By Megan Wasson & Rebecca Polinsky (HSF Kramer LLP)
The bankruptcy venue statute, 28 U.S.C. Section 1408, allows a debtor to file in any district where its domicile, residence, principal place of business, or principal assets were located (i) during the 180 days preceding the bankruptcy filing or (ii) for a longer portion of that period than in any other district. Judge Michael B. Kaplan recently issued a letter opinion analyzing the “deliberately broad” statute.
Multi-Color Corp. and its affiliates (“Multi-Color” or the “Debtors”) filed prepackaged Chapter 11 cases in the Bankruptcy Court for the District of New Jersey (the “Court”) on January 29, 2026 (the “Petition Date”). One dormant entity, Debtor MCC-Norwood, was among those affiliates. About six weeks before the Petition Date, MCC-Norwood opened bank accounts in New Jersey, and the Debtors subsequently funded those accounts. MCC-Norwood’s petition listed principal assets located in New Jersey, and thus, MCC-Norwood served as the basis for the Debtors’ choice of venue in the District of New Jersey.
On March 16, 2026, Judge Kaplan issued a letter opinion denying the motions by the United States Trustee (the “U.S. Trustee”) and an ad hoc cross-holder group (the “Cross-Holders”, and together, the “Movants”) to dismiss or transfer the Debtors’ Chapter 11 cases. The U.S. Trustee separately moved to dismiss for lack of good faith. At the outset, the Court acknowledged that the venue statute “remains broad by design” and as such, would apply the plain language of the statute.
Judge Kaplan discussed various approaches to how courts should analyze what constitutes a debtor’s “principal assets.” The Cross-Holders proposed that the Court apply a “Time-Based Approach”, which focuses on identifying which of the Debtor’s assets were “principal” on each day of the 180-day period, treating the asset held for the longest time as the principal asset.
Judge Kaplan rejected the “Time-Based Approach” and applied an “Asset-Based Approach” to the venue statute. The Court ultimately concluded that venue in New Jersey was proper. The Asset-Based Approach evaluates a debtor’s assets quantitatively and qualitatively as of the time of filing and considers where those assets were located during the longer portion of the 180-day period. Applying this approach, the Court found that the Debtor’s recently opened bank accounts were its principal assets and were located in New Jersey longer than in any other district during the 180-day period.
Judge Kaplan’s ruling aligns with a substantial body of precedent holding that absent “eve of filing” steps taken to manipulate venue, the intentionally broad language of the underlying statute gives potential debtors substantial latitude to file for bankruptcy in their venue of choice.
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