Introduction
On March 16, 2026, the United States Bankruptcy Court for the District of New Jersey issued a significant ruling in In re Multi-Color Corporation, et al., Case No. 26-10910 (MBK), denying motions to dismiss or transfer a group of chapter 11 bankruptcy cases. The decision, authored by the Honorable Michael B. Kaplan, squarely addresses a question that has long simmered in the bankruptcy world: can a debtor establish venue by opening a bank account in a district shortly before filing for bankruptcy? Judge Kaplan's answer, grounded in the text of the statute and a pragmatic assessment of the facts, was yes—at least under the circumstances presented. This article summarizes the court's reasoning and its practical implications for debtors, creditors, and practitioners.
The Facts: A Dormant Entity, a New Bank Account, and a Billion-Dollar Restructuring
The debtor at the center of the venue dispute was MCC-Norwood, LLC, a dormant Ohio LLC originally formed in 2014 to acquire a manufacturing facility that was later closed and sold in 2023. Though it had no employees, customers, or operations, MCC-Norwood remained a guarantor on approximately $5.5 billion in funded debt across the Multi-Color corporate family.
Six weeks before filing, MCC-Norwood opened a bank account at ConnectOne Bank in Englewood Cliffs, New Jersey, which was subsequently funded with approximately $1.05 million. On January 29, 2026, just sixteen days after funding, the debtors filed their chapter 11 petitions in New Jersey, relying on MCC-Norwood's bank accounts as the basis for venue. A group of prepetition lenders and the United States Trustee (UST) (collectively, the “Movants”) promptly challenged venue, arguing the accounts were a manufactured basis for filing in New Jersey.
The Legal Framework: Section 1408 and the "Principal Assets" Test
Under 28 U.S.C. § 1408, a voluntary bankruptcy petition may be filed in the district where a debtor's domicile, residence, principal place of business, or "principal assets" were located for the 180 days preceding the petition, or for a longer portion of that period than in any other district. The debtors relied on the "principal assets" prong. The Movants countered that bank accounts, as intangible assets, should follow the account holder's domicile under the doctrine mobilia sequuntur personam, and that MCC-Norwood's patents, intercompany receivables, and insurance rights, all located outside New Jersey, were the true "principal assets."
The Court's Analysis: An Asset-Based Approach
The court identified two competing frameworks. Under the "Time-Based Approach," a court would identify the principal asset on each day of the 180-day lookback and locate venue wherever that asset sat for the longest duration—a method that would have favored the Movants, since the bank accounts existed for only 16 of the 180 days. Under the "Asset-Based Approach," a court first identifies the debtor's principal asset as of the petition date, then asks where that asset was located during the lookback period.
Judge Kaplan adopted the Asset-Based Approach, reasoning that it better serves practical administration of the estate. He offered a telling hypothetical: assume a debtor purchased two pieces of equipment, one in Kansas and one in Texas. And further assume that the machinery in Kansas is by far the more valuable but is destroyed by a tornado 10 days before filing. The Time-Based Approach would place venue in Kansas because the debtor’s principal asset was located there for 170 out of the 180 days but where the debtor now owns nothing useful. The Asset-Based Approach avoids this illogical result. Applying it here, the court found the Norwood Accounts to be MCC-Norwood's principal asset, both quantitatively and qualitatively.
Disposing of the Competing Assets
The Movants pointed to three categories of competing assets, patents, intercompany balances, and D&O insurance rights, that could be considered the debtor’s “principal assets” for venue purposes, and the court rejected each. MCC-Norwood's patents, though not entirely valueless, were never appraised by the Movants, and without expert valuation evidence the court found they did not displace more than $1 million in cash as the principal asset. Intercompany receivable balances of over $158 million were shown, through unrebutted expert testimony, to be legacy bookkeeping entries that lacked economic substance and had been reclassified to zero before the petition date. And D&O insurance rights were contingent, shared across entities, and had not been triggered—insufficient to outweigh cash on hand.
Bank Accounts Can Establish Venue
Separately, the court rejected the UST's argument that bank accounts, as intangible assets, must follow the account holder's domicile. Citing prior bankruptcy decisions and Article 9 of the Uniform Commercial Code, the court held that a bank account is located where it is opened and maintained in this case, at a ConnectOne Bank branch in Englewood Cliffs, New Jersey, under a deposit agreement governed by New Jersey law.
The "Gut Check" and a Message to Congress
After also declining to transfer the case under 28 U.S.C. § 1412, Judge Kaplan turned to what he called the "gut check." The court acknowledged that "no party can deny that the Norwood Accounts were opened so that MCC-Norwood could file in this district" and conceded that, "[t]o the extent this does not 'sit right' with the parties in interest, the Court shares that sentiment." But Judge Kaplan placed the blame squarely on Congress, noting that legislation to narrow the venue statute—including H.R. 1017, which would have excluded cash and cash equivalents from consideration as "principal assets" has repeatedly died in committee. Where Congress is aware of an issue and declines to act, the court reasoned, courts are not free to judicially rewrite the statute.
Key Takeaways
The Multi-Color decision carries several important lessons. Under current law, a debtor may establish venue by opening and funding a bank account in a chosen district, so long as the account constitutes the debtor's "principal asset." The statute does not require longevity of ownership or operational activity. The court's Asset-Based Approach further favors debtors by focusing on assets owned at the time of filing rather than across the entire 180-day lookback. Creditors, meanwhile, bear the burden of proving that other assets displace the asserted principal asset—and must bring rigorous evidence, including under certain circumstances, expert testimony, to do so.
Perhaps most significantly, the opinion is an invitation to Congress to reform the bankruptcy venue rules. Until it does, Multi-Color stands as a clear statement that courts will not rewrite the statute from the bench—even when the outcome, as Judge Kaplan put it, does not quite "sit right."
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