454 B.R. 166
Bankr. D. Kan.2011Background
- Chapter 7 Trustee seeks to recover a prepetition transfer of $7,794.38 to Gulf City via wire transfer on January 15, 2009.
- Action is an adversary proceeding under 11 U.S.C. §§ 547, 548, and 550; claims include preferential transfer and avoidance under state law.
- Gulf City resides in the Southern District of Alabama with no Kansas presence; Trustee moves to venue under Rule 7012, incorporating Rule 12(b)(3).
- Defendant argues § 1409(b) small-dollar noninsider limit applies, restricting venue to defendant’s home district in Alabama.
- Trustee argues § 1409(a) applies because claims arise under the Bankruptcy Code; § 1409(b) is inapplicable to avoidance actions.
- Court must decide whether § 1409(b) applies to avoidance actions (preferences/fraudulent conveyances) and whether venue lies in Kansas.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1409(b) applies to avoidance actions. | Trustee: avoidance actions do not fall under § 1409(b). | Gulf City: § 1409(b) applies to avoidance actions when debts are small and noninsider. | § 1409(b) does not apply to avoidance actions; venue proper outside defendant’s home district. |
| Whether the small-dollar venue exception in § 1409(b) covers preferences and avoidance actions. | Trustee: exception codified by BAPCPA applies only to certain small-dollar claims, not avoidance actions. | Gulf City: applies to all small-dollar avoidance actions as part of § 1409(b). | The small-dollar exception does not apply to avoidance actions; not limited to preferences. |
| What constitutes proper venue for claims arising under the Bankruptcy Code (preferences/avoidance). | Trustee: claims arise under the Code; venue is in the district where Sunbridge case is pending. | Gulf City: venue should be defendant’s home district under § 1409(b). | Venue is proper in the court where the Sunbridge case is pending; proceedings arise under title 11. |
Key Cases Cited
- In re Guilmette, 202 B.R. 9 (Bankr.N.D.N.Y.1996) (affirms avoidance actions can arise under the Code (not limited by 1409(b)))
- In re Rosenberger, 400 B.R. 569 (Bankr.W.D.Mich.2008) (preference actions arise under the Code; omitted 'arising under' in § 1409(b) supports venue in debtor’s forum)
- In re Van Huffel Tube Corp., 71 B.R. 155 (Bankr.N.D.Ohio 1987) (preference actions deemed arising under the Code; supports venue in the bankruptcy court's district)
- In re Little Lake Indust., Inc., 158 B.R. 478 (9th Cir. BAP 1993) (discussed 1409(b) applicability to preferences; traditional readings favored home-district approach)