SCENARIOS-Court choice for a GM bankruptcy may shape case

By Tom Hals
NEW YORK, April 7 (Reuters) - Lawyers for General Motors
Corp are likely wrestling with the venue for a possible
bankruptcy filing by the automaker, a proceeding that would
qualify as one of the biggest-ever corporate reorganizations.
GM Chief Executive Fritz Henderson has said the company
prefers to restructure out of court, but would go to court if
necessary. A source familiar with the company's plans said on
Tuesday that GM was in "intense" and "earnest" preparations for
a possible bankruptcy filing. [nN07463416]
The case, which most professionals expect could run for two
years or even longer, would be a windfall to the court where it
is filed due to fees, professional travel and other expenses.
The case is likely to generate a record-breaking $1.9 billion in
legal fees, said Lynn LoPucki, a law professor at University of
California at Los Angeles.
GM would most likely choose between New York, Delaware and
Michigan for a potential bankruptcy proceeding. While each court
uses the same federal laws, regional differences in how they are
applied could shape the reorganization.

EASTERN DISTRICT OF MICHIGAN
The home court for Detroit-based GM, many specialists assume
this to be the default location.
The court has handled auto-related bankruptcies such as the
ongoing case of Collins and Aikman and it may be more
sympathetic to a GM, which is identified so closely with the
region, although it might not want GM retirees and workers
showing up every day in court.
"There's the concern they will show on a regular basis and
participate on a regular basis," said Jack Williams, a professor
at Georgia State University College of Law.
A filing in Detroit is also likely to have a bigger local
impact than a filing in Delaware or New York.
"All the people to come in to deal with the court process
and all the money in fees represents a lot of people and hotbed
of activity," said Mike Hammer, a partner with Dickinson Wright
in Detroit. "The local bankruptcy bar, if GM files, wants it to
be here. Even the court would want it to be here."

SOUTHERN DISTRICT OF NEW YORK
The Manhattan court is home to many of the largest
bankruptcies of recent years including auto-parts supplier
Delphi Corp, and Lehman Brothers Holdings Inc which
filed the largest bankruptcy ever.
Many of the top bankruptcy lawyers in the United States are
based in New York, including Harvey Miller of Weil Gotshal &
Manges, who is advising the automaker.
Judges in New York know these lawyers not just
professionally, but personally.
The biggest issue for New York might be justifying a filing
in a court outside of GM's home city and state of
incorporation.
GM's connections to the city could be viewed as tenuous. GM
has executives in the city and owns property, but none of the
affiliates listed among the 174 in the annual report would seem
to qualify, setting up a possible challenge to move the case.
(For related story, see [nN07369220])
"If they file in New York they will have to take some
punches. It will set off at least a temporary firestorm," said
David Skeel of the University of Pennsylvania Law School, who is
also an expert on the history of bankruptcy.

DISTRICT OF DELAWARE
Companies such as GM which are incorporated in Delaware can
file in the court, and since 1980, Delaware has hosted one-third
of U.S. bankruptcies with assets of at least $1 billion,
followed by New York with 24 percent of cases, according to
LoPucki's data.
The court shares a reputation with New York for experience
and rapid approval of first-day requests, such as using cash and
creditors' collateral. That could prove critical if GM seeks to
split into two at the start of the case, as sources have told
Reuters.
The biggest problem for GM might be relatively strict
standards for breaking collective bargaining agreements in the
third district, which include Delaware. A filing there would be
a clear plus for the hundreds of thousands of unionized
employees and retirees.
"The arguments for Delaware are it's not on Wall Street and
not in Michigan with home court pressure and empathy for
employees that might complicate a reorganization," said Skeel.
(Reporting by Tom Hals, editing by Matthew Lewis)
((thomas.hals@thomsonreuters.com; + 1 646-223-6356; Reuters
Messaging thomas.hals.reuters.com@reuters.net))
Keywords: GM/BANKRUPTCY VENUE

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