From Relative Obscurity to Preeminence: The Evolution of Chapter 11 Parctice in Delaware

When Congress passed the Bankruptcy Amendments and Federal Judgeship Act of 1984, few could have predicted that over the following four decades, the District of Delaware would evolve into one of the most significant — and respected — venues for Chapter 11 bankruptcy filings. From humble beginnings to a powerhouse of corporate restructurings, Delaware’s Chapter 11 practice has undergone dramatic changes in case dynamics, participants, timelines and outcomes. This article explores the shifting landscape of Chapter 11 practice in Delaware from the 1980s to today, providing practical insights for newer and mid-level practitioners and reaffirming Delaware’s continuing role as a preferred venue for complex business reorganizations.

The 1980s: Setting the Stage

Before Continental Airlines filed its second Chapter 11 case in Delaware in 1990 — a so-called “Chapter 22” following its first reorganization in Houston in 1983 — the largest bankruptcy case Delaware had seen was Claymont Steel, filed in 1983, which involved approximately $100 million in assets and liabilities. Continental, by contrast, was a multi-billion-dollar case that landed in Delaware with little warning. Virtually overnight, Delaware became a favored jurisdiction — alongside the Southern District of New York — for handling the largest and most complex corporate reorganizations.

For the handful of Delaware lawyers (notably Peter Walsh at Bayard Handelman, Ted von Wettberg at Morris James, Jim Patton at Young Conaway, William Witham at Prickett Jones, David Stratton at Potter Anderson, and a few others) who even knew where the Bankruptcy Court was located at the time (then housed in the United States District courthouse), the shift was dramatic. Phones began ringing off the hook with calls from debtors, creditors and their out-of-state counsel seeking local expertise. It was a heady time, as Delaware’s restructuring practice began to expand rapidly in both profile and volume.

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