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Y’all Means All: Here's Why Nashville is a Preferred Venue for Chapter 11

Delaware, Southern District of New York, and Southern District of Texas attract the biggest cases and most of the attention, but the U.S. Bankruptcy Court for the Middle District of Tennessee in Nashville is widely considered a friendly forum for companies that need to use Chapter 11 to restructure, sell or wind down


by Robert J. Gonzales


Some of the most common circumstances that lead a business to utilize Chapter 11 are: (1) excessive debt that severely strains cash flow; (2) deteriorating lender relationships that compromises current cash management and future borrowing ability; (3) changing market conditions that adversely impact profitability; and (4) major litigation that threatens a company’s existence. Whatever the cause, Chapter 11 protection is a powerful tool that can be the difference between revitalization and disaster.


Once the decision to utilize Chapter 11 has been made, a company must decide where to file. Venue is governed by 28 U.S.C. §1408, which states that a case may be commenced in the district in which the debtor’s domicile, residence, principal place of business or principal assets have been located for the prior 180 days, or where there is a pending case concerning the debtor’s affiliate, general partner, or partnership. This means that a business can file in its state of incorporation, in the location of its headquarters, where its main assets are located, or where an affiliate has a pending case.


For many smaller businesses with a strictly local footprint, the decision of where to file is obvious. But for businesses that operate or have assets in multiple locations, and that may have a choice of where to file, it’s important to consider factors beyond the company’s specific circumstances that may impact a successful Chapter 11 case. Core factors include the sophistication, strength and personalities of the judges, legal community, clerk’s office, U.S. Trustee, and business community. Practical and secondary factors include geographic location, ease of access, and city vibe. Nashville scores high on all counts and that’s why it is considered a friendly and welcoming forum for corporate restructurings.


1. Bench

Middle Tennessee has 3 business-minded bankruptcy judges with decades of experience overseeing Chapter 11 reorganizations, sales, and orderly liquidations. While each has his or her own unique strengths, all: treat counsel and management respectfully; welcome practical and realistic solutions to complex legal problems; appreciate creativity and preparation; and reward efforts to maximize value in challenging circumstances. Beyond the judges themselves, each of their courtroom deputies, career law clerks, and staff are wonderful professionals who make the Chapter 11 process work smoothly and efficiently day in and day out.


2. Bar

As a vibrant, mid-sized city, Nashville punches above its weight in terms of its legal community. Nashville is known internationally for its music scene, and the legal pros that support that industry are second to none. But Nashville and Middle Tennessee have long been hubs for healthcare, technology, manufacturing, and other industries, and it has a deep well of commercial and insolvency lawyers who understand business and know how to get things done. Because of the tight-knit insolvency bar, professionals typically know each other and manage to work well together even on hotly contested legal issues. Most of Nashville's best business lawyers are members of the Nashville Bar Association and Tennessee Bar Association, two of the nation's great lawyer associations.


3. U.S. Trustee

The Office of the United States Trustee is part of the U.S. Justice Department that monitors the bankruptcy system. Ask any Chapter 11 lawyer and they will tell you that a strong U.S. Trustee’s Office makes a huge difference in how efficiently the whole process runs. Middle Tennessee is extremely fortunate to have a business-savvy U.S. Trustee’s Office with smart lawyers and financial analysts who are also helpful and fair and understand the challenges faced by companies going through Chapter 11.


4. Clerk of Court

Any clerk of court’s office is a complicated operation, but particularly so in Bankruptcy Court because of the volume and variety of filings. At the start of many Chapter 11 cases there are emergency filings and the company may be in crisis mode with a tremendous amount at stake. Working with a reliable, predictable, and understandable clerk of court makes a world of difference to attorneys who represent businesses filing Chapter 11. The Clerk’s Office in Nashville is defined by efficiency, predictability, consistency, and its embrace of technology, and it is a model for other clerk’s offices around the country.


5. Business Community

Nashville is a business-oriented city with a high degree of professionalism. This is important for companies going through Chapter 11 reorganizations or asset sales because access to lending and professional services can be critical. Accountants, appraisers, auctioneers, and turnaround professionals, in addition to attorneys, regularly lend their expertise in Chapter 11 cases in Nashville and Middle Tennessee. From the Nashville Area Chamber of Commerce to numerous other professional and civic organizations, Nashville means business.


6. Commercial Law and Turnaround Organizations

One of the country’s premier commercial law and bankruptcy seminars is held in Nashville. Each year, the Mid-South Commercial Law Institute conducts an advanced two-day CLE seminar on commercial and bankruptcy law in Nashville, Tennessee. The hallmark of the seminars is sophisticated, cutting-edge content, presented by panels of nationally renowned scholars, judges and attorneys. Presentations are always timely and comprehensive, designed to appeal to a broad spectrum of practices, from litigation to transactional. And sessions are conducted in a relaxed, interactive environment that encourages audience participation. Perhaps most importantly, it is an opportunity for insolvency professionals from Nashville, across Tennessee and throughout the midsouth and southeast to catch up and compare notes on best practices.


The Tennessee chapter of the Turnaround Management Association is both representative of, and positively impacts, the talented pool of turnaround professionals in Tennessee. The TMA is the most professionally diverse organization in the corporate restructuring, renewal, and corporate health space. Established in 1988, TMA has almost 10,000 members in 54 chapters worldwide, including 34 North American chapters. Members include turnaround practitioners, attorneys, accountants, advisors, liquidators, consultants, as well as academic, government employees, and members of the judiciary. Tennessee’s chapter is especially active.


7. Congeniality

Corporate restructuring isn’t a popularity contest, but one of the key ingredients that makes Nashville a favored Chapter 11 venue is the congenial relationships among the people involved. From judges and their chambers, the clerk’s office, U.S. Trustee’s office, to attorneys, financial advisors, and others, Nashville is simply a friendly place to be. Of course, professionals can occasionally butt heads as they zealously represent their clients, but there seems to be a southern gentility at play that encourages people to disagree without being disagreeable.


8. Hey, it’s Nashville

Nashville has become a hugely popular tourist and convention destination for good reason. The people are friendly; the weather is usually great; it’s easily accessible with a great airport and located at the intersection of several interstates; there are tons of great bars, restaurants, and hotels; and of course an amazing music scene. None of these is necessarily the driving force behind a company’s choice of venue for its Chapter 11 case, but the city of Nashville provides a nice backdrop for a serious and complex legal proceeding.


Conclusion

The bankruptcy courts in Delaware, Southern District of New York, and Southern District of Texas garner most of the restructuring press and are the venues of choice for the largest Chapter 11 cases. Like those districts, the Bankruptcy Court for the Middle District of Tennessee has also adopted special rules to make large chapter 11 cases run more efficiently. And thanks to its experienced Bankruptcy Judges, U.S. Trustee’s Office, and Clerk of Court, its strong legal and business community, and all-around welcoming environment, Nashville is rightfully at the top of the list for friendly Chapter 11 venues.

 

A partner with EmergeLaw, PLLC based out of the firm's Nashville, Tennessee office, Robert Gonzales guides businesses and their owners through Chapter 11 reorganizations, sales, and orderly liquidations.


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