CORRECTED: Court choice for a GM bankruptcy may shape case

(Corrects to third circuit, not district, penultimate paragraph)

By Tom Hals

NEW YORK (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.

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.

"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.

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 circuit, which includes 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)