works
The mechanics of venue selection in large corporate bankruptcies have been extensively studied by legal academics and practitioners. The following key data points establish the scale of the phenomenon:
| Data Point | Statistic | Source |
|---|---|---|
| Top venues (2024-2025) | Delaware: 40% of large corporate bankruptcies; S.D. Texas: 24% | Cornerstone Research, Sep 2025 |
| Out-of-state filing rate | ~70% of large public companies file in a venue outside their principal place of business | CLLA Bankruptcy Venue Reform Primer, 2023 |
| Forum shopping prevalence | 23% of large firms "forum shop" to a venue where they have no operations | Antill et al., 2024 (Harvard Bankruptcy Roundtable) |
| Judge concentration | 55% of large public company Chapter 11 cases are heard before a handful of judges | Levitin, Illinois Law Review, 2022 |
| Law firm dominance | Kirkland & Ellis represents debtors in approximately 20-40% of major corporate bankruptcies | Daily Journal / Transacted.io, 2024 |
| Texas rise | S.D. Texas became the 3rd most common venue for the first time since 2012 | Cornerstone Research, Sep 2025 |
Sources: Cornerstone Research; CLLA; Harvard Bankruptcy Roundtable; Daily Journal.
The 70% out-of-state filing rate is perhaps the most striking figure. It means that the overwhelming majority of large public company bankruptcies are filed in a venue that is not the company's home state — a state where the company's employees, suppliers, and community stakeholders have no particular connection to the court. The decision about which court will oversee the reorganization, which judge will make critical decisions about asset sales and plan confirmation, and which local professionals will be appointed as trustees and examiners is made by the debtor's legal advisors, not by any neutral allocation mechanism.
The "Affiliate" Loophole
The affiliate provision of the bankruptcy venue rules is the primary mechanism through which companies establish a legal presence in their preferred venue. A company that wishes to file in Delaware but has no operations there can create a Delaware-incorporated subsidiary, file that subsidiary's bankruptcy case in Delaware, and then use the subsidiary's filing as the anchor for the parent company's case.
This practice is so common that it has become a standard element of pre-bankruptcy planning. Law firms that specialize in large corporate restructurings routinely advise clients on venue selection months or years before a bankruptcy filing, and the creation of a Delaware or Texas affiliate for venue purposes is a recognized element of the restructuring playbook.
The Data: Delaware's Dominance and Texas's Rise
The geographic concentration of large corporate bankruptcies has evolved significantly over the past two decades. The following table, constructed from Cornerstone Research and ABI historical data, shows the approximate venue market share of large corporate bankruptcies (assets >$100 million) across key years:
| Year | Delaware | S.D.N.Y. | S.D. Texas | N.D. Texas | D. New Jersey | All Other |
|---|---|---|---|---|---|---|
| 2005 | 38% | 22% | 2% | 1% | 8% | 29% |
| 2009 | 36% | 28% | 4% | 2% | 7% | 23% |
| 2011 | 35% | 25% | 5% | 2% | 8% | 25% |
| 2015 | 40% | 15% | 10% | 4% | 10% | 21% |
| 2019 | 38% | 12% | 18% | 5% | 10% | 17% |
| 2023 | 41% | 10% | 22% | 7% | 8% | 12% |
| 2025 (H1) | 36% | 8% | 24% | 8% | 7% | 17% |
Note: Figures are approximate, derived from Cornerstone Research and ABI reports. Source: Cornerstone Research Midyear 2025 Update; ABI / Epiq Global historical data.
The data reveals two major trends. First, Delaware has maintained its dominant position throughout the period, consistently accounting for 35-41% of large corporate filings. Second, the Southern District of Texas has risen dramatically — from a 2% share in 2005 to a 24% share in 2025, making it the second-largest venue for large corporate bankruptcies and surpassing the Southern District of New York for the first time.
The Historical Lens: The SEC's 2009-2011 Watchlist
The SEC's Public Company Bankruptcy Cases Opened and Monitored dataset provides a valuable historical baseline for understanding the geographic concentration of large corporate bankruptcies. The dataset covers the period 2009-2011 — the most intense phase of the post-financial-crisis bankruptcy wave — and maps each monitored case to the federal judicial district where it was filed. [^2]
The dominant districts in the 2009-2011 era were the Southern District of New York and the District of Delaware, reflecting the venue preferences of that era. The largest cases — CIT Group ($71 billion), General Growth Properties ($29.6 billion), MF Global ($40.5 billion), and AMR Corporation ($25 billion) — all filed in SDNY. Nortel Networks ($11.6 billion), Smurfit-Stone Container ($7.9 billion), and Palm Inc. ($1.1 billion) filed in Delaware.
The concentration in SDNY during the 2009-2011 period reflected the dominance of New York-based law firms and the preference of financial sector companies for the Manhattan courthouse. The subsequent rise of Texas reflects a deliberate strategy by major restructuring law firms — particularly Kirkland & Ellis — to build a presence in the Houston bankruptcy court and attract large cases to that venue.
The Law Firm Factor: Who Controls the Courtroom?
The concentration of large corporate bankruptcies in Delaware and Texas is inseparable from the concentration of large corporate bankruptcy work in a small number of law firms. Kirkland & Ellis, the world's largest law firm by revenue, represents debtors in approximately 20-40% of major corporate bankruptcies — a market share that would be considered a monopoly in almost any other industry. [^3]
The relationship between law firm concentration and venue concentration is bidirectional. Large law firms prefer to file cases in venues where they have established relationships with judges, local counsel, and restructuring professionals. Their preference for specific venues reinforces those venues' dominance, which in turn attracts more large cases and further entrenches the concentration.
Critics argue that this concentration creates systemic risks. When a small number of judges handle the vast majority of large corporate bankruptcies, the development of bankruptcy law becomes dependent on the preferences and interpretations of a handful of individuals. When a small number of law firms dominate the market, the competitive dynamics that normally discipline professional fees and quality of representation are weakened.
The Texas Scandal: When Judge Shopping Goes Wrong
The rapid rise of the Southern District of Texas as a preferred venue for large corporate bankruptcies was closely associated with a specific judge: David R. Jones, who presided over the Houston bankruptcy court's complex case panel. Judge Jones developed a reputation for efficient case management and debtor-friendly rulings that attracted major law firms and their clients.
In October 2023, Judge Jones resigned from the bench after revelations that he had a romantic relationship with Elizabeth Freeman, a restructuring attorney who regularly appeared before him in bankruptcy cases. The relationship, which had not been disclosed to the parties in those cases, raised serious questions about the integrity of the proceedings over which he had presided.
The Judge Jones scandal is a cautionary tale about the risks of venue concentration. When a single judge handles a disproportionate share of large corporate bankruptcies, the integrity of the entire system becomes dependent on that judge's conduct. The concentration of cases before a small number of judges — documented by Levitin's research showing that 55% of large public company Chapter 11 cases are heard before a handful of judges — creates structural vulnerability to exactly this kind of problem.
The scandal also illustrates the broader concern about the relationship between the bankruptcy bar and the judiciary. In a system where the same law firms, the same judges, and the same restructuring professionals interact repeatedly across hundreds of cases, the boundaries between professional relationships and improper influence can become blurred.
The Purdue Pharma Venue Gambit
The Purdue Pharma bankruptcy, discussed in depth in our companion article on the opioid crisis, provides a particularly striking example of strategic venue selection. Purdue filed for Chapter 11 in the Southern District of New York — specifically in the White Plains courthouse — despite being headquartered in Stamford, Connecticut.
The venue choice was not accidental. Purdue and its legal advisors selected SDNY because of the court's history of approving complex reorganization plans, including plans that included broad third-party releases. The White Plains courthouse, which handles cases from the northern suburbs of New York City, had a track record of approving ambitious reorganization structures.
The Supreme Court's ultimate rejection of the nonconsensual third-party release in Harrington v. Purdue Pharma — discussed in detail in our article on the Purdue case — demonstrated the limits of venue selection as a strategy for achieving outcomes that exceed the boundaries of the Bankruptcy Code. But the case also illustrates how venue selection can be used to seek favorable outcomes that might not be available in other courts.
The Push for Reform: Can Congress Fix Forum Shopping?
The concentration of large corporate bankruptcies in Delaware and Texas has attracted sustained legislative attention. The Bankruptcy Venue Reform Act, introduced in multiple Congresses, would restrict venue selection to the debtor's principal place of business or the state where the debtor is incorporated — eliminating the affiliate loophole and requiring companies to file in their home states.
The CLLA Bankruptcy Venue Reform Primer, published in 2023, provides a comprehensive analysis of the reform proposals and their likely effects. [^4] Proponents argue that venue reform would distribute large corporate bankruptcies more equitably across the country, reduce the concentration of power in a small number of courts and law firms, and improve outcomes for local creditors, employees, and communities. Opponents argue that the current system's efficiency and expertise benefits all parties and that venue reform would increase costs and uncertainty.
The reform debate reflects a fundamental tension in the bankruptcy system between efficiency and equity. The concentration of large corporate cases in specialized courts with experienced judges and practitioners does produce certain efficiencies. But those efficiencies come at the cost of geographic equity and the concentration of power in a small number of actors who are not accountable to the communities most affected by large corporate failures.
As the mega bankruptcy surge of 2024-2025 continues, the question of where these cases are decided — and by whom — has never been more consequential.
If you are a creditor, employee, or community stakeholder affected by a large corporate bankruptcy, the attorneys in our directory can help you understand your rights. Find a bankruptcy attorney in your state or learn more about creditor rights in bankruptcy.
For related data journalism, see our analysis of the Purdue Pharma bankruptcy and venue strategy, the mega bankruptcy surge of 2024-2025, investor protection in public company bankruptcies, and the retail apocalypse and private equity debt.
References
[^1]: Cornerstone Research. "Trends in Large Corporate Bankruptcy and Financial Distress: Midyear 2025 Update." September 2025. https://www.cornerstone.com/insights/reports/trends-in-large-corporate-bankruptcy-and-financial-distress-midyear-2025-update/
[^2]: SEC Public Company Bankruptcy Cases Opened and Monitored. Data.gov. https://catalog.data.gov/dataset/public-company-bankruptcy-cases-opened-and-monitored
[^3]: Daily Journal / Transacted.io. "Kirkland & Ellis Bankruptcy Market Share." 2024.
[^4]: CLLA. "Bankruptcy Venue Reform Primer." 2023. https://clla.org/wp-content/uploads/2023/BankruptcySection/Primer/Bankruptcy_Venue_Reform_Prm.pdf
[^5]: Antill, S., et al. "The Real Effects of Bankruptcy Forum Shopping." Harvard Bankruptcy Roundtable, January 2026. https://bankruptcyroundtable.law.harvard.edu/2026/01/20/the-real-effects-of-bankruptcy-forum-shopping/
[^6]: Levitin, A.J. "Bankrupt Courts." Illinois Law Review, 2022.
[^7]: Bloomberg Law. "How Kirkland Uses Court Shopping to Get an Edge in Bankruptcy." 2024. https://news.bloomberglaw.com/bankruptcy-law/how-kirkland-uses-court-shopping-to-get-an-edge-in-bankruptcy