463 B.R. 332
M.D.N.C.2011Background
- Plaintiff filed suit in Durham County Superior Court against Wells Fargo, American Security, Brock & Scott, Nichols & Satterfield, and Mortgageit alleging breach of contract, good faith and fair dealing, negligent misrepresentation, and negligence.
- Wells Fargo removed the case to federal court based on diversity of citizenship, and Plaintiff moved for remand.
- Plaintiff later filed a Chapter 11 bankruptcy petition in the Eastern District of North Carolina; Wells Fargo moved for a venue change to transfer to EDNC to proceed in conjunction with bankruptcy proceedings.
- Plaintiff consented to transfer to EDNC and potential subsequent transfer to the Bankruptcy Court, without waiving remand rights.
- The court analyzed whether related-to bankruptcy transfers should be governed by 28 U.S.C. § 1404(a) or § 1412, ultimately adopting § 1412 as governing the transfer for related-to actions.
- The court held the action is related to Plaintiff’s bankruptcy, and granted Wells Fargo’s change of venue to the Eastern District of North Carolina, denying remand and expediting motions as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1412 or § 1404 governs transfer of a related-to bankruptcy action | Remand/wrong governing statute; § 1404 should apply | Related-to action should be governed by § 1412 | § 1412 governs transfer for related-to actions |
| Whether the action is related to Plaintiff’s bankruptcy | No effect on the bankruptcy estate | Outcome could affect the estate and its administration | Action is related to bankruptcy |
| Whether transfer to the EDNC is appropriate under § 1412 based on the interests of justice or convenience | Maintain original forum; transfer not warranted | Transfer promotes efficient administration and judicial economy; Plaintiff consent favors transfer | Transfer to EDNC is appropriate |
| Whether remand and related expedited-motion rulings are moot | Remand should be granted; expedited motion matters unresolved | Transfer moots remand and expedited-motion challenges | Remand and expedited-motion moot |
Key Cases Cited
- A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994 (4th Cir. 1986) (related-to test: effect on the estate)
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (test for related-to bankruptcy)
- In re Enron Corp., 317 B.R. 629 (Bankr.S.D.N.Y. 2004) (factors for 'in the interests of justice' transfer)
- Blanton v. IMN Fin. Corp., 260 B.R. 257 (M.D.N.C. 2001) (presumption that related-to matters go to bankruptcy court district)
- Ward v. Invista S.A.R.L., LLC, 385 B.R. 817 (W.D.N.C. 2008) (related-to bankruptcy and impact on estate)
- Creekridge Capital, LLC v. Louisiana Hosp. Center, LLC, 410 B.R. 623 (D. Minn. 2009) (adopts § 1412 approach for related-to actions)
- Dunlap v. Friedman’s, Inc., 331 B.R. 674 (S.D.W. Va. 2005) (supports § 1412 for related-to transfer)
- In re Vital Link Lodi, Inc., 240 B.R. 15 (Bankr. W.D. Mo. 1999) (general related-to venue principle)