A Suburban Judge Has Become The Go-To For NYC Developers In Bankruptcy

Just one judge oversees bankruptcy cases in Westchester County, but his caseload in recent years has been heavy with developers whose business is solely in Manhattan or Brooklyn.

Many companies filing for Chapter 11 bankruptcy have found ways to appear before Judge Robert Drain of the U.S. Bankruptcy Court of the Southern District of New York, The Real Deal reports, which has raised the eyebrows of some legal experts who claim Drain gives favorable rulings to debtors.

TRD’s analysis found that one restructuring officer, Florida-based David Goldwasser, has steered at least 33 property bankruptcy cases to Drain's courtroom since 2013 despite most of the companies being based in Manhattan or Brooklyn.

Among the cases steered to Drain’s courtroom is Toby Moskovits’ Heritage Equity Partners, which filed for bankruptcy on The Williamsburg Hotel in February last year, as well as the owner of another Brooklyn hotel, the Tillary, which filed for bankruptcy in December 2020.

A company can usually file for bankruptcy in the same district as its place of incorporation, the location of its main assets, where it conducts most of its business or where an affiliated business has a pending case. The latter reasoning — commonly used by corporations, including by Purdue Pharma, which had its bankruptcy filing controversially approved by Drain last year — allows companies that lease offices in White Plains to have their cases heard in Westchester and qualify to restructure there.

Defendants will try to select specific judges based on the belief that their plans will be rubber-stamped, Georgetown Law bankruptcy specialist Adam Levitin told The Real Deal.

“Debtors aren't seeking out great judges,” he wrote in a blog post last summer. “They are seeking out judges who are great for them.”

Drain, a graduate of Columbia Law School, became a partner at law firm Paul, Weiss, Rifkind, Wharton & Garrison’s bankruptcy arm before moving to positions as a New York bankruptcy judge in Lower Manhattan in 2002 and Westchester in 2009. 

Drain denies any favorable treatment of debtors, telling TRD that any allegations were “hogwash.” He plans to retire this June, having served for 20 years.

CORRECTION, APRIL 29, 4:30 P.M. ET: A previous version of this article misstated David Goldwasser’s job title. This article has been updated.