Delaware’s Relevance in Chapter 22: Who is ‘Courting Failure’ Now?

Abstract:     
This study presents surprising new statistical evidence that contributes to the current “over-heated” academic debate about the Delaware courts’ role in Chapter 11 failure. In 2001, Professor LoPucki published an influential article suggesting that when large corporations file for bankruptcy under Chapter 11, they fail at a dramatically higher rate in Delaware courts than in other jurisdictions. He attributed this to corruption. His article enraged many academics and practitioners, and ignited many articles in the past two decades. This study presents startling evidence that while Chapter 11s filed in Delaware courts did have much higher failure rates from 1991-1996, after 1996, the failure rates for Delaware-cases and non-Delaware cases have been converging. In fact, in very recent years, failure rates have been approximately the same for Delaware cases and non-Delaware cases. While this study suggests that the debate about Delaware’s relevance is now obsolete, it also offers important insight into Professor LoPucki’s theory, as well as his critics’ arguments.

Number of Pages in PDF File: 23

Keywords: Chapter 22, Chapter 11, Bankruptcy Law, Courting Failure, Delaware, Reorganization

JEL Classification: K20

Accepted Paper Series