The rules for venue for bankruptcy cases are found in 28 U.S.C. § 1408, which provides the following:
Except as provided in section 1410 of this title, a case under title 11 may be commenced in the district court for the district—
(1) in which the domicile, residence, principal place of business in the United States, or principal assets in the United States, of the person or entity that is the subject of such case have been located for the one hundred and eighty days immediately preceding such commencement, or for a longer portion of such one-hundred-and-eighty-day period than the domicile, residence, or principal place of business, in the United States, or principal assets in the United States, of such person were located in any other district; or
(2) in which there is pending a case under title 11 concerning such person’s affiliate, general partner, or partnership.
Typically, large corporate Chapter 11 cases have been filed in Delaware or the Southern District of New York. Often, Delaware is an option because most large corporations are incorporated in Delaware (although there have been recent efforts to remove the "state of incorporation" venue option). Other large corporations may have been incorporated in another state, and have their principal office in another state, yet choose Delaware or New York because they have an office or facility there. This option may no longer be available, depending on how Courts apply the recent Supreme Court opinion.
On February 23, 2010, the United States Supreme Court issued its opinion in Hertz v. Friend, No. 08-1107 (U.S. February 23, 2010) (click here for the opinion). One of the issues in the case was the location of the principle place of business for a corporation. Justice Breyer, for a unanimous Court, stated the following:
In an effort to find a single, more uniform interpretation of the statutory phrase, we have reviewed the Courts of Appeals’ divergent and increasingly complex interpretations. Having done so, we now return to, and expand, Judge Weinfeld’s approach, as applied in the Seventh Circuit. See, e.g., Scot Typewriter Co., 170 F. Supp., at 865; Wisconsin Knife Works, 781 F. 2d, at 1282. We conclude that “principal place of business” is best read as referring to the place where a corporation’s officers direct, control, and coordinate the corporation’s activities. It is the place that Courts of Appeals have called the corporation’s “nerve center.” And in practice it should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination, i.e., the “nerve center,” and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion).
Three sets of considerations, taken together, convince us that this approach, while imperfect, is superior to other possibilities. First, the statute’s language supports the approach. The statute’s text deems a corporation a citizen of the “State where it has its principal place of business.” 28 U. S. C. §1332(c)(1). The word “place” is in the singular, not the plural. The word “principal” requires us to pick out the “main, prominent” or “leading” place. 12 Oxford English Dictionary 495 (2d ed. 1989) (def. (A)(I)(2)). Cf. Commissioner v. Soliman, 506 U. S. 168, 174 (1993) (interpreting “principal place of business” for tax purposes to require an assessment of “whether any one business location is the ‘most important, consequential, or influential’ one”). And the fact that the word “place” follows the words “State where” means that the “place” is a place within a State. It is not the State itself.
A corporation’s “nerve center,” usually its main headquarters, is a single place. The public often (though not always) considers it the corporation’s main place of business. And it is a place within a State. By contrast, the application of a more general business activities test has led some courts, as in the present case, to look, not at a particular place within a State, but incorrectly at the State itself, measuring the total amount of business activities that the corporation conducts there and determining whether they are “significantly larger” than in the next ranking State. 297 Fed. Appx. 690.
This approach invites greater litigation and can lead to strange results, as the Ninth Circuit has since recognized. Namely, if a “corporation may be deemed a citizen of California on th[e] basis” of “activities [that] roughly reflect California’s larger population . . . nearly every national retailer—no matter how far flung its operations—will be deemed a citizen of California for diversity purposes.” Davis v. HSBC Bank Nev., N. A., 557 F. 3d 1026, 1029–1030 (2009). But why award or decline diversity jurisdiction on the basis of a State’s population, whether measured directly, indirectly (say proportionately), or with modifications?
Second, administrative simplicity is a major virtue in a jurisdictional statute. Sisson v. Ruby, 497 U. S. 358, 375 (1990) (SCALIA, J., concurring in judgment) (eschewing “the sort of vague boundary that is to be avoided in the area of subject-matter jurisdiction wherever possible”).Complex jurisdictional tests complicate a case, eating up time and money as the parties litigate, not the merits of their claims, but which court is the right court to decide those claims. Cf. Navarro Savings Assn. v. Lee, 446 U. S. 458, 464, n. 13 (1980). Complex tests produce appeals and reversals, encourage gamesmanship, and, again, diminishthe likelihood that results and settlements will reflect a claim’s legal and factual merits. Judicial resources too are at stake. Courts have an independent obligation to determine whether subject-matter jurisdiction exists, even when no party challenges it. …So courts benefit from straightforward rules under which they can readily assure themselves of their power to hear a case…
Simple jurisdictional rules also promote greater predictability. Predictability is valuable to corporations making business and investment decisions….
A “nerve center” approach, which ordinarily equates that “center” with a corporation’s headquarters, is simple to apply comparatively speaking. The metaphor of a corporate “brain,” while not precise, suggests a single location. By contrast, a corporation’s general business activities more often lack a single principal place where they take place. That is to say, the corporation may have several plants, many sales locations, and employees located in many different places. If so, it will not be as easy to determine which of these different business locales is the “principal” or most important “place.”
Third, the statute’s legislative history, for those who accept it, offers a simplicity-related interpretive benchmark. The Judicial Conference provided an initial version of its proposal that suggested a numerical test. A corporation would be deemed a citizen of the State that accounted for more than half of its gross income. Mar. Committee Rept. 14–15; see supra, at 8. The Conference changed its mind in light of criticism that such a test would prove too complex and impractical to apply. Sept. Committee Rept.2; see also H. Rep. 1706, at 28; S. Rep. 1830, at 31. That history suggests that the words “principal place of business” should be interpreted to be no more complex than the initial “half of gross income” test. A “nerve center” test offers such a possibility. A general business activities test does not.