652 B.R. 49
Bankr. E.D. La.2023Background
- Petitioning creditors (Keystone Chemical, R&R Boats, Specialty Offshore, Total Production Supply, DLS) filed an involuntary Chapter 7 petition against Cox Operating, LLC in the Eastern District of Louisiana (EDLA) on May 12, 2023.
- Cox Operating and six affiliated entities filed voluntary Chapter 11 petitions in the Southern District of Texas (SDTX) on May 14, 2023; the debtors seek a quick going‑concern sale funded by DIP financing from Amarillo National Bank and BP Energy.
- Cox Operating is a Louisiana LLC that operates most wells and employs offshore and onshore personnel; the debtors report substantial trade debt (≈ $211M) with many Louisiana trade creditors and significant secured claims.
- Petitioning creditors argued they filed in EDLA to protect Louisiana‑law lien rights (LOWLA) and to prevent alleged prepetition dissipation of assets; debtors argued SDTX is the proper forum for coordinated Chapter 11 cases and DIP financing.
- The EDLA court held an evidentiary hearing on competing venue/transfer motions (Bankruptcy Rule 1014(b) and 28 U.S.C. § 1412), weighed convenience and interest‑of‑justice factors, and considered perceived fairness and risk of forum shopping.
- Ruling: the EDLA court granted Cox Operating’s emergency motion to transfer venue and ordered the involuntary case transferred to the SDTX; the petitioners’ emergency motion seeking first‑filed priority/service was denied without prejudice.
Issues
| Issue | Petitioning Creditors' Argument | Debtors' Argument | Held |
|---|---|---|---|
| Appropriate venue for related cases filed in different districts under Rule 1014(b)/§ 1412 | EDLA (first‑filed involuntary) should determine venue; Louisiana forum needed to protect LOWLA lien rights | Defer to debtors’ voluntary choice of SDTX to enable coordinated administration, DIP financing, and sale process | Court transferred the involuntary case to SDTX (deference to debtors’ forum choice) |
| Weight/burden regarding competing venue motions and first‑filed rule | First‑filed involuntary petition entitles EDLA to priority; court should preserve petitioners’ forum | Burden unclear; court should evaluate convenience and interests of justice and give weight to debtor’s choice | Court held burden is effectively on the court to balance factors; gave deference to debtors’ forum choice |
| Convenience factors (creditors, witnesses, assets, economic administration) | Proximity of Louisiana trade creditors and local proof on Louisiana law favors EDLA | SDTX is functionally convenient (Houston/New Orleans proximity, remote participation, professionals in Houston), and SDTX is better for efficient estate administration | Convenience factors were neutral; did not outweigh deference to debtors’ forum choice |
| Emergency request to effect service/declare first‑filed priority over later voluntary petitions | Sought emergency relief to enforce EDLA priority and protect lien rights immediately | Opposed; urged transfer to SDTX for coordinated chapter 11 process and DIP draws | Emergency motion denied without prejudice; transfer ordered to SDTX |
Key Cases Cited
- In re Commonwealth Oil Refining Co., 596 F.2d 1239 (5th Cir.) (factors for transfer convenience and interest of justice)
- Gulf States Exp. Co. v. Manville Forest Prods. Corp. (In re Manville Forest Prods. Corp.), 896 F.2d 1384 (2d Cir.) (considerations on transfer and forum deference)
- E.E.O.C. v. Univ. of Pa., 850 F.2d 969 (3d Cir.) (first‑filed rule is equitable, not rigid)
- Matter of ATP Oil & Gas Corp., 888 F.3d 122 (5th Cir.) (Fifth Circuit precedent on lien/priority issues referenced by petitioners)
- In re Enron Corp., 274 B.R. 327 (Bankr. S.D.N.Y.) (discussion of debtor’s choice of forum and transfer factors)