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U.S. District Judge Shira Scheindlin ruled yesterday that a legal battle between junior and senior creditors of the bankrupt division of Caesars Entertainment Corp. should be heard in Chicago rather than New York, Reuters reported yesterday. The chapter 11 filing by the largest casino operator in the U.S., Caesars Entertainment Operating Company, Inc. (CEOC), has been marked by bitter feuding among creditors over everything from when, where and how the bankruptcy was filed. In this case, senior creditors led by Credit Suisse had sought to pursue a lawsuit against junior creditors, including units of Appaloosa Management and Oaktree Capital Management, in New York rather than Chicago, where CEOC filed for bankruptcy. Judge Scheindlin agreed with the junior creditors that it would be more efficient and would likely help resolve the bankruptcy case to send the Credit Suisse case to Chicago.

Currently, businesses can file for bankruptcy in one of three venues: where the business is incorporated (likely Delaware), where its principal assets are located, or where its headquarters are located, according to a commentary in The Hill. A related rule permits a parent company to file where a subsidiary has previously declared bankruptcy. Under this provision, some insolvent businesses will deliberately put a subsidiary into bankruptcy in one location, often New York or Delaware, to satisfy the venue requirements for itself. The debate of where the company should file is not new according to the commentary: Prior to 1987, a business filing for bankruptcy was required to do so either where its principal place of business was located, or where its assets were located. Going back to at least the late 1990s, Congress has wrestled with whether the bankruptcy venue rules could be misused in some way and should be changed. Based on prior legislative efforts, Congress will not likely changes the rules, according to the commentary. However, the new Majority Whip was once very active on this issue, and there are serious arguments made by the proponents of venue reform.