474 B.R. 122
Bankr. S.D.N.Y.2012Background
- Debtors filed a prepackaged chapter 11 with unanimous creditor support; UST moved to transfer venue under 28 U.S.C. §1406 and Fed.R.Bankr.P. 1014(a)(2).
- UST contends venue in SDNY was improper under §1408 and that transfer/dismissal is mandatory; Debtors and creditors oppose arguing venue was proper and transfer would be prejudicial.
- Key debtors are Publishing (principal assets/board location in MA) and HoldCo (claims venue based on principal assets via Sixth Avenue Space lease).
- HoldCo’s assets include 15 subsidiaries with substantial enterprise value, not just the Sixth Avenue lease; assets far exceed the lease as a basis for venue.
- Court concludes §1406 applies where §1408 bases are not satisfied, and finds no §1408(1) basis satisfied for Publishing or HoldCo; transfer ordered to minimize creditor prejudice and timing set.
- Case is transferred on the first to occur of Effective Date or three weeks after the confirmation order (if Plan not yet effective).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether venue was proper under §1408 for the SDNY cases | UST argues venue improper under §1408(1) or (2) | Debtors contend venue proper based on principal assets or domicile | §1408 bases not satisfied; transfer mandatory |
| Whether §1406 requires transfer or dismissal when venue is improper | UST seeks transfer under §1406 | Debtors oppose; argue necessity and inconvenience should modify timing | Court must transfer; timing can mitigate prejudice |
| What constitutes the proper district for transfer | Agreement among creditors to finance participants; New York preferred | Any district with proper venue would be permissible | Massachusetts or other proper districts possible; Court to choose to minimize prejudice |
| Timing of the transfer and impact on creditors | Transfer should occur promptly | Delay should be avoided to protect creditor interests | Transfer set for earliest of Effective Date or three weeks after confirmation order |
Key Cases Cited
- In re Adelphia Communications Corp., 359 B.R. 65 (Bankr.S.D.N.Y.2007) (predictability and handling of venue matters in SDNY bankruptcy practice)
- Thompson v. Greenwood, 507 F.3d 416 (6th Cir.2007) (treatment of venue and transfer standards under §1406/§1412)
- In re General Motors Corp., 407 B.R. 463 (Bankr.S.D.N.Y.2009) (speed of prepack/enterprise cases and implications for venue)