Chapter 11 in Texas: Introduction to the 2008 Cases

Enron filed in the Southern District of New York. However, there are still chapter 11 cases being filed in Texas. During 2008, there were a total of 701 chapter 11 cases filed in Texas. This will be the first of a series of posts examining the Class of 2008. In future posts, I hope to look at who filed, who represented them and how many were successful.

Where Do Texas Chapter 11s File?

In this post, I will look at something more basic: where did the cases file. The answer is that more chapter 11 cases are filed in big cities than in small towns. While there is nothing surprising about the fact that more chapter 11s were filed in Dallas or Houston than in Lubbock, it is interesting that some large metropolitan areas attract a disproportionate number of cases.

The cases were distributed among the four districts of Texas as follows:

Southern District of Texas--271
Northern District of Texas--249
Western District of Texas---102
Eastern District of Texas----79

Of the cases filed in Texas, 663 originated within Texas and 38 were filed by out of state debtors. During 2007 (which is the most recent year available), the population of Texas was 23,904,380. That means that on average, there was one chapter 11 filed for every 36,055 residents. However, that does not mean that every county with at least 36,055 residents could claim a chapter 11 of their very own. Indeed, some 29 counties with at least this much population, including Midland and Taylor did not have any cases. Instead, the cases were skewed toward the larger counties.

The 20 largest counties gave rise to 589 filings for an 89.7% share of the total cases originating from Texas. These counties only contain 71% of the state's population. Thus, it appears that the large counties get a disproportionately large share of the filings compared to the state at large. This is not true across the board. The county with the lowest ratio of residents to filings was humble Camp county. This county had seven filings (all related to Pilgrim's Pride) and a population of 12,557 for a rate of one chapter 11 case for every 1,794 residents.

When the filings per population are compared between the 20 largest counties, there is a definite bias in favor of the Dallas/Fort Worth and Houston megaplexes.

The term Ch.11PP refers to Chapter 11 cases filed per population. A low number means that more cases were filed than would be predicted by the population, while a high number indicates the reverse.

While there is not a complete correlation, counties in the D/FW and Houston area, including Collin, Dallas, Denton, Harris and Tarrant, a a lower Ch.11PP rate (meaning had more cases than would be predicted strictly by population) than the rest of the state. However, some of the outlying counties in the Houston megaplex, including Fort Bend, Montgomery, Brazoria and Galveston counties, had fewer cases than would be expected. The border counties did not show a clear trend. Webb and Cameron counties had higher filing rates, while El Paso, Bexar and Hidalgo counties were in the bottom group. Rounding out the less than expected group were Travis, Nueces, Jefferson and Bell Counties (although Travis was just about average, one of the rare occasions that designation will be applied to the capital of Keeping It Weird).

Why?

Why do cases flock toward some localities and avoid others? Access to judges may be part of the answer. Harris County has four resident judges, while Dallas county has three. On the other hand, Lubbock County, Jefferson County and El Paso County all share judges with other divisions. However, this does not explain Bexar County, which has two resident judges but a low filing rate. Access to the chapter 11 bar may be a factor. Many of the counties which had lower rates of filings were outliers from major metropolitan areas. Montgomery, Fort Bend, Brazoria and Galveston Counties are all part of the Houston megaplex with lower than expected filing rates. If most of the chapter 11 lawyers are located in Houston, individuals and small businesses in outlying areas might be deterred from hiring a lawyer in the big city. Another possibility may be that the types of business prevalent in an area might influence the filing rate. For example, areas with high amounts of agriculture (Lubbock, Nueces) seem to be lower in filings. Suburban areas have very inconsistent results, with Denton, Collin and Williamson Counties ranking high and Ft. Bend, Montgomery and Brazoria counties ranking low.

If you would like a copy of the chart which is easier to read, please send an email to ssather@bnpclaw.com.

Coming Attraction

The next installment of the Class of 2008 will look at the flameouts, the cases that were dismissed or converted in the first 90 days. Although I have not done the research yet, I suspect that paying the filing fee in installments may be an indicator that a case is on rocky ground. I am amazed at just how many cases there are in this category.