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Yost Leads Coalition Urging Corporate Bankruptcy Reform


(COLUMBUS, Ohio) — Ohio Attorney General Dave Yost has co-sponsored a letter to Congress urging support of legislation that will make it tougher for corporations to unfairly game the system when filing for bankruptcy.

“When corporations exploit loopholes, it’s the consumer who bears the brunt of the costs,” Yost said. “The current set of rules is in desperate need of an update and we urge Congress to make those necessary changes.”

A coalition of 42 attorneys general wrote in support of the Bankruptcy Venue Reform Act of 2019, bipartisan legislation that will prevent a corporation from filing for bankruptcy in a district that it believes would be more favorable to them. That practice known as “forum shopping” imposes a burden on states and other creditors who may have to travel and incur significant expenses to pursue their claims.

“This degree of control is not allowed in any other area of the law,” the letter states, “and encourages placing cases in some of the most expensive legal markets in the country contributing to the ever-growing costs of these cases.”

Businesses and consumers who interact with the debtor generally are located in places where the debtor primarily operates, and having to travel great distances away from that area makes it harder to protect their interests. The same hardship applies to states that may be owed taxes or other payments, and may need to incur expenses to collect, which could wipe out any amounts collected through the bankruptcy.

If passed, the Bankruptcy Venue Reform Act of 2019 will:

  • Limit where businesses may file bankruptcy by ensuring that they will do so in a jurisdiction in which their “principal assets” or their “principal place of business” are located; and
  • Require rules to be prescribed to allow all governmental attorneys to appear without charge and without being required to associate with local counsel.
In the letter, the attorneys general contend that passage of the legislation will:
  • Reduce forum shopping in the bankruptcy system.
  • Strengthen the integrity of, and build public confidence and ensure fairness in, the bankruptcy system.
  • Help consumers and other parties to be represented in court without undue burden.
  • Level the playing field for state attorneys general to guard their states’ financial interests and enforce consumer protection laws.
Ohio, along with Maryland, Texas and Washington, co-sponsored the letter. Attorneys general from Alabama, Alaska, Arizona, Arkansas, California, Colorado, D.C., Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, West Virginia and Wisconsin also signed the letter.    

A copy of the letter is available here.

David O'Neil: 614-728-6069

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