Why Companies Like Toys ‘R’ Us Love to Go Bust in Richmond, Va.

By Michael Corkery and Jessica Silver-Greenberg
Nov. 14, 2017

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In recent years, Richmond has become the destination wedding spot for failed companies. The United States Bankruptcy Court there offers several features attractive to the executives, bankers and lawyers trying to get an edge in the proceedings.

First, Richmond’s bankruptcy court offers a so-called rocket docket that moves cases along swiftly. Chapter 11 bankruptcy filings can be laborious proceedings that drag on for years. Gymboree’s bankruptcy was completed in less than four months. ... Second, the legal record in that court district includes precedents favorable to companies, like making it easier to walk away from union contracts.

But perhaps one of the biggest draws, according to bankruptcy lawyers and academics, is the hefty rates lawyers are able to charge there. The firm representing Toys “R” Us, Kirkland & Ellis, told the judge that its lawyers were charging as much as $1,745 an hour. That is 25 percent more than the average highest rate in 10 of the largest bankruptcies this year, according to an analysis by The New York Times. ... “The numbers are stratospheric,” said Kevin Barrett, a lawyer at the firm Bailey Glasser, who represented the State of West Virginia in two coal bankruptcy cases filed in Richmond.
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Delaware and New York — which have long been popular bankruptcy destinations — still see the lion’s share of the filings. ... But Richmond is gaining ground. In July, an article in The Virginia Lawyers Weekly declared the city a “bankruptcy haven” and quoted a local lawyer who said the high legal fees charged there would give judges in other courts a “heart attack.”
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A version of this article appears in print on Nov. 15, 2017, on Page B1 of the New York edition with the headline: The Place to Go for Going Bust. Order Reprints | Today’s Paper | Subscribe