Bavelis v. Doukas (In Re Bavelis)Bavelis v. Doukas (In Re Bavelis)
MEMORANDUM OPINION AND ORDER ON MOTIONS REQUESTING DISMISSAL, TRANSFER, ABSTENTION OR REMAND
I. Introduction
In this adversary proceeding commenced by the debtor and debtor in possession in the underlying Chapter 11 bankruptcy case, George A. Bavelis (“Debtor”), the issue before the Court at this stage of the litigation is not whether the Debtor’s claims for relief have merit, but rather whether the Court should adjudicate those claims at all. The claims arise out of transactions between the Debtor and companies with which he is affiliated, on the one hand, and Mahammad Qureshi (“Qure-shi”), Ted Doukas (“Doukas”), Masroor Rab (“Rab”) and companies with which they are affiliated, on the other. The Debtor seeks relief against Qureshi, Dou-kas and Rab, as well as against other defendants, under both the Bankruptcy Code and Florida law. Among other things, the Debtor requests, pursuant to 11 U.S.C. §§ 544(b) and 548, the avoidance of certain transfers that he alleges were constructively fraudulent and the recovery of the property transferred, or its value, for the benefit of his bankruptcy estate under § 550.
In response, Qureshi, Doukas, Rab and certain of the other defendants ask the Court to dismiss, transfer, remand or abstain from hearing this adversary proceeding.
1
In so doing, they assert several legal
II. Jurisdiction
The Court has jurisdiction to hear and determine the Motions pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in the Southern District of Ohio. Although the Court’s authority to decide this adversary proceeding has been challenged, the Court has jurisdiction to determine whether it in fact has subject-matter jurisdiction.
See, e.g., Chicot Cnty. Drainage Dist. v. Baxter State Bank,
In addition, although the core nature of the claims asserted in this adver
III. Background
The background set forth below is based on the Court’s review of the Complaint, the Motions, the affidavits filed by the parties and the entire record of the Debt- or’s bankruptcy case and this adversary proceeding. The Court is providing this background only for the purpose of its analysis of the issues presented by the Motions, not for the purpose of making findings of fact relevant to the merits of the Complaint or to express any views regarding the veracity of the allegations made by the parties.
A. The Debtor’s Bankruptcy Case and His Assets
The Debtor grounds his position regarding venue on the pendency of his bankruptcy case in the Southern District of Ohio, which, in turn, is based in part on the location of his principal assets here. On July 20, 2010 (“Petition Date”), the Debtor commenced a case under Chapter 11 of the Bankruptcy Code in this Court. Among other things, he asserts that his principal assets were located in the Southern District of Ohio as of the Petition date,
see
Voluntary Petition (Doc. 1 in Case No. 10-58583), and those assets and their then current approximate values, included the following: a brokerage account opened by the Debtor in 2005 with Fifth Third Securities, Inc. (“Brokerage Account”) in Columbus, Ohio ($11.4 million);
2
business assets of an unspecified value; and real property that the Debtor has owned in Columbus for more than 24 years ($435,000).
3
The aggregate value of
B. Other Facts Relevant to the Court’s Adjudication of the Motions
1. The Debtor’s Allegations
a. The Events Leading to the Commencement of this Adversary Proceeding
According to the Debtor, the events that ultimately led to the filing of this adversary proceeding began in 2009 when he, FLOHIO, LLC (“FLOHIO”) and Bavelis Family, LLC (“Bavelis Family”) joined with Qureshi, MAQ Management and Qur-eshi Family to form additional companies — including three of the other Qureshi Defendants, FLOVEST, BMAQ and GMAQ (collectively, “Bavelis-Qureshi LLCs”) — for the purpose of investing in gas stations, office space and mixed-use real estate projects. The Debtor also alleges that the Bavelis-Qureshi LLCs obtained bank financing (including from Fifth Third Bank), that the Debtor and Qureshi executed guarantees in favor of the bank lenders (“Guarantees”) and that, while the Debtor advanced sums to service the bank debt, Qureshi failed to do so.
According to the Complaint, Doukas (1) gained the Debtor’s trust and persuaded him that he could help resolve business disputes he allegedly was having with Qur-eshi, (2) thereafter caused Nemesis — a company affiliated with Doukas — to obtain a 10% interest in the Bavelis-Qureshi LLCs by means of assignments the Court will collectively refer to as the “March 2009 Assignments” and (3) later caused the entire remaining interests held by the Debtor, FLOHIO and Bavelis Family in the Bavelis-Qureshi LLCs to be assigned to Nemesis through assignments that the Court will collectively refer to as the “December 2009 Assignments.” Doukas and Qureshi, according to the Debtor, were acting in concert to divert assets from the Bavelis-Qureshi LLCs to other entities (including, allegedly, to BNK and FLS), causing the Debtor further exposure on the Guarantees. The Debtor alleges that Rab also was acting in concert with the other Defendants.
In addition, the Complaint alleges that Doukas induced the Debtor to issue a promissory note (“Quick Capital Note” and, together with the March 2009 Assignments and the December 2009 Assignments, the “2009 Transactions”) to yet another Doukas-affiliated company — Quick Capital. Prior to the Petition Date, Quick Capital commenced a lawsuit against the Debtor in the Supreme Court of New York, County of Nassau (“New York State Court”) for amounts due under the Quick Capital Note (“Quick Capital Lawsuit”) despite, according to the Complaint, the Debtor’s having repaid to Quick Capital all amounts he actually borrowed from it.
b. The Claims for Relief Asserted in the Complaint
i. The Bankruptcy Law Counts
After reciting in extensive detail the facts summarized above, the Debtor asserts 14 counts against the Defendants and one count solely against another defendant who is not a party to the Motions.
4
In five
Requests for avoidance of the 2009 Transactions under the Bankruptcy Code also form part of the relief sought in Count One through Count Three. The relief requested in Count One and Count Two that is not sought pursuant to the Bankruptcy Code is discussed in the next subsection of the opinion. In addition to seeking in Count Three the avoidance of the Quick Capital Note pursuant to § 544(b), the Debtor also requests in that count a declaratory judgment that the Quick Capital Note (1) should be rescinded based on fraudulent inducement, (2) was not supported by adequate consideration and (3) has been fully satisfied. Quick Capital is the only Defendant that has filed a proof of claim against the Debtor (“Quick Capital Proof of Claim”). It filed its original proof of claim on December 3, 2010 and an amended proof of claim on February 7, 2011, both before the Debtor filed the Complaint, asserting a claim for $14 million, the amount allegedly due under the Quick Capital Note. See Claim No. 49-2. Thus, the allegations of Count Three, which were made before Quick Capital filed Claim No. 49-2, are now effectively objections to the Quick Capital Proof of Claim pursuant to § 502(b) of the Bankruptcy Code.
In Count Fifteen, the Debtor seeks the disallowance, pursuant to § 502(d) of the Bankruptcy Code, of any claims held by the Defendants, including any claim asserted by Quick Capital on account of the Quick Capital Note. The claims for relief discussed in this subsection of the opinion are referred to later as the “Bankruptcy Law Counts.”
ii. The State Law Counts
Portions of Count One and Count Two assert claims for relief under Florida law, as do the entirety of the remaining counts of the Complaint against the Defendants not previously discussed, which assert the following causes of action arising solely under Florida law: Court Four (declaratory relief as to transfers other than the 2009 Transactions, including certain transfers to FLS and BNK and certain transfers that Qureshi and Doukas allegedly caused the Bavelis-Qureshi LLCs to make); Count Five (tortious interference as to the Guarantees); Count Six (contribution and indemnification); Count Seven (breach of fiduciary duty and the duty of good faith); Count Nine (duress/violation of Fla. Stat. § 415.1111); Count Eleven (fraudulent inducement/promissory fraud); Count Twelve (negligent misrepresentation); Count Thirteen (promissory estop-pel) and Count Fourteen (civil conspiracy and/or aiding and abetting). As remedies,
2. The Allegations of the Qureshi Defendants
In contrast to the Debtor, the Qureshi Defendants have a markedly different view of the events described above. 6 They have brought to the Court’s attention two lawsuits pending in the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County, Florida (“Florida State Court”). Those lawsuits predate this adversary proceeding and relate to certain — but not all — of the 2009 Transactions. The parties to one or both of the lawsuits pending in the Florida State Court that also are parties to this adversary proceeding are the Debtor, FLOHIO, 7 FLOVEST, MAQ Management, Nemesis and Doukas.
By way of background, MAQ Management and — at least until the transactions with Nemesis occurred — FLOHIO, were members of FLOVEST. On December 21, 2009 (following the transactions with Nemesis), FLOHIO commenced a lawsuit against FLOVEST in the Florida State Court seeking the dissolution of FLO-VEST and the appointment of a receiver for the windup and liquidation of that entity (“Dissolution Lawsuit”) based on the allegation that FLOVEST’s members (which FLOHIO alleged continued to include itself) were deadlocked and thus unable to effectively conduct business in connection with projects in Florida and Ohio.
On December 30, 2009 — after the commencement of the Dissolution Lawsuit but before the Petition Date — MAQ Management commenced a lawsuit against FLO-HIO and the Debtor requesting that the Florida State Court require FLOHIO to sell any interest it had in FLOVEST to MAQ Management and also requesting that the Florida State Court hold the Debtor in breach of fiduciary duties he purportedly owed to MAQ Management (“Specific Performance Lawsuit” and, together with the Dissolution Lawsuit, “Florida Lawsuits”). On February 11, 2010, FLOHIO asserted a counterclaim in the Specific Performance Lawsuit request
During a hearing held in the Dissolution Lawsuit, an attorney for FLOYEST offered a competing view of certain of the events described in the Complaint. In pertinent part, the attorney for FLOYEST stated as follows:
[FLOHIO] decided it did not want to be part of ... MAQ Management anymore, and pursuant to the terms of the operating agreement extended an offer for MAQ Management to purchase [FLOHIO’s] shares.... So, [FLOHIO] sent this offer ... but added some terms that are not in the operating agreement [asking that] Mr. George Ba-velis individually ... be released from all of these loans that he decided to personally guarantee, even though the operating agreement doesn’t require it. So ... MAQ Management ... sen[t] back the certified letter accepting the offer to purchase [FLOHIO’s] interest ... for $100,000 ... pursuant to the terms of the operating agreement taking out any extra terms that aren’t specifically set forth in the operating agreement. ... [T]he operating agreement says you can seek specific performance to require them to conform to the terms of the operating agreement. So ... we filed an action for specific performance. There [are] a couple other counts against other entities, but we filed an action for specific performance.... [FLOHIO] approaches an entity known as Nemesis of LI Corp ... a company that was created by Mr. Ted Doukas ... [FLOHIO] transfers 100 percent of its interest in [FLOYEST] to Nemesis of LI Corp.... So ... despite the fact that [FLOHIO] had already agreed or made the offer or triggered the sale of their shares, they then transferred the sale of their shares to a wholly owned third separate party ... [B]asically our complaint is suing for specific performance against [FLOHIO] to require them to sell. We are also suing Mr. Bavelis individually and as an agent of [FLO-HIO] because he breached his fiduciary duty to [MAQ Management] by requiring as a condition of the sale that he be personally released....
See Transcript attached as Exhibit E to Qureshi Motion at 11-14.
3. The Allegations of the Doukas Defendants
As described in more detail below, the Doukas Defendants seek a transfer of several of the claims asserted in the Complaint to New York and others to Florida. In support of this request, Doukas has filed an affidavit (“Doukas Bankruptcy Court Affidavit”), see Exhibit A to Doc. 70, alleging that the 2009 Transactions have little, if any, connection with Ohio. See Doukas Bankruptcy Court Affidavit ¶ 10. He also states that “[virtually all of the witnesses concerning the allegations of the Complaint are residents of the State of Florida, in particular, Palm Beach County, Florida.” Id. ¶ 11.
In an affidavit he filed in the New York State Court, a copy of which is attached as part of Exhibit N to the Fifth Third Motion (“Doukas State Court Affidavit”),
8
IV. Arguments of the Parties
The Qureshi Defendants request dismissal based on a purported lack of both personal and subject-matter jurisdiction as well as on allegations of insufficiency of process and service of process. Each of the Defendants contends that venue of this adversary proceeding is improper in the Southern District of Ohio, that it should be transferred to another district and that both mandatory and permissive abstention apply. Finally, the Doukas Defendants assert that equitable remand is appropriate.
V. Legal Analysis
A. Subject-Matter Jurisdiction
Before addressing the other issues presented by the Motions, the Court first must consider whether it has jurisdiction over the Complaint. The Court must do so with respect to each of the Bankruptcy Law Counts and each of the State Law Counts even though certain of those counts are asserted only against parties— the Doukas Defendants — that have not challenged the Court’s subject-matter jurisdiction.
See Rhiel v. Cent. Mortg. Co.
(In re Kebe),
The Qureshi Defendants have challenged the Court’s subject-matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure (“Civil Rules(s)”), made applicable in this adversary proceeding by Rule 7012 of the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rule(s)”). The standard governing a motion brought under Civil Rule 12(b)(1) depends on whether the party seeking dismissal “makes a facial or factual attack on the plaintiffs complaint.”
Orrand v. Kin Contractors, LLC,
No. 2:09-cv-1129,
The Court’s jurisdiction over this adversary proceeding begins with the Court’s jurisdiction over the Debtor’s bankruptcy case. Jurisdiction over bankruptcy cases derives from the combined effect of: (1) two provisions of the Judicial Code^ — 28 U.S.C. § 1334(a) (stating that “the district courts shall have original and exclusive jurisdiction of all cases under title 11 \i.e., the Bankruptcy Code,])” and 28 U.S.C. § 157(a) (stating that “[e]ach district court may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district!,]”)— and (2) the general order of reference that has been entered in the Southern District of Ohio pursuant to 28 U.S.C. § 157(a). In turn, § 1334(b) of the Judicial Code sets forth three categories of civil proceedings over which the district courts (and the bankruptcy courts by reference) have original, but not exclusive, jurisdiction: (1) those “arising under title 11,” (2) those “arising in” bankruptcy cases and (3) those “related to” such eases. 28 U.S.C. § 1334(b). The Qureshi Defendants contend that the Court does not have jurisdiction over this adversary proceeding pursuant to any of these categories. As explained below, however, the Bankruptcy Law Counts fall within the first category (proceedings arising under title 11), and the State Law Counts fall within the third (proceedings related to a case under title 11). In short, the Court has jurisdiction over the claims for relief set forth in each count of the Complaint because each of these claims either arises under the Bankruptcy Code or is related to the Debtor’s bankruptcy case.
1. The Bankruptcy Law Counts
“The phrase’ arising under title 11’ describes those proceedings that involve a cause of action created or determined by a statutory provision of title 11[.]”
Michigan Emp’t Sec. Comm’n v. Wolverine Radio Co. (In re Wolverine Radio Co.),
Other than the portion of Count Three in which the Debtor asserts full satisfaction and lack of consideration, the Bankruptcy Law Counts all: (1) relate either to an allegedly fraudulent transfer or fraudulently incurred obligation — or to a claim objection predicated on the avoidance, preservation or recovery of such a transfer or obligation; and (2) arise under one or more of the following provisions of the Bankruptcy Code: §§ 502(d), 544(b), 548, 550 and 551. The portion of Count Three in which the Debtor asserts full satisfaction and lack of consideration under state law essentially became, with the filing of the Quick Capital Proof of Claim, a claim objection pursuant to § 502(b)(1) of the Bankruptcy Code. See 11 U.S.C. § 502(b)(1) (providing for the disallowance of a claim when “such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured”). Accordingly, the Bankruptcy Law Counts all arise under the Bankruptcy Code, and the Court has subject-matter jurisdiction over them pursuant to 28 U.S.C. § 1334(b).
2. The State Law Counts
Because the State Law Counts do not involve claims for relief “created or determined by a statutory provision of title 11,”
Wolverine Radio,
Nonetheless, the Court has jurisdiction over the State Law Counts because those counts are “related to” the Debtor’s bankruptcy case. As the Court recently explained in Kebe:
The Court of Appeals for the Sixth Circuit follows the test for determining “related to” jurisdiction that was enunciated in Pacor, Inc. v. Higgins (In re Pacor),743 F.2d 984 (3d Cir.1984):
The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.... An action is related to bankruptcy if the outcome could alter the debtor’s rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.
Wolverine Radio,930 F.2d at 1142 (quoting Pacor,743 F.2d at 994 ).
Kebe,
The extent of the Court’s subject-matter jurisdiction — that is, whether it is core or non-core — is relevant to several other arguments made by the Defendants that are addressed later in different parts of this opinion, so the Court will discuss the core/non-core issue here. According to the Sixth Circuit, a core proceeding is one that “ ‘either invokes a substantive right created by federal bankruptcy law [that is, it arises under the Bankruptcy Code] or one which could not exist outside of the bankruptcy [that is, it arises in a bankruptcy case].’ ”
Lowenbraun v. Canary (In re Lowenbraun),
Each of the Bankruptcy Law Counts arises under, and invokes rights created by, the Bankruptcy Code and therefore each is a core proceeding under the Sixth Circuit’s definition of that term.
See also
28 U.S.C. § 157(b)(2)(B) (the allowance or disallowance of claims against the estate are core proceedings); 28 U.S.C. § 157(b)(2)(H) (proceedings to determine, avoid or recover fraudulent conveyances are core proceedings). This is equally true of the fraudulent transfer actions that are based in part on state law and the claim objection based on § 502(d).
See Gulf States Exploration Co. v. Manville Forest Prods. Corp. (In re Manville Forest Prods. Corp.),
Similarly, Count Three is a core proceeding even to the extent that it is predicated on the state-law based objections to the Quick Capital Proof of Claim. One reason for this is that the objections involve the “allowance or disallowance of a claim against the estate ... [.]” 28 U.S.C. § 157(b)(2)(B).
See also Bottcher v. Emigrant Mortg. Co., Inc. (In re Bottcher),
Unlike the Bankruptcy Law Counts, however, the State Law Counts are non-core proceedings. The Court does not reach this conclusion merely because Florida law will affect the resolution of the State Law Counts. In fact, § 157(b)(3) of the Judicial Code mandates that a “determination that a proceeding is not a core proceeding shall not be made solely on the basis that its resolution may be affected by State law.” 28 U.S.C. § 157(b)(3). Indeed, it is not uncommon for applicable state law to affect the outcome of core proceedings arising under the Bankruptcy Code. And the Court finds that the State Law Counts are non-core despite also finding, as explained below in connection with its discussion of permissive abstention, that bankruptcy law issues predominate
Rather, the State Law Counts are non-core because they do not invoke a substantive right created by the Bankruptcy Code and do, in fact, exist outside of bankruptcy. Like other non-core proceedings, each claim asserted in the State Law Counts: “1) is not
specifically
identified as a core proceeding under § 157(b)(2)(B) through (N), 2) existed prior to the filing of the bankruptcy case, 3) would continue to exist independent of the provisions of title 11, and 4) [gives rise to] rights [and] obligations [that] are not significantly affected as a result of the filing of the bankruptcy case.”
Nationwide,
Section 157(b), which “sets forth a non-exclusive list of core proceedings!,]”
Gordon Selr-Way,
The only other basis on which the Court could find that the State Law Counts are core claims is that their resolution would affect the adjustment of the debtor-creditor relationship within the meaning of 28 U.S.C. § 157(b)(2)(0).
See Gordon Sel-Way,
B. Personal Jurisdiction
The Qureshi Defendants also contend, pursuant to Civil Rule 12(b)(2), that the Court lacks personal jurisdiction over them.
12
A court may decide a motion brought under Civil Rule 12(b)(2) “on the basis of affidavits alone; or it may permit discovery in aid of the motion; or it may conduct an evidentiary hearing on the merits of the motion.”
Serras v. First Tenn. Bank Nat'l Ass’n,
The Qureshi Defendants argue that the Court lacks personal jurisdiction over them both under Ohio’s long-arm statute and under the decisions issued by the United States Supreme Court, such as
Int’l Shoe Co. v. Washington,
The reason their attempt to dismiss the case on that basis must fail is that the Court may, if the Qureshi Defendants receive sufficient process and service of process (an issue discussed below), exercise personal jurisdiction over them based on
For reasons that numerous other courts have thoroughly explained in decisions the Qureshi Defendants failed to cite — including several decisions issued by the Sixth Circuit Court of Appeals — minimum contacts with the United States, rather than with the forum state, are sufficient for the purpose of establishing personal jurisdiction over a defendant when the defendant is served pursuant to a provision providing for nationwide service of process. See
Rieser v. Milford
(In re Chari),
Here, the Debtor attempted to serve summonses on the Qureshi Defendants (as well as the other Defendants) pursuant to a rule providing for nationwide service of process. See Fed. R. Bankr.P. 7004(b) (“[S]ervice may be made within the United States by first class mail postage prepaid....”); Fed. R. Bankr.P. 7004(d) (“The summons and complaint and all other process except a subpoena may be served anywhere in the United States.”). For the reasons explained later in this opinion, those summonses will need to be reissued and re-served on the Qureshi Defendants. Once that happens, however, a lack of jurisdiction under Ohio’s long-arm statute will present no impediment to the Court’s exercise of personal jurisdiction over the Qureshi Defendants.
Nor will due process. Under the Judicial Code, with limited exceptions not applicable here, an adversary proceeding over which a bankruptcy court has either core jurisdiction or related-to jurisdiction may be commenced in the district in which the debtor’s bankruptcy case is pending,
see
28 U.S.C. § 1409(a), and there is “nothing fundamentally unfair in permitting” the proceeding to be brought in that district despite the possibility that doing so
C. Process and Service of Process upon the Qureshi Defendants
1. Insufficiency of Process and Service of Process
The Qureshi Defendants rely on the premise that “service of process upon any defendant over whom the court cannot exercise personal jurisdiction is defective as a matter of law[,]” Qureshi Motion at 13, in support of their argument that service of process on them was insufficient. Id. This argument is unavailing for the Qure-shi Defendants because, as discussed above, the Court may exercise personal jurisdiction over them once they receive sufficient service of process pursuant to the provision for nationwide service of process set forth in Bankruptcy Rule 7004. 16
Insufficient process is a defense that can be asserted by motion under Civil Rule 12(b)(4). Although they could have done so in the Qureshi Motion or in a reply
to
the Combined Memorandum, the Qureshi Defendants have not supported their allegation of insufficient process with details regarding the manner in which the process served on them was insufficient. They should have done so if they intended to contest insufficiency of process. “A party objecting to the sufficiency of process under Rule 12(b)(4) ‘must identify substantive deficiencies in the summons, complaint or accompanying documentation.’ ”
Fly Brazil Grp., Inc. v. Gov’t of Gabon, Africa,
Nonetheless, the Court is not required to deem the process and service of process arguments waived.
See Hudgens v. Wexler & Wexler,
A motion based on insufficiency of process typically relates to the form of the summons or to its contents rather than to the manner of its service.
See Majewski v. Highland Bank and Granite,
No. 093063,
Where, as here, the insufficiency in a summons arises from the failure to name the defendant, the summons “could be challenged under [Civil] Rule 12(b)(4) on the theory that the summons does not properly contain the names of the parties, or under [Civil] Rule 12(b)(5) [relating to insufficient service of process] on the ground that the wrong party — a party not named in the summons — has been served.”
Gartin v. ParPharm. Cos., Inc.,
Both Qureshi (Doc. 57) 17 and Rab (Doc. 58) were served with a summons and a copy of the Complaint pursuant to Bankruptcy Rule 7004(b)(1) by regular, first class United States mail postage prepaid at 4800 N. Federal Highway, Suite 200E, Boca Raton, FL 33431. Under Bankruptcy Rule 7004(b)(1), such service is sufficient if 4800 N. Federal Highway is the address for Qureshi’s and Rab’s “dwelling house or usual place of abode or ... the place where the individual regularly conducts a business or profession.” Fed. R. Bankr.P. 7004(b)(1). During a hearing held on November 23, 2010 on the Debt- or’s request for a preliminary injunction (which was resolved by an agreed order), counsel for Qureshi stated that 4800 N. Federal Highway is the location of Qure-shi’s office. In addition, Rab is the registered agent of FLS and in that capacity was served with a summons and a copy of the Complaint (see Doc. 50) at the 4800 N. Federal Highway address. Accordingly, Qureshi and Rab would have been properly served had they been named in the summonses sent to them.
As just noted, FLS, a Florida limited liability company, was served with a summons and a copy of the Complaint
(see
Doc. 50) by regular, first class United States mail postage prepaid c/o Masroor Rab, Registered Agent at the 4800 N. Federal Highway address. Similarly, BMAQ (Doc. 48), BNK (Doc. 49), FLO-VEST (Doc. 51) and GMAQ (Doc. 52) — all of which are Florida limited liability companies — were served with summonses and copies of the Complaint by regular, first class United States mail postage prepaid addressed c/o the Newmark Law Firm, Registered Agent, 2650 West State Road 84, 101C, Fort Lauderdale, FL 33312. Bankruptcy Rule 7004(b)(3) requires that service “[u]pon a domestic or foreign corporation or upon a partnership or other unincorporated association [be made] by mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent, or
to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant.”
The Debtor served MAQ Management, LLC (Docs. 53 & 54) — rather than Defendant MAQ Management, Inc. — pursuant to Bankruptcy Rule 7004(b)(3) by regular, first class United States mail, postage prepaid, at the 4800 N. Federal Highway address. Because the Defendant named in the Complaint, MAQ Management, Inc., is a corporation, the summons and complaint sent to that address should have been directed “to the attention of an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process.... ” Fed. R. Bankr.P. 7004(b)(3). But the Debtor served only “MAQ Management, LLC” — • not an officer, managing or general agent or statutory agent — at the 4800 N. Federal Highway address. The Debtor, however, also served “MAQ Management, LLC c/o Tracy B. Newmark, Esq., Registered Agent, 2650 West State Road 84, 101C Fort Lauderdale, FL 33312.” Newmark is the registered agent for MAQ Management, so service of process on it would have been effective by virtue of the service on Newmark had MAQ Management been properly named in the summons. 18
2. Consequences of Insufficient Process and Service of Process
“Due process requires proper service of process in order to obtain in personam jurisdiction.”
Friedman v. Estate of Presser,
Although “[Civil] Rule 4 is a flexible rule which principally requires sufficient notice to the party of claims brought against it” and “a defendant’s answer and appearance in an action should be enough to prevent any technical error in form from invalidating the process[,]”
Gottfried v. Frankel,
In other words, the Qureshi Defendants, who have not waived service of process, have done nothing that would permit the Court to disregard the insufficiency of the summonses served on them. The
The need for the Debtor to correct the deficiencies in process and service of process raises the issue of whether the Debtor’s doing so at this stage of the litigation would be timely. Civil Rule 4(m) governs the time limit for service of a complaint and summons. That rule states in pertinent part as follows:
If a defendant is not served within 120 days after the complaint is filed, the court' — on motion or on its own after notice to the plaintiff — must dismiss the action without prejudice against that defendant or order that service be effected within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period....
Fed.R.Civ.P. 4(m). As previously discussed, the Debtor failed to effectively serve the Qureshi Defendants, and the time limit for service imposed by Civil Rule 4(m) — 120 days after the filing of the Complaint — has already expired. If the Debtor were to demonstrate good cause for his failure, the Court would be required to extend the time for service.
See
Fed.R.Civ.P. 4(m) (stating that “if the plaintiff shows good cause for the failure, the court
must
extend the time for service for an appropriate period” (emphasis added)). The Debtor, however, has not attempted to demonstrate good cause for his failure to serve proper summonses on the Qureshi Defendants and may well have been unable to demonstrate good cause if he were required to do so.
See Friedman,
In addition, under Civil Rule 4(m), if a defendant is not timely served and no good cause is shown, the Court must either “dismiss the action without prejudice against that defendant
or order that service be made within a specified time.”
Fed R. Civ. P. 4(m) (emphasis added). So the Court has the discretion — even absent a showing of good cause' — to order that service be made upon the Qureshi Defendants within a specified time.
See
Fed. R.Civ.P. 4(m) advisory committee’s note (1993 Amendments) (“The new subdivision explicitly provides that the court shall allow additional time if there is good cause for the plaintiffs failure to effect service in the prescribed 120 days, and authorizes the court to relieve a plaintiff of the consequences of an application of this subdivision even if there is no good cause shown.”);
Henderson v. United States,
The Qureshi Defendants would not be prejudiced by allowing this adversary proceeding to proceed once the summonses are corrected and re-served; accordingly, dismissal based on defective process and service of process would be inappropriate.
See Gottfried,
D. Venue of the Adversary Proceeding
Alleging improper venue, the Defendants also move for dismissal pursuant to Civil Rule 12(b)(3). The Debtor has the burden' — which for the reasons set forth below the Court concludes he has met — of establishing proper venue.
See Ring v. Roto-Rooter Servs. Co.,
No. 1:10—cv-179,
Once again, no evidentiary hearing is necessary. The Defendants’ position is that the Southern District of Ohio is an
1. Venue of the Debtor’s Case
What is relevant to the issue of whether venue of this adversary proceeding is proper here in the first instance is that the Debtor commenced his Chapter 11 case in the Southern District of Ohio. Venue of the case “is presumed to be proper [here], and the party challenging venue bears the burden of establishing by a preponderance of the evidence that the case was incorrectly venued.”
In re Peachtree Lane
Assocs.,
Ltd.,
Indeed, the Court could have held that the Defendants waived any objections they might have had to the venue of the Debtor’s case even if the case had been improperly venued in the Southern District of Ohio. Section 1406 of the Judicial Code “applies to [the transfer of] cases, including bankruptcy cases, filed in an improper venue[.]”
Thompson v. Greenwood,
Moreover, even if the Defendants had not waived their objections to the venue of the Debtor’s case, the Court almost certainly would have held that venue is proper in the Southern District of Ohio. An
With respect to venue of a bankruptcy case, § 1408(1) of the Judicial Code provides as follows:
[A] case under title 11 may be commenced in the district court for the district — (1) in which the domicile, residence, principal place of business in the United States, or principal assets in the United States, of the person or entity that is the subject of such case have been located for the one hundred and eighty days immediately preceding such commencement, or for a longer portion of such one-hundred-and-eighty-day period than the domicile, residence, or principal place of business, in the United States, or principal assets in the United States, of such person were located in any other district[.]
28 U.S.C. § 1408(1). Because the four grounds for venue are set forth in the alternative, “[i]f it is established that the Debtor meets any
one
of the four tests (domicile, residence, principal place of business or principal assets), venue is proper in [this district].”
In re Miller,
Moreover, had the Defendants contested the venue of the Debtor’s case, the Court likely would have found that venue of the Debtor’s case is proper in the
2. Transfer of the Debtor’s Case
The Defendants have not requested transfer of the Debtor’s bankruptcy case. As explained further below, however, there is a strong presumption in favor of an adversary proceeding being heard in the district where the debtor’s bankruptcy case is pending. And, as noted above, certain courts have held that bankruptcy courts have the authority to transfer the venue of a debtor’s case
sua sponte. See, e.g., In re B.L. of Miami, Inc.,
A bankruptcy court may transfer a properly venued case to “a district court for another district, in the interest of justice or for the convenience of the parties.” 28 U.S.C. § 1412.
See also
Fed. R. Bankr.P. 1014(a)(1);
Enron Corp.,
On balance, the Court concludes that the transfer of the venue of the Debt- or’s case would not be appropriate. First, the most important factor — the economic and efficient administration of the Debtor’s estate — weighs against transfer of the case. The Debtor’s case has been pending in this Court since July 2010, the Court has become familiar with the parties and with the issues present in the Debtor’s case. The Court has obtained that familiarity both in connection with this adversary proceeding as well as through several hearings and status conferences on other matters in the case. For example, it has held hearings in connection with the Fifth Third Motion, which was filed by a creditor that, together with its affiliates, holds claims in excess of $7.9 million. A transfer of a case such as this — in which the Debtor intends to reorganize rather than liquidate — would not serve the economic and efficient administration of the estate or the interest of justice.
See In re Vienna Park Props.,
The Debtor has his principal assets, a business office and residential real property in the Southern District of Ohio; likewise, the other individuals responsible for the financial restructuring of the affairs of the Debtor and the development of a plan of reorganization' — including the bankruptcy counsel and financial consulting firm that the Debtor retained with the Court’s approval — are located in this district. Those facts further support a finding that the economic and efficient administration of the Debtor’s estate would be served by retaining venue of the Debtor’s case in the Southern District of Ohio.
See Enron,
The proximity
of
creditors to the Court also supports keeping the case in the Southern District of Ohio. “Consideration of the proximity and convenience of creditors must include the number of creditors as well as the amounts owed.”
Dunmore,
The claims bar date established by the Court in the Debtor’s case passed on November 24, 2010. Of the 51 proofs of claim filed on the claims register, 27 claims were filed by banks (or their affiliates) having their main offices in the Southern District of Ohio (Fifth Third Bank, Huntington
Other creditors located in the Southern District of Ohio who did not file proofs of claim (apparently because their claims were not identified as contingent, unliqui-dated or disputed and therefore did not need to file proofs of claim in order to receive any distribution to which they are entitled)
24
hold claims that aggregate approximately $2.8 million: First Bexley Bank; Genesis Properties; Magna National Financial, LLC; Pro-1, LLC; Riverfront Properties; Bason, Properties; Sfak-ianakis Family, LLC; Sofia Hondroulis; Stella Studer; Tina Manokas; Vasiliki Drake; and Viki Presock. Creditors who are in this same position who are located in districts that are as proximate to the Southern District of Ohio as they are to the Southern District of Florida — Stavros & Roula Tsirikolias (Illinois) and Lou Pa-dula (California) — hold claims in the aggregate approximate amount of $1.1 million. By contrast, with the exception of a single secured creditor (Independent Bankers’ Bank of Florida, which filed a proof of claim), each of the creditors (other than the Defendants) located in Florida whose claims were included on the Debt- or’s schedules were identified as holding claims that are contingent, unliquidated and/or disputed and therefore needed to file proofs of claim in order to receive any distribution to which they were entitled. Among those creditors, Branch Banking and Trust Company and First Southern
In sum, an analysis of the Debtor’s claims register and schedules demonstrates that creditors who either are located in the Southern District of Ohio or in districts that are as proximate to this district as they are to the Southern District of Florida
25
(or who regularly appear in the Southern District of Ohio) hold over 90% in number and approximately 50% in amount of the claims filed or scheduled against the Debtor. These facts support retaining the venue of the case in the Southern District of Ohio.
See Enron Corp.,
The Debtor could have commenced his Chapter 11 case (and thus this adversary proceeding) in a bankruptcy court in Florida given his domicile in that state. If he had, the presumption would have been that the case and this adversary proceeding should have remained there. No doubt the Defendants would have preferred that venue rather than the Southern District of Ohio. But the Defendants’ preference provides no basis for this Court to decline to exercise “its virtually unflagging obligation to exercise the jurisdiction granted to it by Congress.”
Logan v. Credit Gen. Ins. Co. (In re PRS Ins. Grp., Inc.),
3. Ramifications for the Yenue of the Adversary Proceeding
Venue of an adversary proceeding generally is proper in the district where the associated bankruptcy case is pending.
See
28 U.S.C. § 1409(a) (subject to certain exceptions not applicable here, “a proceeding arising under title 11 or arising in or related to a case under title 11 may be commenced in the district court in which such case is pending”);
Enron Corp. v. Dynegy Inc. (In re Enron Corp.),
No. 01-16034,
E. Transfer of Venue of the Adversary Proceeding
This brings the Court to the issue of whether the adversary proceeding itself should remain in the Southern District of Ohio. The Defendants contend that, if this adversary proceeding is not dismissed, the Court should transfer it to another district pursuant to 28 U.S.C. § 1412. 26 The Qure-shi Defendants request transfer of the entire adversary proceeding to the Southern District of Florida. See Qureshi Motion at 17. The Doukas Defendants request transfer of the portion of the Complaint related to the Quick Capital Lawsuit to the New York Federal Court and transfer of the balance of the adversary proceeding to the Southern District of Florida. See Dou-kas Motion at 7,10-11.
The Court begins the transfer analysis by recognizing that, in general, “[t]here is a strong presumption in favor of placing venue in the district where the bankruptcy proceedings are pending.”
MD Acquisition, LLC v. Myers,
The decision to transfer an adversary proceeding is discretionary and should be undertaken with caution given that “[t]ransfer is a cumbersome disruption of the Chapter 11 process.”
Enron Corp. v. Arora (In re Enron Corp.),
Under 28 U.S.C. § 1412, “[a] district court may transfer a case or proceeding under title 11 to a district court for another district, in the interest of justice or for the convenience of the parties.” See also Fed. R. Bankr.P. 7087 (“On motion and after a hearing, the court may transfer an adversary proceeding or any part thereof to another district pursuant to 28 U.S.C. § 1412....”). Because § 1412 is written in the disjunctive, the Court may exercise its discretion to transfer an adversary proceeding if the transfer would either (1) be in the interest of justice or (2) serve the convenience of the parties. Arora, 317 B.R. at 637. In analyzing whether a transfer would be in the interest of justice, courts typically weigh the following factors:
1) whether transfer would promote the economic and efficient administration of the bankruptcy estate;
2) whether the interests of judicial economy would be served by the transfer;
3) whether the parties would be able to receive a fair trial in each of the possible venues;
4) whether either forum has an interest in having the controversy decided within its borders;
5) whether the enforceability of any judgment would be affected by the transfer; and
6) whether the plaintiffs original choice of forum should be disturbed.
Id. at 638-39. In analyzing the convenience of the parties, courts have considered the (1) location of the plaintiff and defendant, (2) ease of access to the necessary proof, (3) convenience of the witnesses and the parties and their relative physical and financial condition, (4) availability of the subpoena power for unwilling witnesses and (5) expense of obtaining unwilling witnesses. Id. at 639. For the reasons explained below, the Court concludes that, on balance, the factors to be considered in analyzing both the interest of justice and the convenience of the parties weigh against the transfer of this adversary proceeding to another district.
1. The Interest of Justice
In deciding whether the transfer of an adversary proceeding would be in the interest of justice, courts give the greatest weight to whether the proposed transfer would promote the economic and efficient administration of the bankruptcy estate.
See id.
at 640;
Gunner v. Anthony (In re Heritage Fin. Network, Inc.),
For several reasons, the Court concludes that transferring this adversary proceeding to another district would not promote the economic and efficient administration of the bankruptcy estate and also would not serve the interests of judicial economy. First, as with the transfer of the case, transfer of the adversary pro
Furthermore, the Defendants’ reliance on the pendency of the Quick Capital Lawsuit and the Florida Lawsuits to support their transfer argument is misplaced. The pendency of the Quick Capital and Florida Lawsuits provides no basis for the Court to find that the transfer would be in the interest of justice. As the background provided by the Court earlier in this opinion demonstrates, the Quick Capital Lawsuit relates only to the Quick Capital Note, not to the other counts against the Doukas Defendants. The Doukas Defendants contend that the causes of action asserted against them in the Complaint should have been raised as compulsory counterclaims in the Quick Capital Lawsuit. Even if that is true — an issue the Court need not reach — the Debtor did not bring any such claims in the New York State Court and in fact, as explained further below, could not have done so with respect to claims that he is now bringing only in his capacity as debtor in possession. Moreover, the documents provided by the parties to this Court demonstrate that the Florida Lawsuits relate primarily, if not entirely, to FLOVEST, not to the other Bavelis-Qure-shi LLCs. The other pending lawsuits, therefore, encompass only a portion of the claims asserted by the Debtor in this adversary proceeding.
In fact, this adversary proceeding is fundamentally different from the Quick Capital Lawsuit and the Florida Lawsuits or, for that matter, any action the Debtor conceivably could have brought outside of bankruptcy. The gravamen of the Debt- or’s Complaint is that the 2009 Transactions constitute fraudulent transfers or, in the instance of the Quick Capital Note, a fraudulently incurred obligation.
27
Prior to the Petition Date, creditors of the Debt- or or of the other entities that made the allegedly fraudulent transfers, including FLOHIO, might have been able to bring such constructive fraudulent transfer actions. The Debtor, however, could not have brought them without filing a bankruptcy case. He has the right to bring the actions only because he is acting in his capacity as debtor in possession on behalf of the bankruptcy estate.
See Official Comm. of Unsecured Creditors of Cybergenics Corp. v. Chinery (In re Cybergenics Corp.),
This does not mean, however, that the Debtor is going to succeed. The merits of the adversary proceeding, including the fraudulent transfer actions, are for a later date. But, to the extent that the Debtor has the right to bring any fraudulent transfer actions, only the pendency of his bankruptcy case and the Bankruptcy Code afford him that right. Accordingly, the avoidance actions are appropriately determined in the district where the Debtor’s bankruptcy case is pending and (unless the reference is withdrawn) by this Court as the bankruptcy court presiding over the Debtor’s case. This is especially true where, as here, the ground for the Debt- or’s requested recovery — avoidance of allegedly fraudulent transfers — is primarily based on the Bankruptcy Code. So the factor to which the courts give the greatest weight in analyzing the interest of justice — whether the proposed transfer would promote the economic and efficient administration of the bankruptcy estate — counsels heavily against transfer of the core claims, as do the interests of judicial economy. Given the close connection between the core and non-core matters, both of those factors also lead the Court to conclude that the related, non-core matters should be decided by this Court as well.
The other factors to be considered when determining whether the interest of justice warrants transfer are either neutral or weigh against transfer. As the Court suggested earlier in this opinion, it has not prejudged the merits of the adversary proceeding, so there is no reason to believe that the parties would be unable to receive a fair trial in this Court. Given that the Debtor’s bankruptcy case is pending here (and properly so), the Southern District of Ohio has just as much an interest in having the controversy decided within its borders as does the Southern District of Florida or the Eastern District of New York. The Court finds that the enforceability of any judgment would not be affected whether a transfer occurs or not. Finally, the Court finds no good reason for disturbing the Debtor’s choice of the Southern District of Ohio as the forum in which to assert the Bankruptcy Law Counts and the State Law Counts.
2. The Convenience of the Parties
Likewise, a consideration of the convenience of the parties supports the Court’s decision to decline to transfer this adversary proceeding to another district. The Debtor has residential real property, a business office and his primary assets in the Southern District of Ohio, and has chosen this district as his forum. Thus, the Southern District of Ohio clearly is convenient for him. The Court has no doubt that it would be more convenient for most, if not all, of the Defendants to have this adversary proceeding heard in Florida or New York. But, as previously discussed, after balancing the interests of parties in bankruptcy cases, Congress has provided — with limited exceptions not applicable here — that adversary proceedings may be commenced in the district where the debtor’s bankruptcy case is pending.
See 28
U.S.C. § 1409(a). And the Defendants have not set forth in their affidavits or their other submissions to the Court anything suggesting that it would unduly inconvenience them to litigate this adversary proceeding here. The Court has no reason to believe that it would unduly prejudice them to present evidence on the issues to be decided in this adversary pro
Moreover, because the parties’ disputes currently are pending in both Florida and New York, it makes sense to centralize the litigation in the Southern District of Ohio, which is relatively accessible from both of the other states.
Cf. Post-Confirmation Trust v. Berry (In re Fleming Cos.),
Finally, although the Qureshi Defendants base their request for a transfer in part on their assertion that courts located in Florida have personal jurisdiction over them, this Court also will have personal jurisdiction over the Qureshi Defendants once the Debtor completes service of process on them. For all of these reasons, the Court concludes that neither the convenience of the parties nor the interest of justice weighs in favor of a transfer of this adversary proceeding to another district.
F. Mandatory Abstention
The Defendants contend that mandatory abstention applies here — the Qureshi Defendants based on the Florida Lawsuits,
see
Qureshi Motion at 14, and the Doukas Defendants based on the Quick Capital Lawsuit.
See
Doukas Motion at 7.
Mandatory abstention is governed by 28 U.S.C. § 1334(c)(2), which provides as follows:
Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction.
28 U.S.C. § 1334(c)(2). Based on this statute, the Sixth Circuit has held that “[flor mandatory abstention to apply, a proceeding must: (1) be based on a state law claim or cause of action; (2) lack a federal jurisdictional basis absent the bankruptcy; (3) be commenced in a state forum of appropriate jurisdiction; (4) be capable of timely adjudication; and (5) be a non-core proceeding.”
Lowenbraun,
1. The Bankruptcy Law Counts
Under
Loewnbraun,
mandatory abstention applies, if at all, only to matters within the Court’s non-core, related-to jurisdiction, not to matters within the Court’s core jurisdiction that arise under the Bankruptcy Code.
See also Nat’l Century,
Further, contrary to the suggestion of the Doukas Defendants, the Court also need not abstain from adjudicating Count Three in favor of the Quick Capital Lawsuit. For the reasons previously discussed, Count Three is core in its entirety. But even if it were not, mandatory abstention nonetheless would not apply because, as explained below, the federal courts would have had jurisdiction over the Quick Capital Lawsuit absent the Debtor’s bankruptcy. After its commencement in the New York State Court, the Quick Capital Lawsuit was removed by the Debtor to the New York Federal Court.
See
Notice of Removal filed with the New York Federal Court (copy attached as Exhibit A to Doc. 71).
28
The Quick Capital Lawsuit was removed by the Debtor before the Petition Date and accordingly was not removed pursuant to the bankruptcy-removal statute of 28 U.S.C. § 1452(a).
29
Rather, the
2. The State Law Counts
The Court next will consider whether it must abstain from adjudicating the State Law Counts so that those claims may be heard in the Florida State Court. Unlike the Bankruptcy Law Counts, the State Law Counts are based entirely on state law, and the Court has only related-to jurisdiction over them. And, unlike Count Three and the Quick Capital Lawsuit, the State Law Counts and the Florida Lawsuits provide no grounds for federal jurisdictional absent the Debtor’s bankruptcy. Other than bankruptcy jurisdiction, there appears to be no federal question basis for jurisdiction over the claims pending in the Florida State Court. Given the Debtor’s domicile and MAQ Management’s organization in Florida, there also appears to be no basis for diversity jurisdiction.
See Nat’l Century Fin. Enters.,
There also is no reason to believe that the Florida State Court is not a state forum of appropriate jurisdiction or that it is incapable of timely adjudicating any claims pending there. During the hearing in the Dissolution Lawsuit, the Honorable Timothy McCarthy suggested that he and the other judges of the Florida State Court have — as does this Court — a heavy case load.
See
Transcript at 6:18-20 (“I have only got 2,200 cases, and 58,000 foreclosure cases so I really need some additional files.”). Despite this, he devoted considerable time and attention to hearing (and ultimately denying) FLOHIO’s motion for appointment of a receiver.
Cf. XL Sports,
Mandatory abstention, however, does not apply to the State Law Counts because, notwithstanding the pendency of the Florida Lawsuits, the Court concludes that an action has not been commenced in a State forum of appropriate jurisdiction within the meaning of 28 U.S.C. § 1334(c)(2). In this regard, it must be kept in mind, as explained above in connection with the Court’s discussion of the transfer-of-venue issue, that the parties to this adversary proceeding are not the same as the parties to the Florida Lawsuits and that the relief being sought in the Florida Lawsuits is substantially different from, and generally much more limited than, the relief being sought in this adversary proceeding. In the Dissolution Lawsuit it is FLOHIO, not the Debtor, that seeks the dissolution of FLOVEST. Although the Debtor is a defendant in the Specific Performance Lawsuit, he is not a plaintiff or counterclaimant. Rather, it once again is FLOHIO as counterclaimant that is requesting that the Florida State Court require MAQ Management to sell its interest in FLOVEST to FLOHIO; it also is FLOHIO requesting that the Florida State Court declare that Nemesis and Doukas have no right to FLOHIO’s membership interest in FLOVEST. By contrast, FLOHIO is not a party to this adversary proceeding.
As with the parties, the issues in this adversary proceeding and the Florida Lawsuits also are not the same. In this adversary proceeding the Debtor does not seek the dissolution of FLOVEST and does not request that the Court require MAQ Management to sell its interest in FLOVEST to FLOHIO. In that respect, the Florida Lawsuits involve claims for relief not requested in this case. Otherwise, the relief sought here is much broader than that requested in the Florida State Court. As explained above, MAQ Management seeks relief in the Florida State Court only with respect to FLOVEST, not with respect to the other Bavelis-Qureshi LLCs, and this adversary proceeding, unlike the Florida Lawsuits, includes core bankruptcy matters that the Debtor could not have brought without commencing his bankruptcy case. Finally, the issue of whether the Debtor on behalf of the estate, rather than FLOHIO, is entitled to relief on account of the State Court Counts is not before the Florida State Court.
For all of the reasons set forth above, the Court finds that the pendency of the Florida Lawsuits does not support a finding that an action has been commenced in a state forum of appropriate jurisdiction that would require this Court to abstain from hearing this adversary proceeding.
See ConocoPhillips Co. v. Semgroup, L.P. (In re SemCrude, L.P.),
In sum, although a different analysis applies to the Bankruptcy Law Counts and the State Law Counts, the conclusion is the same: mandatory abstention does not apply. For all of the reasons set forth above, the Court rejects the Defendants’ arguments that it must abstain from hearing this adversary proceeding.
G. Permissive Abstention
If mandatory abstention is inapplicable, the Court should, according to the Defendants, exercise permissive abstention, which also is known as discretionary abstention. They base this argument on the state law issues present in this adversary proceeding, the alleged minimal effect that abstention would have on the administration of the Debtor’s bankruptcy estate and the judicial efficiency the Defendants believe would be served by having the Florida State Court and the New York Federal Court decide the matters pending there—avoiding, according to the Defendants, the necessity of this Court’s submitting, subject to de novo review, proposed findings of fact and conclusions of law to the District Court with respect to any rulings on non-core matters. See Qureshi Motion at 16-17; Doukas Motion at 8-10. For the reasons explained below, the Court finds none of the grounds for permissive abstention posited by the Defendants to be persuasive.
Permissive abstention is governed by 28 U.S.C. § 1334(c)(1), which states that:
Except with respect to a case under chapter 15 of title 11, nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.
28 U.S.C. § 1334(c)(1). Permissive abstention under § 1334(c)(1) is “an extraordinary and narrow exception to the duty of the federal courts to adjudicate controversies which are properly before it.”
United Sec. & Commc’ns,
In deciding whether to exercise permissive abstention, courts have considered the following factors:
1) the effect or lack of effect on the efficient administration of the estate if a court abstains; 2) the extent to which state law issues predominate over bankruptcy issues; 3) the difficulty or unsettled nature of the applicable state law; 4) the presence of a related proceeding commenced in state court or other non-bankruptcy court; 5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334; 6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy ease; 7) the substance rather than form of an asserted ‘core’ proceeding; 8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court; 9) the burden of this court’s docket; 10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties; 11) the existence of a right to a jury trial; 12) the presence in the proceeding of nondebtor parties; and13) any unusual or other significant factors.
Nat'l Century Fin. Enters.,
The Court concludes that, on balance, these factors weigh against abstention. As previously discussed in connection with its consideration of the requested transfer of venue, the efficient administration of the Debtor’s bankruptcy estate would be served by the Court’s adjudication of this adversary proceeding. Thus, the first factor listed above supports the Court’s decision to decline to abstain from hearing this adversary proceeding.
So to do the second through fourth factors, which relate to the status of applicable state law and the proceedings pending in state court. The Defendants’ arguments based on state law do not support abstention. Notwithstanding the Defendants’ contention that this adversary proceeding raises only state law issues, bankruptcy law issues predominate. The Complaint is largely grounded in core matters that arise under provisions of the Bankruptcy Code. Moreover, the state law issues present in this adversary proceeding are not unsettled and, as the Qureshi Defendants concede, also are not complex.
See
Qureshi Motion at 17. As also explained above, the proceedings in state court are not sufficiently similar in scope to this adversary proceeding.
Cf. Lindsey v. Dow Chem. Co. (In re Dow Corning Corp.),
Several other factors militate against abstention. The core proceedings in this adversary proceeding are core in substance rather than merely in form, and it would not be feasible to sever the state law claims from the core bankruptcy matters. And the Court finds that forum shopping is not an issue. In fact, as discussed above, the Debtor would have been unable to bring the fraudulent transfer actions that are the subject of this adversary proceeding without first commencing a bankruptcy case.
See Official Unsecured Creditors’ Comm. of Hearthside Baking Co. v. Cohen (In re Hearthside Baking Co.,
The Defendants contend that the presence of non-core claims justifies the exercise of permissive abstention, see Qureshi Motion at 18, 16-17; Doukas Motion at 10, because the Court would, rather than being able to enter final orders on such claims, be required to submit, subject to de novo review, proposed findings of fact and conclusions of law to the District Court pursuant to 28 U.S.C. § 157(c), which provides as follows:
(c)(1) A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge’s proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.
(2) Notwithstanding the provisions of paragraph (1) of this subsection, the district court, with the consent of all the parties to the proceeding, may refer a proceeding related to a case under title 11 to a bankruptcy judge to hear and determine and to enter appropriate orders and judgments, subject to review under section 158 of this title.
28 U.S.C. § 157(c).
True, the Court will, unless the District Court orders otherwise and the parties consent pursuant to 28 U.S.C. § 157(c)(2), be required to submit proposed findings of fact and conclusions of law to the District Court with respect to non-core matters. Although the Defendants do not cite any cases in support of their argument in this regard, courts indeed have considered the restriction on their ability to enter final orders in non-core matters as being relevant to whether the efficient administration of the estate would be served by abstention.
See Taub v. Taub (In re Taub),
By contrast, in a case involving both core fraudulent transfer actions and non-core matters, a bankruptcy court declined to exercise its discretion to abstain from adjudicating an adversary proceeding under the permissive abstention doctrine despite its recognition that it would be required to submit proposed findings of fact and conclusions of law to the district court on the non-core matters.
See Morris v. Burghart (In re Burghart),
No. 03-5146,
Two factors to be considered in the permissive abstention context weigh in favor of abstention. First, there is no basis for the Court’s jurisdiction over this adversary proceeding other than 28 U.S.C. § 1334.
Cf. Taub,
H. Equitable Remand
Finally, the Doukas Defendants seek equitable remand of the Quick Capital Lawsuit to the New York State Court pursuant to 28 U.S.C. § 1452(b). The permissive-abstention analysis that the Court just conducted “is largely the same asunder § 1452(b)[,]”
Nat’l Century Fin. Enters.,
The section of the Judicial Code on which Quick Capital relies for its remand argument provides in pertinent part that “[t]he court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground.” 28 U.S.C. § 1452(b) (emphasis added). The authority to remand actions removed pursuant to 28 U.S.C. § 1441(a) likewise naturally belongs to the court to which the action was removed.
The court to which a state court action involving a debtor is removed might conclude that the presiding bankruptcy court is the appropriate court to decide the remand issue.
See MD Acquisition,
In any event, the New York Federal Court has not transferred the Quick Capital Lawsuit to the Southern District of Ohio for a decision on the issue of equitable remand. And the Court is aware of no authority that would support its wresting from the New York Federal Court that court’s right to either (1) decide the remand issue itself or (2) transfer the issue, along with the rest of the Quick Capital Lawsuit, to the Southern District of Ohio. This Court, therefore, has no authority to rule on the Doukas Defendants’ request
VI. Conclusion
For the foregoing reasons, the Court declines to dismiss, transfer, remand or abstain from hearing this adversary proceeding. The Motions, therefore, are DENIED. The Debtor shall have 30 days after the entry of this opinion and order to obtain reissued summonses (as required by Bankruptcy Rule 7004(e)) and to serve a properly executed summons on each of the Qureshi Defendants.
IT IS SO ORDERED.
Notes
. The defendants who are requesting that the Court decline to hear this adversary proceed
. See Motion of Fifth Third Bank for Relief from Stay ("Fifth Third Motion”) (Doc. 33 in Case No. 10-58583) at 2 and Exhibit K.
.
See
Affidavit of George A. Bavelis (copy attached as Exhibit 1 to the Appendix) at ¶¶ 2 & 6 (“[B]oth immediately before and after my Bankruptcy filing, I have maintained a residence, which I jointly own with my wife, in Upper Arlington, Ohio [located in the Southern District], I have ... owned it for more than 24 years.... Central Ohio, and specifically, Columbus, is also where I opened and continue to maintain a brokerage account with Fifth Third Securities — an account that currently has a value of more than $13 million.”). The Debtor’s affidavit is dated December 23, 2010 — approximately five months after the Petition Date. The Brokerage Account apparently increased in value during
. In Count Eight, the Debtor asserts breach of fiduciary duty, dual agency and legal malpractice claims against John Stravato, who
. The Debtor also seeks the appointment of a receiver for certain of the Defendants. See Compl. at 46. Section 105(b) of the Bankruptcy Code, however, provides that "a court may not appoint a receiver in a case under this title.” 11U.S.C. § 105(b).
. Qureshi and Rab are residents of Florida, and each of the other Qureshi Defendants is organized under the laws of Florida. See Affidavit of Masroor Rab ¶ 2 (copy attached as Exhibit B to the Qureshi Motion) ("I am a resident of the State of Florida.”); Affidavit of Mahammad Qureshi ¶ 2 (copy attached as Exhibit C to the Qureshi Motion) ("I am a resident of the State of Florida.”); Compl. ¶¶ 11-20 (stating that the individual Qureshi Defendants are Florida residents and that the other Qureshi Defendants are business entities organized in Florida).
.The Debtor, through an affiliate, apparently has only a partial interest in FLOHIO. See Attachment to Proof of Claim of FLOHIO (Claim No. 35-1 filed by FLOHIO in the Debt- or’s case) ('T) Claimant in this claim is FLO-HIO, LLC (FLOHIO), an Ohio Limited Liability Company. This claim is being filed by the Yessios Family Limited Partnership (YFLP), and by the Vakaleris Family Limited Partnership (VFLP), each of which owns one-third of FLOHIO. 2) The other owner of FLOHIO is Bavelis Family, LLC, which also owns a one-third interest in FLOHIO. 3) The Debtor, George Bavelis, is the General Manager of FLOHIO, as stated in the FLOHIO Operating Agreement, executed on or about October 1, 2002....”).
. Quick Capital is organized under the laws of New York. See Notice of Removal filed with the United States District Court for the Eastern District of New York (“New York Federal Court”) (copy attached as Exhibit A to Doc. 71) ¶ 10; Quick Capital Note attached as part of Exhibit N to Fifth Third Motion. Doukas,
. Under § 502(d) of the Bankruptcy Code, "the court shall disallow any claim of any entity from which property is recoverable under section ... 550 ... or that is a transferee of a transfer avoidable under section ... 544 ... 547 [or] 548 ... unless such entity or transferee has paid the amount, or turned over any such property, for which such entity or transferee is liable under section ... 550....” 11 U.S.C. § 502(d).
. A party cannot confer subject-matter jurisdiction on a court lacking it,
see Nair v. Oak
.
But see, e.g., Blackman v. Seton (In re Blackman),
. Unlike subject-matter jurisdiction, the defense of personal jurisdiction is waived by the failure to timely assert it.
See Preferred RX, Inc. v. Am. Prescription Plan, Inc.,
. Bankruptcy Rule 7004(f) provides as follows:
If the exercise of jurisdiction is consistent with the Constitution and laws of the United States, serving a summons or filing a waiver of service in accordance with this rule or the subdivisions of Rule 4 F.R.Civ.P. made applicable by these rules is effective to establish personal jurisdiction over the person of any defendant with respect to a case under the Code or a civil proceeding arising under the Code, or arising in or related to a case under the Code.
Fed. R. Bankr.P. 7004(f).
. As the Sixth Circuit itself has noted, "it is not universally accepted by the courts of appeals that a nationwide service of process provision suffices for personal jurisdiction."
NGS Am., Inc. v. Jefferson,
. Exceptions to the general venue rule applicable in bankruptcy cases exist for actions by trustees to recover money judgments or property of a value falling below a specified de minimis threshold and actions by trustees based on claims arising after the commencement of the bankruptcy case from the operation of the debtor’s business. See 28 U.S.C. § 1409(b) & (d). Neither exception applies here.
. Each of the Doukas Defendants waived service of process. See Doc. 22 (R.P.M. Recoveries, Inc.); Doc. 23 (Nemesis); Doc. 24 (Doukas); and Doc. 25 (Quick Capital). Although Nemesis filed a waiver of service of process with respect to BMAQ (Doc. 21), GMAQ (Doc. 27) and FLOVEST (Doc. 28), which are the Bavelis-Qureshi LLCs, it did so only on behalf of itself, and the current owner^) of the other one-half interests in the Bavelis-Qureshi LLCs did not agree to waive service. See Qureshi Motion at 13.
. The document numbers referenced in this part of the opinion refer to the certificates of service of the summonses filed by the Debtor with respect to the Qureshi Defendants.
. There are, perhaps, other issues the Debtor needs to address when it corrects the deficiencies in the summonses. For example, in addition to the fact that the MAQ Management that is one of the Defendants in this adversary proceeding is MAQ Management, Inc., not MAQ Management, LLC, the Debtor also served Qureshi Family Investments, LLC (Doc. 56) (through its registered agent, New-mark) rather than the entity named in the Complaint, which is Qureshi Family, LLC.
.
See Team Enters., LLC v. W. Inv. Real Estate Trust,
No. CV F 08-1050 LJO SMS,
. Unlike the advisory committee’s note, Civil Rule 4(m) does not explicitly state that a court may extend the time for service even if there is no good cause shown. It is perhaps for that reason that, even after the 1993 amendments to Civil Rule 4(m), some courts have suggested that good cause continues to be required for an extension to be granted.
See, e.g., Barham v. Taylor (In re Taylor),
07-00037,
. Moreover, there is authority supporting the proposition that a bankruptcy court may transfer or dismiss a case for improper venue sua sponte.
See In re Langston,
.
See
Qureshi Motion at 3; Doukas Motion at 3. ''[T]he location of a person’s domicile at any given time is a
question of intent:
what is the fixed location to which he intends to return when he is elsewhere?”
Miller,
. The Court leaves for another day whether the analysis set forth in Shelton would apply to a corporation or other business association that argues that its principal assets are its operating assets and the value of those assets is less than 50% of the value of all of its assets.
. See Doc. 30 in Case No. 10-58583 (notice stating that "[i]f your claims [are] not listed at all [in the Debtor's schedules] or if your claim is listed as disputed, contingent, or unliqui-dated, then you must file a Proof of Claim by the deadline listed above or you may not be paid any money on your claims against the debtor in the bankruptcy case.”). See also Bankruptcy Rule 3003(c)(2) ("Any creditor or equity security holder whose claim or interest is not scheduled or scheduled as disputed, contingent, or unliquidated shall file a proof of claim or interest within the time prescribed by subdivision (c)(3) of this rule; any creditor who fails to do so shall not be treated as a creditor with respect to such claim for the purposes of voting and distribution.”).
. Because Quick Capital is a party to the Doukas Motion, the Court has not included Quick Capital in this category despite its incorporation in New York.
. There is a split of authority on the issue of whether § 1412 applies only to core proceedings, with 28 U.S.C. § 1404(a) instead applying to non-core matters.
See Dunlap v. Friedman’s Inc.,
. During a hearing on a motion for relief from the automatic stay filed by Quick Capital (Doc. 186 in Case No. 10-58583), counsel for Quick Capital took the position that, although the actions asserted in this adversary proceeding pursuant to §§ 544(b) and 548 are core proceedings, the Quick Capital Note is not the subject of any of the counts of the Complaint that are brought pursuant to those sections of the Bankruptcy Code. As explained above, however, the Debtor seeks to avoid the Quick Capital Note as a fraudulently incurred obligation pursuant to §§ 544(b) and 548.
. Although there is a split of authority on the issue, the Sixth Circuit has held that removal of an action pursuant to 28 U.S.C. § 1452 does not in and of itself make mandatory abstention inapplicable, even though removal means that no action remains pending in state court.
See Robinson v. Mich. Consol. Gas Co.,
. 28 U.S.C. § 1452(a) provides as follows:
A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit’s police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title.
. Pursuant to 28 U.S.C. § 157(e), “[i]f the right to a jury trial applies in a proceeding that may be heard under this section by a bankruptcy judge, the bankruptcy judge may
. A district court sometimes will withdraw the reference only after the matter is actually ready for trial.
See Doucet
v.
Drydock Coal Co. (In re Oakley),
No. 2:06-cv-556,